The Parameters of Forward Ijarah

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The Parameters of Forward Ijarah and its Application in Financing Services in


Islamic Financial Institutions

Conference Paper · September 2010

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The Parameters of Forward IjÉrah and its Application in Financing
Services in Islamic Financial Institutions

by

AÍmad MuÍammad MaÍmËd NaÎÎÉr


Director of the Center for Islamic Financial Monitoring and
Communication
The General Council for Islamic Banks and Financial Institutions
The Kingdom of Bahrain
ABSTRACT

This research paper attempts a jurisprudential examination of a lease for benefits of


determined specifications which becomes a binding debt (referred to herein as “forward
ijÉrah”). This starts with a survey of the classical Islamic fiqh heritage, in order to extract the
rules and parameters particular to it. The important fiqh issues associated with this type of
contract are mentioned, and the material is organized as per the organization schemes of
Islamic jurisprudence, in order to facilitate understanding of this contract as a preliminary
step to its utilization in the Islamic finance industry. The ways the contract form can be
applied in the rental of services will also be presented, in addition to the most important
fatwÉs and resolutions relevant to forward ijÉrah contracts.
In the Name of Allah, the Most Beneficent, the Most Merciful

All praise is for Allah; may peace and blessings be upon the Messenger of Allah.

To proceed: Since the last thirty years the Islamic finance industry has made one of its
strategic goals research in the classical Islamic fiqh heritage, the aim being to extract
financial formats and become conversant with their parameters and financing particularities
and put them to use in developing contemporary financial products that comply with Islam‟s
worldview and objectives. This task is difficult in and of itself, as it requires knowledge of
fiqh and finance, as well as awareness of the way financial products are used in the real
world. This research paper strives to examine, from fiqh and financial perspectives, an
important contract format which jurists of the past have discussed and which Islamic banks
have greatly benefited from in many of their applications. I‟m referring to a rental contract
based upon a description of attributes which becomes a binding debt. It has become the object
of a great deal of study with regard to the fiqh issues associated with it, in order to formulate
a sound structure for it and to develop a comprehensive conceptualization of the format in
order to put it to good use in banking applications. In the opinion of the researcher, it is a
necessary preliminary effort, and all research efforts must be expended to further develop it
in the Islamic banking industry.

This paper concentrates on the applications of this contract format in financing the rental of
services. I ask Allah to enable me in the task before me. What is correct in it is from Allah,
and what is mistaken in it is from me and from Satan. I seek Allah‟s pardon for every slip.
And all praise is for Allah, Lord of the Universe.
Topic One

A Rental Contract Based on Attributes That Becomes a Financial


Obligation in Islamic Jurisprudence
The Definition of al-IjÉrah fÊ al-dhimmah

Al-ijÉrah al-mawÎËfah fÊ al-dhimmah is a specific type of contract recognized by Islamic


jurisprudence that combines characteristics of two other contracts recognized by Islamic
jurisprudence, i.e., a salam contract1 and an ijÉrah (rental) contract. It is possible to define a
contract for ijÉrah al-mawÎËfah fÊ al-dhimmah as the sale of future benefits for immediate
cash or, alternatively, a salam contract for benefits, whether the benefits are derived from
objects or from acts. Alternatively, it is ijÉrat al-dhimmah (rental [entailing] an obligation)
because the promised benefit is associated with an undertaking of responsibility by the lessor
and is not linked to a particular object or entity. An alternative definition is “rental of a
guaranteed benefit” because the lessor guarantees its provision under all circumstances, and it
is thus a responsibility he is obliged to fulfil. The English term for it is “forward ijÉrah”. The
Kuwaiti al-MawsËÑah al-Fiqhiyyah, in the chapter on ijÉrat al-dhimmah, states:

The majority of jurists classified leases, with regard to the locus of the right to the
benefit that is the subject of the contract, into two categories: leases of [particular]
objects and leases that entail an undertaking of responsibility.
1. lease of a [particular] object: The right to the benefit that is the subject of
the contract is related to a specific object; for example, a person leases a
specific house or piece of land or car; or he hires a specific person to sew a
garment or build a wall, etc. Regarding this type of ijÉrah, there is no
difference of opinion among jurists that it is not necessary for the lessor to
receive payment on the spot for the contract to be valid or binding or for
the usufruct to pass to the renter. That is because leasing an object is like
selling it, since a lease is the sale of a benefit in return for a specified
compensation, and the sale of an object is valid whether the payment is
immediate or delayed, so likewise is the lease [of an object].
2. a lease that applies to an undertaking of responsibility: The right to the
benefit that is the subject of the contract is linked to the lessor‟s
undertaking of responsibility; for example, if someone rents a horse of
stipulated qualities for riding or for carrying goods, saying, “I rent from
you a horse with such-and-such characteristics to carry me to such-and-
such a place,” or if someone says, “I will make you responsible for getting
this garment sewn or for getting this wall of the following characteristics
built,” and the lessor accepts that.

1
Translator‟s note: Salam is a sale with advance payment and delayed delivery of the commodity. It is lawful
when the attributes and amount of the commodity and its delivery date have all been specified in the contract.
The Legality of al-IjÉrah al-MawÎËfah fÊ al-Dhimmah

Scholars differ about the legality of al-ijÉrah al-mawÎËfah fÊ al-dhimmah. The ×anafÊs

prohibited lease of the benefits of generic objects determined by specifications and for which

the lessor undertakes responsibility. They stipulated that the object being leased be a

particular object.

The majority of jurists, comprising the MÉlikÊs, ShÉfiÑÊs and ×anbalÊs, considered it

permissible to lease objects that are merely described and for which the lessor undertakes

responsibility, considering that as falling into the category of salam of benefits.

Therefore, the legality of forward ijÉrah is derived from the legality of leasing contracts and

salam contracts.

Types of Forward IjÉrah:

1. A lease in which the price is something described for which there is an undertaking of

responsibility

The rental payment due upon the renter/hirer will either be specific, delimited and

visible at the time the contract is enacted, or it may be determined by a description of

its traits. In the latter case it is not rendered void by the destruction of an object that

fulfils the stipulations the lessor/hiree designated for the payment due from the renter;

nor is it rendered void by the appearance of a defect in a particular object. The

difference between the two is that the destruction of the object or the appearance of a

defect in it is considered a breach of a stipulated condition of the contract if the two

parties had agreed to payment in the form of a specific object. However, if they had

agreed to payment by a description of its traits, it entails no breach of the condition

they agreed upon, since in this case the condition is not linked to a specific object that
the buyer or hirer stipulated as discharging the responsibility of the seller or hiree; it is

only linked to the type of object that is established as being the financial responsibility

of one of them to the other.2

2. A lease in which the subject is an action for which responsibility is undertaken

A lease in which the subject of the contract is an action is subdivided into two cases;

the first is when the contract pertains to the person himself; for instance, the other

party says, “I hereby hire you to do such-and-such an act.” The second case is when

the contract pertains to the liability of the person being hired; for instance, the other

party says, “I hereby commission you,” or says, “I‟m giving you these dirhams for the

tailoring of this garment.”3 Here the lease contract does not pertain to the person of

the lessor/hiree, and the performance of the desired action is not restricted to his

person; he is merely responsible for making sure the action is completed. He may

choose to do it himself or, if he so wills, he can hire or depute someone whom he

considers qualified to carry it out.4

3. Lease of a type of object, specified by description, that the lessor undertakes to

provide:

Many scholars use the term kirÉ’5 for a rental contract of something like a riding

animal, a car or a boat. The subject of such a rental may be a particular object which

is seen and specified at the time of rental, or it may pertain to a type of object

delimited by a description that the lessor undertakes to provide6 by saying, for

instance, “I assign you the use of it (i.e., the described object) for a year for such-and-

such amount.” If it is a riding animal, for instance, the type would have to be specified

2
MuÍammad SaÑÊd al-BËÏÊ, “Forward IjÉrah”, a paper presented at the 2007 Conference on the Practice of
Islamic Finance and Banking, held in Bahrain, p. 3.
3
TuÍfat al-MuÍtÉj fÊ SharÍ al-MinhÉj, 42:952; See also MuÍammad SaÑÊd al-BËÏÊ, op. cit., p. 4.
4
MuÍammad SaÑÊd al-BËÏÊ, op. cit., p. 6.
5
Translator‟s note: „Charter‟ may be the closest English equivalent.
6
MuÍammad SaÑÊd al-BËÏÊ, op. cit., p. 11.
because animals differ in their usefulness for differing purposes, based on variations

in qualities such as speed, etc.7

The Rules of Forward IjÉrah in Islamic Jurisprudence

The comprehensive criterion that provides the parameters and rules that govern forward

ijÉrah is thorough specification of the attributes of what it is that will be provided in the

leasing contract, i.e., total commitment to the conditions and parameters of salam contracts.

That is because forward ijÉrah is a salam contract that pertains to benefits, as was already

explained. In MuntahÉ al-IrÉdÉt it says:

The condition of thoroughly stipulating the characteristics of the subject of the


contract in forward ijÉrah is because uses differ with the variation of
characteristics. Therefore, failure to describe it precisely will lead to disputes,
whereas a precise and thorough description of that which is to be provided will
preclude disputes and help avoid gharar (ambiguity and uncertainty).”8

The following are the most important rules associated with forward ijÉrah:

General Rules of Forward IjÉrah:

1. It is not permitted to delay the payment, or make a substitution for the form of

payment agreed upon, or shift responsibility for payment to a third party or to a source

of expected income, or call an absolution of responsibility payment of the rent.

In fact, it is obligatory to make payment on the spot at the time the contract is enacted,

just as for the payment in a salam contract, because this is a salam contract for

usufruct. If the payment is present and observable but its value or extent is not known,

there are two opinions about that, just as for the advanced capital (payment) in a

7
AsnÉ al-MaÏÉlib, 12:161.
8
SharÍ MuntahÉ al-IrÉdÉt, Section: IjÉrah Is of Two Types; 2:252.
salam contract.9 Ibn Rushd said, “One of the conditions of forward ijÉrah, according

to MÉlik, is that payment be immediate, in order to avoid the sale of a debt for a

debt.”10 However the ShÉfiÑÊ and ×anbalÊ schools make a distinction in that regard.

The first case involves forward ijÉrah contracts that are formulated using the term

salam; for instance: “I make over to you (aslamtuka) this amount for the use of a

house with such-and-such attributes,” or “for the services of a construction worker of

such-and-such qualifications to build a wall.” If the lessor accepts, the payment must

be received on the spot so as not to turn the situation into the exchange of a debt for a

debt. However, in case the terms salam and salaf (debt) and their related verbs are not

used, for instance: “I commission you to do such-and-such,” or “I make you

responsible for such-and-such,” it is not necessary in such cases to make immediate

payment.11 The issue of immediate payment is a controversial one, and, therefore, it

will now be examined in detail due to the importance of the topic:

o Juristic Differences Regarding Immediate Payment

Those who permit forward ijÉrah differ whether immediate payment at the time the

contract is enacted is a condition for the validity of the contract. There are three

opinions on the issue:12

a. The ShÉfiÑÊ School requires, for the validity of a forward ijÉrah contract, that the

lessor/hiree receive payment at the time the contract is enacted, just as they

require that the supplier in a salam contract receive payment at the time the

contract is enacted.

9
AsnÉ al-MaÏÉlib, Section: IjÉrah Entailing an Undertaking of Responsibility, in vol. 2.
10
BidÉyat al-Mujtahid, 2:182.
11
SharÍ MuntahÉ al-IrÉdÉt, 2:36.
12
NazÊh ×ammÉd, 28th al-Barakah Symposium on Islamic Economics, Jeddah, 2007, p. 33.
If the two parties separate without receipt of payment, the ijÉrah contract becomes

null and void because a forward ijÉrah contract is a salam contract for usufruct

and, therefore, the same rule applies to it as applies to salam contracts for physical

commodities, regardless of whether the contract is formulated using the term

salam and its derivatives or the term ijÉrah or any other term. In TuÍfat al-MuÍtÉj

it says:

(It is a condition [for the validity] of a forward ijÉrah contract), if it is


formulated using the term salam [and its derivatives] or the term ijÉrah,
(that payment be handed over on the spot) just as for the capital of a salam
contract, for it is a salam contract for usufruct; therefore it is not possible
that the payment for it be delayed, whether the activity [that is the subject of
the contract] is delayed or not; just as [it is not possible] that a substitution
be made in the form of payment, or that responsibility for payment be
shifted to a third party, or that the hirer be made responsible for a
corresponding debt owed by the lessor/hiree, or that the payment be
exempted altogether. All this is in case the contract is formulated using the
term ijÉrah. These conditions do not apply if the contract is an undertaking
of obligation formulated using the term „sale‟ (bayÑ), even though it is the
same as a salam contract in meaning. This is due to the weakness of an
ijÉrah contract, since it is a contract for something that doesn‟t exist at the
time of enactment and it is impossible to discharge the obligation all at
once, whereas that is not the case for a sale regarding both points. Therefore,
the weakness is made up for by stipulating the condition that payment be
received on the spot.13

Al-ZarkashÊ said:

Among the conditions for a forward ijÉrah contract is delivery of payment


on the spot, if the contract is formulated using [the term] ijÉrah, according
to the most correct [view], (in consideration of the meaning). The parameter
of this rule is that if the choice of words leads to nonsensical incoherence,
the contract is ruled invalid, according to the famous and dominant view; for
example: “I sell you such-and-such for free.” If it doesn‟t lead to
nonsensical incoherence [there are two possible cases]. If the wording is
more widespread and well known regarding its meaning, the stronger
opinion is that the wording takes precedence; for instance: “I make over to
you (aslamtu ilayka) this garment for this slave.” This is because the term
salam is so widespread and well known with regard to a sale that involves
an undertaking of obligation. Another opinion is that it takes effect as a
[regular] sale. If the term is not widespread and well known, then the
meaning is treated as the intention; for instance: “I bestow [this] upon you in
exchange for...” The most correct view is that this takes effect as a sale. If

13
TuÍfat al-MuÍtÉj fÊ SharÍ al-MinhÉj, the Book of IjÉrah, vol. 6.
the two considerations are equally strong then there are two views within
the madhhab, the most correct being that precedence is given to the wording
because it is the basis from which meaning is derived, which makes
meaning subordinate to it. If the term salam is used in an ijÉrah contract
then the requirement that payment must be delivered on the spot is
indisputable. If the contract is enacted using the term ijÉrah, there are two
opinions, the strongest being that precedence of consideration is given to the
meaning, as in the use of the term hibbah (gift). If he says, “I hereby
purchase from you a garment of the following attributes with these
dirhams,” it takes effect (as a sale, according to the most authentic view)
due to the equal weight of the meaning and the wording, in which case the
most authentic opinion is that the wording is given consideration; thus a sale
takes effect.14

b. The MÉlikÊ School considers it an obligatory condition for the validity of a

forward ijÉrah contract that payment be received immediately upon enactment of

the contract; for a delay of payment means that the transaction turns into the sale

of a debt for a debt and the activation of lingering obligations on each party vis-a-

vis the other, which is prohibited. There is an exception, however: if the renter has

begun to make use of the property―for instance, if the renter has begun driving a

car that has been rented on the basis of stipulated attributes to the place he has

stipulated it transport him to―in that case, delay of payment is allowed since it is

no longer a delayed transfer by both parties. That is because the receipt of the

beginning of usufruct is similar to the receipt of the last moments of usufruct,

which means the factor that prevents delay of payment is no longer operative...and

there is no difference in that between a contract enacted using the term ijÉrah and

one enacted using the term salam. The author of ×Éshiyat al-DasËqÊ says:

A salam contract is also allowed for the usufruct of something in particular,


such as occupancy of a [particular] house, the service of a [particular] slave,
riding a particular animal, etc. if the object is taken into possession, even if
the intended use of the object is delayed, based upon the concept that receipt
of the beginnings is [like] receipt of the conclusions. [The promise of
benefit in exchange] for a delayed payment was only prohibited because it is
entirely an exchange of one debt for another debt. This, however, is only the
preliminary of a debt for a debt, which is less serious. The specific item

14
Al-ManthËr fÊ al-QawÉÑid, 2:442.
precludes the hazard of [a delayed payment for] a guaranteed future benefit,
which is not lawful. An example of that would be for the one offering
service to say to the one offering payment: “I will carry you to Makkah for a
specific amount of wheat, which will be a pending obligation upon you to
be paid at such-and-such a date.”15

The MÉlikÊs consider payment within two to three days of contract enactment to

be tantamount to payment on the spot because when one thing is almost

equivalent to another it takes its ruling, just as in salam contracts.

c. The ×anbalÊ School requires payment on the spot for forward ijÉrah contracts

formulated using the terms salam or salaf [and their derivatives]; for instance: “I

hereby make over to you (aslamtuka) this dÊnÉr for the use of a car of such-and-

such specifications to take me to such-and-such a place” or “...for the services of a

person with such-and-such attributes to build a wall of such-and-such

specifications.” If the service provider accepts the offer, in order for the forward

ijÉrah contract to be valid, payment must be made when and where the contract is

enacted, for this is a salam contract for usufruct. If payment is not received before

the two contracting parties separate, then it becomes the sale of a debt for a debt

(i.e., delayed payment for delayed service), which is prohibited. If, however, the

forward ijÉrah contract is formulated without using the terms salam or salaf,

immediate payment is not a condition for the validity of the contract because it

will not be salam in that case; therefore the conditions associated with it are not

applicable or binding.

Ibn QudÉmah stated in al-KÉfÊ:

If the hiring is for work to be done later, payment is due as soon as the
work is completed, based upon the statement of the Prophet (peace be
upon him): “Give a worker his wages before his sweat dries,” and
because it is one of the two items being exchanged, so when one of
them is made over it is incumbent for the other to be made over as
well, just as in a sale. If they agree to a condition of delayed payment,

15
×Éshiyat al-DasËqÊ ÑalÉ al-SharÍ al-KabÊr, 12:336.
it is permissible, unless the contract is for an undertaking to provide
usufruct. There are two opinions about that in the madhhab:
The first is that it is lawful, because it is compensation for
leasing/hiring,16 so delaying it is allowed, just as in delayed payment
for an object.
The second is that it is not allowed because it is a contract for an
undertaking of obligation, so it is not allowed to delay payment for it,
just as in salam sales.17

o Some Contemporary Views Regarding Delayed Payment for Forward IjÉrah

a. The opinion of Dr. MuÍammad SaÑÊd al-BËÏÊ:

The view Dr. BËÏÊ espoused in the paper he presented to the 2007 Conference on

the Practice of Islamic Finance and Banking was “It is obligatory to deliver

payment when and where the contract is enacted because this contract is a salam

contract for usufruct, and it is well known that it is obligatory to hand over

payment on the spot for salam contracts in order to avoid selling a debt for a debt.

This is the general rule.”18

b. The opinion of Dr. ÑAbd al-SattÉr AbË Ghuddah

Dr. ÑAbd al-SattÉr AbË Ghuddah mentioned a dissenting view about delayed

payment in forward ijÉrah contracts in his paper, “Parameters for Leasing

Services and the Applications of Forward IjÉrah Contracts” presented at the 28th

al-Barakah Symposium on Islamic Economics. He indicated that the AAOIFI

SharÊÑah Standards favoured the view that it is permissible to delay payment even

when the contract is formulated using the term salam. Dr. AbË Ghuddah did not

express his personal opinion on the matter.19

16
Translator‟s note: There is a mistake in the Arabic original; ijÉzah was written instead of ijÉrah.
17
Ibn QudÉmah, al-KÉfÊ fÊ Fiqh Ibn ×anbal, 2:169.
18
MuÍammad SaÑÊd al-BËÏÊ, “Forward IjÉrah”, a paper presented at the 2007 Conference on the Practice of
Islamic Finance and Banking sponsored by the Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI) and the World Bank in Bahrain, p. 8.
19
Dr. ÑAbd al-SattÉr AbË Ghuddah, “Parameters for Leasing Services and the Applications of Forward IjÉrah
Contracts” presented at the 28th al-Barakah Symposium on Islamic Economics, Jeddah, 2007, p. 98.
c. The opinion of Dr. NazÊh ×ammÉd

In a paper that he wrote on forward ijÉrah, Dr. NazÊh ×ammÉd stated: “I favour

the ×anbalÊ view that forward ijÉrah contracts are permissible without the

requirement that payment be submitted on the spot, when the contract is enacted

using the term ijÉrah and the like and the terms salam and salaf are avoided. This

makes life easier for people, lightens their burdens and removes hardship from

them regarding the types of financial transactions they need. This is in line with

the statement of AbË YËsuf: “That which is kinder to the people is more fitting

for adoption, for difficulty should be removed.”20

d. The opinion of Dr. Ali al-QuradÉdghÊ

Dr. Ali al-QuradÉdghÊ, in a paper he presented to the European Council for FatwÉ

and Research, advocated the permissibility of delayed payment when the contract

is formulated using the term ijÉrah. He mentioned that while discussing the

conditions and parameters for forward ijÉrah contracts, saying,

Payment must be made on the spot if the contract is enacted using the
term salam. However, if it is enacted using a term like ijÉrah, this is
not a condition of validity, according to one opinion in the ShÉfiÑÊ
madhhab and according to the favoured opinion in the ×anbalÊ
madhhab.21

e. The opinion of the Accounting and Auditing Organization for Islamic Financial

Institutions (AAOIFI) in Bahrain

AAOIFI referred to forward ijÉrah contracts and the permissibility of delayed

payment for them in its SharÊÑah standard no. 9 specifically for ijÉrah and ijÉrah

ending in ownership, article 3, points 3 and 5:

It is not a condition [of validity] that payment be immediate as long as


the contract is not formulated using the terms salam or salaf. And if
the lessor provides the renter with something that does not meet the

20
Dr. NazÊh ×ammÉd, op cite.
21
Dr. Ali al-QuradÉdghÊ, “IjÉrah for Human Services,” Paris: European Council for FatwÉ and Research, 2008.
specifications stipulated in the contract, the renter may refuse to
accept it and demand that which does meet the specifications.22

From what has been presented it is clear that the issue requires further research and

deep ijtihÉd due to its importance in the applications of leasing human services by

Islamic financial institutions. The sound foundation for that will be research into

the objectives of the SharÊÑah that relate to this contractual form in particular.

Guidance can be taken from that in real-world practice by considering the financial

and economic effects. The only manifest rule that we can rely upon for the time

being is that in AAOIFI’s SharÊÑah Standards, since the Islamic Fiqh Academy has

not issued a clarification of this issue.

However, there are a number of observations that may serve as a basis that would

help in the issuance of a decision on this matter:

a. If we consider delay of payment to be permissible in consideration of the

contract wording, which rules will we apply? Are they the rules for the lease of

a particular object or the rules for forward ijÉrah? That makes a difference,

since the rules differ.

b. If we allow delay of payment, we enter into the domain covered by the

prohibition of initiating the sale of a debt for a debt.

c. The apparent meaning of the juristic texts that mention taking into consideration

the contract wording is that they rely upon the wording to indicate the intent of

the contracting parties, but if that can be apprehended by customary practice,

particularly in the case of modern societies, which rely upon documentation and

authentication to clarify transactions, that would be more helpful in

understanding the transaction and the objectives of the contracting parties.

22
The Accounting and Auditing Organization for Islamic Financial Institutions: AAOIFI’s SharÊÑah Standards,
Bahrain, 2007, p. 135.
Therefore, this issue will have to be settled by means of the various fiqh

councils after copious and painstaking research of the topic. And Allah knows

best.

2. A forward ijÉrah contract pertains to the lessor‟s undertaking of responsibility.

This means that the contract requires him to commit himself to making sure that an

act desired by the hirer is executed in a sound and acceptable manner, no matter who

does it and no matter what means are used. Based on that, the lessor can hire

whomever he chooses to execute the act requested of him, and he has the right to

come to an agreement with him on a payment as he wills. ImÉm al-NawawÊ says:

It (i.e., ijÉrah) is of two types: that whose subject is a particular object, like
rental of a particular piece of real estate or animal or person. Or it could be
the undertaking of responsibility, such as rental of a riding animal that
matches certain specifications which the lessor undertakes to provide, or
giving [the lessor] the responsibility of getting a garment sewn or a building
built.23

That is, renting an animal by assigning a person the responsibility of providing a type

of animal requires that the animal meet the stipulated specifications. This is different

from hiring someone to personally do a certain job. ImÉm al-NawawÊ called attention

to that when he said: “If the hirer says, „I hereby charge you with the responsibility of

providing me with a woven garment of such-and-such specifications, on the condition

that you weave it yourself,‟ the contract is not valid due to the imposition of hazard

(gharar).”24

3. If the lessor fails to provide the renter with the rented item at the specified

time―some of them use the expression “flees from [the responsibility]”―the renter

has the option of keeping the contract in effect and accepting the delay, or he may

cancel it.

23
Al-NawawÊ, al-MinhÉj, with al-ShirbÊnÊ‟s commentary, 2:333.
24
Al-NawawÊ, RawÌat al-ÙÉlibÊn, 5:256.
4. The lessor is allowed to use the lease payment for his personal purposes.

An analogy is drawn here with the permissibility of doing so in a regular salam sale.

This is supported by a ÍadÊth collected in Sunan AbË DÉwËd on the authority of ÑAbd

AllÉh ibn AbÊ AwfÉ al-AslamÊ, who related, “We went on an expedition to Palestine

with Allah‟s Messenger (peace be upon him). The Palestinian peasants would come to

us, and we would pay them in advance for wheat and oil at a specified price and for a

specified date of delivery.” He was asked, “From whom would they get it?” He

replied, “We wouldn‟t ask them.”25 The lessor is allowed to use the payment for

personal purposes unrelated to the expenses of providing the service; however, he is

obligated to provide it at the time and in the manner agreed to.

5. It is permitted to take something as a security deposit from the lessor.

It is permitted to take a security deposit from the lessor in a forward ijÉrah contract;

for instance, to take a pledge of corresponding value to the job from a builder who has

contracted to build a house; in case he doesn‟t build the house, the deposit holder has

the right to sell it and use the proceeds to pay someone else to build it. “This is similar

to the sureties government agencies take from those who do work for them to make

sure that they do not perform the jobs negligently.”26

o Detailed Rules for Forward IjÉrah Contracts, with Respect to Each Type

 Rules Particular to Forward IjÉrah Contracts in Which the Payment is an

Obligation to Provide Something as per Specifications

1. Payment must be of specified quantity and attributes if it is in the

form of a future obligation.

The amount and attributes of the payment must be known if the

payment is delayed, just like delayed payment in a sale. If the hirer

25
Sunan AbË DÉwËd, 3:273.
26
ÑAbd al-RaÍmÉn al-JazÊrÊ, al-Fiqh ÑalÉ al-MadhÉhib al-ArbaÑah, 2:220.
says, “Do this, and I will make sure you‟re satisfied,” or “...I‟ll give

you something,” etc., the contact is invalid. If the hiree goes ahead and

performs the task, he is entitled to the going market rate for a job of

that sort. If the terms of his hire are that he gets his living expenses or

be provided with clothing, the contract is also invalid.27

2. The payment is allowed to be non-monetary.

In the commentary on al-Bahjah al-Wirdiyyah it says:

If he hires him for a certain amount of wheat or barley and


specifies it according to the standards required in a salam
sale, it is allowed. If he hires him for a certain weight of
bread, [it is allowed] based upon the permissibility of
selling bread by salam. If he rents out a house in exchange
for its restoration, or a riding animal in exchange for its
fodder, or a piece of land for its crop and the labour
required to produce it, or for a specified amount of dirhams
in exchange for cultivating it on the condition that whatever
he spends in doing so is not to be counted as part of the
payment, it is not valid. If he rents it for a certain number of
dirhams on the condition that he spend them on the
cultivation, it is not valid because the payment is
compounded of the dirhams and the cultivation costs, which
is an indeterminate task. If he does spend them on its
cultivation, he [has the right to] ask for compensation for
them.28

 Rules Particular to IjÉrah Contracts in Which the Benefit is a Specified Task

that the Contractor Becomes Responsible for (ÑAmal MawÎËf fÊ al-

Dhimmah).

1. It is not permitted to determine both the specifications of the task

and the time devoted to it.

It says in MuntahÉ al-IrÉdÉt:

[It is] a condition (that the specifications of the task and the
time devoted to it should not both be determined); for
instance, someone says, “I contract you (to sew it) i.e., this

27
Al-GhamrÉwÊ, al-SirÉj al-WahhÉj ÑalÉ Matan al-MinhÉj, 1:294.
28
SharÍ al-Bahjah al-Wirdiyyah, 2:206.
garment (in one day),” because he may finish it before the
day is done. If [the hirer] uses his labour for the rest of the
day, he has exceeded what he contracted him for. And if [the
labourer] doesn‟t work, he has left doing so in part of the
time allotted for it, which makes it avoidable deception, and
there is no equivalent to it [in the format that scholars agree
upon].29

Garments and buildings are like real estate in that their


benefits are not determinable except in terms of time. They
are like livestock in that it is permissible to enact contracts
for particular individuals among them or generically on the
basis of a binding obligation to provide specimens that meet
stipulated specifications. If a benefit is assessed in terms of a
task, for instance, “I contract with you to transport such-and-
such...etc.,” the contract is valid.30

(It is not permitted to determine both the specifications of the


task and the time devoted to it; to say, for instance: “I
commission you for a day to sew this garment for me.” That
is not valid), according to the most well known and
widespread view, for needlessly combining the two increases
the gharar (hazard and deception) of the ijÉrah. That is
because he may finish the task before the day is done. If he
uses his labour for the rest of the day, he has exceeded what
he contracted him for. And if he doesn‟t work, he has left
working in part of the time allotted for it, which makes it
gharar that could be avoided, and there is no equivalent to it
in the format that is agreed upon; therefore, the contract is not
allowed with it. (But it could be construed to be valid.) There
is a narration [attributed to ImÉm AÍmad to that effect], for
the ijÉrah is contracted for the task, and the time period is
only mentioned in order to expedite it; therefore it would not
invalidate the contract, just as in juÑÉlah.31 That has some
credibility. [The author of] al-TabÎirah said, “If he stipulated
that the work be expedited in the shortest possible time, his
stipulation is valid.” Based on that, should [the worker]
complete the work before the deadline he is not required to
work for the rest of the stipulated period, just as for payment
of a debt before the deadline. If the period expires before the
work is completed, the hirer has the option to annul the

29
SharÍ MuntahÉ al-IrÉdÉt, 2:258.
30
FatÉwÉ al-SubkÊ, 2:372.
31
Translator‟s note: JuÑÉlah is a contract to perform a particular action for a particular compensation. In that, it
is a type of ijÉrah, but it is non-binding, so there are fewer conditions for its validity. For instance, someone can
announce, “Whoever finds my lost camel will get such-and-such a prize.” This task could take an hour or a
month, so its indeterminate nature would make it invalid as a binding contract. Also―and this is why it was
cited here―in juÑÉlah the hirer can stipulate, “Whoever sews me a garment like this in one day will get such-
and-such.” If the worker completes it in one day, he is entitled to the compensation, but if he takes longer he is
not. Both parties in juÑÉlah have the option to cancel before the work starts, but once the work starts the
requestor of the work loses that option. See http://www.islam-qa.com/ar/ref/21239.
contract. If he decides to continue it, the service provider has
no option [to refuse].32

2. If the contract is for a stipulated task for which responsibility is


assumed, it is like salam. Therefore, it must be precisely determined by
the attributes of a salam contract in order that [the responsibility]
becomes known [to both parties]. (And the contractor to provide
service [ajÊr] can only be a human being) because [the contract] entails
the undertaking of legal responsibility, and non-humans cannot assume
legal responsibility. And the contractor must be legally competent
(jÉ’iz al-taÎarruf) because it entails compensation for a task for which
responsibility is assumed, so it is not allowed for someone lacking legal
competence. (The contractor [ajÊr] is [also] called a mushtarik
[participant]) because he accepts tasks on behalf of a group, with the
profit shared between them.33

 Rules Particular to IjÉrah Contracts for a Specified Benefit of a Particular

Object that the Contractor Becomes Responsible for.

1. A forward ijÉrah contract does not become void if the object being

leased should be destroyed. That is not the case if the ijÉrah contract is

for a particular object. It is mentioned in JawÉhir al-ÑUqËd: “Rental of

a particular [animal] is annulled if the animal dies, and the option to

annul becomes operative if it has a defect, but forward ijÉrah is not

annulled by destruction [of the particular object].”34

2. There is no option to annul a forward ijÉrah contract due to a

defect.

That is because the lessor has the obligation to replace the defective

item. It is mentioned in JawÉhir al-ÑUqËd:

There is no option to annul it (i.e., a forward ijÉrah


contract) due to a defect; however, the lessor is obligated to
replace it. And the food that was carried to be eaten must be
replaced, if it has been eaten, according to most correct
view.35

32
Al-MubdiÑ SharÍ al-MuqniÑ, 6:840.
33
Ibid.
34
JawÉhir al-ÑUqËd, 1:264.
35
Ibid.
3. The lessor must provide services that are subordinate to the

usufruct.

This is different from the lease of a particular object, for which such

services are the responsibility of the renter. It is mentioned in JawÉhir

al-ÑUqËd:

The lessor has the responsibility to take the riding animal


out in order to look after it, to help the rider mount and
dismount it as needed, to help load baggage onto it and
unload it, and to saddle and unsaddle it. When one is renting
a particular animal the lessor‟s only responsibility is to turn
the animal over to the renter.36

 A Comparison of Forward IjÉrah (MawÎËf fÊ al-Dhimmah) and

Particularized IjÉrah (MuÑayyanah)

1. The subject matter of a forward ijÉrah contract is a specified

benefit (service), for which responsibility is assumed without

stipulating the particular person who will actually perform the service,

whereas the subject matter of a particularized ijÉrah contract is a

specified benefit that will be performed by a stipulated individual.

2. When the worker who actually provides the service in a

particularized ijÉrah contract dies, the contract is automatically

dissolved, whether the other party has received part of the stipulated

service or not. On the other hand, in a forward ijÉrah contract if the

actual service provider dies, the contract is not dissolved; rather the

contractor is obligated to provide the service through some other

person.

36
Ibid.
3. If the actual service provider is found to have a defect, the hirer

has the right to annul a particularized ijÉrah contract while in a forward

ijÉrah contract he has the right to demand a replacement.

4. If the actual service provider is an abstract legal entity, like a

hospital, a university or an airline, the previous two rules apply in cases

of destruction or dissolution, inability, defect or shortcoming.

5. The right to annul the contract in case of a defect is confirmed for

a particularized ijÉrah contract. That is not applicable to a forward

ijÉrah contract because the service is substituted in case of a defect,

since the actual provider is not specified in the contract.

6. The service that is the subject of a forward ijÉrah contract must be

provided in a manner that enables the hirer to benefit from it. This

necessitates providing essential (ÌarËriyyah) and necessary (ÍÉjiyyah)

attendant services without which it is not possible to take benefit from

the primary service. On the other hand, a particularized ijÉrah contract

does not call for that unless it is stipulated.

7. It is permissible to delay providing the service that is the subject of

a forward ijÉrah contract until a future date, i.e., to formulate it for

provision in the future―in fact, that is how such contracts are normally

formulated. On the other hand, it is not permissible to formulate a

particularized ijÉrah contract for future delivery―at least according to

the ShÉfiÑÊ School. The other madhhabs do allow that.

8. It is not a condition of a forward ijÉrah contract that the stipulated

service be existent at the time of the contract; nor is it necessary to

have a person lined up to actually provide the service, since the


financial institution can provide them based upon the specifications. On

the other hand, for a particularized ijÉrah contract the person who will

be providing the service must be lined up at the time the contract is

confirmed.37

 A Comparison of Forward IjÉrah (MawÎËf fÊ al-Dhimmah) and Some Other

Contracts

1. Forward IjÉrah and IstiÎnÉÑ 38

IstiÎnÉÑ is a contract of exchange with deferred delivery in which the

task and the payment are both specified. IstiÎnÉÑ is similar to ijÉrah

in that it involves a request for work to be done. It resembles

[particularized] ijÉrah in that both are dissolved upon the death of

either party to the contract. IstiÎnÉÑ differs from ijÉrah in that the

essential element of istiÎnÉÑ is the work requested. If the nature of

the task requires that the worker, for instance, dye the material, he

would procure the materials―since he is more knowledgeable about

the materials―for that is pursuant to the task, and the job orderer

comes to the manufacturer empty-handed. In ijÉrah the owner of a

garment would come to the dyer with his own garment to be dyed,

so that is a difference between the two. As for the difference

between forward ijÉrah, in particular, and istiÎnÉÑ, it lies in the

following points:

a. It is permissible to pay the worker by instalments in

particularized ijÉrah and istiÎnÉÑ, but that is not allowed for

37
See Dr. Ali al-QuradÉdghÊ, op. cit.
38
Translator‟s note: IstiÎnÉÑ is a contract of exchange with deferred delivery, applied to specified made-to-order
items. See; http://www.islamic-finance.com/item_istisna_f.htm
forward ijÉrah, since it is salam of usufruct, according to the

most correct opinion, as was previously mentioned.

b. IstiÎnÉÑ is actually the sale of a commodity, which may be a

consumable or non-consumable (muÑammarah), and that is the

subject matter of the contract. Forward ijÉrah, on the other hand,

is actually a form of rental, and the subject of the contract is a

benefit from a commodity that must be non-consumable.

c. The commodity manufactured in istiÎnÉÑ is the property of the

job orderer, and while it is in the custody of the manufacturer he

is responsible for any damage to it. In forward ijÉrah ownership

of the commodity is not transferred to the renter, only the

usufruct.

2. Forward ijÉrah and juÑÉlah: In juÑÉlah one person offers another

compensation for completing a task; if the contractor does not

complete the task, he deserves no compensation, and his effort goes

to waste.39 There is a similarity between juÑÉlah and ijÉrah in

general, in that both are contracts for labour in exchange for a

specified compensation; however, Ibn Rushd considered that the

similarity does not eliminate the difference between the two. He

says, “JuÑÉlah is an independent category [governed by its own

particular evidence]; it is not to be analogically compared to ijÉrah,

nor is ijÉrah to be analogically compared to it, even if there are

similarities between the two.”40

JuÑÉlah differs from forward ijÉrah in a number of ways:

39
Ibn Rushd, al-MuqaddimÉt, 5:630.
40
Ibid.
a. In forward ijÉrah the compensation is paid up front, whereas in

juÑÉlah the compensation is paid upon completion of the task.

b. In juÑÉlah the worker may be a particular person, an unspecified

person, or a group; however, an ijÉrah contract will specify a

particular entity as either a worker or a contractor because the

task desired of him is something that he assumes responsibility

for.

c. The subject matter of a juÑÉlah transaction is restricted to the

action of a human being, whereas the subject matter of a forward

ijÉrah contract may be the action of a human being or usufruct

of an object of stipulated specifications that the lessor assumes

responsibility for providing.41

d. JuÑÉlah is more inclusive than ijÉrah because it can be

contracted for devotional deeds;42 also the desired task may be

determinate or indeterminate; also the contract is [initially] non-

binding, as opposed to ijÉrah.43

41
ShawqÊ DunyÉ, al-JuÑÉlah wa al-IstiÎnÉÑ: TaÍlÊl FiqhÊ wa IqtiÎÉdÊ, p. 61.
42
For instance, to arrange with a person to make ×ajj on behalf of an elderly or sick person who can afford to
go but cannot handle the physical demands of the journey and the rites.
43
Ibn SaÑdÊ, Minhaj al-SÉlikÊn fÊ al-Fiqh.
Topic Two

Forward IjÉrah in Contemporary Practice

Unique Financing Features of Forward IjÉrah Contracts

1. It is possible to provide services attendant to the primary benefit.

For instance, hiring to transport a person entails helping them to get in and out of the

vehicle.44

2. It is possible to make use of the liquidity provided for personal uses.

This is based upon the permissibility of using the capital advanced in a salam contract for the

seller‟s personal needs; it need not be related to the production of the contracted commodity,

as was previously mentioned in the rules for forward ijÉrah. Therefore, the lessor/contractor

in forward ijÉrah can use the advance payment, just as in a salam contract, for personal

purposes or for his personal expenses, since this is a salam contract for usufruct. He is not

obligated to spend it specifically on acts related to the provision of the service.45 This

provides flexibility for using this contract format to provide funding for a variety of cash

needs.

3. It is possible to provide the benefit by means of more than one object or entity,

which is the opposite of the rule for particularized ijÉrah, in which only the specific

subject matter of the contract can be supplied for usufruct; whereas in forward ijÉrah

the subject matter of the contract is generic, described by specifications, the

provision of which the contractor guarantees.46

44
ÑAbd al-SattÉr AbË Ghuddah, op. cit., p. 100.
45
Al-TÊjÉnÊ ÑAbd al-QÉdir AÍmad, “Salam is a SharÊÑah-Compliant Alternative for Contemporary Bank
Financing: A Finance and Investment Perspective,” The Sudani Ministry of Finance and National Economy,
The Higher Advisory Committee on Government SukËk, Sudan, 2006, p. 11.
46
ÑAbd al-RaÍÊm al-HÉshim, “Specification and its Impact on Financial Contracts,” University Thesis Series no.
67, ImÉm MuÍammad Ibn SaÑËd University, Riyadh, 2006, p. 55.
Areas for Application of Forward IjÉrah Contracts in the Islamic Finance Industry

Forward ijÉrah contracts are applied in the following areas of the Islamic finance industry:

1. Financing services

2. Investment ÎukËk

First: An Overview of the Application of Forward IjÉrah Contracts in Financing Services.

The steps for using a forward ijÉrah contract to finance a service can be detailed as follows:

1. The lessor (the financial institution) enters into a forward ijÉrah contract to provide

financing for usufruct (manfaÑat al-Ñayn) to its client.

2. Then the financial institution enters into a forward ijÉrah contract with an entity that

assumes the responsibility of providing the desired service. The following guidelines

must be observed:

a. The financial institution must stipulate that the service provider provide it or a

specified client the desired service.

b. There must be no linkage between the two contracts; i.e., the contract between the

financial institution and the service provider must not be linked to the contract

between the financial institution and the beneficiary of the service. That is because

one does not have the right to act freely [with regard to the benefit] for which

someone else has undertaken specified responsibility before one has taken

possession of the object, i.e., before the particular source of the benefit has been

identified.47

47
ÑAbd al-SattÉr AbË Ghuddah, op. cit., p. 102.
Second: Areas of Application

1. Financing education, training sessions, health services, trips, including ×ajj and

ÑUmrah, wedding receptions and transport.

2. Investment ÎukËk (forward ijÉrah)

This can occur, for example, when a real estate developer comes up with a plan to

build housing units described with detailed specifications. Then it prepares ÎukËk of

identical value that bestow rights to the benefits of these housing units of detailed

specifications and opens them for public subscription. The ÎukËk should stipulate the

beginning and ending dates of the usufruct rights and other important specifications of

those rights, such that:

 The issuer of the ÎukËk is the lessor.

 The ÎukËk subscribers will be the renters of the benefits of the specified

objects that the lessor has undertaken the responsibility to provide.

 The yield of the subscription is the lessor‟s compensation (ujrah).

 The ÎukËk holders will jointly possess the benefits of the specified objects that

the lessor has undertaken the responsibility to provide. They will reap their

benefits and share the responsibility for them [in common].48

When issuing this type of ÎukËk the following SharÊÑah rules must be observed:

a. It is not permitted to securitize ownership rights to the actual objects which

contain the benefits specified in the forward ijÉrah.

That is due to the indeterminacy of the object the lessor is capable of

providing to the renter, which contains the benefit described in the contract

and which has become a debt obligation of the lessor. That is because the

48
×Émid ibn ×asan MÊrah, “IjÉrah ØukËk: A Jurisprudential Study of Their Foundational Principles and
Application,” The SharÊÑah Group Publication Series No. 1, al-BilÉd Bank, DÉr al-MaymÉn, 2008, pp. 330-331.
objects in which the specified benefits reside vary greatly in nature and price.

The disparity is so great that it is impossible to specify the particular object for

which the ÎukËk of ownership is intended. The glaring indeterminacy is

virtually guaranteed to lead to disputes, which precludes the contract from

being valid.49

b. It is permitted to securitize the benefits that are the subject matter of the

forward ijÉrah contract, and which have become a debt obligation upon the

lessor. It is then permissible to buy and sell them. That is because a stipulated

benefit is by its nature amenable to transactions by means of an ijÉrah

contract; so, likewise, it can be traded by the original renter, who gains the

right to it by the ijÉrah contract. He can rent it to a third party, who can rent it

to a fourth party, who can rent it to a fifth. The price can be the same as the

original rental or higher or lower. It doesn‟t matter, in this regard, if the

original ijÉrah contract was for a particular object or a specified description

[that narrows down a genus]. That is because, from a fiqh standpoint, it

doesn‟t matter if the benefit that the ijÉrah contract bestows right to is

connected to a particular object or a generic object that the lessor undertakes

responsibility to provide, as long as it is sufficiently described with

specifications that make it determinate and, thus, valid for purposes of

transaction.50

49
NazÊh ×ammÉd, op. cit., p. 344.
50
Ibid., p. 345.
Contemporary Rules and FatwÉs for Forward IjÉrah

1. The rental of services such as teaching, medical treatment, transport, etc. are all

considered forward ijÉrah contracts if the specification consists merely of identifying

the legal personality [responsible for providing them].

This personality is legally responsible for providing the service, rather than the doctor,

teacher, or means of conveyance. The key issue involved in transforming this type of

ijÉrah from a forward ijÉrah format to particularized ijÉrah is the specification of the

party who will actually provide the service. If the party is specified it becomes a

particularized ijÉrah, and if the party is left unspecified it remains a forward ijÉrah

format. To leave the direct service provider unspecified is the standard banking

practice.51

2. The lessor in forward ijÉrah does not have the right to deliver the rented item before

the agree-upon date―

unless both parties agree at that time; otherwise, the additional period [of the renter‟s

possession] is not to assessed as part of the rental period, which means that the

agreed-upon compensation is not applicable to it.

3. If the lessor delays providing the renter access to the benefit beyond the agreed-upon

starting date, the renter has the right to a refund proportional to the extent of the delay.

4. It is not permitted to structure a forward ijÉrah contract to end with the purchase of

the item that contains the benefit.

That is because the benefit that is the subject matter of a forward ijÉrah contract is a

debt obligation on the part of the lessor. It does not pertain to a particular item, but

rather to the legal liability of the lessor. That means that he is in compliance with the

terms of the contract as long as he provides any item that contains the benefit he has

51
Decision no. 8/3/2006_1 of the FatwÉ and SharÊÑah Advisory Board of AbË Dhabi Islamic Bank.
contracted to provide the renter/hirer, who has no right to reject that particular item or

demand a replacement as long as the item provided does contain the benefit in accord

with the specifications stipulated in the contract. This logically necessitates the

anonymity of the item by which the lessor can fulfil his obligation of providing to the

renter. The level of indeterminacy is too high for a contract that includes a purchase at

the end of the lease period. That will almost certainly lead to disputes and arguments

between the two parties, and there is no contract provision that will fend off this

eventuality, which means that a forward ijÉrah contract that ends in purchase is

irrevocably invalid.52

Suggestions

1. The controversies surrounding forward ijÉrah, such as the basic issue of its legality

and the permissibility of delaying the payment, should be settled by means of the

collective ijtihÉd of the fiqh councils.

2. Extensive research should be conducted on this topic in particular in order to come to

a clear understanding of its rules, parameters and various permutations.

3. A study should be conducted of the economic impact on banks of using forward

ijÉrah. The results should be used as a guide to develop new financial products

consistent with the positive economic effects.

4. Research should be done on the risks involved in forward ijÉrah and suggestions

should be proposed for SharÊÑah-compliant means to safeguard against those risks as

much as possible.

52
NazÊh ×ammÉd, FÊ Fiqh al-MuÑÉmalÉt al-MÉliyyah wa al-MaÎrafiyyah al-MuÑÉÎarah: QirÉ’ah JadÊdah.
(Regarding Jurisprudence of Modern Financial and Banking Transactions: A New Reading), DÉr al-BashÊr,
2007, p. 344.
5. A study should be conducted of financing real estate projects using forward ijÉrah.
APPENDIX: A Financing Contract by Means of Forward IjÉrah

Templates from the Document Compilation (al-MajmËÑah al-

Mustanadiyyah)53

A Forward IjÉrah Contract (for Financing)

Preface

Whereby the second party (the renter) wishes to lease the services specified in the appendix

attached to this contract, and whereby the first party (the lessor) agrees to guarantee the

provision of those services to the second party in accord with the requirements of a forward

ijÉrah contract and the particular conditions and regulations stipulated below, the two parties,

who are fully legally competent as per the requirements of the Islamic SharÊÑah and the law of

the land, do hereby agree and consent to the following:

Article One:

The preface above and the attached chart shall be considered integral and inseparable parts of

this contract; and the contract shall be read, completed and interpreted in light of this preface.

Article Two: The Subject Matter of the Contract

The second party acknowledges that he agrees to the descriptions, explanations, constituents,

and specifications of the useful service that is the subject of the contract, that he has accepted

it with those specifications, and acknowledges that it is suitable for fulfilment of the benefit

intended by confirmation of this contract with due consideration to the regulations contained

in Article Three of this contract.

53
These templates are from Bayt al-TamwÊl al-ÑArabÊ (an Islamic bank) in Lebanon. References to the two
contracting parties, the date, the currency, addresses and signatures have all been removed.
Article Three: The Period of the Contract and the Lease

a. This contract shall commence from the date the second party is enabled to take benefit

from the useful service that is the subject of the contract, and it shall terminate on the

date that the contracted useful service described in the appendix is terminated.

b. This lease shall be executed and the compensation shall be due when the second party

is provided access to the subject of the contract.

c. The total compensation for this contract shall be __________________ only, nothing

else. The second party agrees to pay it immediately upon demand.

Article Four: Payment

a. The second party hereby pledges to pay the instalments of the lease payment

stipulated in Clause Three of Article Three above to the first party without any

deduction, adjustment or withholding on the date that payment is requested.

b. The second party has no right to delay payment in the manner clarified in this

contract. In the event that he should delay payment or refuse to pay, the first party

shall, in this circumstance, have the right to claim from the second party due

fulfilment of all its rights proceeding from this contract, as it is also its right to secure

fulfilment of its rights by what may be in its custody of property and deposits

belonging to the second party without any restrictions or conditions.

c. The client shall be obliged, should he fail to pay an instalment on time, to give, in

charity to good causes, with the knowledge of the SharÊÑah Board of the Bank, a

percentage of each instalment as determined by the administration; and the client shall

bear all direct procedural expenses incurred by the Bank in seeking restitution for the

amounts owed to it by the client.


Article Five: Making Use of the Service that is the Subject of the Contract

a. The second party is obliged to use the service that is the subject of the contract in a

manner that accords with its nature and with the prevailing custom and the

instructions issued by the entity that will be providing the service mentioned in the

attached appendix. Any departure from the regulations applied by this entity shall be

the sole responsibility of the second party, and the first party shall have nothing to do

with that. Therefore, all administrative procedures and relevant laws of that entity

shall be applied to the second party only, and that shall not absolve him of any

obligations he owes to the first party.

b. The second party assumes responsibility for all attendant necessities required for

deriving benefit from the service that is the subject of the contract; that is by

guaranteeing [provision] of all necessary materials, such as books, stationary, research

papers and items of similar nature, as may be required for the completion of this

useful service. All such items shall be the responsibility of the second party since they

are not part of the subject matter of the contract.

Article Six: Disposal of the Asset that Is the Subject of this Contract

a. The second party has a right to relinquish the benefit that is the subject of this

contract to ______________, while remaining responsible to the first party for the

obligations of the contract.

b. The second party has no right, without previous written agreement by the first party,

to make any additions, alterations or amendments to the service that is the subject of

the contract, and any unauthorized additions or amendments shall not be considered

subject to this contract, and, as such, they shall be the sole responsibility of the

second party to bear, no matter how much they cost.


Article Seven: Loss of the Benefit

If the second party should be unable to avail of the service that is the subject of this contract

due to reasons for which he is not responsible and which are not considered unpreventable

and unpredictable―for instance, the entity providing the service entirely stops its operations

―he has the right to request of the first party provision of another entity having qualifications

comparable to the first entity through which he can attain the contracted service.

Article Eight: Dissolution and Termination of the Forward IjÉrah Contract

The first party has the right to dissolve this contract by written notice to the second party if

one of the following causes should materialize:

a. If the second party should renege on any of the obligations imposed upon him by this

contract.

b. If any of the promises advanced or information provided by the second party in this

contract or in any document or certificate related to it should prove to be false in a

way that exposes the first party to risk.

Article Nine: The Authority and Competence of the Second Party

The second party affirms that he possesses the complete authority and necessary legal

competence to enter into this contract and carry out the obligations contained in it, and that

such execution shall not conflict with any existing law or contract or with any promise or

obligation to the first party.


Article Ten: Soundness of the Contractual Process

The second party affirms that he has understood the articles, rules and conditions of this

contract, and that he has not been subject to any type of deception, mistake or any other

defect that would impair his judgment.

Article Eleven: The Law that Must Be Followed, Dispute Resolution and Jurisdiction

a. Everything that is not mentioned in this contract is subject to the laws and prevailing

commercial practice of ________________ that do not contradict the laws of the

Islamic SharÊÑah with the proviso that the Arabic text shall be relied upon as the

principle basis for judgment.


TEMPLATE 3A

A Contract for Acquiring the Benefits of an Academic Seat in a University

(With an Option of Annulment for the Bank)

University of ___________________

(University Address)

Attention: Registrar‟s Office

Dear Sirs: We wish to inform you that we would like to acquire an academic seat in the

specialization of _________________, year _________________ / for a period of one

semester / two semesters (Semester _________ and Semester _________) for the academic

year (2_____/2_____), tuition and fees totalling _______________________________.

We request your confirmation so that we can complete the necessary procedures, after which

the payment due will be delivered; with the knowledge that, should you agree to assign to us

the desired seat(s), we reserve the right to cancel the lease of the aforementioned seat(s)

within ten days of the date of receipt of your confirmation.

(Islamic Bank)
TEMPLATE 3B

Ceding Benefit

Permission to Grant the Benefits of an Academic Seat in a University

University of ___________________

(University Address)

Attention: Registrar‟s Office

Dear Sirs: With reference to your bestowal upon us of an academic seat in the specialization

of _________________, year _________________ / for a period of one semester / two

semesters (Semester _________ and Semester _________) for the academic year

(2_____/2_____), tuition and fees totalling _______________________________;

we wish to inform you that we have ceded our right to the benefits of this academic seat to

Mr. ________________________. Please allow ____________________ to pursue study.

We are including a check for _______________________ to cover all the tuition and

attendant fees.

Please provide us a receipt in the name of _____________________.


TEMPLATE 5A

Request of a Commitment

University of ___________________

(University Address)

Attention: Registrar‟s Office

Dear Sirs: With reference to the academic seat awarded by you to the Bank for year

_________________ of the academic year ________ in the department of

_________________, the rights to which were ceded to the student ____________________,

we request you not to give the yearly academic results directly to the student _____________

or his parents/guardian, but, rather, to give them directly to the administration of the Bank as

soon as they come out.

(Islamic Bank)
TEMPLATE 5B

Request of a Commitment

University of ___________________

(University Address)

Attention: Registrar‟s Office

Dear Sirs: With reference to the academic seat awarded by you to the Bank in the

specialization of _________________ for the academic year ________, the rights to which

were ceded to the student ____________________,

we request you not to give the yearly academic results directly to the student

____________________ or his parents/guardian, but, rather, to give them directly to the

administration of the Bank as soon as they are ready.

(Islamic Bank)
TEMPLATE 6A

Contract Cancellation

With reference to the contract signed between the two abovementioned parties for the

registration of the student ____________________, in class __________________ for the

academic year ________,

both parties have agreed that this contract and all it entails are null and void.

The First Party The Second Party

_________________________ ___________________________
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