SYARIAH IN ISLAMIC

BANKING & FINANCE

Chapter 11: Urbun

1.Definition of Urbun
• Linguistic Definition
• means to pay or receive in advance

• Technical Definition
• Payment in lieu of the right given to the buyer to
have a waiting period, whether to continue or
withdraw from the contract. The period is
undetermined
• Payment considered as part of the purchase price if
the buyer decides to proceed. If he withdraws, the
seller will have the right to keep the deposit

• the second type of urbun contract is being

disputed by the jurists

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 Legitimacy of Urbun
 Not permitted
 majority jurists
 No harm although period not determined
 Hanbali and majority Hanbalis
 Same view for Umar ibn al- al-Khattab,
Khattab, his son `Abd
`Abd Allah, Ibn
Sirin,
Sirin, Mujahid,
Mujahid, Nafi`
Nafi` ibn al-
al-Harith and Zayd ibn Aslam
 valid if the waiting period for urbun is determined
 Some of the Hanbalis
 held by some modern jurists such as Wahbah al- al-Zuhayli,
Zuhayli,
`Abd al-
al-`Aziz bin Muhammad al- al-Rabish,
Rabish, `Abd
`Abd Allah bin
Sulayman bin Mani`, Yusuf al- al-Qaradawi,
Qaradawi, al-al-Shaykh `Abd al-
al-
Sattar Abu Ghaddah,
Ghaddah, `Ali Muhyi al- al-Din al-
al-Qarah Daghi,
Daghi, `Ali
al-Taskhiri, and many others.
al-Taskhiri,
 This is also the decision of the Fiqh Academy of Jeddah in its
eighth session in Brunei

The Nature of Urbun

1. a kind of clause for liquidated damages
 One may lose the opportunity of selling his item for
a good price, a court intervention is necessary to
assess the damage
 damage should be assessed by a court of law even
if the parties have agreed at the beginning to a
certain amount of compensation
 If no damage has taken place, then there are no
grounds for compensation
 occurrence of the damage is a condition for
receiving the compensation

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 The Nature of Urbun
2. the beneficiary is entitled to it whether there is
damage or not
 the parties have agreed and fixed the amount just
for the “right”
right” to cancel the contract
 different from the nature of urbun, which is an
exchange of the “right”
right” to cancel the contract as
agreed upon between the parties, and one which,
as such, could not be subjected to court
intervention
3. Some jurists consider urbun as a conditional gift
 “If I withdraw from this contract, I will give you the
amount that has been given as an urbun”

Purposes of Urbun
1. To Secure a Right
 still wants to keep his options open and the contract can still
be aborted
2. To Secure More Time
 to acquire sufficient amount of money to pay the price
3. Risk Mitigation Tool
 instead of paying the full amount, one negotiated with the
seller to pay an urbun
 Will act according to price movement
4. To Make a Profit
 Act according to price movement
 mainly in derivatives trading

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Urbun as an Independent Sum of the
Commodity
 urbun in Islamic law is a part of the total price of sale or
rent, and not an independent sum of money from the
commodity’
commodity’s price

 makes urbun different from option

 In option, the buyer will have to pay the full purchase

price as the premium (deposit) paid in getting the option
is considered as an independent sum of money

 This is not allowed in Islamic law, as has been decided

by the Fiqh Academy of Jeddah

The End

Thank You