Islamic Contract – Bay’ al-Istijrār: Istijrār With Deferred Payment

​Islamic Contract – Bay’ al-Istijrār: Istijrār With Deferred Payment
1. Definition of Istijrār With Deferred Payment
Explanation
Istijrār with deferred payment refers to:
a continuous supply arrangement where the buyer takes goods gradually over time and payment is deferred until a later date or settlement period.
Instead of:

• paying immediately upon each withdrawal,

the buyer:

• receives goods continuously;
• settles payment later.

Scholars differ regarding:

• the permissibility of various forms of this arrangement,
  particularly:
• price determination.

2. Types of Istijrār With Deferred Payment
Scholars discuss several forms of deferred-payment istijrār.


A. Price Specified in Every Transaction
Structure
In this form:

• every time goods are taken,
• the price is clearly specified.

Although payment is deferred,
the parties know:
✅ exact quantity
✅ exact price
during each transaction.


Scholarly View
This form is generally:
✅ permissible.
It is accepted by scholars who allow:
sale by conduct (bay‘ al-mu‘āṭāh).


Schools Allowing It
✅ Hanafis
✅ Mālikis
✅ Hanbalis
✅ Some Shāfi‘ī scholars
(such as al-Ghazālī and Ibn Surayj)


Majority Shāfi‘ī Position
The majority of Shāfi‘ī jurists:
❌ do not allow it.


Example
A restaurant regularly purchases:

• chicken supplies from wholesaler.

Week 1

• 100 kg chicken
• RM15 per kg

Price
100 \times 15 = 1{,}500
100 \times 15 = 1{,}500


Week 2

• 120 kg chicken
• RM16 per kg

Price
120 \times 16 = 1{,}920
120 \times 16 = 1{,}920


End of Month
Restaurant pays:
1{,}500 + 1{,}920 = 3{,}420
1{,}500 + 1{,}920 = 3{,}420


Analysis
Every withdrawal:

• has known price;
• has known quantity.

Only payment is deferred.
Result
✅ Generally permissible according to majority non-Shāfi‘ī schools.


B. Price Not Specified Each Time But Determined by Market Price on Day Goods Are Taken
Structure
In this form:

• goods are taken continuously;
• price not expressly stated during each withdrawal.

However:

• parties initially agree that:

price shall follow prevailing market price on the day goods are taken.


Majority Juristic View
The famous opinion among the four schools:
❌ generally does NOT allow this arrangement.
Why?
Because:

• price is unknown during contract session;
• uncertainty (gharar) exists.

Basis of Prohibition
The jurists rely upon:

• Qur’ānic prohibition against unlawful consumption of wealth;
• prohibition of uncertainty in contracts;
• scholarly consensus requiring known price.

Example
A supermarket continuously takes:

• vegetables from supplier.

No exact price stated during each withdrawal.
Parties merely agree:
“Price will follow market price each day.”


Problem
At the moment goods are taken:
❌ exact price unknown.
This may lead to:

• disputes;
• uncertainty.

Result
❌ Invalid according to majority view.


Minority Hanafi and Hanbali View
Some Hanafi and Hanbali jurists:
✅ allow this arrangement
if:

• market price is stable and commonly known.

Basis of Their Opinion
They rely on:

• customary market practice (‘urf);
• prevailing market value (thaman al-mithl);
• practical commercial necessity.

Example
A petrol station regularly takes:

• fuel supplies.

Daily market price:

• publicly known and stable.

Thus:

• parties rely on prevailing market rate.

Result
✅ Permissible according to some Hanafi and Hanbali jurists.


C. Price Not Specified and No Agreed Pricing Mechanism
Structure
In this form:

• goods are continuously taken;
• no exact price stated;
• no agreed pricing formula;
• final payment determined only during later account reconciliation.

Majority Juristic View
Most jurists:
❌ prohibit this arrangement.
Why?
Because:

• contract lacks certainty regarding price;
• excessive gharar exists.

Example
A retailer continuously takes:

• beverages from supplier.

No:

• price;
• pricing formula;
• market benchmark

is agreed initially.
At month-end:

• parties negotiate final amount.

Problem
At time goods are taken:
❌ no binding sale price exists.
Thus:

• contract remains incomplete.

Result
❌ Invalid according to majority.


Later Hanafi Position
Some later Hanafi scholars:
✅ allowed this arrangement
if:

• parties finally agree on price during reconciliation stage.

They based this on:

• juristic preference (istihsān);
• commercial custom (‘urf);
• widespread public need (‘umūm al-balwā).

Example
A grocery store continuously receives:

• bread supplies daily.

No exact price fixed initially.
At month-end:

• parties reconcile account using accepted market rates.

Because this practice:

• became widespread commercial custom,

later Hanafi scholars:
✅ tolerated it.


3. Comparative Summary
Type A
Price Specified in Every Transaction
Majority View
✅ Permissible.
Reason
Price known at every withdrawal.


Type B
Market Price Used But Not Expressly Stated
Majority View
❌ Not permissible.
Minority Hanafi/Hanbali View
✅ Permissible if market price stable.


Type C
No Price and No Pricing Mechanism Initially
Majority View
❌ Not permissible.
Later Hanafi View
✅ Permissible after reconciliation based on custom.


4. Important Sharī‘ah Principle
The major concern in deferred-payment istijrār is:
uncertainty regarding price (jahālah al-thaman).
Islamic commercial law generally requires:
✅ certainty of price;
✅ certainty of obligations;
✅ avoidance of excessive gharar.
However:

• some jurists allow flexibility where:
  • strong commercial custom exists;
  • public need is widespread;
  • market prices are stable and commonly known.