An Overview of Islamic Contracts and Principles

1. An Overview of Islamic Contracts and Principles By Yusuf Talal DeLorenzo Kuwait March 2005

2. Agenda • Introduction • Governing Law • Contracts • Nominate Contracts • Rethinking the Nominates • Summary

3. Introduction • The context of Modern Islamic Contracts • Modern Shariah Boards and the their jurisprudence • Classical Islamic contracts • “Using the nominate contracts for trade and exchange as their building blocks, modern Muslim jurists have provided Shariah-compliant solutions to an ever-expanding spectrum of needs.”

4. Governing Law • British Court of Appeals (Civil Division) 2004, decides that it cannot recognize Shariah Law. • The jurists of Islam hold that it is the responsibililty of the believer to transact in compliance with Shariah • Faith, not jurisdiction, is the determining factor • Modern agreements may be drafted to accommodate Shariah compliance in any jurisdiction

5. Contracts • The sanctity of contracts • Mutual consent • Freedom of contract restricted only by Shariah principles

6. Nominate Contracts • Recognized ways of contracting, contractual norms approved by consensus • Legitimacy of modern commercial jurisprudence derives from the use of nominates (classical models) • Recovery and adaptation of classical models for modern needs

7. Rethinking the Nominates • Blocks or units in which the integrity of the classical models is maintained • Blocks may be combined and joined together to meet contemporary needs • Adaptation of classical models by modern Shariah boards for modern business and commerce

8. Summary • Nominates represent the fundamental building blocks of all modern Islamic Finance • The regulation of modern Islamic finance may benefit from an enhanced understanding of the nominates • The modern Islamic financial services industry needs to further explain its inner workings as it continues to adapt the nominates for innovation and development

9. Questions ?

10. Contact Yusuf@delorenzo.com