JURISTIC STUDY OF FINANCIAL

CONTRACTS
(Fiqh al-‘Uqud al-Maliyyah)
Dr Habeebullah Zakariyah
IIUM Institute of Islamic Banking and Finance (IIiBF)
International Islamic University Malaysia
habzak@iium.edu.my

1
IJARAH CONTRACT
 DEFINITION OF IJARAH
• IJARAH : is leasing of an asset under which a specified
permissible benefit, in the form of a usufruct, is obtained for a
specified period in return for a rental payment.

• BNM: “An ijarah refers to a contract that transfers

ownership of usufruct or service for a specified period
in exchange for a specified consideration”
 Contract of Ijarah (Leasing)
• The essential elements with the necessary conditions are:
• 1. Contract: Offer and Acceptance
• (i) In definite and decisive language.
• - in the past or present tense
• - not in the future or imperative tense.
• (ii) The acceptance must agree with offer
• (iii) The offer and acceptance must be made at the one and same
meeting.
NATURE OF THE CONTRACT: (BINDING)

• Ijarah contract is a binding contract which shall not be

terminated unilaterally by any of the contracting
parties.
PILLARS OF IJARAH CONTRACT
An ijarah shall consist of the following components:

(a) the contracting parties, (the lessor and lessee);

(b) ijab (offer) and qabul (acceptance);
(c) the asset and usufruct; and
(d) rental
The Asset

• (i) It must be owned by the lessor. or agent , or natural , or

appointed guardian of the owner(wali mal).
• (ii) It must be specified and known by address description or
specifications.
• (iii) It must be delivered to lessee in good working condition.
The Benefit (use or usufruct)
(i) It can be fixed in value
(ii) The lessor has the power and capacity to use and lease the
asset
(iii) It must be permissible
(iv) It must be known
• - the purpose for which the asset is used must be known
• - the period of leasing must be known.
(v) It must not be any material part of the asset.
The Rental

Rental shall be determined and agreed by the contracting parties at the

inception of the ijarah contract.-
The rental to be paid by the lessee in the following manne
(a) in cash or in kind;
(b) in advance or deferred; and
(c) in a lump sum or by instalments at such intervals as daily, weekly,
monthly, quarterly, semi-annually or annually

It must be known in currency and absolute amount

The Lessor

(The necessary conditions are the same as those for buyer and seller.)
The Lessee

(The necessary conditions are the same as those for buyer and seller)
Dissolution of an ijarah contract

1- Mutual agreement between the contracting parties to terminate the

contract;
2- any contracting party exercises its option to terminate the ijarah
contract within an agreed time period;
3-Total destruction of the leased asset
CONTRACT OF WADIAH
• There are two forms of Wadiah:
• (i) Wadiah Yad Amanah (Trustee Safe Custody)
• (ii) Wadiah Yad Dhamanah (Guaranteed Safe Custody)
Contract of Wadi`ah
• Definition:

• Wadi`ah: refers to a contract by which an owned asset is placed with

another party on the basis of trusteeship (amanah) for safekeeping
purposes. The contract is also referred as wadi`ah yad amanah.
• Originally Wadiah is of Yad Amanah where the custodian has the duty
to protect the property by:
• (i) Not mixing or pooling the properties (money) under his custody.
• (ii) Not using the properties.
• (iii) Not charging any fees for safe custody.

• If he failed in any of the above Wadiah changes to Yad Dhamanah

where:
• - he has to return (replace) the properties to the owners if they were
lost or destroyed.
Dissolution of wadi`ah yad amanah
A wadi`ah yad amanah contract is dissolved under the following
circumstances:

(a) any of the contracting parties unilaterally terminate the contract;

(b) both contracting parties mutually agree to terminate the contract;
(c) any of the contracting parties unilaterally terminate the contract
due to misconduct (ta`addi), negligence (taqsir) or breach of
specified terms (mukhalafah al-shurut‫ )طورفلا ةفلاخم‬of the contract
by the other
THANK YOU