Wad requires customer to make a unilateral promise to buy before bank makes the purchase from the supplier

OR a unilateral promise given by one party to another to perform an obligation. E.g

A customers promise to buy the leased asset upon expiry of the leasing (ijarah) in (Islamic hire-purchase) transaction.

Does not normally create legal obligation Legal obligation is created: Genuine need of the masses Contingent promise

Wadan

Unilateral promises given by 2 different parties which are independents from each other and subject to different independent conditions. E.g. in certain Islamic-structured product, a customer promises to sell securities to a bank for an agreed settlement price with certain conditions. At the same time, the bank also undertakes to buy the securities for certain price with another different conditions.

Islamic contracts
A promise without any intention of fulfilling it, is not permissible (haram) deemed to be a liar and pretentious (munafiq) person who are seriously condemned by the religion.

If the same promisor takes an oath to convince the promissee will be subject to Allahs condemnation a fine or compensation (kaffarah) to relieve him from his false oath.

If a promise with an intention of fulfilling it, the jurists are whether its fulfillment is obligatory or recommended. Those who opine the fulfilling a promise is obligatory are further divided as to whether it is binding by religion (mulzim diyanatan) or enforceable by the court (mulzim qada-an). Islamic jurists have different views with regard to the liability imposed to the parties of the promise.

VIEW 1: Fulfilling a promise is recommended (Mandub), not obligatory; promise must be fulfilled for religious reason only and it is a question of morality

Al-Zarqa- a promise does not initially bind the person who makes it (promisor), and it does not give any right to the promissee. The Shafii, Hanbali and Zahiri Schools recommend the fulfillment of a promise, even if it is subject to certain condition.

VIEW 2:
Fulfilling a promise is obligatory by religion; otherwise the promisor is deemed to be sinful. Its non-fullfilment will not be enforced by the court. Hanafi, Shafii, Hanbali, and a few from Maliki schools - a promise made by a person to the other is religiously binding (mulzim diyanatan) but not a legal duty (mulzim qadha-an). This is because wad is part of a voluntarily contract Therefore, the judge has no way of such enforcement, because the second party has nothing more than a moral right.

Imam Nawawi - when a person promises another something (provided it is not illegal) he should fulfill his promise.

VIEW 3: Fulfilling a promise is obligatory by religion and can be enforceable by the court

Ibn Al-Arabi - The promise is absolutely binding & must be fulfilled by all means unless if its fulfillment is impossible.
Ibn Shubramah made the fulfillment of promise as compulsory.

VIEW 4: Where a promise is subject to certain conditions, its fulfillment is obligatory and enforceable although the promissee has not acted upon the promise yet.
Hanafi School - distinguished between absolute promise and conditional promise.

VIEW 5:

Where a promise is subject to conditions, its fulfillment is obligatory and enforceable only if the promissee has indeed acted on the basis of the promise & incurred loss.
Ibn Al-Arabi - if the promise results in particular consequence, its fulfillment is obligatory; but if it is a promise per se without any consequential effect, fulfilling it is not made obligatory.
or the promisee will suffer loss or difficulties as a result of the non fulfillment. This is a preferred opinion in the Maliki School which was expounded by Malik, Ibn Al-Qasim and Sahnun

Recommended 1. The Shafii School 2. Abu Hanifah 3. Some Maliki jurists 4. Al-Qarafi (Maliki)

Obligatory 1. Majority of Maliki jurists Ibn Al-Arabi

CONTRACT IN ISLAM
CONTRACT
SUBJECT MATTER CONTRACTORS

WORDING OF CONTRACT

CONDITIONAL CONTRACTS:
There are four basic rules for judging the validity of conditions in a contract:

1.

A condition, which is not against the contract, is a valid condition. For example a condition of free delivery to buyers premises. 2. A condition, which seems to be against the contract, but it is in the market practice, that type of condition is not void, if its voidness is not proven with the clear injunctions of the Holy Quran and Sunnah. .

For example 'A' buys an air conditioner on a condition that the seller will provide him five-year guarantee and one year free service. This type of condition does not invalidate the contract

3.

A condition that is against the contract and not in market practice but is in favor of one of the contractors or subject matter, the condition is void. For example if A sells a car with a condition that will use it on a fixed date every month, this contract will be void .

4.

A condition, which is against the contract, not in the market practice and not in favor of any contractor, that is not a void condition.

For example if both A and B decide to give to charity, a certain percentage of both subject matter and cosideration , upon completion of sale.

VOID CONDITIONS AND VOID CONTRACTS: The contracts of compensation (Uqood Muawadha) like sale, purchase, lease agreements) become void by putting void condition. Non-compensatory (voluntary) agreements (Uqood Ghair Muawadha) like contract of loan (Qard-eHasanah), do not become void because of void condition.

DEFINITION OF SALE(BAI)
exchange of a thing of value with another

thing of value with mutual consent.

the sale of a commodity in exchange of cash

TYPES OF SALE
1. Valid sale ( Bai Sahih) 2. Void/Non existing Sale ( Bai Baatil )

3. Existing sale but void due to defect ( Bai

Fasid )

4. Valid but disliked sale ( Bai Makrooh )

ISLAMIC SALE CONTRACT

VALID SALE ( Bai Sahih)
A sale is valid if all elements together with their

conditions are present

Elements of valid sale are Contract ( Aqd) Subject matter ( Mabee) Price (Thaman) Possession or delivery ( Qabza )

ISLAMIC SALE CONTRACT

Valid Sale (Bai Sahih)

Contract or transaction (Aqd)

1

Sold goods or subject matter (Muta'aquadeen)

2

Price (Thaman)
3

Delivery or possession (Qabza) only in respect of movable goods, not immovable 4

ISLAMIC SALE CONTRACT

ELEMENTS OF A VALID SALE (Bai Sahih) 1. CONTRACT ( Aqd )

Offer & Acceptance ( Ijab-o-Qobool)

Oral ( Qauli ) Implied ( hukmi ) e.g creadit sale Sane(mentally sound) Mature( adult)

Buyer and seller ( Mutaaquadeen ) must be

Conditions of contract ( Sharaet-e-Aqd )

sale must be non-contingent

sale must be immediate

ISLAMIC SALE CONTRACT

ELEMENTS OF A VALID SALE (Bai Sahih)
2. SOLD GOOD OR SUBJECT MATTER ( Mubee )

Existing. At the time of sale Valuable Usable(Harram things are not allow to sale Capable of ownership/title Capable of delivery/possession Specific & Quantified

ISLAMIC SALE CONTRACT

ELEMENTS OF A VALID SALE (Bai Sahih)

3. PRICE ( Saman )

Quantified ( Maloom ) currency should be known Specified & certain ( Mutaaiyan )

ISLAMIC SALE CONTRACT

ELEMENTS OF A VALID SALE (Bai Sahih)
4.DELIVERY OR POSSESSION (QABZA)

Physical ( Haqiqi )
Constructive ( Hukmi )

ISLAMIC SALE CONTRACT

VOID/NON EXISTING SALE (BAI BAATIL)
Certain conditions are not met. These relate to: conditions of offer and acceptance

Oral acceptance OR Implied acceptance

conditions for Buyer and Seller

Sane AND Mature

conditions for Sold Goods where goods should be:

Existable, Valuable, Usable, Capable of ownership/title AND Capable of delivery/possession

ISLAMIC SALE CONTRACT

VOID/NON EXISTING SALE (BAI BAATIL)
Certain conditions are not met. These relate to: conditions of offer and acceptance

Oral acceptance OR Implied acceptance

conditions for Buyer and Seller

Sane AND Mature

conditions for Sold Goods where goods should be:

Existable, Valuable, Usable, Capable of ownership/title AND Capable of delivery/possession

ISLAMIC SALE CONTRACT

EXISTING SALE BUT VOID DUE TO DEFECT ( BAI FASID )
sale will exist but will be void due to defect because

of non compliance of conditions of contract the buyer does not have the title to subject matter the seller does not have title to price Both subject matter and price cannot be used lawfully the produce of both will be unlawful

ISLAMIC SALE CONTRACT

EXISTING SALE BUT VOID DUE TO DEFECT ( BAI FASID )
the subject matter should not be possessed by the buyer if possessed with the consent of the seller, title or

ownership will be passed to the buyer but usage of subject matter will be impermissible Buyer must return the goods to the seller However if the defect is rectified the sale becomes valid

ISLAMIC SALE CONTRACT

VALID BUT DISLIKED SALE ( BAI MAKROOH )
sale is valid but not liked due to certain conditions like:

sale after Juma Azan sale by intervention of a third party while two are negotiating

Types of Sales Following are the common Types of sales

1. Bai Musawamah: It refers to normal sale in which cost price is not known. 2. Bai Murabaha: It refers to a sale in which cost and sale price is known to the buyer. 3. Bai Muqayada: It refers to barter sale excluding currency sale. 4. Bai Surf: It refers to the sale of gold, silver and currency. .

5. Bai Salam: It is a kind of sale in which payment is spot while the delivery of the good is deferred 6. Bai Istisna: It refers to such sale in which commodity is transacted before it comes into existence. It is basically an order to manufacture. 7. Bai Muajjal: It refers to such sale in which payment is delivery is spot while payment is deferred but cot is not known.