2. The word istisna is derived from the word Sana'a which literally
means "making, manufacturing or constructing something.“
Definition:
Istisna is an agreement in a sale at an agreed price whereby the
purchaser places an order to manufacture, assemble or construct (or
cause so to do) anything to be delivered at a future date.“
3. There are two parties in istisna
1. Sani
2. Mustani
Sani: The person who makes it is called sani'.
Mustani: person who causes it to be made
called mustani.
Masnu: the thing made called Masnu.
4. The contract is valid only for those objects that have to be
manufactured or constructed.
The subject of Istisna (the thing to be manufactured or constructed)
must be known and specified to the extent of removing any
ignorance or lack of knowledge of its kind, type, quality and
quantity.
In Istisna‘a, the manufacturer arranges both the raw material and the
labour.
An Istisna‘a contract may be drawn for real estate developments
Invalid subject matter.
. It is invalid for natural things or products like animals, corn, fruit,
etc.
It is not permissible that the subject matter of an Istisna‘a contract
be an existing asset.
5. An Istisna‘a contract must be:
definitely state in clear terms and conditions
Price must be specified
Quality and quantity of goods, the type, dimensions, period
and place of delivery of the asset
The asset can be manufactured or produced by any or a
specific manufacturer, or manufactured from specific
materials
6. The Hanafi jurists generally divide the binding effect of this kind of contract into
three stages.
At the first stage, where the work of manufacturing has not yet started.
At the second stage, the manufacturer may finish making the needed
goods, but the purchaser has not seen the manufactured object yet.
The third stage is when the required goods have been manufactured and
presented to the purchaser.
In third stage Muslims scholars have different opinions:
AI-Imam Abu Hanifah is of the opinion that the purchaser can exercise
his option of inspection (Khiyar-e-RoiyyaT) after seeing the goods.
Abu Yusuf, a follower of Abu Hanifah, opines that if the commodity was
in conformity to the inspections agreed upon between the parties at the
time of the 'contract, the purchaser is bound to accept the goods and he
cannot exercise the option of inspection (khiyar al ru'yah).
8. In the case of general conditions, the istisna' sale must fulfill the requirement
of a valid contract as discussed by the jurists:
The capacity of the contracting parties
The subject-matter
Offer and acceptance
9. 1. The object must be precisely determined both in its essence and quality.
2. The recommended manufactured goods should be things that people
customarily deal with in the field of manufacture. Otherwise, the contract
of istisna' will be invalid.
3. It is a condition that the time of delivery is specified whether it is short or
long so as to avoid ignorance, which might lead to conflict between the
two parties.
4. The materials should be supplied by makers, if they are supplied by the
buyer, the contract is regarded as al Ijarah and not istisna'.
5. It is a condition that the place of delivery is stated if the commodity needs
loading or transportation expenses.
10.
11. Two contracts are involved :
Contract-1
Islamic Bank Manufacturer
contract-2
Third party Islamic Bank
As a buyer
Istisna contract
As a supplierAs a buyer
Parallel Istisna
Delivery of commodity
Delivery of commodity
12.
13. 1. There must be two different and independent
contracts, these two contracts cannot be tied up and
performance of one should not be contingent on the
other.
2. Parallel Istisna is allowed with third party only.
14. Delay in delivery of goods
from the producer to the
customer at maturity
Delivery risk
1.
The producer is either unable
or is unwilling to manufacture
the goods during assigned
time
Non-
Performance
2.
15. Risks
The producer delivers
defected/inferior goods,
which is realized by the
customer only at the time of
delivery
Quality
Risk
3.
Cost incurred by the
producer turns out to be
higher than anticipated,
which causes the producer to
default on performance.
Increased
costs of
Production
4
In the case of parallel istisna’,
the goods once delivered by
the producer will be at the
bank's risk before being sold
to the customer.
Storage
Risk
5
16. When manufacturer makes the commodity and presents it to the
purchaser and receives the payment.
the jurists are of the opinion that the contract of istisna' can be
terminated by the death of one of the contracting parties.
But now a days!
There are large corporation the manufacturer is not a single person.
Therefore it is not applicable the contract will be ended by the
death of one or two persons.
it will continue as long as the corporation or company is in existence
