The combination of contracts in Shariah: A possible mechanism for product development in Islamic banking and finance

The combination of contracts is a potential mechanism of product development in Islamic finance. However, this concept encounters legal issues due to ahadith that prohibit two contracts in one deal. The article argues for the validity of combining two or more contracts to structure Shariah‐compliant products. It discusses many aspects of combination of contracts, including terminologies and purposes of the con‐tracts, the degree of uncertainty and ambiguity, and the nature of the bargain in the contracts combined. If the contracts combined pass the tests established by legal prin‐ciples, there will be no legal objection to combine such contracts into one deal. © 2007 Wiley Periodicals, Inc.