Subject : Comments on Contracts that Include Violations of Sharia
Fatwa Number : 2826
Date : 30-07-2013
Classified : Usury (interest) &Loans
Fatwa Type : Search Fatawaa

Question :

Could you kindly examine the attached contracts and financial annexes and clarify the ruling of Sharia on them? This is in addition to giving the alternatives that comply with the provisions of Sharia in this regard.

The Answer :

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

After having examined the attached contracts, it was found out that they include usurious conditions because of the following:

First: It was stated in the procurement delegation and the promise : "I, undersigned,……… I hereby authorize (Company name), under this bill, to purchase for me and under my responsibility the vehicle No. ( ), register it in my name and pay its price to the owner."

The form of this contract is procurement agency. However, the fourth condition related to the commission and profits of the payments turns this contract into a usurious loan. Therefore, We (Iftaa` Department) recommend amending the (Procurement delegation) contract to become (A contract of Murabaha for the purchase orderer). Thus, the company must take possession of the vehicle first, then sell it to the client.

Second: It was stated in the mortgage contract: "The creditor has the right to recover from the price of the commodity the value of the debt, in addition to the implementation fees, commissions, accrued interest and previously agreed upon attorney`s fees, which is (5%) from the value of the debt.

However, recovering more than the debt and the actual administrative fees is unfair to the purchaser and forbidden from the perspective of Sharia. Therefore, the amounts added to the principal amount of debt and the actual administrative expenses must be deleted.

Third: It is stated in the attached (Bill of exchange) that legal interest is due upon late payment. Nevertheless, it is no secret that the legal interest is from the forbidden Riba/usury, so this phrase must be deleted.

In conclusion, these contracts aren`t valid from the perspective of Sharia until the given comments are put into effect. And Allah the Almighty knows best.



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