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Legal Implications of Misuse of Bank Facilities in Contracts
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M S1   , A S , M S2 |
1- , ahmadsaberimajd@ut.ac.ir
2- m |
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Abstract: (34 Views) |
The use of Sharia-compliant contracts, as outlined in the Law on Usury-Free Banking Operations, is a key strategy in Iran’s legal system to eliminate usury. However, challenges such as "banking facilities deviation" have emerged. This deviation, identified as a form of "moral hazard" in economic literature, refers to the misuse of banking facilities for purposes beyond the contract's scope. It includes scenarios like formalized contracts without genuine intent or breaches of conditions after the contract’s conclusion. This article, using a descriptive-analytical method and economic literature review, categorizes contracts based on the types of deviations and addresses the question: "What are the legal implications of banking facilities deviation on the validity of contracts?" The author argues that the validity or voiding of a contract hinges on the parties' intent at its conclusion, with distinct legal consequences for each outcome. The study explores scenarios of banking facilities deviation to clarify the legal disposition of the principal, profit, and other benefits, whether the contract is valid or void. A critical issue is the legitimacy of claiming banking profit when a contract is void. Opinions vary: some view such profit as usurious, while others see it as compensation for inflation or foregone benefits. The necessity of this research lies in the precise identification of banking contracts and the legal analysis of breaches resulting from the diversion of loan facilities, as an incorrect understanding of the contracts' nature may erroneously lead to the invalidation of contracts and disruption of commercial order. |
Article number: 2 |
| Keywords: Banking law, Islamic banking, Facility deviation, Contractual liability, Concept of damage, Banking supervision. |
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Full-Text [PDF 692 kb]
(57 Downloads)
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Article type: Research |
Subject:
Special
Received: 2025/01/29 | Accepted: 2025/06/7 | Published: 2026/05/31
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