Istisna (manufacture to order)

The istisna contract

Istisna is the commission of manufacture: a defined product against a known price, manufacture being the attribute of the contract. For the Hanafis the contract is valid by istihsan and by the continuous practice of people in every era, despite the refusal of analogy, since selling what one does not own was forbidden except for salam. Its effects: the commissioned product becomes a debt owed by the maker, and the price belongs to the maker as non-binding ownership. Abu Hanifa held both parties free before manufacture; Abu Yusuf and Muhammad hold the contract binding, and the Majalla (article 392) took this view: no withdrawal even before manufacture, unless the product delivered differs from the contracted attributes, in which case the client has the option.

If the client provides the material and pays a wage (iron to a blacksmith, leather to a shoemaker), the contract is a hire, not an istisna.

The position of the three schools

For the Malikis, Shafi'is and Hanbalis, istisna as an independent contract is not valid; it stands as a salam with all the conditions of salam: capital paid in the session, precise description, a term. The Malikis forbid specifying the raw material (iron, for instance) or a particular worker, because of the gharar this introduces; they allow ordered purchase modeled on a salam term without such specification. The Hanbalis state that selling a good on the condition of manufacturing it is not valid outside the salam form. ash-Shafi'i in the Umm validated the combined structure: buying the material from the craftsman and hiring his work in one contract.

The differences with salam

• Salam requires a term of at least a month; istisna is valid with or without a term.
• Salam requires the capital in the session; istisna admits partial payment, in line with custom.
• Before taking possession, no substitution of capital or object is allowed in salam; the price of istisna can be substituted like any sale price.
• Salam is binding; istisna is non-binding on the sound position, each party keeping its choice before delivery.
• The salam object is a debt (measured, weighed, counted); the istisna object is a defined item, even if the maker delivers one made by another hand.

Practical note

For any manufacturing order, the fiqh checklist is short: described product, known price, payment terms, and a clear choice between the binding salam form and the free commission.