FAQ #69: If I cancelled my intention to purchase a car or a house, my initial deposit is forfeit. Is this allowed in Islam?

Islamic Commercial Matters FAQ #

It is a principle of a sale transaction that it is a binding contract that cannot be rescinded except by the mutual agreement and will of both parties (buyer and seller).

This entails that none of the parties has the right to abandon their obligations. Hence, if the buyer does not pay the remaining price, they are legally obligated to it just as the seller is obligated to deliver the sale.

However, for the case concerning the question, it is known as bai’ al-urbun in our shariah.

Simply, it represents a partial payment of the price of a particular good, which entitles the buyer to the right to buy it but does not obligate the buyer to do so. If the buyer does in fact purchase the asset, the urbun (deposit) becomes part of the purchase price, and if the buyer does not purchase the goods, the seller retains the urbun as compensation for their trouble.

This sale arrangement is permissible with the condition that the period where the buyer enjoys the right to buy or rescind is predetermined and mutually agreed upon between both parties.

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