Islamic Contract – Legality of Bay’ al-Istijrār

Islamic Contract – Legality of Bay’ al-Istijrār
1. General Legality of Istijrār
Explanation
In general:
Muslim jurists agree on the permissibility of istijrār,
based on:

• the general permissibility of sale contracts in Islamic law.

This permissibility applies particularly when:
✅ the price is known to both contracting parties.


What Is Istijrār?
Istijrār refers to:
a continuous supply arrangement where a buyer repeatedly takes goods from a seller over time with periodic settlement of payment.
It is commonly used in:

• wholesale supply;
• retail supply;
• trade financing;
• import-export transactions.

Example of Permissible Istijrār
A restaurant regularly purchases:

• rice from supplier.

Every week:

• quantity and price are specified.

At month-end:

• payment is settled collectively.

Example With Figures
Week 1
50 bags rice at RM80 each
50 \times 80 = 4{,}000
50 \times 80 = 4{,}000


Week 2
60 bags rice at RM82 each
60 \times 82 = 4{,}920
60 \times 82 = 4{,}920


Total Month-End Payment
4{,}000 + 4{,}920 = 8{,}920
4{,}000 + 4{,}920 = 8{,}920


Result
✅ Permissible because:

• goods known;
• prices known;
• obligations clear.

2. Position of the Shāfi‘ī School
Majority Shāfi‘ī View
The majority of the Shāfi‘ī School:
❌ do not generally recognise:
sale by conduct (bay‘ al-mu‘āṭāh)
without:

• explicit offer (ijāb);
• explicit acceptance (qabūl).

What Does This Mean?
According to the majority Shāfi‘īs:

• every sale transaction should contain:
  • expressed offer;
  • expressed acceptance.

Thus:

• merely taking goods and paying later without verbal/formal contract may be insufficient.

Example
A customer enters grocery shop:

• takes bread daily;
• no formal agreement;
• pays at month-end.

Majority Shāfi‘ī Concern
Because:

• no explicit sale contract formed each time,
  they may regard:
  ❌ the transaction as problematic.

Some Shāfi‘ī Scholars Were More Flexible
Certain Shāfi‘ī scholars such as:

• al-Ghazālī;
• Ibn Surayj

were more accepting of:
sale by conduct (bay‘ al-mu‘āṭāh).
Especially where:

• customary practice clearly indicates mutual consent.

3. Position of the Mālikī School
Mālikī View
The Mālikī School generally:
✅ allows istijrār.
However:

• the contract begins:

once the buyer takes the commodity from seller.
Thus:

• taking possession itself signifies contractual consent.

Example
A bakery regularly takes:

• flour supplies from wholesaler.

The bakery:

• simply collects flour;
• records quantities;
• pays later.

Mālikī Analysis
The act of:

• taking the flour

itself constitutes:
✅ contractual formation.


4. Unknown Price Issue in Istijrār
Main Sharī‘ah Concern
Jurists differ regarding:
permissibility of istijrār when the price is unknown at the time goods are taken.


Why Is This Important?
Islamic commercial law generally requires:
✅ certainty of price (thaman).
Uncertainty regarding price may create:
❌ gharar (excessive uncertainty).


Example of Problematic Situation
A retailer continuously takes:

• beverages from supplier.

No:

• exact price;
• pricing formula;
• market benchmark

is agreed upon initially.
Only later:

• parties negotiate total amount.

Juristic Concern
At the time goods are taken:
❌ price remains uncertain.
This may lead to:

• disputes;
• unfairness;
• unlawful consumption of wealth.

Majority Position
Most jurists:
❌ do not allow sales with unknown prices.
They rely on:

• Qur’ānic prohibition against unlawful appropriation of wealth;
• prohibition of gharar;
• requirement of certainty in contracts.

Minority Position
Some Hanafi and Hanbali jurists:
✅ allow reliance on:

• prevailing market price;
• commercial custom (‘urf);
• public need.

Especially where:

• market prices are stable and commonly known.

Example of Permissible Market-Based Practice
A petrol station continuously receives:

• fuel supply.

Daily market price:

• publicly displayed;
• commercially standardised.

Thus:

• some jurists tolerate deferred reconciliation using prevailing market rates.

5. Important Sharī‘ah Principles in Istijrār
Principle 1
Sale Contracts Are Generally Permissible
Based on:

• general permissibility of trade in Islam.

Principle 2
Mutual Consent Is Required
Contracting parties must genuinely consent.


Principle 3
Price Certainty Is Important
Islamic law generally requires:
✅ known price;
✅ known obligations.


Principle 4
Excessive Uncertainty (
Gharar
) Must Be Avoided
Unknown prices may invalidate sales.


Principle 5
Commercial Custom (
‘Urf
) May Be Considered
Some jurists allow flexibility where:

• stable market practices exist;
• public need is widespread.

Overall Conclusion
Istijrār is generally:
✅ permissible in Islamic law,
particularly when:

• goods are known;
• prices are known;
• contractual obligations are clear.

However:

• jurists differ regarding:
  • sale by conduct (bay‘ al-mu‘āṭāh);
  • unknown pricing;
  • deferred settlement structures.

The major Sharī‘ah concern remains:
avoiding uncertainty and ensuring fairness in commercial transactions.

​