AL-TAFAHUM AL-MUSBAQ (THE PRIOR UNDERSTANDING BETWEEN PARTIES): DETERMINING ITS POTENTIAL PRACTICES IN SELECTED ISLAMIC BANKING PRODUCTS

Abstract

Mutual understanding is an element that exists in contracts, promises, and any form of agreement, as long as the intention of one party is agreed upon by another. These formal contracts and promises are achieved through a prior understanding that shapes the understanding on the details of the contract or promise between the contracting parties, known as al-tafahum al-musbaq (prior understanding between parties). Al-tafahum al-musbaq, as a linking mechanism in multi-contract arrangements, may potentially trigger the Prophetic prohibitions of bay‘ wa salaf (sale and loan in one transaction), bay‘atayn fi bay‘ah (two sales in one sale), and safqatayn fi safqah (two deals in one deal), as well as issues of interconditionality between contracts. Accordingly, this study analyses the views of Shariah scholars on the nature of prior understandings preceding a contract and examines their effect on subsequent contractual arrangements, particularly in determining whether such understandings are to be treated as binding conditions (shart) or as non-binding preliminary understandings. It further explores the juristic rulings of al-tafahum al-musbaq by reference to the objectives underlying the prior understanding (al-amr al-mutawata’ ‘alayh), highlighting how its Shariah characterisation may differ according to purpose and structure.