Murabahah — practice questions

Correct answer: A. Clause 2/2/3: The Institution must ensure that the party from whom the item is bought is a third party other than the customer or his agent; the supplier may not be owned by the customer wholly or by way of majority (more than 50%), and if such a sale is later discovered it is void as tantamount to ’Inah. A blood or marital relationship (Clause 2/2/4) does not void the sale but obliges the Institution to verify that the sale is not fictitious. Nominating a supplier and guaranteeing its performance are permitted (Clauses 2/1/2 and 2/5/1), and a general quotation is merely an invitation to negotiate (Clause 2/1/4).

Correct answer: D. Clauses 2/3/1 and 2/3/3: The promise document signed by the customer may not include a bilateral promise that is binding on both the Institution and the customer, because a binding bilateral promise resembles a contract concluded on an item the Institution does not yet own. A bilateral promise is permissible only if there is an option to cancel it, exercisable by both promisors or by either of them. Hamish Jiddiyyah (Clause 2/5/3) secures a binding unilateral promise and cannot cure a binding bilateral one, and combining the wish and the promise in one document (Clause 2/1/3) relates only to the customer’s own undertaking.

Correct answer: C. Clauses 2/4/1 to 2/4/5: The Institution may not receive a commitment fee (Clause 2/4/1) or a fee for providing a credit facility (Clause 2/4/2). Documentation expenses must be proportional to the actual work involved so that they do not implicitly include a commitment or facility fee (Clause 2/4/3). However, the Institution may receive a fee for a feasibility study it undertakes at the customer’s request and for the customer’s benefit where the customer agrees to pay it, and the customer is entitled to a copy of the study (Clause 2/4/5).