CHP 8: Legal Documentation for Islamic Banking and Finance. - Coggle…
CHP 8: Legal Documentation for Islamic Banking and Finance.
A legal document that documented some contractual relationship or a parties can grant right in the contract.
Terms and conditions that written down to grant any financing faciites offered by bank to customer and signed by both parties.
Security document where the amount payment due to bank are documented and sign by parties that involved.
Legal Documention of IBF
Document that involve written transaction about the terms and condition og agreement / transfer property
Allah commanded all transaction that might be done in future must be written. But if the transaction is on the spot, its okay if the no transfer documentation.
Surah al-Baqarah (282): "Oh you who believe when you deal with each other in future and in fixed time, reduce them in writing.
Opinion of Muslim Jurists on Surah al-baqarah (282).
Written contract as
to safeguard property/diperse doubt. (
Malik, Shafie, Abu Hanifah
Written contract involving future consideration is
which determine by al-quran. (
Written contract is
for future transaction (
It is a
for future debt transactions (
Prof Dr Hamka
Maqasid of legal documents
To secure the rights of parties involving in the contract and legitimize their claims.
To avoid any future disputes/arguments.
To organize and standardize the procedure of Muamalat in the business society.
To differentiate between legal and illegal contract.
Importance of Legal Documentation
To express the intention of parties to enter a contract with written agreement.
To connect both parties and comply with Shariah regulations.
To prevent disputes among the parties
To reflect the true modus operandi of the contract use.
The NLC1950 Land transaction
The term interest to profit in Form 16A change to comply with Shariah principles.
HPA 1967- FInanciang vehicles
Under BBA, the bank need to have notice of repossession from Court before repossess vehicle
Stamp Act 1948 Islamic banking products
Enhance all instrument of Islamic banking by attracting stamp duty to conventional banking
Requisites of being valid and enforceable
Compliance with Shariah Regulations
To ensure the transaction will be valid and can be enforce in Isalmic law, the terms and condition must in line with Shariah.
Compliance with existing laws of the country
To determine status for the document in law.
It can be used for evidence
Must be structured in manner to be enforceable in the court
Use any method that does not have conflict with Shariah law.
Compliance with Shariah
No interest allowed in Islamic loan
Document agreed must reflect underlying Shariah transaction involving contracting parties.
The terms and condition in document must in past tense
Dont mixed up together of all transaction in one financing contract.
Issues in Legal Documentation (Bay Inah)
Bay Inah should
two clear and seperate agreements.
follow all conditions of valid sale and purchase in Islam.
no obligation in any agreement.
sign the sale and purchase agreement in proper sequence.
Obeserve the documents
absolute rights on proper upon transfer of ownership
Observation of Bay Inah
Provide clear flow for buy and sell underlying transactions.
Clear documentation as safeguarf
Clear use of the tenets of valid contract
Provide reasonable discouragement to default.