General Prohibitions

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General Exhibitions

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  • Any benefit arising out of any act of lending is illegal
  • A contract between parties must have a consideration, one side of the contract must be made immediately.
  • Currencies can only be traded for spot delivery. Gold and Silver are currencies and must be traded as such. Specific food items can only be traded against each other for spot delivery - however Scholars views differ on this
  • Partnerships and Profit from partnership do not have to be proportionate, but losses must be shared proportionately.
  • Collateral must not be used by lender, all benefits until outcome is decided is for the borrower.
  • Islamic Contract Law regulates the financial obligation between parties when transacting in Goods and Services Goods and Services must have a price, which is contracted by the use of the Medium of Exchange, Money. Therefore, Money (Unless in cases of FX spot exchange) can not be priced itself, can not be bought, its relevance is only as a medium of exchange between goods and services
  • Any loan that creates a benefit is Riba (please consult commonly used terms)
  • You can lend cash, but can only receive capital back
  • If you earn interest, you can't use it. Can not use interest earned for Zakat.

This prohibition reflects the nature, timing, quantity, and quality of goods versus currency and is reflected in one of the most important of the Prophet's sayings: "Gold for Gold, Silver for Silver, Wheat for Wheat, Barley for Barley, Dates for Dates, Salt for Salt, hand to hand in equal measures. If types differ, then sell as you wish but hand to hand" Notice that only if types differ; Type is not genus, Gold and Wheat are different types but also different genus, and therefore, spot rule doesn't apply, one leg, either currency or good can be deferred..

  • An agreement between 2 parties is a contract and a contract must have consideration.
  • The Prophet PBUH forbade the contracting of 2 non-present items, one must be delivered immediately
  • Goods can be purchased on deferred payment when goods are delivered spot (Murabaha)
  • Goods can be delivered at a later date if paid for immediately (Salam)
  • Some exceptions are Ijara, Istisna, and Arboon (please consult commonly used terms).

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