PRESENTED BY :

Mehboob ul hassan (44454)

 TRADING BASED AGREEMENTS
• Trading based agreement has two types of agreements
1. Bai’mu’ajjal
2. Bai-Salam
1.Bai’mu’ajjal :
• It means sale on deferred payment basis(delayed payment),by the agreement with
the seller .
• Debt against the buyer , paid in lump sum or installments.

• Or a sale in which the parties agree that the payment of price shall be deferred is
called “Bai-mu’ajjal”.
Conditions for a valid Bai’mu’ajjal :
 The price to be paid must be agreed and fixed at the time of the deal.
 The deferred price may be more then the cash price, but It must be fixed at the time
of sale.
 Once the price is fixed , It cannot be decreased in case of earlier payment ,nor it can
be increased in case of default.
 Complete or total possession of the thing must be given to the buyer. while the
deferred price is to be treated as debt against the buyer.
 BAI-MU’AJJAL AT THE LEVEL OF BANK

 There should be two separate contracts, one between the bank and the supplier and
the other between the bank and the buyer.
 The bank will decide its profit on deffered payment with the buyer in advance.
The buyer has the right to negotiate with the bank for the profit on deffered payment.
The bank has also to make its contract with the supplier at the bank level so they do
not need to take delivery with additional man power at the time to deliver the goods
to the buyer.
 Islamic trading (Bai-mu’ajjal)
Application of Funds

(4) Deferred Price

Bank
Bank’ client
(3) Good

(2) Good
(1) Cash payment

Supplier

Traditional Trading

(1) Loan Bank’s client

Bank
(4) Principal (2) Cash
+ (3) Good
Payment
Interest
Supplier
 THE PRINCIPLE OF KHAYAR:
(RIGHT TO MAKE RECOURSE & CLAIM REFUND)

 As per Shari’ah requirements, the period of khayar in favour of of the buyer against
the bank may be specified in the contract between them.
 The period of khayar for the bank against the ultimate seller (supplier) in the other
contract may be specified as one day or another agreed period above that between
the bank and the buyer.
Wakalah: (Power of Attorney)
It means the supplier can directly supply the goods on agreed date to the bank’s client
with the consent of bank.
 IN CASE OF IMPORT OF GOODS :

In the context of the client’s promise to accept the goods upon delivery, the bank may
incorporate the following preventive measures.
 The transaction may be initiated with a down payment by the client that can be held
by the bank as a loan till the final settlement.
 The client has to bring a guarantor that would buy the goods in place of client in case
of his default or authorize the bank to dispose off the goods in the open market in
order to recover its losses.
 The bank will deduct the original price of the good plus the cost of reselling from the
down payment if the goods sold on less then its actual value. If it could not recover
from down payment then bank can make a legal obligation against the buyer for
further recovery.
BAI-SALAM
 BAI-SALAM

Defination:
Seller agrees to supply specific good to the buyer at a future date in
exchange of an advance price fully paid at the spot.
Price is in cash but the supply of goods is deferred.
• It is alternate of Bai-mu’ajjal.
 Bai-salam is a valid transaction with the following three basic conditions:
1. The nature, quality and quantity of the merchandise (to be delivered in future) must
be clearly specified along with the delivery date.
2. The price to be paid in advance should also be fixed.
3. Only those goods can be sold through bai-salam contract in which the quantity and
quality can be exactly specified.
E.g. Precious stones cannot be sold on the basis of salam because each stone
differ in quality, size, weight and their exact and their exact specification is not
possible.
 Islamic Trading
Trading :

Bank Bank’s Client

(1) Financing
(4) Goods Produced
(5) Revenues (2) Cash Payment (3) Needs

Goods Market Needs

Traditional Trading
Goods
Market
(5) Revenues
(6) Principal + Interest (4) Goods Produced

Bank Bank’s Client

(1) Loan
(3) Needs
(2) Cash Payment
Needs
LEASED BASED
AGREEMENT
 IJARAH OR LEASING
• Ijarah is a contract for the use of an asset (by a lessee) for an agreed price over a fixed
period of time while its ownership still remains with the original owner(lessor).

Three Fundamental conditions for a valid ijarah contract :

1. The asset be the property of the lessor.
2. The period of contract be specified.
3. The rental and its payment schedule be precisely stated.
Note :
• The asset remains in working condition (during the period of lease) is the
responsibility of lessor.
• The lessee can get incidental repairs done at his own initiative and either charge
against the rental to be paid, or bill the same to the lessor on cost basis.