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. 157 (6/17)

Mutual Promises and Collusion in Contracts

The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 17th session in Amman, Hashemite Kingdom of Jordan, on 28 Jumādā al-Ūlā – 2 Jumādā al-Ākhirah 1427h (24–28 June 2006), Having examined the research papers submitted to the Academy concerning

Mutual Promises and Collusion in Contracts,

Having recalled the Academy resolution nos. 40–41 (2/5–3/5), Having listened to the discussions on the subject,

Resolves

First: In principle, mutual promises between the two parties are binding from the religious perspective, but they are not so on legal grounds.

Second: Mutual promises as a trick for evasion of restrictions on Ribā is prohibited in Shariah. It is like collusion to practice ʿĪnah or the prohibition of combining sale and a loan.

Third: In cases where it is not possible to conclude a sale contract because the commodity is not in seller’s possession, while there is a general need for ob- ligating the two partiers – by virtue of law or international commercial tradi- tions – to conclude the deal at a definite future date (as in the case of opening documentary credits, LC), mutual promises can be made binding either through government regulations or by mutual consent of the two parties in the contract. Fourth: When mutual promises become binding, as indicated in the third paragraph above, they do not become a sale contract suspended on a future date. Hence, such mutual promises neither transfer ownership of the object to the buyer nor create a debt of the price on him. The sale transaction does not take place between the two parties until the future date agreed by then offer

and acceptance.

Fifth: If any of the two parties fails to honor his promise in the case referred to in the third paragraph above, he can be forced by law to conclude the con- tract or bear the actual damage that falls on the other party due to breach of commitment (not to include any opportunity cost).

Indeed, Allāh is All-Knowing.