A sale with a down payment is a deal in which the buyer pays money before the sale is final or the goods arrive; depending on the contract, that money counts toward the price, serves as a refundable guarantee or stays with the seller.
Three ways to hand over money before the final sale
An upfront sum can be a part payment of the price under a sale already concluded, an urbun deposit the buyer forfeits on withdrawal, or earnest money attached to a mere promise to buy. Each one creates very different rights for both sides.
Urbun, the forfeitable deposit accepted by the Hanbali school
With urbun, the sale is concluded, the buyer pays part of the price and keeps the right to withdraw within a fixed period, losing that sum. The Hanbali school accepts it, while the other classical schools were more reluctant.
Why does a fixed deadline guard against gharar?
An option to withdraw with no time limit would leave the seller uncertain indefinitely. AAOIFI standards therefore require a defined period: once it expires, the sale becomes binding and the amount already paid is automatically credited toward the price.
Refund or credit when the buyer goes ahead
If the buyer confirms the sale, the urbun is not an extra charge: it is deducted from the total price. A contract that combined forfeiting the deposit with payment of the full price would be unbalanced and open to challenge.
Earnest money in a home purchase Murabaha
Before buying a property to resell it to the customer, the bank often requests hamish jiddiyya. It is not part of the price: it secures the customer's promise to buy and remains the customer's money until the sale is concluded.
What may the bank keep if the customer backs out?
If the customer withdraws after the bank has acquired the asset, the bank may deduct from the deposit only its actual loss, for instance the shortfall when reselling the property to a third party. The balance has to be returned.
Can the security deposit be invested in the meantime?
The deposit may stay frozen as a pure guarantee or, with the customer's consent, be placed in an investment account in the customer's name. Any profit then belongs to the customer, and this must be written into the initial agreement.
Deposits in sales with deferred delivery
For goods made to order, such as equipment built under istisna, a first instalment often funds the start of production. It is then a part payment of the price rather than a forfeitable urbun, unless a clearly accepted clause says otherwise.
Urbun-based structures on capital markets
Some jurisdictions, Malaysia among them, have accepted products whose mechanism draws on urbun to approximate a call option. The premium paid rewards the right to walk away. Other scholars reject transferring the concept to tradable securities.
A forfeited deposit is not a late-payment penalty
Losing the urbun compensates the seller for the option granted and for keeping the goods off the market. It must not turn into a sanction calculated on the length of a delay, which would resemble prohibited default interest.
Points to check on an order form or preliminary contract
The document should name the nature of the sum, the withdrawal period, what happens if either party pulls out and what becomes of the money if financing is refused. Any ambiguity should be settled in writing before paying anything.
Matters left to the Sharia board's judgement
The choice between urbun and earnest money, the amount kept on withdrawal and the use of frozen funds differ between institutions. Compliance of a specific arrangement is assessed by the provider's Sharia board, not by the seller or a salesperson.
Specialist external source
The Securities Commission Malaysia portal sets out resolutions of its Shariah Advisory Council, including those on using urbun in capital market products.