Abdul Rashid, Khairuddin

Hasan, Sharina Farihah

English

The International Islamic University Malaysia Repository

THE 3RD IIUM – KYOTO UNIVERSITY RESEARCH COOLOQUIUMAnCasa Hotel & Spa, Kuala Lumpur2nd – 3rd December 2015A COMPARATIVE ANALYSIS BETWEEN SHARIAH COLMPLIANT AND CONVENTIONAL CONTRACT PROVISIONS FOR CONSTRUCTION WORKSProfessor Sr. Dr. Khairuddin Abd RashidAsst. Prof. Dr. Sharina Farihah HasanContent1. Introduction2. The Shariah in Contract3. Current conventional contract practices4. Comparison between conventional contract practice and Istisna’5. Conclusion3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Introduction• The Muamalat emphasizes the need for business transactions to apply concept of justice, moral obligation, accountability and equality.• In accordance to Islamic beliefs• Subject matter, agreement, terms, conditions and the nature of the contract or covenant in business transaction should not be contrary to the shariah.• Hence the term ‘Shariah Compliant’.3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015The Shariah in Contract• Contract or covenant between people, it’s binding on the parties etc both in personal and in business transactions outlined by Quran and Sunnah• Must acknowledge and incorporates these aspects into its subject matter, agreement, terms and conditions thereto• Contract – al-aqad (to tie, to knot, to conjunct)• Al-aqad – contract or a covenant between two or more parties on a subject matter– Based on ijab and qabul– Mutual consent– Subject matter not contrary to shariah– Persons of sound mind, reached puberty, free to enter into contract and not bankrupt.3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015The Shariah in Contract3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Istisna’ financing contract Client Bank ContractorPurchases a building               Calls for the construction of        Masnooa the buildingMustasnia SaniaInvolves manufacturing                 Bank and Contractor enterDetailed specifications                  into a parallel contractSpecified priceSpecified periodSpecified terms of paymentCurrent Conventional Contract Practice3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Construction contracts - Traditional SupplierClient’s advisors Client                      ContractorStd form of contractThe primary contractPrincipal AdvisorArchitectQuantity SurveyorEngineer: C&SEngineer: M&EMain ContractorNSCDSCLSCDirect ContractorOthersClientCurrent Conventional Contract Practice3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Construction contracts – Design and Build / TurnkeySupplierAdvisor/sQuantity SurveyorEngineer: C&SEngineer: M&EDB/T ContractorDSCDSCLSCOthersClientStandard form of contractThe primary contractComparison between conventional contract practice and Istisna’Description Remarks1. Formation of contract• Capacity to contract• Offer and acceptance• ConsiderationBroadly appears consistentData on the basis of an ijaband qabul and the procedures they entail are currently not availableBroadly appears consistent2. Contractor’s obligations Broadly appears consistent3. Insurances Should include provisions making Takaful mandatory4. Third partiesBroadly appears consistent5. The works6. Payments3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Comparison between conventional contract practice and Istisna’Description Remarks7. Damages for non-completin and Liquidated damages (L&D)Broadly appears consistent8. Delay and extension of time9. Alternative method of dispute resolution through arbitration10. When is contractor discharged of his liabilities 3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Conclusion• A shariah comliant construction contract should embrace in its subject matter, agreement, terms and the conditions the Islamic doctrines that reiterate all of the Islamic belief, practice and value system• Absent features:– The validity of a shariah compliant contract is subjected to the divine sanctions– The subject matter, considerations etc must be in conformity with the divine lawas– Business transaction that complies with the shariah is considered part and parcel of the religious belief and practice of the Muslims3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015Conclusion• Based on mutual agreement• Istisna’ is the most appropriate model• Brief comparison between 10 key conventional contract practice and their relation to the shariah has been identified and provided• Initial findings suggested that most of them broadly comply with the requirements of the shariah• The demand will grow• Desire of muslims to apply al-muamalat in procuring construction works• Shariah, legal and construction experts should prepare themselves to embrace this new challenge.3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUMANCASA HOTEL & SPA, KUALA LUMPUR2nd – 3rd December 2015THANK YOU&WASSALAMsfarihah@iium.edu.my3RD AICIFASEAN INTERNATIONAL CONFERENCE ON ISLAMIC FINANCENovotel, Hotel Semarang, Indonesia 17th – 19th November 2015

A comparative analysis between Shariah compliant and conventional contract provisions for construction works

http://irep.iium.edu.my/49517/1/Paper_15_-_Sharina.pdf

A comparative analysis between Shariah compliant and conventional contract provisions for construction works

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