contigent impact of incidents on commitment.pptx

its about contingent impact of incidents on commitment. the shariah standards

1. AAOIFI Shariah Standards Impact of Contingent Impact of Contingent Incidents on Commitments Submitted to: Dr. Qaisar Maqbool Khan

2. Submitted by Syeda Sana Batool MBIB-23-01 Section 23-25

3. Shari’ah Standard No. (36) Presented by: Syeda Sana Batool Understanding the Implications in Islamic Financial Institutions

4. Statement of the Standard Preface: T his Standard aims to illustrate the contingent incidents which come suddenly upon commitments and cause deviation from stipulated results. Scope: This Standard covers the contingent incidents encountered in honoring the commitments that stem from application of Islamic modes of the commitments and the effects of such incidents on commitments .

5. Definition of Contingent Incidents Incidents occurring suddenly with significant influence on commitments . Different from defects of will (present at contract signing) and mutual consent terminations . Types of Contingent Incidents Amendments necessitated by contingencies. External reasons for contract termination.

6. Contingencies Leading to Amendment of the Contract Levy of custom duties or taxes post-contract. Significant price changes in commodities. Import restrictions on goods for Murabaha or Ijarah contracts. New laws imposing additional financial commitments. Contingencies Leading to Contract Termination Impossibility or futility of delivery. Total or partial damage to the commitment object. Ownership issues of the commitment object. Termination due to emergent excuses or abnormal harm. Calamities ( Jawa`ih ) affecting contract execution.

7. Levy of Custom Duties or Taxes After Signing the Contract Such incidents affect the commitment of the party who has to bear the new obligations by virtue of law or as per the stipulations of the contract. Change in Prices of Commodities Significant price changes in commodities used in contract implementation can harm the contractor. This harm can be mitigated through reconciliation, arbitration, or legal arrangements. Import Restrictions on Goods for Murabaha or Ijarah Contracts Import restrictions can cause harm to the client or the institution, which can be addressed by reconciliation, arbitration, or legal means.

8. Change in Laws Leading to More Financial Commitments New laws imposing additional financial burdens require determination of the responsible party, either through law or contract stipulations. Impossibility or Futility of Delivery Delivery failure may render the commitment null if it is inevitable, objective, and caused by an external party. Total or Partial Damage of the Object of Commitment Damage to the commitment object before delivery impacts responsibility. Partial damage from unavoidable incidents allows the committing party an option.

9. Ownership Issues of the Commitment Object If the object is owned by another, the committing party may be compensated, and partial ownership issues grant the right of option. Termination Due to Emergent Excuses Incidental excuses in Ijarah causing abnormal harm can lead to contract termination, resolved by agreement or law. Calamities ( Jawa`ih ) Incidents like storms affecting agricultural produce can lead to price discounts. Similar principles apply to Ijarah Muntahia Bittamleek contracts.

10. Date of Issuance and Adoption of the Standard Issued: 17 Rabi’ I, 1430 A.H. (15 March 2009). Adopted by Shari’ah Board on 15-17 Rabi’ I, 1430 A.H. (12-13 March 2009). History of the Standard's Preparation Initiated in 2005 by the Shari’ah Board with multiple revisions and public hearings between 2005 and 2009. Shari’ah Basis for the Standard Amendments to absorb impacts are permissible. Commitments become null if fulfillment is useless. Commitments are ineffective if the object is owned by others. Adjustments in Jawa`ih cases are based on Hadith.

11. Shari’ah Standard No. (37) Credit Agreement

12. Credit Agreement Preface This Standard aims to indicate the various types of credit facilities and their most important applications as well as the returns and commissions their most important applications as well as the returns and commissions which result from them. Scope of the Standard This standard covers credit facilities and the returns and commissions This standard covers credit facilities and the returns and commissions arising from them. Definition of Credit Facilities Definition of Credit: Financial transaction where one party becomes indebted to another Can be direct cash credit or incidental credit

13. Credit Facilities Includes both direct cash credit and incidental credit Types of Credit Facilities in Institutions Cash Facilities: Qard Hasan (benevolent loan) Musharakah and Mudarabah (investment partnerships) Murabahah and lease financing Incidental Facilities: Suretyship and letters of guarantee Exclusions and Decision of Granting Credit Facilities Exclusions: Transactions entailing instant delivery are not credit facilities Decision of Granting: Approval process with financial limits and conditions

14. Using Credit Facilities Utilization: Commencement by client requests such as letters of guarantee or credit Types of Traditional Credit Facilities Loans : Payable on a specific date Overdrafts : Draw as needed up to a limit Discounted Papers : Commercial papers and bonds Credit Cards : Indebtedness with interest Documentary Credits : Commitment to pay beneficiaries Bank Acceptances and Guarantees: Commitment to pay on accepted papers and guarantees Foreign Exchange Operations: Deferred contracts for currency exchange

15. Types of Islamic Credit Facilities Murabahah and Musawamah : Sale transactions for financing Mudarabah: Partnership with profit sharing Musharakah : Joint ventures with shared profits and losses Ijarah: Leasing assets to clients Istisna’a : Manufacturing or construction financing Salam: Advance purchase for future delivery Other Operations: Qard Hasan, overdraft balances, guarantees, and letters of credit

16. Shari’ah Status of Offering Credit Facilities Non-binding Promises: Agreement as a mutual understanding Utilization: Depends on the contract type Shari’ah Rulings on Credit Facilities Impermissible Practices : Interest-bearing loans and deferred currency exchange No Compensation: No compensation for rejected applications or unused facilities Commissions and Returns on Credit Facilities Before Contracting: Credit study, facility offering, contract preparation, and feasibility study costs Security deposit (Hamish Jiddiyyah )

17. On Signing Contract Commitment fees, earnest money (' Arboun ), guarantee returns, and debt rescheduling Obtaining Guarantees on Credit Facilities Permissible Forms: Ensure fulfillment of commitments Date of Issuance Standard Issued On :17 Rabi’ I, 1430 A.H. (15 March 2009) Shari’ah Basis for the Standard Charging Fees: For credit studies and other preparatory costs

18. Conclusion This standard ensures that online financial dealings align with Shari'ah principles, offering guidelines for contract formation, execution, and protection of all parties involved.

19. Shari’ah Standard No. (38) Presented by: Online Financial Dealings

20. Online Financial Dealings Preface This Standard aims to indicate the Shari’ah rulings relating to conclusion of contracts and financial dealings online, and illustrate what the Institution. Scope of the Standard Objective: Establish Shari'ah rulings on online financial contracts. Coverage: Includes commercial websites, online access services, contract inception timing, permissible possession procedures, and protection of online financial dealings. Launching Commercial Websites for Contractual Dealings 2.1 Permissibility: Allowed if websites avoid impermissible acts. 2.2 Online Contracts: Permissible if compliant with Shari'ah rules on transactions.

21. Provision of Online Access Services 3.1 Subscription Services: Permissible based on subscription contracts. 3.2 Ijarah Mushtarakah : Services provided under shared-hiring contracts. 3.3 Preventing Misuse: Institutions must prevent impermissible use of services. Contract Signing Session (Majlis al-’ Aqd ) 4.1 Audio/Visual Communication: Follows same rules as physical presence contracts . 4.2 Written Communication: Treated like message contracting, with specific rules for offer and acceptance periods.

22. Expressing Offer and Acceptance in Online Financial Contracts 5.1 Forms of Expression: Any form indicating mutual consent is acceptable. 5.2 Detailed Messages: Considered as offers if rights and commitments are clearly stated. 5.3 Conditional Messages: Viewed as invitations for contracting. 5.4 Click Acceptance: Valid if the website does not require additional confirmation. Time of Commencement of an Online Contract Validation: Contract is valid upon acceptance of the offer, regardless of the offeror's awareness.

23. Possession ( Qabd ) in Online Financial Contracts 7.1 Methods of Possession : Actual and constructive possession methods are recognized . 7.2 Software and Data: Possession occurs when the buyer downloads the items. 7.3 Instant Exchange: Required for currencies, gold, silver, and other commodities. Protection of Online Financial Dealings 8.1 Website and Data Protection: Institutions must protect against trespassing and unauthorized data use. 8.2 Identity Verification: Necessary precautions to verify dealer identities. 8.3 Adhesion Contracts: Must be fair and subject to state control. 8.4 Description-Based Contracts: Buyers can choose to conclude, terminate, or negotiate if the delivered item differs.

24. Date of Issuance and Adoption of the Standard Issuance Date: 17 Rabi’ I, 1430 A.H. / 15 March 2009. Adoption Meeting: Held in Bahrain, March 2009. Brief History of the Preparation of the Standard Initial Decision: June 2006 in Al-Madinah Al- Munawwarah . Consultant Commissioned: August 2005. Joint Committee Meetings: Held in Bahrain, discussions and amendments followed. Public Hearing: February 2009 in Bahrain. Final Adoption: March 2009 by the Shari’ah Board.

25. The Shari’ah Basis for the Standard Permissibility of Commercial Websites : Websites are permissible as long as they do not involve impermissible practices. Transactions are generally allowed unless they lead to committing something impermissible. The convenience and benefit to a large number of people in the modern era align with the underlying goals of Shari’ah . Online Financial Contracts : Contracts concluded online are permissible if they do not involve impermissible aspects. They are seen as no different from traditional contracts as long as they adhere to Shari'ah rules.

26. Types of Online Contracts : Contracts through audio or audiovisual communication are considered as if parties are present together, fulfilling the requirement of simultaneous presence. Written communication (e.g., email) where parties are not physically present is classified as a contract between absent parties. Validity of Contracts : Contracts become valid upon the acceptance of the offer by the other party, whether or not the offering party knows about the acceptance immediately. Possession and Transactions: Possession in Shari'ah terms occurs when the buyer downloads or gains control over the purchased item or data from the website.

27. Prohibitions : Trespassing on commercial websites and data theft are prohibited under Shari'ah , as they infringe upon the rights of others and go against principles of justice and fairness. Electronic Signatures: Adoption of electronic signatures is acceptable as long as it is recognized by prevailing rules and regulations, and it helps prevent forgery and preserve wealth, aligning with Shari'ah principles. Termination and Disputes: If there is forgery or an error regarding the identity or characteristics of a party, the deceived party has the right to terminate the contract, as consent of both parties is essential in Shari'ah contracts.

28. Adhesion Contracts : The state is encouraged to regulate adhesion contracts online to prevent harm and ensure justice, as per general Shari'ah principles. Consumer Protection : Consumers have the right to terminate contracts if the delivered goods or services do not match the description provided during the contract formation. Adhesion Contracts and State Regulation Definition: Contracts with uniform terms and public offers; state intervention justified to prevent harm. Shari'ah Instruction: Avoidance of harm and promotion of justice in commercial dealings.

29. Conclusion This standard ensures that online financial dealings align with Shari'ah principles, offering guidelines for contract formation, execution, and protection of all parties involved . Shari'ah principles provide a framework for regulating online transactions. Aligning commercial activities with ethical and legal norms of Islamic jurisprudence.

30. Q&A Invitation for audience questions: Encourage participants to ask about specific cases or scenarios. Provide detailed answers based on the standard and practical experience.

31. Thank you