Is it permissible to use master agreements?


Is it permissible to use master agreements?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salamu ‘alaykum wa-rahmatullahi wa-barakatuh.

The Answer:

Using master agreements as a reference for any future transaction is permissible on condition that the offer (‘ījāb) and acceptance (Qabūl) are exchanged at a future date when the parties intend to transact.

The Fiqh (jurisprudence of the answer):

The master agreement is a document agreed to between two parties that sets out standard terms that apply to all the transactions entered into between those parties. Each time that a transaction is entered into, the terms of the master agreement apply automatically and do not need to be re-negotiated. As such, it is not a contract of exchange, but an agreement of a framework and standard terms for any future transactions.

Agreeing to a master agreement is not regarded as an offer and acceptance for a sale. Rather, it is an agreement to conduct a transaction in the future on the terms within the master agreement. Discussing and agreeing to terms in advance is customary practice and takes place all the time before most transactions. However, the only difference is that in those circumstances, a transaction follows immediately, in financing agreements where master agreements are used, the transactions are not always executed immediately.

In practice, most Islamic financial institutions which use master agreements will have a notice of offer and acceptance outlined in the schedules of a master agreement. This notice is then exchanged on the day of the transaction with the details of the transaction as a formal offer and a formal acceptance. Therefore, any future transaction will require its own offer and acceptance.


And Allah Alone Knows Best

Mufti Faraz Adam
Shariah Advisor


The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any institutions to which he may be affiliated.

Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. On the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.

The Shari’ah ruling given herein is based specifically on the scenario in question.  The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage.  This answer may not be used as evidence in any court of law without prior written consent from the author.  Consideration is only given and is restricted to the specific links provided, the author does not endorse nor approve of any other content the website may contain.





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