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The Principles and Practices of Shariah in Islamic Finance - page 16 / 49

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11. Essential pillars of a sales contract, which are:

(i (ii) (iii) (iv)

legal capacity of contracting parties; offer and acceptance; lawful and existing subject matter; and price known with certainty, apply to the MPO.

  • 12.

    From an operational perspective, MPO involves four significant components, which are:

    • (i)

      customer order with Wa’d or promise to purchase;

    • (ii)

      acquisition at known and agreed cost;

    • (iii)

      sale at mark-up; and

    • (iv)

      deferred payment. However, various other applications of MPO may be formalized based on the specified technical definition of MPO.

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