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Transactions in which Nonrefundable Deposits were Paid

Answered according to Shafi'i Fiqh by Darul Iftaa Jordan
What is the ruling on transactions in which nonrefundable deposits were paid. In other words, if the buyer takes the commodity, the deposit is considered part of its price, but if he doesn`t, that sum goes to the seller?

Answer:
All perfect praise be to Allah, The Lord of The Worlds, and may His blessings and peace be upon our Prophet Mohammad and upon all his family and companions. In principle, sale is a binding contract which may not be terminated except with the consent of both parties, and this aims to create stability in various sales and transactions; consequently, none of the two parties may back down. If the buyer didn`t pay the remaining part of the commodity`s price, then Sharia obligates him to do so, and he doesn`t have the right to terminate the sale contract. Similarly, the seller is obligated to deliver the commodity in question. This type of sale comes in two forms: 1-Before concluding the sale contract. In this form, the buyer gives a nonrefundable deposit to the seller. If the transaction wasn`t concluded then that deposit goes to the seller without liability on his part, but if it was concluded then the buyer pays the remaining portion of the commodity`s price. This form is unquestionably permissible because the Prophet(PBUH) said: "The Muslims will be held to their conditions"{Al-Hakim}. 2-Upon concluding the sale contract. In this form, the buyer gives a nonrefundable deposit to the seller. If the transaction was concluded then that deposit becomes part of the commodity`s price, but if it wasn`t, that deposit goes to the seller without liability on his part. The Hanafie and the Shafie jurists have considered this form impermissible based on the following Hadith: "The Messenger of Allah, may Allah bless him and grant him peace, forbade transactions in which nonrefundable deposits were paid."{Ibn Majah}. However, the Hanbali jurists have considered it permissible based on the following Hadith: "Nafi` Ibn Al-Harith has bought a building in Makkah from Safawan Bin Umaiah, to be used as a prison, under the condition that if Omar Bin Alkhatab approved of that then the sale transaction is concluded, but if he didn`t then Safwan takes four hundred dinars{Nonrefundable deposit}." Nonetheless, Ahmad Bin Hanbal has considered this Hadith to be weak. Resolution No. (76/3/85) of the Islamic Fiqh Assembly, session 8, has considered this type of sale permissible if it is confined to a certain period, the deposit is considered part of the price in case the deal was concluded, and the seller gets the deposit if the buyer backed down on deal. In addition, article(107) of the Jordan Civil Code permitted this type of sale. We, the General Iftaa` Dept, opt for considering this type of sale "Nonrefundable Deposit sale transaction" permissible, where the deposit paid by the buyer is considered part of the commodity`s price in case the sale was concluded, or else the seller gets the deposit if the buyer backed down on deal. This is provided that both parties agree on a certain time limit. This sale transaction goes under what is called "Stipulated right of cancellation." And Allah knows best.

This answer was collected from the official government Iftaa Department of Jordan.

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