Fiqh al-'Arbun — Earnest Money in Islamic Law: The Hanbali Permission, the Majority Prohibition, and Modern Deposits

The Three-School Prohibition

The Hanafi, Maliki, and Shafi’i schools hold ‘arbun transactions void for three reasons:

1. Gharar: The seller receives the deposit whether or not the sale completes — a one-sided contingency that creates uncertainty and unfairness
2. Prohibition on conditional sales: The Shafi’is view the “right to withdraw” as an impermissible condition that undermines the contract’s finality
3. Hadith: They cite a hadith in Muwatta’ and Abu Dawud that the Prophet “prohibited ‘arbun sales” — though the hadith’s chain is weak

The Hanbali Permission

Ahmad ibn Hanbal permitted ‘arbun based on:

1. The weak hadith against it does not reach probative threshold; therefore the default permissibility of contracts applies
2. A narration that Umar ibn al-Khattab approved an ‘arbun transaction
3. Commercial necessity: buyers need a mechanism to secure a deal before finalizing it, and sellers need compensation for keeping goods off the market during negotiation

The Hanbali position is now accepted by many contemporary Sharia boards, particularly in Islamic banking and property transactions.

Contemporary Application

Modern property and corporate contracts use ‘arbun extensively:

• Real estate deposits: A buyer secures a property with a 10% deposit; if they proceed, it counts toward the price; if they withdraw, it is forfeit
• Corporate M&A: Break fees in merger agreements function similarly and are generally validated under contemporary Sharia committees
• Subscription deposits: Reserving goods or services before full payment

See also: Fiqh Al Buyu, Fiqh Al Aqd, Fiqh Al Ijarah, Fiqh Al Dayn, Fiqh Al Wakala, Waqf