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The Principles and Practices of Shariah in Islamic Finance - page 46 / 49

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112. Upon settlement of the outstanding debt owed to the IFI by the purchase orderer without any encumbrances, the Murabahah contract is dissolved.

Maturity of debt and natural termination of contract

113. The IFI and the purchase orderer may mutually agree to dissolve the contract at any point in time prior to maturity date unless stated otherwise in the relevant documents of the Murabahah contract.

Mutual agreement to dissolve

114. The IFI may take a down payment (‘urbun) from the purchase orderer after signing the contract. This payment may be forfeited by the IFI should the purchase orderer were to terminate the contract.

Down payment (‘urbun)

  • 110.

    If the purchase orderer breaches the Murabahah agreement or defaulted in payment of the Murabahah contract, a portion or all of the property charged as collateral may be disposed, or cheques deposited by the purchase orderer may be encashed at an equivalent value to compensate for the total outstanding amount.

  • 111.

    To safeguard the interest of the IFI, the IFI may defer the registration of the asset in the name of the purchase orderer until full settlement of selling price. However, this practice does not and shall not deprive the purchase orderer’s right of ownership to the asset.

Dissolution/Termination of Contract

Postponement of asset registration

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