Deferred Discounts in Financial Exchange Contracts–A Foundational Legal Study

Abstract

Objectives: This research aims to establish the juristic foundation of deferred discounts in contemporary and renewed financial exchange contracts. It typologizes the various forms of these discounts based on their contractual conditions and examines whether the discount constitutes a form of compensation (such as subscription fees exceeding mere administrative costs) or whether it is subject to conditions that do not entail direct compensation for the same discount.

Methodology: The study adopts three methodologies. It employs an inductive approach to collect and categorize prevalent forms of deferred discounts in marketing practices, a descriptive approach to analyze these forms, and a deductive approach to establish their legal foundation and validity.

Findings: Deferred discounts fall into two categories. First, if the refund amount is initially unknown and tied to a subscription fee that constitutes consideration, it is considered a gift given with an expectation of return (hibat al-thawāb) and is impermissible. If the fee is incidental, it qualifies as a gift and is valid. Second, if the discount amount is fixed upfront, non-cash refunds are permissible, while cash refunds are prohibited due to the prohibition of combining loans with reciprocal benefits.

Originality: The significance of this research lies in its examination of emerging marketing practices that are widely prevalent but have not been previously studied as independent juristic issues.