Derivatives
Funded Credit Derivative
July 22, 2020
Islamic Finance
Khiyar
July 22, 2020

Arabic (خيار الرد بالعيب) for an option (khiyar) to return an object of sale to the seller due to defect (‘ayb‘aib)- that is, because it turned out to be defective. For example, a person purchased a car from another, and it transpired that the car was not working properly due to some hidden defect (a defect unseen at the time of sale). In this case, the buyer has the right to return the car to the seller and recoup the price (thaman) he had paid, based on khiyar al-radd.

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