(18.3) Installation Service
(18.3) Installation Service
Question (1):
We buy central air conditioning units from a seller. The seller commits himself to bear the cost of installation service within the building. The value is paid to the seller in partial installments. Whenever he installs or finalizes a portion of the work, we pay him an amount equivalent to the finalized service. It should be noticed that the building where the equipment are installed is not a property of Kuwait Finance House; instead it is the property of another party. This other party buys from Kuwait Finance House the equipment on a profit margin and the equipment value is not registered on the buyer’s account irrespective of the sale being in cash or credit until the equipment are installed in the building. Thus, Kuwait Finance House is the buyer whereas the exporter is the seller bound by a contract. Similarly, there is another totally independent contract between Kuwait Finance House and the building owner (buyer).
What is Shariah acceptable method to complete this transaction?
Answer:
Kuwait Finance House has been approached by the building owner with whom a promise is made to sell the equipment on Murabaha on condition of installation. It buys the air conditioning units from the exporter on mutually agreed terms on condition of installation, and it desires and agrees with the exporter on the payment method depending on the agreed installation stages. Kuwait Finance House installs the equipment in execution of the promise and the installed equipment is considered a trust lodged with the building owner. Later, a contract is signed between Kuwait Finance House and the building owner pursuant to the promise and in accordance with the agreed upon maturity scheduled for payament of price.
Source:
Kuwait Finance House, Book of Fatwas on economic issues, Part (1), and (2), Fatwa No.(86).
Question (2):
A client requested us to provide some machines under Murabaha transaction, some portion of the total price of these machines are installation expenses and it is known that the expenses of installation are services and not tangible. Hence is it allowable to include in the price of Murabaha the expenses of installation, or should they be deducted from the value of the machine?
Answer:
There is a general rule in the sale of Murabaha that must be understood and applied i.e. the sale of Murabaha is the sale of trust. Therefore, the buyer in Murabaha says to the seller: " I purchase these goods and give you a profit of (…)". This profit may be calculated out of "the purchase price plus other costs". Any way the essence is the purchase of the goods themselves regardless of other services and expenses. However, the seller may ask a profit calculation based on the purchase price plus other expenses, but if
he said: "I sell you the goods and the profit should be based on purchase price only", then it is inadmissible to add any other he said: "I sell you the goods and the profit should be based on purchase price only", then it is inadmissible to add any other
Source:
Kuwait Finance House, Book of Fatwas on economic issues, Part (1), and (2), Fatwa No.(118).
Question (3):
Is it Shariah permissible for Kuwait Finance House to sell equipment to a company besides the installation; provided that the installation costs are calculated within the sale price?
Answer:
The board is of the view that this work is, Shariah permissible, but if the sale is in Murabaha mode then it is not permitted to mention in the contract that this is the price, but rather to be mentioned that it costs the seller so and so.
Source:
Kuwait Finance House, Book of Fatwas on economic issues, Part (1), and (2), Fatwa No.(124).
Question (4):
A customer desires to buy some machines from Kuwait Finance House provided the payment to the exporter is as follows:
50% upon delivery, 40% after 60 days of delivery pursuant to a letter issued by him confirming the receipt and installation and 10% after the installation and commissioning of the machines and ensuring their workability, as it is clear that the credit value includes the price of the goods, plus the cost of installation and operation without identifying each separately, what is the responsibility of Kuwait Finance House towards the installation 50% upon delivery, 40% after 60 days of delivery pursuant to a letter issued by him confirming the receipt and installation and 10% after the installation and commissioning of the machines and ensuring their workability, as it is clear that the credit value includes the price of the goods, plus the cost of installation and operation without identifying each separately, what is the responsibility of Kuwait Finance House towards the installation
Answer:
This process includes a promise to purchase and a contract between Kuwait Finance House and the exporter to sell the machines on condition of installation and commissioning and then a contract with the promising buyer also to sell the machines and install them. The responsibilities and commitments are assigned between the parties of the contracts as the exporter is responsible towards Kuwait Finance House for the delivery of machines and installation whereas Kuwait Finance House is responsible towards the buyer. Further the agreed upon schedule of payment in each contract is binding to the contract parties. Kuwait Finance House in This process includes a promise to purchase and a contract between Kuwait Finance House and the exporter to sell the machines on condition of installation and commissioning and then a contract with the promising buyer also to sell the machines and install them. The responsibilities and commitments are assigned between the parties of the contracts as the exporter is responsible towards Kuwait Finance House for the delivery of machines and installation whereas Kuwait Finance House is responsible towards the buyer. Further the agreed upon schedule of payment in each contract is binding to the contract parties. Kuwait Finance House in
Source:
Kuwait Finance House, Book of Fatwas on economic issues, Part (1), and (2), Fatwa No.(432).
Question (5):
We have executed a Murabaha transaction with one of our clients, which included an assignment of fitting aluminum as per provisions of a contract signed between us and a contractor. While the contractor was in the process of executing the work, there appeared some additional works which was not stipulated in the contract. The client with whom we are dealing, instructed the contractor to execute the additional work and that he would inform Kuwait Finance House accordingly. These additions were implemented in accordance with the previous specifications and conditions. There would be a variance of price between the We have executed a Murabaha transaction with one of our clients, which included an assignment of fitting aluminum as per provisions of a contract signed between us and a contractor. While the contractor was in the process of executing the work, there appeared some additional works which was not stipulated in the contract. The client with whom we are dealing, instructed the contractor to execute the additional work and that he would inform Kuwait Finance House accordingly. These additions were implemented in accordance with the previous specifications and conditions. There would be a variance of price between the
With the foregoing in mind, may Kuwait Finance House pay value of the additions to the contractor and sells them to the client taking into consideration that we have already completed our contract with the client and closed his records.
Answer:
If the provisions of the construction contract concluded between Kuwait Finance House and the contractor stipulate that if there are issues whose completion is of interest then the price shall be determined as in the contract price, and Kuwait Finance House has to pay the value of the new works to the contractor. This additional payment shall be referred to the client. However if, the contract does not include such a provision while at the same time the common interest necessitates its execution, the matter would have to be governed by customary practices. The client shall be demanded to settle the additional amounts as per the agreed profit If the provisions of the construction contract concluded between Kuwait Finance House and the contractor stipulate that if there are issues whose completion is of interest then the price shall be determined as in the contract price, and Kuwait Finance House has to pay the value of the new works to the contractor. This additional payment shall be referred to the client. However if, the contract does not include such a provision while at the same time the common interest necessitates its execution, the matter would have to be governed by customary practices. The client shall be demanded to settle the additional amounts as per the agreed profit
Source:
Kuwait Finance House, Book of Fatwas on economic issues, part (1), and (2), Fatwa No. (434).
(18.4) Calculation of Profits on Insurance service Question:
How far is it permissible for the bank to calculate its profits on insurance paid by it to non-Islamic insurance company?
Insurance of vehicles purchased from the bank is conducted to cover the period of deferred installments in behalf of Dubai Islamic Bank, and this is done in two ways:
First: the bank either pays the value of insurance, and in this case includes it within the total value of the Murabaha and then calculates its profits. Occasionally, the bank pays the insurance value to non-Islamic company, includes it in the value of the transaction and then out of which calculates its profits. Is it permissible for the bank to pay the insurance value to non-Islamic insurance company and enter it into the transaction value?
Second: or the client pays in cash the value of the insurance or otherwise the insurance is conducted through him. In such Second: or the client pays in cash the value of the insurance or otherwise the insurance is conducted through him. In such
Answer:
The Bank is not permitted to pay the value of insurance for clients dealing with non-Islamic insurance companies as long as there is an Islamic insurance company, as this encourage dealing with non- Islamic insurance companies, besides the bank is considered as a contractor with such companies as far as it has paid them the value of insurance and obtained the profits.
Source:
Opinions of the Shari'ah Board of Dubai Islamic Bank, Fatwa No. (72).
(18.5) Profit on the Service Associated with the Commodity Question:
Is it permissible for the bank to buy a taxi, with a plate number and sells it, considering that the plate number itself has a value that is independent of the car price, meaning that the price of the vehicle purchased by the bank without plate number is different from the price of the vehicle with a plate number?
Answer:
Purchase of a taxi with a plate number that increases its price compared to the one without a plate number in a Murabaha sale is permissible and does not contain any violation of the provisions of Shari'ah rules.
Source:
Opinions of the Shari'ah Board of Dubai Islamic Bank, Fatwa No. (61).
(19)
Repetitive Murabaha within a Specific Ceiling
(19.1) Repetitive Murabaha within a specific ceiling Question (1):
What is the Figh view on what is known as Repetitive Murabaha within a specific Ceiling, which gives the client a power of attorney to purchase on behalf of the Bank and sell to himself at an agreed upon fixed profit and a specific ceiling?
Answer:
This mode of Murabaha is special mode which is mostly applied to customers of small scale business and retailers who need to purchase miscellaneous and repetitive materials which make it difficult to revert to the bank for each operation to make a separate contract.
The reference of permissibility of such mode of Murabaha is the permissibility of authorization of the client (as agent) by the Bank to purchase on behalf of it, and based on this agency, the client sells to himself at a previously agreed upon fixed profit and ceiling (this is the majority opinion).
Source:
Kuwait Finance House, Book of "Shari'ah Fatwas on Economic Issues", parts (1), and (2), Fatwa No. (8).
Question (2):
Please advice Shari'ah opinion about the attached Form "Appendix of Sale Contract for the Purchase orderer", particularly with respect to the following:
Is it permissible, according to Shari'ah, to set a period of time for the contract of sale of Murabaha made with the Purchase orderer (the client) whereby the latter is limited by specific ceiling (appropriations) and through this ceiling (appropriations) he can concludes several transactions with the bank against sufficient guarantees, the proposed amendments are:
First: Article No. (): "The duration of this contract can be renewed with the approval of the First Party."
Second: Article No. (): "The First Party has the right to amend all applicable dealing provisions (Murabaha ratios, Second: Article No. (): "The First Party has the right to amend all applicable dealing provisions (Murabaha ratios,
Answer:
As for the clarification on the amendments taken by the Board of Directors to the terms of a Murabaha contract, regarding identification of time for a Murabaha contract, what appears to me that this contract is a partnership on a trading matter in accordance with an agreement between the two parties. However, Jurists have different points of view regarding the permissibility of determining
a specific time for the contract of partnership or Mudaraba, for example five years. Some of them permit it while others forbid it. The permissibility of timing of partnership has been confirmed in Fatwas of Al-Khaniyah. Also in Hanablah Glossary Mudaraba timing is permissible according to some opinions although it has been forbidden by others.
The Jordanian civil law took the views of jurists who permitted timing of both partnerships and Mudaraba; as stated in articles (601) and (631).
In view of the above mentioned facts I here by support the opinion that timing of Murabaha contract is permissible based on the approval of the two parties, if it is essential for the interest of the Bank.
Source:
The Islamic Bank of Jordan for Finance and Investment, Book of "Shari'ah Fatwas", parts (1), and (2), Fatwa (Opinions) No. (9).