In fact it, Istisna, is a safe transaction where a commodity is transacted before it comes in to existence. Therefore, we can say that it is an order to a manufacturer to manufacture a specific commodity for the purchaser. In case of Istisna the manufacturer uses his own materials to manufacture the required goods for the person who has given such order to him.
In case of istisna, it is necessary, that the price must be fixed with the free consent of all parties involved in this agreement. Similarly all other necessary specification of the commodity must be fully settled, before entering in to the agreement. It is necessary because it can lead to some misunderstanding if these conditions are not fully and clearly specified at the time of contract of Istisna.
Cancellation of contract:
Various contract are cancelled due to different reasons. But the contract of Istisna can be cancelled in this manner. "After giving prior notice, either party can cancel the contract before the manufacturing party has begun its work. Once the work starts, the contract can not be cancelled unilaterally". Thus it become clear that contract or agreement of Istisna can be cancelled when the first party give prior notic to the manufacturing party. The manufacturing party will not have initiated or started work on the manufacturing of goods. But in case if the manufacturing party has started its work, then this contract can not be cancelled unilaterally. It is because the manufacturer has initiated its manufacturing work on the preperation of goods and also have used some of its materials in the manufacturing process, therefore, who will be responsible for this loss or usag of goods. There fore to cancelle the Istisna contract, it is necessary that, a prior notice should be issued to the manufacturer that the contract has been cancelled. And once the manufacturer has started the work then the contract can not be cancelled unilaterally.
Difference between istisna and salam:
The following points are noted to be the difference between istisna and salam. These are given below one by one to fully understand this concept.
Istisna:
(1) The subject, on which transaction of istisna is based, is always a thing which needs to be manufactured.
(2) The price, in case of istisna doesn’t necessarily need to be paid in full in advance. It is not even necessary to pay the full price at delivery. It can be deferred to any time according to the agreement of the parties. His payment may also be made in installments.
(3) The time of delivery does not have to be fixed in istisna.
(4) The contract can be cancelled before the manufacturer starts the work.
Now let us going to the points of salam.
Salam:
(1) The subject can be anything that need manufacturing or not.
(2) The price has to be paid in full in advance.
(3) The time of delivery is an essential part of the sale.
(4) The contract can not be cancelled unilaterally.
After working on the subject I have identified the above points that clearly differntiat istisna and salam from each other. Now I am going to present a few points of differences between istisna and ijarah.
Difference between istisna and ijarah:
Istisna:
The manufacturer either uses his own material, or if it is not available with him, obtains it to make the ordered goods.
The purchaser has a right to reject the goods after inspection as shariah permits somebody who purchases a thing not seen by him to cancel the sale after seeing it. The right of rejection only exists if the goods do not conform to the specification agreed upon between the parties at the time of contract.
Ijarah:
The material is provided by the customer and the manufacturer uses only his labor and skill meaning that his services will be hired for a specified fee paid to him.
Right of rejection of goods after inspection does not exist.
Istisna as a mode of financing:
Istisna may be used to provide financing for house financing. If the client owns a land and seeks financing for the construction of a house, the financier may undertake to construct the house on the basis of an istisna. If the client does not own the land and want to purchase that too, the financier can provide him with a constructed hous on a specified piece of land. The financier does not have to construct the house himself. He can either enter in to a parallel istisna with a third party or hire the services of a constructor (other than the client). He must calculate his cost and fix the price of istisan with his client that allows him to make a reasonable profit over his cost. The payment of installments by the client may start right from the day when the contract of istisna is signed by the parties. In order to secure the payment of installments, the title deeds of the house or land, or any other property of the client may be kept by the financier as a security until the last installment is paid by the client. The financier will be responsible to strictly conform to the specifications in the agreement for the construction of the house. The cost of correcting any discrepancy would have to be borne by him.
Istisna as a mode of financing:
Istisna may also be used for similar projects like installation of an air conditioner plant in the client’s factory, building a bridge or a highway.
The modern BOT (buy, operate and transfer) agreements may be formalized through an istisna agreement as well. So, if the government wants to build a highway, it may enter into an istisan contract with the builder. The price of istisna may be the right of the builder to operate the highway and collect tools for a specific period.
Uses of istisna:
Istisna can be used in the following cases,
(1) House financing
(2) Financing of plant/factory/ building
(3) Booking of apartments
(4) BOT arrangements
(5) Construction of buildings and plants.
In case of istisna, it is necessary, that the price must be fixed with the free consent of all parties involved in this agreement. Similarly all other necessary specification of the commodity must be fully settled, before entering in to the agreement. It is necessary because it can lead to some misunderstanding if these conditions are not fully and clearly specified at the time of contract of Istisna.
Cancellation of contract:
Various contract are cancelled due to different reasons. But the contract of Istisna can be cancelled in this manner. "After giving prior notice, either party can cancel the contract before the manufacturing party has begun its work. Once the work starts, the contract can not be cancelled unilaterally". Thus it become clear that contract or agreement of Istisna can be cancelled when the first party give prior notic to the manufacturing party. The manufacturing party will not have initiated or started work on the manufacturing of goods. But in case if the manufacturing party has started its work, then this contract can not be cancelled unilaterally. It is because the manufacturer has initiated its manufacturing work on the preperation of goods and also have used some of its materials in the manufacturing process, therefore, who will be responsible for this loss or usag of goods. There fore to cancelle the Istisna contract, it is necessary that, a prior notice should be issued to the manufacturer that the contract has been cancelled. And once the manufacturer has started the work then the contract can not be cancelled unilaterally.
Difference between istisna and salam:
The following points are noted to be the difference between istisna and salam. These are given below one by one to fully understand this concept.
Istisna:
(1) The subject, on which transaction of istisna is based, is always a thing which needs to be manufactured.
(2) The price, in case of istisna doesn’t necessarily need to be paid in full in advance. It is not even necessary to pay the full price at delivery. It can be deferred to any time according to the agreement of the parties. His payment may also be made in installments.
(3) The time of delivery does not have to be fixed in istisna.
(4) The contract can be cancelled before the manufacturer starts the work.
Now let us going to the points of salam.
Salam:
(1) The subject can be anything that need manufacturing or not.
(2) The price has to be paid in full in advance.
(3) The time of delivery is an essential part of the sale.
(4) The contract can not be cancelled unilaterally.
After working on the subject I have identified the above points that clearly differntiat istisna and salam from each other. Now I am going to present a few points of differences between istisna and ijarah.
Difference between istisna and ijarah:
Istisna:
The manufacturer either uses his own material, or if it is not available with him, obtains it to make the ordered goods.
The purchaser has a right to reject the goods after inspection as shariah permits somebody who purchases a thing not seen by him to cancel the sale after seeing it. The right of rejection only exists if the goods do not conform to the specification agreed upon between the parties at the time of contract.
Ijarah:
The material is provided by the customer and the manufacturer uses only his labor and skill meaning that his services will be hired for a specified fee paid to him.
Right of rejection of goods after inspection does not exist.
Istisna as a mode of financing:
Istisna may be used to provide financing for house financing. If the client owns a land and seeks financing for the construction of a house, the financier may undertake to construct the house on the basis of an istisna. If the client does not own the land and want to purchase that too, the financier can provide him with a constructed hous on a specified piece of land. The financier does not have to construct the house himself. He can either enter in to a parallel istisna with a third party or hire the services of a constructor (other than the client). He must calculate his cost and fix the price of istisan with his client that allows him to make a reasonable profit over his cost. The payment of installments by the client may start right from the day when the contract of istisna is signed by the parties. In order to secure the payment of installments, the title deeds of the house or land, or any other property of the client may be kept by the financier as a security until the last installment is paid by the client. The financier will be responsible to strictly conform to the specifications in the agreement for the construction of the house. The cost of correcting any discrepancy would have to be borne by him.
Istisna as a mode of financing:
Istisna may also be used for similar projects like installation of an air conditioner plant in the client’s factory, building a bridge or a highway.
The modern BOT (buy, operate and transfer) agreements may be formalized through an istisna agreement as well. So, if the government wants to build a highway, it may enter into an istisan contract with the builder. The price of istisna may be the right of the builder to operate the highway and collect tools for a specific period.
Uses of istisna:
Istisna can be used in the following cases,
(1) House financing
(2) Financing of plant/factory/ building
(3) Booking of apartments
(4) BOT arrangements
(5) Construction of buildings and plants.