Shariah fundamentals

Khiyar (option to revoke or confirm)

A right of one or both parties to confirm or revoke a contract, for example because of a defect, a stipulated condition or a cooling-off period.

Khiyar is an option that gives a party the right to confirm or revoke a contract. AAOIFI has separate standards on options to revoke contracts because of incomplete performance and on options to reconsider, which cover cooling-off options, either-or options and options to revoke for non-payment. Its murabaha standard also deals with defects, allowing a seller to sell on an as-is basis while the buyer otherwise keeps the right to reject a defective asset. Options matter for systems because a contract subject to an open option is not yet final for the party who holds it.

Sources

AAOIFI Shari'ah Standards, English edition (full text, PDF): Shari'ah Standards No. 51, Options to Revoke Contracts Due to Incomplete Performance, and No. 52, Options to Reconsider

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

Related terms

MurabahaA sale at cost plus an agreed, disclosed profit; the seller must own the asset first. Payment is often deferred in instalments.Urbun (earnest money)An earnest payment made at signing: part of the price if the sale completes, kept by the seller if the buyer withdraws.GhararExcessive uncertainty in a contract, about the object, price, quantity or delivery, which can make the contract invalid.Bay al-bara'ah (sale on an as-is basis)A sale in which the seller is released from liability for some or all defects in the goods, by agreement with the buyer.