In the previous article, we presented the introduction of istisna and its comparison with some similar contracts. Today, we are going to discuss the basic rules and conditions for bay al-istisna. As we said in the previous article that istisna is an exceptional type of sale. Therefore, there are some specific conditions for the validity of istisna contract apart from the general conditions of a valid sale transaction.
1. The object to be manufactured must be clearly determined in terms of its type, kind, quality and quantity. This condition is very crucial in istisna contract. Because, istisna is a sale of non-existent and exempted from the original rule of sale. That’s why, it’s necessary to remove any kind of ambiguity and mitigate the risks associated with subject matter.
2. The subject matter of istisna is only those objects which have to be manufactured or constructed. It’s not necessary that the seller himself manufactures the item. However, if it’s stated in the contract, then the seller has to manufacture himself according to the contract.
3. It’s not permissible to do istisna contract on an existing and identified asset. For instance, it’s not allowed to sell a particular car manufactured by a factory to sell on the basis of istisna.
4. The price in istisna contract must be known at the time of contract execution. The price could be in cash or tangible goods or the usufruct of an asset for defined period.
5. Principally, the price cannot be unilaterally increased or decreased once it settled in istisna contract. However, the manufacturing of big assets or constructing of large buildings may necessitate more time and material. In this case, the price can be adjusted with the mutual consent of the parties.
6. It’s permissible in istisna contract to defer the whole price or to pay it in installments within a fixed and known time period.
7. The contract of istisna is not binding on the parties as long as the manufacturer does not start work. But once he starts works on the subject matter, none of the contracting parties cancel the contract unilaterally. It’s important to mention here that majority of the contemporary scholars and Islamic fiqh academy of OIC are of the view that istisna is a binging contract on both parties if the necessary terms and conditions of istisna are satisfied.
8. The place of delivery of istisna goods must be specified if it needs loading or manufacturing expenses.
9. The delivery of istisna goods may take place through constructive possession by enabling the purchaser to take control over the subject matter.
These are some basic rules and conditions which need be observed in the istisna transaction. In the coming article, we shall look at its applications in modern Islamic financial institutions.