One of the types of transactions that’s very common today is a down-deposit transaction. This happens all the time with somewhat large purchases, like wedding cakes, or cars.

Say your sister is getting married. You go to the bakery to locate a nice cake; passing by towers of icing, you locate one that doesn’t seem too unhealthy.

“That one?” the shopkeeper says. “That one is $200. There’s a non-refundable deposit of $50 on it.” Non-refundable–if you pay for it, walk out, change your mind, and cancel, then that money is lost.

Is this allowed or not?

Scholars have differed over this. The majority of scholars hold that it is not permissible to do this.

Why? Because it’s a debt-for-debt transaction! You owe the guy $200 – $50 (so $150), and he owes you a cake! That’s a debt-for-debt transaction! Ahhhhhhh!! (Wait, wait!! Don’t throw up that cake yet ….)

The Hanbali scholars disagree with this; they hold that this is a permissible type of transaction. And their opinion is insha’Allah the stronger and the correct one.

Why did they say this? Two of their proofs are:

  1. No Prohibition: There is no specific prohibition against a down-deposit transaction. The asl (root) is that all transactions are halal until proven haram. Since there’s no specific prohibition, we’re somewhat good to go.
  2. The Narration of Nafis lbn al-Harith. Nafis (radiallahu ‘anhu) built a prison for ‘Umar (radiallahu ‘anhu) and sold it to him on the condition that if he liked it, he would pay the full amount; and if he didn’t like it, then his deposit would be forefit! [Recorded in the Musnad of Imam Ahmed] Isn’t that exactly what we’re doing here?

So insha’Allah it’s halal. So go ahead! Enjoy that cake!

Wallahu ta’ala ‘alam.

Action Steps:

  • Grab the nearest person and explain to them why down payments are permissible, and what the proofs are for both sides of scholars. (Grab your friend, email your family member, blog it, podcast it, whatever you like!)
  • Use down payments in your transactions as a seller. If you’re selling something and stand to lose a lot and need collateral, use a down deposit! It’s halal!

Shaykh Tawfique Chaudhry. The Real Deal. University of Toronto, Toronto. 08 Jan. 2009.