Is a non-refundable deposit (ʿurbūn / earnest money) permissible in a sale?

ʿUrbūn is where the buyer pays part of the price up front on the understanding that if he completes the purchase it counts towards the price, and if he withdraws the seller keeps it. The Ḥanafīs, Mālikīs and Shāfiʿīs prohibited it, relying on a narration forbidding bayʿ al-ʿurbān — which the ḥadīth scholars grade weak, Imām Aḥmad himself saying it is not authentic — and on the argument that the seller takes money for nothing. Imām Aḥmad permitted it, acting on the report that ʿUmar ibn al-Khaṭṭāb bought a house from Ṣafwān ibn Umayyah on these terms, and this is the view of Ibn Taymiyyah, Ibn al-Qayyim, Ibn Bāz and Ibn ʿUthaymīn: the general principles that trade is by mutual consent and that contracts must be honoured cover it, and the forfeited sum is compensation to a seller who held his goods off the market. This is the stronger position and the one contemporary Islamic finance standards work with, on condition that both parties know the amount in advance, that a waiting period is specified rather than left open-ended, and that the deposit genuinely counts towards the price if the sale proceeds. Some scholars add that the amount forfeited should be proportionate to the actual harm caused.

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