(6.1) The binding nature of promise

(6.1) The binding nature of promise

Resolution:

Having taken cognizance of the papers presented by members and experts in the subject of Murabaha Sale for purchase orderer and after listening to discussions about the subject, it has been decided that:

First: Promise (issued by the purchase orderer or the ordering entity unilaterally): would be binding to the promisor according to Shari'ah Fatwas, unless there is an acceptable excuse with respect to this matter. However, it would be enforceable judicially, if it is tied up to certain cause and if the promise has caused the promissor to incur some expenses, the effect of binding in this case is determined either by fulfilling the promise or paying a compensation for the damages incurred thereby due to non-fulfillment of the promise without any reason.

Second: In case of promise (the promise is made by both parties): it is permissible to execute a Murabaha sale, provided that Second: In case of promise (the promise is made by both parties): it is permissible to execute a Murabaha sale, provided that

Source:

Organization of Islamic Conference (OIC), Resolutions and Recommendations of the Council of the Islamic Figh Academy, First, Second and Fifth Sessions, Resolution No. (2 and 3).

Question (1):

You are kindly requested to provide the Shari'ah opinion regarding the permissibility in case we purchased commodities and goods, in cash, based on a promise by a client that he is ready, if we received the commodities, to purchase them from us on credit basis at a price higher than their cash price. For instance:

A client is in need of purchasing specific commodity or goods that

he can not pay their price in cash, yet we believed that, if we purchased and possessed the same, he shall purchase it on credit basis against a specific profit as referred to in his previously stated promise?

Answer:

The statement made by the purchase orderer is a promise and the Islamic main Jurists (Imams) were of different opinions with regard to whether this promise is binding or not.

Hence I advocate the opinion of "Ibn Shibrimah" who said:" Any binding promise that does not allow what is prohibited and Hence I advocate the opinion of "Ibn Shibrimah" who said:" Any binding promise that does not allow what is prohibited and

Source:

Kuwait Finance House, Book of , Fatwas on Economic Issues, part (1), and (2), Fatwa No. (2).

Question (2):

What is the Shariah opinion if Kuwait Finance House requires to purchase a crop, or metal other than Gold and Silver or any other raw material that is actually possessed by the seller, who specified

a maximum period of time to receive the goods; provided that Kuwait Finance House is entitled to receive the goods at any time during this period. Kuwait Finance House paid an amount of money to the seller as an earnest money (Urbun) and promised to pay the remaining amount upon delivery.

Is this transaction permissible? and is it permissible for Kuwait Finance House to sell such goods? and when?

Answer:

This purchase transaction (which is called (Purchase on earnest money "Urbun") is correct, it is permissible for Kuwait Finance House to directly or indirectly sell these goods after taking the full possession of the same, otherwise it is impermissible to sell them.

Source:

Kuwait Finance House, Book of , Fatwas on Economic Issues, part (1), and (2), Fatwa No. (4).

Question (3):

Is it permissible for us to purchase a specific commodity based on

a promise from a client who will purchase it on credit at a price higher than the purchase value?

• Are we allowed to take earnest money (Urbun) from this client?

• If we purchased the commodity while the client declined to purchase it from us, is it permissible for us to confiscate the

earnest money paid to us?

Answer:

First: Regarding the promise made by a client to purchase a specific commodity to be sold to him on credit at a price higher than the original purchase price, I say that: all general texts of Shariah stipulate that all Muslims have to fulfill and abide by their contracts and promises, unless they allow what is prohibitd and prohibits what is permissible. However, all main Islamic jurists (Imams) see that the fulfillment of a promise is obligatory although it is not forcible by courts in accordance with the opinions of the three Emams (Jurists): Abi Hanifah, Al Shafei and Ahmed. Nevertheless, Emam Malik has stated three scenarios which are:

1. Promise should not be fulfilled.

2. Promise should be fulfilled absolutely.

3. If Promise has resulted in a commitment inflieted on the promisee that he would not had been bound to it unless

he is promised, in such case it would be binding. Hence the question falls within the last scenario. I support

this opinion as fulfillment of a promise is a major feature of the believer whereas backing out is a distinctive feature of hypocrites.

Second and Third: Taking earnest money from such client is Shari'ah permissible and if he did not fulfill his promise the earnest money may be seized, If this condition is stipulated in the contract.

Source:

Kuwait Finance House, Book of , Fatwas on Economic Issues, parts (1), and (2), Fatwa No. (5).

Question (4):

A client approached us to purchase specific goods and promised to repurchase them on credit. We actually arranged shipment of the required goods. Before the arrival of the goods we have been informed that this client is insolvent as well as indebted for much money and he has been put under liquidation by court. Are we obliged to execute our promise, and deliver the goods to same client and be included within the procedures of the liquidation? Or shall we hold back our promise to reserve our rights?

On the other hand if we concluded a sale contract with this client and sold him the goods and then we are informed of his insolvency, shall we deliver him the goods in such case or not?

Answer:

Promise, according to the opinion of jurists, is not enforceable through courts. Yet, to safeguard the funds of shareholders and depositors the goods should not be delivered to this client. However if a contract of sale is concluded and before the delivery of goods and knowing the insolvency of the client, goods shall not Promise, according to the opinion of jurists, is not enforceable through courts. Yet, to safeguard the funds of shareholders and depositors the goods should not be delivered to this client. However if a contract of sale is concluded and before the delivery of goods and knowing the insolvency of the client, goods shall not

Source:

Kuwait Finance House, Book of Fatwas on Economic Issues, parts (1), and (2), Fatwa No. (140).

Question (5):

A client approached the bank to purchase a specific commodity that he identifies its full description and agrees with the bank on the purchase price by the bank and repurchase price offered by the customer after adding the agreed upon margin of profit ?.

What is the opinion regarding this transaction?

Answer:

The conference is of the view that this transaction implies a promise by the client of the bank to purchase the commodity in accordance with the specified provisions and another promise by The conference is of the view that this transaction implies a promise by the client of the bank to purchase the commodity in accordance with the specified provisions and another promise by

This promise, according to the Fatwas of Malki school of jurisprudence, is enforceable by law while other schools of Figh see that it is Shari'ah binding. What is Shariah compatible, can be enforced by law, if it is necessity and if it is possible for the courts to intervene.

The wording of contracts in such transactions need Shari'ah technical accuracy, and might need the issuance of law (Act) in Islamic countries, to make them enforceable through courts.

Source:

Recommendations and Resolutions of the first conference of Islamic banks, Fatwa No. (8).

Recommendation:

The conference acknowledges that promising in Murabaha sale for the purchase orderer, after taking possession of the purchased commodity and reselling it to same party at the price mentioned in The conference acknowledges that promising in Murabaha sale for the purchase orderer, after taking possession of the purchased commodity and reselling it to same party at the price mentioned in

Source:

Recommendations & Resolutions of the first conference of Islamic banks, Fatwa No.6

Question (6):

Is it permissible to hold the promise by the purchase orderer binding in Murabaha transaction?

Answer:

According to resolution No (2) issued by Islamic Figh Academy in its fifth session held in Jeddah regarding Murabaha sale for the purchase orderer, it has been forbidden to hold the promise by both parties as binding without giving either of them the right of option because it will be similar to the action of selling itself. Hence the Committee sees that the party who deserves to be given the option, to avoid binding promise by both parties, is the purchase orderer. Hence, banks should adopt the opinion of not binding the purchase orderer or any party.

Source:

Dallah Al-Barakah Group, Development and Research Department, Resolutions & Recommendations of Al-Baraka Symposia on the Islamic economy, (First, second and third seminar),Fatwa No.12