Islamic Manufacture Financing Contract (Aqd al-Istisna’)

Abstract

Istisna is a debt-like contract, which is based on Mark-up. Some define the istisna contract as a contract for acquisition of goods by specification or order, where the price is paid progressively in accordance with the progress of a job completion But it is necessary for the validity of Istisna that the price is fixed with the consent of the parties and that necessary specification of the commodity (intended to be manufactured) is fully settled between them. The contract of Istisna creates a moral obligation on the manufacturer to manufacture the goods, but before he starts the work, any one of the parties may cancel the contract after giving a notice to the other. But after the manufacturer has started the work, the contract cannot be cancelled unilaterally.