Islamic Law of Sales Contract

  1. Bai (Sale) • Definition: Exchange of a valuable thing by another valuable thing with mutual consent.
  2. Basic Elements of Sale • Aqd (Contract) • Mutaqidain (Contractors) • Mabee (Subject Matter) • Thaman (Price)
  3. Conditions for (Contract) • Offer and Acceptance Must be in Past/Present tense (Implied form is also applicable) • Sale must be instant and absolute • Sale should be unconditional • A contract must not be comprise of any other contract within itself.
  4. Conditions for Contractors • Buyer and seller should be sane • Both should be mature.
  5. Conditions for Subject matter • Existing (Salam and istisna are exempted) • Valuable (Some things do have scope of becoming valuable with the change of time) • Usable (In the light of shariah) • Capable of ownership/title (Things that could be in private property) • Capable of delivery and possession (a stolen car) • Seller must have ownership & risk(Other wise it will be dependent on the permission of its owner) this problems some time occurs in MURABAHA) • Specific / Quantified (Transaction will not be completed until separated in W/H)
  6. Conditions for Price •The price must be quantified •The price must be specified in terms of currency etc. •The price must be certain at the time of contract (either this or that will not be accepted)
  7. Rules of Bai Muajjal (Deferred Sale) • Price should be fixed. • Time/date should be fixed. • Deferred price may be more than cash price. • Once the price is fixed it can not be changed due to late payment. • In case of installments the installments dates and amount should be known.
  8. Rules of Bai Muajjal (Deferred Sale) • A condition may be put that in case any instalment is not paid/delayed the remaining installments will become due immediately.
  9. Rules of Bai Muajjal (Deferred Sale) • Agent ( AAOIFI Clause No. 4/11)
  10. Rules of Bai Muajjal (Deferred Sale) • Sadqa ( AAOIFI Clause No. 5/6)