CONCERNING INSTALLMENT SALE
Quote - The Council of the Islamic Fiqh Academy, in its
seventh session held in Jeddah, Kingdom of Saudi Arabia, from 7-12
Dhul Qi'dah 1412H (to 9-14 May 1992).
Having considered the research papers received by the Academy on the subject, ''Instalment Sale'' ,and in continuation to the resolution no. 51/2/6 adopted on this subject by the Sixth session of the Council;
Having heard the discussions held about it.
First: The installment sale is permissible in
Shari'a even if the deferred price exceeds the spot price.
Second:Commercial papers (cheques - promissory notes, bills of exchange) are lawful types of authentication of a debt by putting it down in writing.
Third:The discount of commercial papers is not permissible in Shari'a for it amounts to a transaction involving "Riba an Nasi'ah" (interest on delayed repayment) which is prohibited.
Forth:To reduce a deferred debt with the aim of accelerating its repayment, whether at the request of the creditor or of the debtor (pay less but ahead of time), is permissible in Shari'a and does not fall within the province of Riba (which is forbidden) if it is not based on an advance agreement and as long as the relationship between the creditor and the debtor is bilateral. If there is a third party between them, the reduction is not permissible as it will then be subject to the ruling on discount of commercial papers.
Fifth:It is permissible for the two parties to a debt to agree on the fact that all instalments shall be due for payment if the debtor refuses to repay any one of the instalments owned by him, as long as he is not insolvent.
Sixth:If a debt falls due because of the death, bankruptcy or procrastination of the debtor, it may be reduced in all these cases in order to speed up the coming to terms.
Seventh:The criterion of insolvency to be applied by trusties (bankruptcy) is that the debtor has no possessions in excess of his basic needs to discharge his debt in cash or in kind.
Allah knows best- unquote