Istisnaa and Parallel Istisnaa - Appendix C (Definitions)

Transcription

1. Shari ’ah Standard No. (11): Istisna’a and Parallel Istisna’a Appendix (C) Definitions Istisna’a Contract Istisna’a is a contract of sale of specified items to be manufactured or constructed, with an obligation on the part of the manufacturer or builder (contractor) to deliver them to the customer upon completion. Parallel Istaisna’a Another form of Istisna’a, known in modern custom as Parallel Istisna’a “al-Istisna’a al-Muwazi”, al-Muwazi”, takes effect through two separate contracts. In the first contract, the Islamic Financial Institution acts in the capacity of a manufacturer, builder or supplier and concludes a contract with the customer. In the second contract, the Institution acts in the capacity of a purchaser and concludes another contract with a manufacturer, builder or supplier in order to fulfil its contractual obligations towards the customer in the first contract. By this process, a profit is realised through the difference in price between the two contracts and, in most cases, one of the two contracts is concluded immediately, (i.e. the Istisna’a contract entered into with the manufacturer, builder or supplier), while the second contract (i.e. the contract entered into with the customer) is concluded later. Difference Between Istisna’a and Ijarah The contract of Istisna’a differs from the contract of Ijarah in the sense that the latter is a contract of services without any commitment to supply materials whereas the former requires that the manufacturer or builder provide both services for the transformation or construction process and ultimately to supply the materials in the form of the finished items. Difference Between Istisna’a and a Standard Construction Contract The contract of Istisna’a also differs from a standard construction contract in that the latter is regarded as an Ijarah contract if it is confined to providing 319
2. Shari ’ah Standard No. (11): Istisna’a and Parallel Istisna’a services only, with the materials to be provided by the customer (the person who engaged the Institution to carry out the construction work). But if a construction contract requires the builder to provide both the services and the materials needed to fulfil the contract, then it is an Istisna’a contract. Difference Between Istisna’a and Salam The Istisna’a contract also differs from a Salam contract in the sense that the former is a contract that involves a sale of specified items that have by nature to be manufactured or constructed. In other words, an Istisna’a contract is applicable to materials that require transformation by a manufacturing or construction process. The Salam, on the other hand, is a contract of sale of specified goods, the permissibility of which is not attached to a condition that the goods must be manufactured or constructed. 320