Financial
Contracts in Islam
Starter
Fulfillment of the
Covenants
Covenants -
Agreements -
AFL
Self Assessment
feed back
I ‘ve some I didn’t get it
I got it
doubts
LESSON OBJECTIVES
• •Define the meaning of
contracts in Islam.
• •Explore the importance
attached to the regulation
of Financial contracts
• •Clarify the classification
of financial contracts in
Islam of legitimacy and
purpose.
• •Illustrate the features of
financial contracts in
Islam.
Religious
Social
International
Financial
Scientific
Differentiations
Classify the following items to the correct topic
Truce, Scholarships, Vow, Sale, Oath, Lease, Marriage
Oath, Vow
Marriage
Truce
Sale, Lease
Scholarships
Significance of regulating and notarizing contracts
Loss of the buyer - conflict and greed - lack of confidence
Save the rights of people, Cutting the causes of conflict,
Elements of Financial Contracts
1. Form of Contract
2. The two contracting
parties
3. The subject matter of ﯾَﺎ أَﯾﱡﮭَﺎ اﻟﱠﺬِﯾﻦَ آ َﻣﻨُﻮا ﻻ ﺗَﺄْ ُﻛﻠُﻮا أَ ْﻣﻮَاﻟَ ُﻜﻢْ(
Contract ﺑَ ْﯿﻨَ ُﻜ ْﻢ ﺑِﺎ ْﻟﺒَﺎطِ ﻞِ إِﻻﱠ أَنْ ﺗَﻜُﻮنَ ﺗِﺠَ ﺎ َرةً ﻋَﻦْ
ﺴ ُﻜ ْﻢ إِنﱠ اﻟﻠﱠﮫَ ض ِﻣ ْﻨ ُﻜ ْﻢ وَﻻ ﺗَ ْﻘﺘُﻠُﻮا أَﻧﻔُ َ
ﺗَﺮَا ٍ
اﻟﻨﺴﺎء ) 29ﻛَﺎنَ ﺑِ ُﻜ ْﻢ رَﺣِ ﯿﻤﺎ ً
Elements of Financial Contracts
1) Form of Contract
Formulation of offer and acceptance
❖ 1. Either by word, writing, gesture, or act.
❖ 2. Can be expressed in any clear, understood,
customary way such as modern communication
means in concluding contracts.
Elements of Financial Contracts
2) The Two Contracting Parties
❖ 1. Sanity/Maturity: Both parties must be mature.
❖ Insanity and childhood are NOT considered!
❖ 2. Adulthood is where a person can handle financial
matters independently and make the best use of
properties.
❖ Mutual Consent: To indulge in a contract,
willingly and voluntarily.
Compulsion/coersion SHOULD NOT EXIST!!
Elements of Financial Contracts 3) Subject of Contract
What is concluded within the contract
❖ 1. Goods/Kind: such as a sales contract
❖ 2. Usufruct: such as leasing
❖ 3. Service/Action: such as power of
attorney
Write the subject of the matter of the contracts below
1. Mortgage contract = _________
2. Lending contract = _________
3. Security contract = __________
Writing (written form)
Action (by deed)
Saying (by word) verbal form
AFL
Self Assessment
feed back
I ‘ve some I didn’t get it
I got it
doubts
Maturity
Adulthood (mind)
Puberty
Current and Mortgaged, Lessor and Tenant,
Creditor and Debtor, Lender and Borrower
Lender and Borrower
Current and Mortgaged
Lessor and Tenant
Creditor and Debtor
Action (service)
In kind (commodity)
Usufruct (benefiting usage)
UAE Identity
Contract is the law of the contractors
This is adopted in the UAE by the H.H. Leaders of the
UAE not to be unjust towards the workers who
support us in the country progress and prosperity
It is not permissible because he is not the owner of the commodity
It is not permissible because the place of the contract is illegal to
do harm to him
It is not permissible, because he is not its owner, and the owner's permission is not
sought
Types of financial contracts
Based on exchange of items like buying and selling
Voluntary based like a gift or donation
based on getting ones right back. Like a security check.
Forward sale – Sale –
speculation
Endowment-grant-lending
Guarantee - mortgage
Legal contract
Illegal contract for it contains Usury
1. Flexible and
Exchange contracts: compatible with the
to fasten by Form of 1. Legal contracts:
e.g. Sale . Leasing spirit of our age
drawing together Contract they are contracts
the parts or sides two accredited by sharia 2. Flexible and
and knotting with contracting compatible with the
strings or laces parties Donations contracts
spirit of our age
e.g. Endowment –
2. Illegal contracts: Grant 3. Fulfilling the
the legal
The they are the ones which needs of society
binding of two
parties’ wills subject Islamic Sharia prohibited Security contracts:
matter of such as usury, fraud, e.g. guarantee –
sequestration 4. They must
the …….etc. be
contract enforced
