Murabaha is a contract of trust, thus, the goods must be of the quality agreed between the bank and customer. The bank bears the risks that the goods may develop a defect or may be destroyed, since Murabaha is executed at the second sale. The customer can reject the goods if they contain defects or for the reasons of unsatisfactory performance (Hayes and Vogel 141). Question Two It is prohibited to sell Waqf (endowments) since they are not owned by a specific person and for any sell to be valid; the owner must be unambiguously identifiable. Istibdal, which is the sale of Waqf land, can be entered in Murabaha agreement, since the proceeds are used for the purchase of another land to be used for the Waqf purposes. However, according to Hanbalis, the benefits of Waqf cannot be obtained where the land is ruined, barren or is a mosque that is not used for prayers (Iqbal and Greuning 40). Question Three A bank conducting a purchase under a Murabaha contract may open a documentary credit in a foreign bank and receive commissions. Fiqh Academies prefer the prevention of banks taking the commission since it may demand the value of the guarantee in case of buyer defaulting on the agreement (Schoon 32). The bank should notify the buyer of such commission and pass it to the buyer by a way of reduction in the Murabaha contract price (Haron and Azmi 400). Question Four It is not allowed for the bank to finance a concluded deal between the client and owner of goods under a Murabaha contract. Murabaha entails the selling of an identifiable good that the seller owns, disclosing the costs and adding a mutually agreed mark up to the cost of the goods (Saeed 58). Murahaba agreements are not valid for the goods which are not bought or in the possession of the bank (Kettel 48). If the concluded deal is for a specific transaction, the bank should request for evidence of the termination of the concluded deal before it can enter in to a Murabaha agreement with the client. According to the Quran, Allah permitted trade but prohibited usury (Kettel 49). Question Five It is allowed to include insurance expenses to the cost of goods being sold under Murabaha. If the laws and regulations of the trade make it mandatory to insure the goods, the bank should comply accordingly and include the insurance expenses in the costs of goods under the Murabaha contract. Irrespective of any insurance cover or not, the bank is liable for the damages caused on the goods while on transit (Visser and Visser 58). In the event of damage of the goods and compensation is paid by the insurance company, the bank should reduce the price of the goods by an amount equivalent received in lieu of damages to the goods. The bank cannot hand over the compensation to the client without decreasing the price of the goods (Visser and Visser 58). Question Six It is a condition that the goods under Murabaha contract should be known and identifiable. The original costs and expenses incurred by the original buyer should be declared openly in the contract (Kettel 47). The asset should be in possession and under the name of the seller before execution of Murabaha contracts. The asset must be existing at the time of sale and the owner should have the rights and liabilities of the goods including the risks of defects at the time of sale (Lewis and Hassan 152). The price and delivery of the asset must be certain and not
Name: University: Course: Tutor: Date: Murabaha Question One It is allowed for the client to reject the goods bought by a bank under Murabaha agreement due to defect in the goods. Under Murabaha, the seller discloses the costs and profit charged there. The price of the sale can be spotted and deferred…
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will, upon the request made by the customer, purchase the goods from a supplier and sell them to the customer for either immediate payments or on deferred payment basis (Thomas 66). Under Murabaha, the bank must have actual possession of the goods and goods must exist at the
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