Contract: Pledge and Debt

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  • Topic: Pledge, Debt, Debtor
  • Pages : 3 (603 words )
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  • Published : May 20, 2013
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Supporting Contract.
Among the supporting contract that used by Islamic financial institutions are: 1. Contract of Rahn (Pledge)
2. Contract of Kafalah or Dhaman (Guarantee)
3. Contract of Wakalah (Agency)
4. Contract of Wadiah (Safe Custody)
5. Contract of Ibraa (Rebate)
Contract Of Rahn (Pledge)
The conditions to each essential elements of Rahn are as follows: a. Pledgor (customer)
b. Pledgee (eg: Islamic Bank)
3 necessary conditions of ‘Pledgor and Pledgee’ as follows: i. They must be capable of taking responsibility
ii. They must not prohibited from dealing with their properties iii. No coercion is exerted on them
c. Obligation or right to a claim (debt)
i. A debt must have been established
ii. The debt must be known
d. Pledge (property pledge)
iii. Anything that can be bought and sold can be pledge. iv. It must exist (can be perceived by sense of touch
v. It must be of use according to the Shariah
* It must not be too little as to be of no use
* It must not distract from remembering Allah
* It must not be used for haram purposes.
* It must be owned by the pledgor
* It must be capable of being delivered (must be free from encumbrances) * It must be known and specific by address, description or specification e. Contract (offer and acceptance)
2 necessary conditions:
i. A pledge becomes a concluded contract by the offer and the acceptance of the pledgor and pledge. The offer and acceptance must be absolute and in definite and decisive language. ii. The acceptance must agree with the offer.

Other features relating to the pledged property are as follows: 1. One pledge may be exchanged for another
2. It is lawful to increase the debt that is secured by the pledge 3. One pledge can be taken as security for two different debts from two different creditor 4. A borrowed property can be used as a pledge

5. The pledge (i.e Bank Rakyat)...
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