Auction Contracts

In the Name of Allāh,

the Entirely Merciful, the Especially Merciful

Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.

Resolution No. 73 (4/8) Auction Contracts

The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 8th session in Bandar Seri Begawan, Brunei Darussalam, on 1–7 Muḥarram 1414h (21–27 June 1993),

Having examined the research papers submitted to the Academy concern- ing Auction Contracts,

Having listened to the discussions on the subject,

Having considered that auction contracts are a common practice today and, in some cases, have involved certain infractions which have made it necessary to regulate its application in a way that would preserve the rights of the contract’s parties, in compliance with Shariah rulings,

Having noted that that even governments and institutions have approved this type of contract through specific administrative regulations,

Having aknowledged the need to elucidate Shariah rulings regarding this contract,


  1. An auction contract is an exchange contract involving an invitation by interested parties, verbally or in writing, to participate in the auction. The contract is concluded with the consent of the seller.
  2. An auction contract may vary in nature according to its object and ramify into a sale or lease or other types of contract. Accordingly, it may also be optional, such as ordinary auctions amongst individuals, or compulsory such as in the case of auctions dictated by the judiciary. It may be re- quired by public and private institutions as well as governmental entities and individuals.
  3. An auction contract’s procedures in terms of written documentation, ar- rangements and administrative and legal terms and conditions must not be in contradiction with Shariah rulings.
  4. Requiring a deposit from those wishing to enter the auction sale is per- missible in Their deposits must be reinstituted to all the partic-

ipants who have not been the last bidders. The deposit is deducted from the selling price for the winning bidder.

  1. There is no restriction in Shariah to charging entry fees – value of the schedule of conditions – not exceeding the actual value as it represents a cost thereto.
  2. It is permissible for an Islamic financial institution or any other party to initiate investment projects to secure for itself a higher benefit, whether the investor is a party in a Muḍārabah contract with the Bank or not.
  3. Najash (shill bidding), which Shariah prohibits, may include the follow- ing practices:

    1. Someone with no intention to buy, offering higher bids just to entice the buyer into making higher offers.
    2. Someone not really intending to buy, pretending to admire the commodity as an expert, and extol its benefits to the buyer, thus affecting a higher price.
    3. The owner of the commodity, the agent or the broker, claims falsely that a specific price has been paid for it, so as to mislead the
    4. Contemporary forms of Najash, which Shariah prohibits, include the use of the media, whether audio, visual, or in print to attribute unreal characteristics to the commodity, or to increase the price in order to entice the buyer and manipulates him into entering the contract.

Indeed, Allāh is All-Knowing.

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