Impact of Contingent Incidents on Commitments — practice questions

Correct answer: C. Clauses 1 and 2: Contingent incidents are incidents that occur suddenly and significantly affect commitments that were properly stipulated. They differ from defects of will, which exist from the time of signing even though their impact appears later, and from termination of commitments by mutual consent or by a party exercising a contractual right. The Standard does not cover defects of will or conduct resulting from mutual consent.

Correct answer: A. Clauses 3 and 4: Contingent incidents either necessitate amendment of the contract or constitute an external reason for its termination. Examples of the former include the levy of customs duties or taxes after signing (affecting the party who must bear them by law or contract), price changes causing serious harm, prevention of importation of goods due under Murabahah or Ijarah, and changes in law increasing one party’s obligations. Impossibility, destruction and third-party entitlement fall under Clause 5.

Correct answer: D. Clause 4/2: A change in the prices of commodities used in implementing a contract, in a way that subjects the contractor to serious harm, is a contingency leading to amendment rather than termination; the actual harm can be removed through reconciliation, arbitration or legal arrangements. This is consistent with Clause 4/2/1 of Shari’ah Standard No. (11), which permits amendment of the Istisna’a price for force majeure by agreement, arbitration or the judiciary.