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Fatawaa


Subject : Conditions of Istisna` Contract and its Related Rulings

Fatwa Number : 3071

Date : 27-04-2015

Classified : Current Financial Issues

Fatwa Type : Search Fatawaa


Question :

What are the conditions that make an Istisna` contract valid?



The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon Prophet Mohammad and upon all his family and companions.

Istisna` refers to a contract for the acquisition of goods by specification where the price is paid at the time of contract or gradually in accordance with the progress or on completion of a job. Hanafi jurists have regarded Istisna` permissible out of Istihsan (Application of discretion in a legal decision) while the Shafi jurists considered it permissible in case it met the conditions of Salam contract ( A sale contract whereby the purchaser pays the price in advance and the delivery of subject matter is postponed to a specified time in future).

Al-Kasani (May Allah have mercy on him) said: "Istisna` contract is permissible, out of Istihsan, because this is the scholarly consensus and this has been practiced in all ages without being denied. This is also because it includes two permissible contracts: Salam and Ijarah (Hiring). Salam is a sale contract whereby a product is a debt on the manufacturer, and hiring is conditional upon manufacturing a product. Consequently, the contract that includes two permissible contracts is also permissible." {Badai` Al-Sana`ei`, V.5:2}.

Upon conclusion of Istisna` contract, it becomes binding on the contracting parties, and this has been adopted by Majallah el-Ahkam-i-Adliya, which was drafted by some of the eminent late Hanfi scholars. It stated: "If the Istisna` contract is concluded, none of the contracting parties has the right to back out and if the product doesn`t conform with the agreed specifications, the one who required the manufacturing of the product "the demander" either accepts or backs down on the deal." {Article 392}.

The author of the book "Al-Moheet Al-Borhani" attributed the saying "the Istisna` contract is binding" to Imam Abi Yousuf although there is another opinion that Abu Yousuf didn`t say so. However, Majallah el-Ahkam-i-Adliya has adopted the former saying. For more details, kindly check "Al-Moheet Al-Borhani, V.7:136."

This was also adopted by the International Islamic Fiqh Academy at its seventh session.

An Istisna` contract must meet the following conditions:

First: The specifications of the product to be manufactured. "The conditions of its permissibility are: Specifying the type, kind, quality and quantity of the product to be produced, and that it is common amongst the people." {Badai` As-Sana`ei`, V.5:3}.

Second: The product is commonly manufactured via Istisna` contract, because the permissibility of Istisna` is based on customary practice. Thus, Istisna` doesn`t apply to products which aren`t commonly obtained through Istisna` contract, such as fruits and grains. 

Third: The delivery date must be determined. For more details, check {Badai` As-Sana`ei`, V.5:3} by Imam Al-Kasani.

Fourth: The price is made known upon concluding the contract of Istisna`. Deferring and advancing the price depends on agreement of the contracting parties, so it could become advanced, deferred, and or paid in installments.

Resolution (67/3/7) of the International Islamic Fiqh Academy stated: "In a contract of Istisna`, it is conditioned to specify the the type, kind, quality and quantity of the product to be produced, in addition to the date of delivery. However, it is permissible to delay the whole price or pay it in installments with specific dates.

Fifth: The material and the manufacturing is provided by the manufacturer or else this becomes an Ijarah contract. And Allah the Almighty knows best.




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