SLIDE BLOCK 1
01 The sale contract (عقد البيع)
A contract of sale is an agreement where one person transfers full
ownership of an item to another in exchange for money.
Legal ruling: permissible.
Evidence — Quran (al-Baqarah 2:275)
وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا
Allah has permitted trade and has forbidden interest.
Evidence — the option to cancel
“Both parties in a business transaction have the right to annul it
as long as they have not separated, or unless it is a sale with an
option to cancel.”Sahih al-Bukhari 2112 / Sahih Muslim 1531
SLIDE BLOCK 2
02 Seven conditions of a sale (شروط البيع)
1. Mutual consent
Agreement between the two parties.
2. Legal capacity
Both parties are mature and of sound mind and age.
3. Legal permissibility
The item has recognized value in Islamic law and is lawful for
ordinary use outside extreme necessity.
4. Ownership
The seller legally owns the goods at the time of the contract.
5. Deliverability
The seller can physically or legally deliver the goods.
6. Knowledge
The goods and the price are clearly specified and known to both —
type, quantity, weight or description — to prevent dispute.
7. Execution
The contract takes effect immediately, without delay or suspension.
Mnemonic — “Can Legal Owners Deliver Known Items Now?”
Consent · Legal capacity ·
Legal permissibility (the “Legal” covers both) ·
Ownership · Deliverability ·
Knowledge · Now (immediate
execution).
Watch condition 4
Ownership is the condition the whole Murabaha section turns on. A bank
that sells before it owns breaks it — that is why block 6 insists the
bank buys first.
SLIDE BLOCK 3
03 Direct installment sale (بيع التقسيط)
Selling with an addition (markup) over the initial price in exchange
for delayed payment or paying in installments.
Example
| Cash price | Deferred price (1 year or installments) | Markup for the time |
|---|---|---|
| 50,000 riyals | 60,000 riyals | 10,000 riyals |
Ruling: permissible — on condition that the price is fixed. Once agreed, the 60,000 cannot grow if he pays late.
Evidence
“The Prophet ﷺ came to Medina and the people used to pay in advance
the price of fruits to be delivered within two or three years. The
Prophet ﷺ said, ‘Whoever pays in advance the price of a thing to be
delivered should pay it for a specified measure and a specified
weight for a specified period.’”Sahih al-Bukhari 2240
Common mistake
“A higher price for paying later is riba.” Not here: the extra is part
of a sale price fixed at the contract. It becomes
riba only if the debt grows because payment is late.
SLIDE BLOCK 4
04 What Murabaha is (المرابحة)
A Murabaha transaction is a cost-plus sale where the seller fully
discloses the item’s original cost and the markup charged.
| Originally | Today (Islamic banks) | |
|---|---|---|
| Parties | Two — a buyer and a seller | Three — customer, bank, and the original seller |
| How it works | A simple trade at cost plus a disclosed profit | The customer asks the bank to buy an item; the bank buys it and resells it to the customer at an agreed markup, paid in fixed installments |
Some have questioned its legality because it resembles riba, but most scholars agree it is permissible — as long as the elements below are respected.
SLIDE BLOCK 5
05 Element 1 — the promise (الوعد)
- The customer promises the bank to buy the goods.
- Before the first contract, the promise is not legally binding — though breaking it could be sinful if it causes harm to a party.
- At this stage the bank may not take any money from the customer, because of the hadith “Don’t sell what you don’t have.”
- Once the bank has bought the commodity, the promise becomes binding: the customer either buys it or pays compensation.
Why no money up front?
The bank does not own the goods yet. Taking payment now would be
selling what it doesn’t have — condition 4 of every sale.
SLIDE BLOCK 6
06 Element 2 — the first contract (العقد الأول)
A sale between the bank and the seller (the commodity’s owner). Scholars agree it is allowable.
The condition people forget
The bank must fully own the commodity through its
purchase order, and this must be checked before it
signs the second contract with the customer.
SLIDE BLOCK 7
07 Element 3 — the second contract (العقد الثاني)
A profit sale between the bank and the customer: the customer pays the price in installments, with the profit built in. It is permissible only if:
a. Terms agreed
Both parties agree on cash or deferred payment, and the price is
specified.
b. One price
Installment profit is part of the price —
not listed as interest separate from the base
price.
c. No late penalty
If payment lags, the buyer pays nothing beyond the agreed
installments — the price never increases because of
delay.
d. No usurious items
The goods are not items that must be exchanged hand-to-hand, like
gold or dates, because Murabaha defers all or part of the price.
e. Security allowed
The bank may protect its rights with a guarantee or a mortgage.
Mnemonic — “Agree, Bundle, Freeze, Avoid, Secure”
Agree the terms · Bundle the profit
into the price · Freeze the price on late payment ·
Avoid gold and dates · Secure with a
guarantee.
SLIDE BLOCK 8
08 Murabaha in order
- Step 1 · PromiseThe customer asks the bank to buy a specific item and promises to buy it. Not binding yet; no money taken.
- Step 2 · First contractThe bank buys the item from the seller and fully owns it.
- Step 3 · Promise bindsNow the customer must buy or compensate.
- Step 4 · Second contractThe bank sells to the customer at cost plus a disclosed, fixed markup, paid in installments.
- Step 5 · RepaymentInstallments as agreed — no increase for late payment; the bank may hold a guarantee.
Mnemonic — “Promise, Purchase, Profit”
One promise and two contracts, always in that order. Swap the order —
the bank selling before it buys — and the deal fails condition 4.
SLIDE BLOCK 9
09 Installment sale vs. Murabaha
| Direct installment sale | Murabaha (today) | |
|---|---|---|
| Parties | Two: seller and buyer | Three: customer, bank, original seller |
| Contracts | One sale | A promise + two sales |
| Cost disclosed? | Not required | Yes — cost and markup are disclosed |
| Shared rule | Price fixed at the contract | Price fixed; no increase for late payment |
SLIDE BLOCK 10
10 Flashcard glossary
Click a card to flip it.
SLIDE BLOCK 11 · FINAL CHECK
11 Pop quiz
14 questions covering the whole lecture.