Istijrar (supply contract)
Area of Application
Istijrar refers to an agreement where the buyer purchases commodities under a single agreement from a supplier in part by part from time to time in different quantities and each time there is no offer or acceptance or bargain required. The deal will be considered as a sole agreement where all terms and conditions are finalized.
- X keeps on taking medicines from a medical store as and when needed and pays him at the end of a month.
- Y pays monthly for a newspaper in advance and receiving the newspaper daily.
Istijrar mainly is of two types. These are:
- The price is determined after all transactions of purchase are complete.
- The price is determined in advance but the purchase is executed from time to time.
Uses of Istijrar
Istijrar is used in transactions like Murabahah, Ijarah and Mudarabah. The concept of Istijrar can be applied in Murabahah transaction. The bank may use the concept of Istijrar for acquiring goods from suppliers and selling those goods to buyer on Istijrar basis by adding some amount of proﬁt on a deferred payment basis.
It is required to get ready template purchase requisition letter so that it unmistakably specifies the speciﬁcations of the goods. The supplier needs to send a conﬁrmation letter to the bank and then from the bank to the purchaser that portrays every single required detail of the merchandise alongside costs. describes all the required details of the goods along with prices. This is done to avoid any ambiguity and dispute. The provider needs to send a conﬁrmation letter to the bank and after that from the bank to the buyer
Area of Application
- The Bank may practice Istijrar with the provider when buying the goods in various arrangements from a single or few supplier(s).
- The Bank may practice Istijrar with the provider when offering the products under Murabahah by obtaining through Letter of Authority against the dealership.
- The Bank may practice Istijrar with the provider when acquired merchandise is conveyed in portions and installment is made after completion of supplies.
- The Bank may exercise Istijrar with the client on pitching the products in various arrangements to a specific customer, etc.