Istisna’ is an Arabic word which means ‘request to construct’ and technically it refers to an agreement to sell or to buy a non-existent asset that is going to be manufactured in the future with the same specifications given by the ultimate purchaser and is to be delivered on a specified future date with a predetermined selling price.
Parallel Istisna’ Contract
The parallel istisna’ contract shall consist of two separate and independent istisna’ contract with the same specification of the istisna’ asset.
In parallel istisna’, the bank will sign istisna’ contract with the customer and also the bank will sign another contract with the developer.
In the parallel istisna’, the bank is acting as a middle man who is trying to ensure the requirement of the first istisna’ contract is fulfilled in the second istisna’ contract.
The contracting parties of the istisna’ contract are the seller, al-soni` and the buyer, al-mustasni who shall have the legal capacity to enter into the istisna’ contract.
The istisna’ contract, same like any other Islamic financial contract, being concluded by offer and acceptance between the contracting parties.
Istisna’ contract has got a number of conditions, for example, the subject matter of istisna’ shall be an item that needs manufacturing; the manufacturer uses its own materials; the quantity, the quality and the specification of the subject matter of istisna’ has to be agreed upon by the contracting parties.
If istisna’ asset does not conform the specification which has been given by the customer, the customer will have the right to accept or refuse the istisna’ asset.
The istisna’ price has to be fixed and agreed upon by the contracting parties.
The price of istisna’ asset could be paid on the spot, or could be paid on deferred basis, or could be paid on installment basis.
It is actually subject to the agreement of the contracting parties.
The price of the istisna’ asset could be cash or in kind.
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