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