Khiyar is an option that is given to one or both of the contracting parties or a third party to reconsider the contract or the terms of the transaction in light of specific factors or occurrences during a specific period of time. In that sense, khiyar has nothing to do with options in their conventional, technical meaning (as a form of derivatives).
Wa’ad (Arabic for promise or promising) refers to an obligation issued by one counterparty, such as a potential purchaser or purchase orderer in murabaha transactions, to another, and whereby the promisor undertakes towards the promisee to proceed with the contract. Shari’a considers a promise binding on the issuer unless an excuse (force majeure) comes forth and prevents fulfillment. In law, a promise is binding if it is pending on a cause and incurring the promisee costs and expenses.
The main differences between khiyar and wa’ad are as follows:
| Khiyar | Wa’ad | |
| Link to core contract | It is embedded in the core contract | It is added in a separate document, not in the core contract |
| Time of use | Before conclusion of the contract. | Upon or after execution of the contract |
| Compensation | No compensation if damages incurred during the period of khiyar. | Damages arising from non-execution of wa’ad shall be compensated. |
