Kembaraxtra-Islamic Finance: Kafālah (Guarantee in Islamic Finance)


Introduction

In Islamic jurisprudence, Kafālah (كفالة) is a contract of guarantee in which a guarantor (kāfil) undertakes to assume responsibility alongside the principal debtor (makfūl ‘anhu) for a specific obligation, whether it involves a person, financial debt, or performance of an act. The essence of Kafālah is “joining liability”, meaning the guarantor adds his responsibility to that of the debtor without releasing the debtor from his original obligation.


This distinguishes Kafālah from Hiwālah (transfer of debt):

• In Hiwālah, the debt obligation is transferred completely, and the original debtor is released.
• In Kafālah, the debtor remains liable, but an additional party guarantees fulfillment, strengthening the creditor’s confidence.

Kafālah applies in different forms:

1. Kafālah bi al-nafs (personal guarantee): Ensuring the presence of a person in court or fulfilling a personal obligation.
2. Kafālah bi al-māl (financial guarantee): Guaranteeing repayment of a financial debt.
3. Kafālah bi al-‘amal (performance guarantee): Guaranteeing the completion of a certain task or act.

This contract is widely used today in Islamic banking and finance, particularly in bank guarantees, performance bonds, and letters of credit, reflecting its importance in facilitating trade, building trust, and protecting creditor rights.


Qur’an and Hadith Evidence

• Al-Qur’an:
  “And be responsible for him before Allah. You will find me trustworthy.”
  (Surah Yusuf 12:66)
  – This verse refers to the Kafālah of Bunyamin (Benjamin), where the brothers guaranteed his return to their father.
  “And cooperate in righteousness and piety, but do not cooperate in sin and aggression.”
  (Surah Al-Mā’idah 5:2)
  – Guaranteeing someone in a lawful manner is a form of cooperation in good.
• Hadith:
  The Prophet ﷺ said:
  “The guarantor is liable.”
  (Sunan al-Tirmidhi, Hadith 1265)
  Another narration:
  “A Muslim is bound by his conditions.”
  (Sunan Abu Dawood, Hadith 3594)

These evidences highlight the seriousness of guarantees in Islam and the accountability of guarantors.



10 Case Scenarios with Solutions

Case 1: Financial Debt Guarantee

• Scenario: Ahmad borrows RM5,000 from Ali. Bilal acts as guarantor. If Ahmad defaults, Ali can claim the money from Bilal.
• Solution: Valid. Bilal, as kāfil, is liable to settle the debt if Ahmad fails.

Case 2: Personal Guarantee for Court Appearance

• Scenario: A judge requires Zayd to guarantee that his friend will appear in court.
• Solution: Permissible as Kafālah bi al-nafs. If the person fails to appear, Zayd must ensure compliance or face liability.

Case 3: Kafālah vs. Hiwālah Confusion

• Scenario: Maryam guarantees her brother’s debt, but the creditor thinks the debt is transferred to her.
• Solution: This is Kafālah, not Hiwālah. The original debtor remains liable, but Maryam is added as guarantor.

Case 4: Performance Guarantee

• Scenario: A contractor must complete a building project. The bank issues a guarantee on his behalf to assure the client.
• Solution: Valid under Kafālah bi al-‘amal. If the contractor defaults, the bank must fulfill the obligation.

Case 5: Creditor Demands Direct Payment from Guarantor

• Scenario: Without approaching the debtor, a creditor demands immediate repayment from the guarantor.
• Solution: Jurists differ, but generally the creditor should first seek repayment from the debtor before turning to the guarantor, unless otherwise stipulated.

Case 6: Guarantor Dies

• Scenario: The guarantor dies before the debt is settled.
• Solution: Liability passes to the guarantor’s estate. His heirs are not personally liable, but repayment can be taken from his inheritance assets.

Case 7: Guarantee without Debtor’s Knowledge

• Scenario: Umar guarantees Khalid’s debt without informing him.
• Solution: Valid in Shari‘ah. The debtor’s consent is not necessary for Kafālah.

Case 8: Guarantee with Interest Clause

• Scenario: A bank issues a guarantee but charges riba-based interest on the guaranteed amount.
• Solution: Not permissible. Only actual service fees for administrative costs are allowed, not interest-based charges.

Case 9: Revocation of Guarantee

• Scenario: A guarantor tries to revoke his guarantee before the debt matures.
• Solution: Not valid once the guarantee contract is concluded. The guarantor remains liable until the obligation is fulfilled.

Case 10: Guarantee in Islamic Banking

• Scenario: A company requires a performance bond for a government contract. An Islamic bank issues a Kafālah contract instead of a conventional guarantee.
• Solution: Permissible. The bank can charge a service fee for documentation, but not profit from the guarantee itself.

Critical Analysis

Strengths of Kafālah

• Builds trust between creditors and debtors by providing additional security.
• Widely applicable in trade, banking, and legal matters.
• Protects creditors while allowing debtors access to financing they might not otherwise receive.

Challenges in Practice

• Moral hazard: Debtors may become careless, relying on guarantors.
• Burden on guarantors: Risk of heavy liability if debtors fail.
• Commercialization: Some institutions exploit guarantees with excessive fees, bordering on riba.

Comparison with Modern Law


Kafālah resembles the modern legal concept of suretyship or guarantee, but Islamic law emphasizes:

• Prohibition of unjust profit (no interest-based fees).
• The guarantor’s liability is a matter of religious accountability.
• Transparency and fairness between all parties.

Kembaraxtra-Bilateral Contracts in Islamic Finance – Qard (Hassan)

Expanded Introduction

In Islamic commercial law, a bilateral contract involves the mutual consent of both parties, where each undertakes a reciprocal obligation. This distinguishes it from a unilateral contract, which only binds one party until performance occurs. The bilateral structure is evident in loan contracts (Qard/Hassan), where one party lends and the other borrows, creating reciprocal duties: the lender must disburse, and the borrower must repay.


However, the Islamic framework places unique ethical and spiritual restrictions upon such arrangements. Unlike conventional systems where loans typically involve interest, Islam prohibits any contractual benefit to the lender—whether monetary or in kind—because such benefit amounts to Riba (usury). The Qur’an strictly condemns Riba as unjust exploitation, while the Prophet ﷺ clarified through Hadith that “every loan that draws benefit (to the lender) is Riba.”


Nonetheless, Islam does not bar borrowers from voluntarily offering more upon repayment, as a gesture of gratitude. This is not an enforceable condition but an ethical encouragement, aligning with another Hadith where the Prophet ﷺ praised those who repay their debts with generosity.


Therefore, Qard Hassan represents a benevolent, yet binding, bilateral contract where the primary objective is assistance, not profit-making. It maintains the borrower’s liability, transferable to heirs if necessary, but prohibits any stipulated increase over the principal. Thus, it becomes a balance between financial responsibility and moral duty.


Qur’an & Hadith – Critical Analysis

1. Qur’an (2:275): “Allah has permitted trade and forbidden Riba.”
   • This verse draws a clear line between legitimate commercial exchange (bilateral trade) and exploitative contracts (usurious loans).
   • Bilateral contracts are valid as long as they avoid elements of Riba and Gharar (excessive uncertainty).
2. Qur’an (2:280): “And if the debtor is in difficulty, then grant him respite until ease. But if you remit it by way of charity, that is better for you.”
   • This underlines compassion within bilateral contracts. Rescheduling debts or forgiving them is spiritually superior.
3. Hadith (Sunan Ibn Majah, 2431): “Every loan that draws benefit is Riba.”
   • Establishes the absolute prohibition of any lender benefit linked to the loan contract.
4. Hadith (Bukhari, 2393): “The best among you are those best in repaying their loans.”
   • Encourages goodwill and voluntary extra repayment, provided it is not contractual.

10 Case Scenarios with Solutions

Case 1: Interest Clause in Loan Agreement

• Scenario: Ahmed lends $1,000 to Bilal with an agreed 5% interest after six months.
• Ruling: Invalid—prohibited as Riba.
• Solution: Remove the interest clause; make repayment only equal to principal.

Case 2: Voluntary Extra Repayment

• Scenario: Bilal repays Ahmed $1,100 for a $1,000 loan, without prior agreement.
• Ruling: Permissible—this is a voluntary act of gratitude.
• Evidence: Prophet ﷺ praised repayment with generosity.

Case 3: Loan in Different Currency

• Scenario: A lender gives SAR 1,000 and expects repayment in USD equivalent after 3 months.
• Ruling: Invalid if exchange rate is deferred. Riba al-Nasiah applies.
• Solution: Fix the conversion rate on the spot at the time of loan contract.

Case 4: Loan with Gift Condition

• Scenario: Lender demands the borrower buy groceries from his shop in exchange for a loan.
• Ruling: Prohibited—benefit is contractually tied.
• Solution: Allow borrower freedom; if he chooses to buy, it must be voluntary.

Case 5: Collateral Requirement

• Scenario: Lender requires a gold watch as collateral.
• Ruling: Permissible—security does not constitute benefit, it ensures repayment.
• Qur’an (2:283) supports written contracts and securities.

Case 6: Delay in Repayment with Penalty

• Scenario: Lender imposes $100 penalty for late repayment.
• Ruling: Invalid—penalty is a form of Riba.
• Solution: Instead, enforce repayment through collateral; or courts can penalize habitual defaulters administratively, not contractually.

Case 7: Loan for Food Items (Fungible Goods)

• Scenario: A man borrows 10 kg of rice and agrees to return 12 kg.
• Ruling: Prohibited—extra quantity is Riba.
• Solution: Return only the borrowed measure.

Case 8: Debt Forgiveness as Charity

• Scenario: Borrower unable to repay $500 loan, lender forgives part or all.
• Ruling: Highly recommended; Qur’an (2:280) encourages remission.

Case 9: Heirs Inheriting Debt

• Scenario: Borrower dies leaving $2,000 unpaid loan.
• Ruling: Liability transfers to heirs if estate allows.
• Evidence: Debt remains an obligation beyond death.

Case 10: Modern Bank Loan with Service Charges

• Scenario: Bank issues a Qard Hassan loan but imposes “processing fees” linked to loan amount.
• Ruling: If directly proportional to amount, it is disguised Riba.
• Solution: Only actual administrative costs may be charged, not profit-related fees.

KembaraXtra – Islamic Finance Insight

In practice, bilateral contracts in Islamic finance are structured to balance ethical compliance with economic utility. Modern Islamic banks often employ Qard Hassan facilities as part of their corporate social responsibility (CSR), especially for students, small businesses, or emergency relief.


However, because these loans are non-profitable, banks prefer profit-sharing (Mudarabah, Musharakah) or sale-based contracts (Murabahah, Ijarah) for sustainability. Thus, Qard Hassan plays a supplementary, humanitarian role rather than a core financing tool.


For investors and institutions, this reflects the spirit of Maqasid al-Shariah (objectives of Islamic law): ensuring justice, removing exploitation, and promoting social welfare. In contrast, conventional bilateral loan contracts are often profit-driven, which Islam rejects under the prohibition of Riba and Gharar.

KembaraXtra – Islamic Finance: Tanāzul vs Ibrā’

Tanāzul (Waiver)

• Definition: Voluntarily giving up a right or entitlement.
• Nature: Applies to rights/benefits (e.g., profit share, rental rights).
• Example: Investor waives part of her profit in favour of the fund manager.
• Trigger: Done voluntarily by the rights-holder, either upfront in agreement or later.
• Legal Effect: Permanently removes the right of the waiving party.
• Shari’ah Ruling: Permissible as long as voluntary and does not harm others.

Ibrā’ (Rebate/Discount)

• Definition: Voluntary reduction or forgiveness of a debt/monetary obligation.
• Nature: Applies to debts/outstanding payments.
• Example: Bank grants a rebate when a customer repays financing early.
• Trigger: Arises when the debtor repays or struggles to repay; must be at creditor’s discretion.
• Legal Effect: Reduces or cancels the debtor’s liability.
• Shari’ah Ruling: Permissible, but cannot be pre-agreed in contract (to avoid gharar).

KembaraXtra – Islamic Finance: Case Scenarios of Tanāzul & Ibrā’

Case 1 – Tanāzul (Waiver of Profit Share)

• Scenario: Investor Fatimah earns RM50,000 profit but waives RM5,000 to reward the fund manager.
• Solution: Valid waiver (tanāzul) as it is voluntary.
• Qur’an: “…And give full measure and weight in justice…” (Al-An‘am 6:152).
• Hadith: “The best of people are those who are most beneficial to others.” (al-Mu‘jam al-Awsaṭ, 5787).

Case 2 – Tanāzul (Waiver to Avoid Dispute)

• Scenario: Two brothers inherit land. One brother waives his share to maintain peace in the family.
• Solution: Permissible waiver that preserves unity.
• Qur’an: “…And reconciliation is best.” (An-Nisa’ 4:128).
• Hadith: “The Muslim is the brother of another Muslim. He neither wrongs him nor abandons him.” (Sahih Muslim 2564).

Case 3 – Ibrā’ (Rebate on Early Settlement)

• Scenario: Yusuf owes RM20,000 to an Islamic bank. He repays early, and the bank gives him RM2,000 rebate.
• Solution: Valid ibrā’ as long as rebate is discretionary, not pre-agreed.
• Qur’an: “But if the debtor is in difficulty, then postpone until a time of ease. And if you give charity, it is better for you…” (Al-Baqarah 2:280).
• Hadith: Prophet ﷺ said: “Whoever grants relief to one in difficulty, Allah will grant him relief in this world and the Hereafter.” (Sahih Muslim 2699).

Case 4 – Ibrā’ (Partial Forgiveness of Debt)

• Scenario: A farmer owes RM5,000 but suffers crop failure. The creditor forgives RM2,500.
• Solution: Valid ibrā’, encouraged in Islam as an act of mercy.
• Qur’an: “…If the debtor is in difficulty, grant him time until it is easy for him…” (Al-Baqarah 2:280).
• Hadith: The Prophet ﷺ said: “A man was forgiven because he used to grant relief to the debtor in hardship.” (Sahih Muslim 1560).

Case 5 – Tanāzul & Ibrā’ Combined

• Scenario: In a partnership, one partner waives his right to extra profit (tanāzul). Later, when the other partner struggles with debt, he forgives part of it (ibrā’).
• Solution: Both actions are valid as they are voluntary, showing generosity and fairness.
• Qur’an: “The reward of those who pardon is with Allah…” (Ash-Shura 42:40).
• Hadith: “Charity does not decrease wealth.” (Sahih Muslim 2588).

Quick Recap:

• Tanāzul = Waiver of rights (profits, shares, benefits).
• Ibrā’ = Rebate/forgiveness of debts.
• Both promote fairness, generosity, and brotherhood in line with Qur’an & Sunnah.

Summary:

• Tanāzul = waiving rights/entitlements.
• Ibrā’ = waiving debts/obligations.

Kembaraxtra – Islamic Finance: Common Unilateral Contracts in Practice


Introduction


In Islamic commercial law, contracts are generally classified into two categories: bilateral (mu‘awadat), which involve an exchange, and unilateral (tabarru‘at), which involve acts of donation, concession, or benevolence. While bilateral contracts dominate trade and commerce, unilateral contracts are equally important because they promote compassion, social justice, and ethical dealings in society.


Some of the most common unilateral contracts include:
1. Wasiyyah (Will): A person leaves a will in favour of a beneficiary who is not already entitled to inherit under the Qur’anic rules of inheritance. The will cannot exceed one-third of the estate, ensuring fairness to rightful heirs.
2. Tanāzul (Waiver): A person voluntarily gives up their right or entitlement, either during negotiations or as an upfront clause. For example, an investor may waive excess returns to a fund manager as an incentive.
3. Ibrā’ (Rebate/Discount): A creditor forgives or reduces part of a debt, often when a debtor settles early. In Shari’ah, this rebate must be voluntary; pre-agreed rebates are not permissible because they create uncertainty (gharar) in the sale price.


These contracts highlight Islam’s emphasis on generosity, fairness, and transparency. They not only regulate financial transactions but also cultivate trust, compassion, and accountability.


Five Case Scenarios with Solutions


Case 1: Will Beyond the One-Third Limit
• Scenario: Ahmad writes a will leaving half of his estate to his friend. His children object.
• Solution: The Qur’an (An-Nisa’ 4:11-12) fixes heirs’ shares clearly. A will cannot exceed one-third of the estate to non-heirs. Ahmad’s will is valid only up to one-third, and the rest must go to heirs.
• Hadith: The Prophet ﷺ said: “Allah has given every rightful person his right, so there is no bequest for an heir.” (Sunan Abi Dawud 2870).



Case 2: Waiver of Profit Share
• Scenario: Fatimah invests in a Shari’ah-compliant fund. The fund earns higher profits than expected. She agrees upfront to waive extra profit above a set threshold to reward the fund manager.
• Solution: This is valid because waiver (tanāzul) is her voluntary choice. It incentivises the manager without injustice.
• Qur’an: “And give full measure and weight in justice…” (Al-An‘am 6:152).


Case 3: Ibra’ on Early Loan Repayment
• Scenario: Yusuf owes RM10,000 to an Islamic bank but settles early. The bank voluntarily grants him a rebate of RM1,000.
• Solution: This is permissible because the rebate was discretionary, not pre-agreed. If it had been pre-fixed in the contract, it would cause uncertainty in the selling price.
• Qur’an: “But if the debtor is in difficulty, then postpone until a time of ease. But if you give from your right as charity, then it is better for you, if you only knew.” (Al-Baqarah 2:280).


Case 4: Waiver to Avoid Conflict
• Scenario: Two business partners disagree over profit distribution. One partner waives part of his share to preserve their friendship and continue the business.
• Solution: This voluntary waiver avoids dispute and strengthens the relationship.
• Hadith: The Prophet ﷺ said: “The best among you are those who are best to their companions.” (Sunan al-Tirmidhi 1162).



Case 5: Wasiyyah to Non-Muslim Neighbour
• Scenario: Ali wishes to leave part of his wealth to his non-Muslim neighbour who always supported him.
• Solution: This is valid as long as it does not exceed one-third of the estate and does not harm the rights of heirs.
• Qur’an: “Allah does not forbid you from being kind and just to those who do not fight you because of religion nor drive you out of your homes…” (Al-Mumtahanah 60:8).



Critical Analysis

Unilateral contracts in Islam serve an essential role in balancing strict commercial rules with compassion and ethical flexibility. By limiting wills to one-third for non-heirs, Islam protects heirs’ rights while allowing space for generosity. Waivers and rebates ensure that contracts remain fair and flexible without introducing uncertainty.


Critics argue that prohibiting pre-agreed rebates reduces efficiency in modern banking, as customers prefer clarity. However, Shari’ah prioritises certainty (qat‘iyyah) and fairness over convenience to prevent exploitation.


In practice, unilateral contracts bridge gaps between rigid legal obligations and human realities. They foster trust, reduce disputes, and encourage social solidarity—values embedded in both Qur’an and Sunnah.



Conclusion


Unilateral contracts such as wasiyyah, tanāzul, and ibrā’ reflect the ethical spirit of Islamic finance: balancing rights with compassion, certainty with flexibility, and law with morality. They provide a Shari’ah-compliant way to deal with death, debt, and business relationships, ensuring justice while cultivating goodwill.

Kembaraxtra – Islamic Finance: Sale Contracts (Bayʿ)

Introduction (Paraphrased)

Among the various forms of commercial transactions recognized in Islamic law, sale contracts (Bayʿ) hold a position of central importance. Throughout history, buying and selling has been the most vital mechanism for circulating wealth, distributing resources, and meeting human needs. Islam, while prohibiting Riba (interest/usury), explicitly permits Bayʿ (trade) as a legitimate and ethical means of wealth exchange, as stated in the Qur’an:


﴿وَأَحَلَّ ٱللَّهُ ٱلۡبَيۡعَ وَحَرَّمَ ٱلرِّبَوٰاۚ﴾
“…Allah has permitted trade and forbidden Riba.” (Qur’an 2:275)


The word Bayʿ in the Qur’an and Sunnah refers not only to the sale of physical ownership (milk al-ʿayn), but also the transfer of usufruct (manfaʿah), i.e., the right to use an asset. For example, the sale of land, livestock, or a house falls under ownership transfer, while hiring a taxi or renting equipment involves the transfer of usufruct (later categorized under lease contracts – Ijarah).


Islamic law lays down clear rules to ensure fairness, remove Gharar (excessive uncertainty), and prevent exploitation in sale transactions. Whether the exchange is barter (commodity-for-commodity), sale (commodity-for-money), or currency exchange (money-for-money), the principles of transparency, equality, and consent must be observed.


The Prophet ﷺ emphasized honesty, warned against fraudulent practices, and introduced safeguards such as Khiyar (options/rights to rescind a sale) to protect both parties. Over time, jurists classified sales into multiple categories, such as:

• Murabahah (cost-plus sale),
• Salam (advance payment sale),
• Istisnaʿ (manufacture/supply order),
• Bayʿ al-ʿInah (sale and buy-back), and others.

Each classification addresses different needs but always operates within the framework of Shariah: removing Riba, preventing Gharar, and ensuring mutual consent.

Qur’an, Hadith & Sunnah – Critical Analysis

1. Qur’an (2:275)

﴿وَأَحَلَّ ٱللَّهُ ٱلۡبَيۡعَ وَحَرَّمَ ٱلرِّبَوٰاۚ﴾
“…Allah has permitted trade and forbidden Riba.”

• Establishes Bayʿ as lawful, in contrast to Riba which is exploitative.

1. Qur’an (4:29)

﴿يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُواْ لَا تَأۡكُلُوٓاْ أَمۡوَٲلَكُم بَيۡنَكُم بِٱلۡبَـٰطِلِ إِلَّآ أَن تَكُونَ تِجَـٰرَةً عَن تَرَاضٖ مِّنكُمۡۚ﴾
“O you who believe! Do not consume one another’s wealth unjustly, but only through trade conducted with mutual consent.”

• Ensures that wealth transfer occurs fairly, without coercion or exploitation.

1. Hadith – Options in Sale (Khiyar)

البيِّعان بالخيار ما لم يتفرقا
“The buyer and the seller have the option (to cancel) as long as they have not separated.”
(Sahih al-Bukhari, Hadith 2079)

• Encourages fairness, giving both parties flexibility until the deal is fully closed.

1. Hadith – Prohibition of Gharar

نهى رسول الله ﷺ عن بيع الغرر
“The Messenger of Allah ﷺ forbade sales involving uncertainty (gharar).”
(Sahih Muslim, Hadith 1513)

• Prohibits transactions where essential details are unknown, such as selling fish not yet caught.

1. Hadith – Virtue of Honest Trade

التاجر الصدوق الأمين مع النبيين والصدِّيقين والشهداء
“The truthful, trustworthy merchant will be with the Prophets, the truthful, and the martyrs on the Day of Resurrection.”
(Sunan al-Tirmidhi, Hadith 1209)

• Links ethical trade to high spiritual reward.

10 Case Scenarios with Solutions

Case 1: Hidden Defect in Goods

• Scenario: A seller hides a car’s engine problems from the buyer.
• Ruling: Invalid due to deceit (Tadlis).
• Solution: Buyer has Khiyar al-ʿAyb (right to return).

Case 2: Sale of Unseen Goods

• Scenario: Buyer purchases a house without visiting it, relying only on the seller’s description.
• Ruling: Permissible if description is clear, otherwise Gharar.
• Solution: Provide full details and inspection rights.

Case 3: Currency Exchange with Delay

• Scenario: Exchange of $1,000 for €900, but euros are delivered after 2 days.
• Ruling: Invalid (Riba al-Nasiah).
• Solution: Settlement must be simultaneous.

Case 4: Unequal Barter

• Scenario: 10 kg of wheat exchanged for 15 kg of wheat.
• Ruling: Prohibited (Riba al-Fadl).
• Solution: Must be equal weight and immediate delivery.

Case 5: Salam Contract (Advance Payment)

• Scenario: Buyer pays in full for 100 kg of dates to be delivered in 6 months.
• Ruling: Valid (Salam), if quantity, quality, and date are fixed.

Case 6: Unspecified Price

• Scenario: Seller says, “Buy this item at whatever price I decide later.”
• Ruling: Invalid due to price uncertainty.
• Solution: Price must be fixed at contract time.

Case 7: Sale of Non-Owned Goods

• Scenario: Trader sells a car he doesn’t yet own.
• Ruling: Prohibited (Bayʿ al-Maʿdum).
• Solution: He must own the asset first.

Case 8: Haram Goods

• Scenario: Muslim shopkeeper sells alcohol for profit.
• Ruling: Forbidden—sale of haram items is invalid.

Case 9: Murabahah (Deferred Payment)

• Scenario: Bank buys a laptop for $1,000, sells it for $1,200 payable in 12 months.
• Ruling: Valid, provided terms are transparent and agreed upfront.

Case 10: Buyer Cancels Before Separation

• Scenario: Buyer cancels after agreeing but before parting.
• Ruling: Allowed—Khiyar al-Majlis (right of cancellation before separation).

KembaraXtra – Islamic Finance Insight

Modern Islamic finance heavily relies on Bayʿ contracts as the foundation for Shariah-compliant products. Instead of issuing interest-based loans, Islamic banks use trade-based structures like:

• Murabahah: Cost-plus financing for homes, vehicles, and trade.
• Salam & Istisnaʿ: Financing agriculture, construction, and manufacturing.
• Sarf: Currency exchange under strict Shariah rules.

These contracts align with the Maqasid al-Shariah (objectives of Islamic law): preventing exploitation, ensuring fair wealth circulation, and promoting justice. While conventional systems often generate income through Riba, Islamic finance ensures profits emerge only through real trade, risk-sharing, and asset-backed transactions.

Kembaraxtra-Islamic Finance: Sale of Trust (Bay’ al-Amanah)

Introduction
Islamic commercial law places great emphasis on honesty, fairness, and transparency in all business transactions. One of the key principles that safeguard these values is the sale of trust (Bay’ al-Amanah). This principle obliges the seller to disclose the true cost price of an item when engaging in certain types of sale contracts, thereby ensuring that the buyer is not misled and that the transaction remains free from deceit (gharar) or fraud.


The Qur’an commands believers to act justly and uphold integrity in trade:


“And establish weight in justice and do not make deficient the balance.”
(Surah ar-Rahman, 55:9)


Similarly, the Prophet Muhammad ﷺ strongly warned against dishonest dealings in business. He said:


“The truthful and trustworthy merchant will be with the Prophets, the truthful ones, and the martyrs.”
(Sunan al-Tirmidhi, Hadith 1209)


Therefore, sales based on trust are not merely legal arrangements but also moral obligations that elevate commerce into an act of worship (ibadah).


Islamic law recognizes two broad categories of sale:

1. Trust-based sales (Bay’ al-Amanah) – where the cost price is disclosed.
2. Non-trust sales – where the price is based on negotiation without reference to cost.

This discussion focuses on the three main forms of Bay’ al-Amanah:

1. Bay’ al-Murabahah (Cost-plus Sale)
2. Bay’ al-Tawliyah (Sale at Cost)
3. Bay’ al-Wadiah (Discounted Sale)

Each form requires strict disclosure of the actualcost. Any concealment or dishonesty renders the contract null and void and obligates the return of the commodity and consideration exchanged.

1. Bay’ al-Murabahah (Cost-plus Sale)

• Definition: Sale at cost price plus a disclosed profit margin.
• Key Condition: Seller must truthfully declare the cost price and the profit.
• Example: Seller says, “I bought this item for RM10,000 and I am selling it to you for RM12,000 (RM2,000 profit).”

2. Bay’ al-Tawliyah (Sale at Cost)

• Definition: Sale at the exact cost price without any profit.
• Key Condition: Disclosure of cost is necessary to maintain trust.
• Example: Seller states, “This item cost me RM8,000, and I am selling it to you at the same price, RM8,000.”

3. Bay’ al-Wadiah (Discounted Sale)

• Definition: Sale at a price below cost.
• Key Condition: Disclosure of cost remains crucial; otherwise, it is invalid.
• Example: Seller says, “I purchased this at RM5,000, but I am selling it to you for RM4,000.”

15 Case Scenarios with Solutions

Case 1 – Murabahah Profit Disclosure

• Scenario: A car dealer tells a customer he bought a car for RM50,000 and sells it at RM55,000. Later, it is discovered he actually purchased it for RM45,000.
• Solution: The sale is invalid. The dealer must refund the extra amount or the entire sale may be rescinded.

Case 2 – Tawliyah at True Cost

• Scenario: A businessman sells textiles at the exact cost he purchased them for, RM2,000, and honestly declares this.
• Solution: Valid Tawliyah sale. Reward for truthfulness applies (Qur’an 9:119).

Case 3 – Tawliyah with Hidden Costs

• Scenario: A seller declares cost as RM5,000 but hides transport expenses of RM500.
• Solution: The sale is defective due to partial concealment. Full disclosure is mandatory.

Case 4 – Wadiah with False Loss Claim

• Scenario: A trader claims to sell at a loss, saying cost is RM3,000 and selling at RM2,800. Later found his cost was RM2,500.
• Solution: Invalid due to false claim. The Prophet ﷺ forbade deception (Sahih Muslim 101).

Case 5 – Murabahah with Percentage Profit

• Scenario: Seller says, “I bought this machine for RM20,000 and sell it with 10% profit.” Final price = RM22,000.
• Solution: Valid, as cost and profit were clearly disclosed.

Case 6 – Buyer Requests Evidence of Cost

• Scenario: A buyer doubts the seller’s disclosure and requests an invoice.
• Solution: Seller should provide evidence. If he refuses, the sale may be voidable.

Case 7 – Sale with Mixed Inventory

• Scenario: A trader bought two lots of goods at different prices but sells them claiming a uniform cost.
• Solution: Invalid unless costs are separately disclosed.

Case 8 – Tawliyah in Family Transactions

• Scenario: A man sells his brother a laptop exactly at cost.
• Solution: Valid. Qur’an 16:90 encourages fairness in dealings, including family.

Case 9 – Wadiah as Charity Gesture

• Scenario: A seller genuinely sells below cost to help a poor buyer.
• Solution: Valid and praiseworthy. Hadith: “Allah shows mercy to a man who is kind when he sells…” (Bukhari, 2076).

Case 10 – Murabahah in Islamic Banking

• Scenario: Bank buys a house at RM300,000 and sells to a client for RM330,000 (RM30,000 profit disclosed).
• Solution: Valid Murabahah financing.

Case 11 – Wadiah for Quick Sale

• Scenario: Seller urgently needs cash and sells below cost, disclosing truth.
• Solution: Valid Wadiah sale.

Case 12 – False Cost in Tawliyah

• Scenario: Seller inflates cost to make buyer believe he is selling at no profit.
• Solution: Fraud, hence haram and void.

Case 13 – Joint Ownership Disclosure

• Scenario: Two partners sell an asset bought at RM10,000. They must disclose cost to buyer.
• Solution: Valid if cost is fully disclosed.

Case 14 – Murabahah with Deferred Payment

• Scenario: A shop sells goods at cost plus profit but allows 6 months to pay.
• Solution: Valid if cost and profit are disclosed upfront.

Case 15 – Buyer Finds Hidden Discount

• Scenario: Seller says he bought goods at RM1,000, but invoice shows supplier gave him RM100 rebate.
• Solution: Sale is flawed unless rebate disclosure is included in cost statement.

Conclusion

The sale of trust (Bay’ al-Amanah) is a unique feature of Islamic commercial law, reflecting the ethical foundations of Islam in trade. Whether in Murabahah, Tawliyah, or Wadiah, the guiding principle is truthful disclosure of cost to safeguard fairness, eliminate exploitation, and earn Allah’s blessing.


The Qur’an reminds us:

“Give full measure and weight in justice, and wrong not people in their things.”
(Surah al-A‘raf, 7:85)

Thus, every Muslim trader must uphold honesty, as business in Islam is not only about profit but also about fulfilling a trust (amanah) before Allah.

Kembaraxtra-Islamic Finance: Transfer of the Right to Use (Usufruct) in Islamic Commercial Contracts


Introduction

In Islamic commercial law, contracts are not limited to the sale and purchase of goods; they also cover the transfer of usufruct — the right to use and benefit from an asset without transferring its ownership. This principle ensures that economic activity is conducted ethically, with clear allocation of rights and responsibilities between parties.


The most prominent contract under this classification is Ijarah, which encompasses both hire of services and lease of assets. Ijarah contracts allow one party, the lessor, to transfer the right to use a lawful asset or service to another party, the lessee, in exchange for a pre-agreed consideration, either as a wage, rental, or fee.

Sub-divisions of Ijarah

1. Ijarah ‘ala al-Ashkhas (Hire of Services)
   • In this sub-division, a person offers services, and the consideration is typically a wage or salary.
   • Common examples include employment contracts, professional consultancy, and other service agreements.
2. Ijarah al-A’yan (Lease of Assets)
   • This involves leasing a tangible or intangible asset.
   • The lessor retains ownership, while the lessee enjoys its use.
   • The lessee pays rental for the usufruct and bears only the costs arising from use, while the lessor bears ownership-related risks, such as major repairs or insurance.
   • This structure is highly relevant in Islamic financial markets, particularly for leasing vehicles, machinery, properties, and equipment.

Key Features of Ijarah Contracts

(a) The lessor must be the legal owner or a duly authorized agent. Sub-leasing is allowed with consent.
(b) The leased asset must be lawful and beneficial. Assets tied to haram activities (e.g., gambling, alcohol) are prohibited.
(c) Rental payments must be known and agreed upon. Floating rates are allowed if the revision benchmark is predetermined.
(d) Ownership risks (maintenance, insurance) are borne by the lessor; operational costs (water, fuel, road tax) are borne by the lessee.
(e) The asset is held in trust (Amanah) by the lessee. Damage without negligence does not incur liability.
(f) Total damage voids the contract unless replaced; partial damage may allow rental adjustment.
(g) Ijarah contracts are binding; unilateral changes by one party are invalid unless mutually agreed.


Quranic and Hadith Foundations

• Quran: “O you who believe! Do not consume one another’s wealth unjustly but trade by mutual consent.” (Surah An-Nisa: 29) — emphasizing fairness in transactions.
• Hadith: The Prophet Muhammad (peace be upon him) said: “The worker is entitled to his wages.” (Sahih Bukhari) — highlighting the legitimacy of Ijarah for labor and services.
• The principle of trust (Amanah) is repeatedly emphasized in Islamic teachings (Surah Al-Mu’minun: 8), supporting lessees’ protection in using leased assets responsibly.

15 Case Scenarios with Solutions, Improvement Suggestions, Quran/Hadith References, and Critical Analysis

Case 1: Leasing a Car to a Client

• Scenario: Bank leases a car to Ahmad for three years with fixed monthly rental.
• Solution: Contract specifies the car model, rental amount, duration, insurance, and maintenance obligations. Ownership risks remain with the bank; Ahmad bears fuel and minor operational costs.
• Improvement (Quran/Hadith): Ensure clarity and fairness in rental terms (Surah An-Nisa: 29).
• Critical Analysis: Protects both parties; reduces Riba risk by avoiding deferred sale.

Case 2: Leasing Office Space for a Startup

• Scenario: A startup rents an office for 2 years.
• Solution: Lessor maintains property insurance; lessee pays utilities. Lease terms fixed in advance.
• Improvement: Include clear termination and renewal clauses, aligning with Hadith about fulfilling contracts.
• Analysis: Reduces disputes, ensures asset benefit, and aligns with Shariah principles of trust.

Case 3: Ijarah of Machinery for Manufacturing

• Scenario: Manufacturer leases a CNC machine for 5 years.
• Solution: Lessor maintains major repairs; lessee handles daily operation costs. Rental fixed with inflation-adjusted benchmark.
• Improvement: Include periodic inspection clause; Quranic principle of transparency in trade (Surah Al-Baqarah: 282).
• Analysis: Encourages capital use without ownership transfer.

Case 4: Hiring a Consultant (Ijarah ‘ala al-Ashkhas)

• Scenario: Company hires a marketing consultant for 6 months.
• Solution: Fixed wage agreed upfront; deliverables clearly defined.
• Improvement: Include performance metrics; Hadith: “The worker is entitled to his wages.”
• Analysis: Prevents disputes; ensures fairness for labor and employer.

Case 5: Leasing a Residential Property

• Scenario: Tenant leases apartment for one year.
• Solution: Landlord covers structural repairs; tenant pays utilities and minor damages.
• Improvement: Specify dispute resolution process; Quranic guidance on fulfilling covenants (Surah Al-Ma’idah: 1).
• Analysis: Upholds rights and duties, protects lessor and lessee.

Case 6: Leasing Equipment to a Factory

• Scenario: Factory leases forklifts from a leasing company.
• Solution: Rental agreement defines usage, insurance, maintenance, and liabilities.
• Improvement: Include safety training clause for operators; Quranic principle: “Do not consume wealth unjustly.”
• Analysis: Risk sharing is clear; prevents misuse.

Case 7: Leasing Vehicles in Fleet Management

• Scenario: Logistics company leases trucks for delivery operations.
• Solution: Trucks insured; maintenance scheduled; rental benchmark linked to mileage.
• Improvement: Include fuel efficiency monitoring; Hadith: “Trust is a key principle in commerce.”
• Analysis: Encourages responsible asset use; reduces operational disputes.

Case 8: Leasing IT Infrastructure

• Scenario: Data center leases servers to a tech firm.
• Solution: Ownership risk remains with lessor; lessee pays operational costs.
• Improvement: Include downtime compensation; Quran: fairness and transparency in contracts.
• Analysis: Modern Ijarah application; mitigates cyber and operational risks

Case 9: Ijarah for Event Hall

• Scenario: Wedding hall leased for a month.
• Solution: Rental includes security deposit; lessor responsible for major maintenance.
• Improvement: Specify prohibited uses (no gambling or alcohol).
• Analysis: Ensures Shariah compliance; protects reputation of asset.

Case 10: Sub-Leasing Allowed

• Scenario: Lessee wants to sub-lease a leased retail shop.
• Solution: Allowed with lessor’s written consent; terms of sublease must align with original lease.
• Improvement: Include profit-sharing clause; Quran: transparency in trade (Surah Al-Baqarah: 282).
• Analysis: Encourages economic activity while maintaining legal control.

Case 11: Partial Damage During Lease

• Scenario: Leased factory suffers minor damage.
• Solution: Lessee continues paying proportionally reduced rental; lessor repairs major structure.
• Improvement: Specify calculation of rental reduction; Hadith on fair compensation for damage.
• Analysis: Balances risk; prevents disputes.

Case 12: Total Loss of Asset

• Scenario: Leased machine destroyed by fire.
• Solution: Contract void unless lessor provides replacement; lessee not liable.
• Improvement: Mandatory insurance for leased assets; Quranic principle: risk belongs to owner.
• Analysis: Protects lessee from unforeseen liabilities.

Case 13: Leasing Agricultural Equipment

• Scenario: Farmer leases a tractor for harvesting season.
• Solution: Rental based on season; lessor maintains major repairs; lessee handles fuel.
• Improvement: Include usage log; Hadith: fairness in measurement and weight.
• Analysis: Enables farmers without upfront capital; Shariah-compliant.

Case 14: Leasing Educational Materials

• Scenario: School leases tablets for students for one academic year.
• Solution: Lessors handle maintenance; lessee responsible for damage due to negligence.
• Improvement: Clear rules for damage and replacement; Quran: uphold agreements.
• Analysis: Modern Ijarah adapts to technology; promotes resource sharing.

Case 15: Floating Rental Rate for Office Lease

• Scenario: Office lease with rental linked to inflation index.
• Solution: Benchmark agreed upfront; periodic rental adjustments transparent.
• Improvement: Specify maximum cap and review intervals; Hadith: agreements must be clear.
• Analysis: Ensures fairness; allows lessor to hedge inflation risk while protecting lessee.

Conclusion

Ijarah contracts, whether for services (Ijarah ‘ala al-Ashkhas) or asset leasing (Ijarah al-A’yan), are essential tools in Islamic finance for transferring the usufruct rights without transferring ownership. The principles of risk allocation, clarity, fairness, and trust (Amanah) are grounded in both the Quran and Hadith, ensuring ethical commercial transactions.


The 15 cases demonstrate Ijarah’s versatility, from traditional assets like vehicles and factories to modern applications like IT infrastructure, showing how Shariah-compliant leasing can solve real-world financial challenges while adhering to Islamic ethics.

I can also create a summary table of all 15 cases with asset type, rental responsibility, ownership risk, and Shariah references, making it a ready reference guide for practitioners.

Kembaraxtra-Islamic Finance: Time of Delivery – Problems and Solutions
Case 1: Murabahah Transaction with Delay

• Problem: Ahmad buys a car via Murabahah, but delivery is set one month later.
• Solution:
  1. Delivery must be immediate since the car exists and is identified.
  2. If Ahmad still wants later possession, the bank can sell the car now and then lease it back (Ijarah) until delivery.
  3. Alternatively, the bank can hold the car in trust (Wakalah) until Ahmad collects it.
• Outcome: The contract remains valid without breaching Shariah principles.

Case 2: Salam Contract for Wheat

• Problem: Farmer agrees to deliver wheat in six months under Salam; Bilal pays in full now.
• Solution:
  1. Full upfront payment is required (Bilal pays immediately).
  2. Wheat must be clearly specified (quality, grade, weight, delivery date).
  3. Farmer must deliver on the due date, or compensate in value if unavailable.
• Outcome: Both parties are protected — farmer gets capital, Bilal secures future wheat.

Case 3: Istisna’ for a Factory Building

• Problem: Corporation contracts a builder to deliver a factory in 18 months.
• Solution:
  1. Contract terms must specify materials, design, and completion date.
  2. Payments may be staged (milestone-based).
  3. If the builder delays, penalties (ta’widh) may apply if agreed upfront.
• Outcome: Risk is minimized and delivery obligations are enforceable.

Case 4: Currency Exchange with Deferred Settlement

• Problem: USD to MYR exchange, but one side delays settlement by 3 days.
• Solution:
  1. Currency exchange must be spot (immediate).
  2. If spot delivery is not possible, use a wa’ad (promise) contract to exchange later, and execute Sarf only on the actual settlement date.
  3. Alternatively, use a Shariah-compliant forward structure like Wa’ad-based FX Hedging.
• Outcome: Riba al-Nasi’ah is avoided, ensuring compliance.

Case 5: Musawamah Sale with Deferred Delivery

• Problem: Laptop sold under Musawamah, but delivery in 2 months.
• Solution:
  1. Spot delivery must occur; otherwise, the contract is invalid.
  2. If future delivery is intended, restructure as Salam (buyer pays in full, laptop delivered later) if item is generic, not specific.
  3. Or use Istisna’ if the laptop is custom-built.
• Outcome: The deal can proceed by adjusting the contract type.

Case 6: Salam for Perishable Goods

• Problem: Buyer pays upfront for strawberries, delivery in 2 weeks.
• Solution:
  1. Exact description (weight, freshness grade, packaging) must be specified.
  2. Delivery date fixed to avoid disputes.
  3. If strawberries perish before delivery, farmer must source equivalent or return funds
• Outcome: Risk-sharing is fair, avoiding Gharar.

Case 7: Istisna’ for Customized Software

• Problem: A company contracts a developer for accounting software delivery in 6 months.
• Solution:
  1. Specifications (features, compatibility, functions) must be clearly listed.
  2. Delivery milestones can be set for testing phases.
  3. If software is defective, developer must rectify or provide compensation.
• Outcome: Software qualifies under Istisna’ as “manufactured work.”

Case 8: Wadiah with Deferred Delivery

• Problem: Gold to be deposited in Wadiah, but custodian delays possession until next week.
• Solution:
  1. Delivery must be immediate to establish Wadiah.
  2. If delay is unavoidable, a temporary safekeeping contract (Amanah) can be agreed until full transfer.
  3. Alternatively, use a Murabahah or Salam sale if actual transfer is intended later.
• Outcome: The deposit arrangement remains Shariah-compliant.

Case 9: Currency Exchange via Online Platform

• Problem: Online exchange deducts USD instantly, but EUR credited after 24 hours.
• Solution:
  1. Both currencies must be settled on the spot (even electronically).
  2. The platform must upgrade to instant settlement systems (e.g., RTGS or blockchain-based transfer).
  3. If delay persists, classify the contract as invalid Sarf and restructure as a promissory arrangement until both sides deliver simultaneously.
• Outcome: Compliance is restored through technological fixes.

Case 10: Parallel Salam for Agricultural Produce

• Problem: Bank enters Salam to buy rice in 6 months, and another Salam to sell rice in 7 months.
• Solution:
  1. Contracts must be independent — the second Salam cannot depend on the first.
  2. Bank bears full risk of non-delivery in the first Salam.
  3. If farmer defaults, bank must source rice elsewhere to honor the second Salam.
• Outcome: Parallel Salam provides liquidity without Shariah violation.

Kembaraxtra-Islamic Finance: Negotiated Sale (Musawamah)

Introduction

Islamic commercial law recognises different ways of conducting sales depending on the level of disclosure between buyer and seller. While some sales are trust-based (Bay’ al-Amanah) where the seller must reveal the cost price, others operate purely on negotiation. One such type is the Musawamah sale.


The term Musawamah literally means “bargaining” or “negotiating.” It refers to a contract of sale where the buyer and seller agree on a price without any reference to the cost price or profit margin. The only figure that matters is the final selling price agreed upon after bargaining. Unlike Murabahah (cost-plus sale), the buyer does not know the profit margin or cost incurred by the seller.


Importantly, Musawamah is a perfectly valid contract under Shariah, provided that:

1. The subject matter of the sale is lawful (halal).
2. The asset is in existence and deliverable on the spot.
3. There is no fraud, deception, or coercion in negotiation.
4. The parties freely consent to the agreed price.

Allah ﷻ commands fairness in trade:


“O you who believe! Do not consume one another’s wealth unjustly, but only [in lawful] business by mutual consent.”
(Surah an-Nisa’, 4:29)


The Prophet ﷺ also encouraged honesty in sales:


“The buyer and the seller have the option (to cancel) as long as they have not separated, and if they speak the truth and make everything clear, they will be blessed in their transaction. But if they conceal and lie, the blessing of their transaction will be erased.”
(Sahih al-Bukhari, Hadith 2079; Sahih Muslim, Hadith 1532)


Thus, Musawamah reflects a natural form of trade where the seller may earn profit, but the buyer’s main concern is whether the agreed price is acceptable, regardless of the seller’s actual costs.


Key Features of Musawamah

1. Negotiation-based – price is determined solely by bargaining.
2. No cost disclosure – seller is not obliged to reveal purchase cost or profit.
3. Flexibility of payment – can be spot or deferred (installments), but delivery of the asset must be immediate.
4. Profit is permissible – seller can profit, but the exact margin is unknown to the buyer.
5. Not a trust sale – any disclosure of cost price converts it into Murabahah, Tawliyah, or Wadiah.

10 Case Scenarios with Solutions

Case 1 – Pure Bargain
Scenario: A farmer sells mangoes for RM100 per basket, buyer negotiates to RM80, cost undisclosed.
Solution: Valid Musawamah, mutual agreement achieved.


Case 2 – Hidden Cost Mentioned
Scenario: A trader says, “I bought this at RM500, selling for RM700.”
Solution: Not Musawamah, becomes Murabahah due to cost disclosure.


Case 3 – Deferred Payment
Scenario: Furniture sold at RM2,000 payable over 10 months, no cost disclosed.
Solution: Valid Musawamah, deferred payment is allowed.


Case 4 – Forward Delivery Attempt
Scenario: Rice sold via Musawamah, but delivery after 6 months crop harvest.
Solution: Invalid, delivery must be immediate; otherwise it becomes Salam (forward sale).


Case 5 – Profit without Disclosure
Scenario: Wholesaler buys at RM5,000, sells at RM8,000 without stating cost.
Solution: Valid, profit allowed in Musawamah.


Case 6 – Seller Lies About Cost
Scenario: Seller says, “I bought this for RM2,000, selling for RM1,800,” but real cost was RM1,200.
Solution: Invalid, fraudulent disclosure; Hadith forbids dishonesty.


Case 7 – Musawamah in Islamic Finance
Scenario: Islamic bank finances machinery for RM100,000; invoice states only total price.
Solution: Valid Musawamah financing, cost and profit undisclosed.


Case 8 – Buyer Accepts High Price
Scenario: Tourist buys handicraft for RM200, actual value closer to RM50.
Solution: Valid Musawamah, as long as no coercion or deception involved.


Case 9 – Coercion in Bargaining
Scenario: Seller pressures buyer into inflated price under threat.
Solution: Invalid, coercion makes the contract void.


Case 10 – Instalments with Markup
Scenario: Motorbike RM5,000 cash or RM6,000 in instalments, no cost disclosed.
Solution: Valid Musawamah, multiple pricing acceptable if agreed upfront.

Conclusion

Musawamah represents the most common form of sale in everyday markets. It emphasises mutual consent, honesty, and fair negotiation, allowing sellers to profit without mandatory cost disclosure.


The Qur’an reminds us:


“Give full measure and weight in justice and do not deprive people of their due.”
(Surah al-A‘raf, 7:85)


This balance ensures that while sellers can benefit, buyers are protected through free consent and prohibition of fraud.








Comparison: Types of Sales in Islamic Commercial Law (Note Form)




Musawamah

• Negotiated price, no cost disclosure.
• Profit margin hidden from buyer.
• Most common type in markets.

Murabahah

• Cost-plus sale, cost price disclosed.
• Profit margin explicitly stated.
• Often used in Islamic banking.

Tawliyah

• Sale at cost price, no profit.
• Trust-based disclosure required.
• Buyer relies on seller’s honesty.

Wadiah (Bay’ al-Wadiah)

• Sale below cost price (discounted).
• Seller must disclose true cost.
• Buyer benefits from seller’s sacrifice.