A security in form of a guarantee, mortgage or hypothecation may be required for Istisna in order to ensure that the manufacturer shall deliver the commodity on the agreed date,
in the case of default in delivery,the guarantor may be asked to deliver the same commodity,and if there is a mortgage,the buyer can sell the mortgaged property and the sale proceed can be used either to realize the required commodity by purchasing it from the market,or to recover the price advanced by him.
It is not necessary in Istisna that the time of delivery is fixed. However,the purchaser my fix a maximum time for delivery after the appointed time,he will not be bound to accept the goods and pay the price.
In order to ensure that the goods will be delivered within the specified period,some modern agreement of this nature contain a penalty clause to the effect that in case the manufacturer delays the delivery after the appointed time,the price shall be reduced by a specified amount per day.
Risks in Istisna applications and their solutions RISKS SOLUTIONS Ownership of Material The Islamic bank is not the owner of the materials in the possession of the manufacturer for the purpose of producing the asset. Security is available with the bank. Delivery Risk Islamic bank may be unable to complete the manufacturing of goods as scheduled due to late delivery of completed goods by the sub-contractor of Parallel Istisna. Bank can reduce the Istisna price acording to the Istisna agreement. Sale not permissible before delivery Sale of Istisna goods is not allowed before taking physical possession. Bank can take “promise to purchase” from the third party and can make arrangements for the “agency agreement”