FIQH MUAMALAT 

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Chapter 5: Concept Of Contract Chapter 6: Sale-Based Transactions 1 Chapter 7: Sale-based Transactions 2 Chapter 8: Mudarabah Chapter 9: Musharakah Chapter 10a: Ijarah Chapter 10b: Rhan Contract Chapter 11a: Kafalah Chapter 11b: Wakalah Chapter 12: Bay al-Dayn Chapter 13a: Wadi'ah Contract Chapter 13b: Contract of Sarf
Table of Contents ▼


    Introduction to Ijarah

    1. Core Concept


    Definition: Ijarah (leasing) is a contract permitted by the al-Qur’an and Sunnah.

    Purpose: It allows people who cannot afford to buy assets to still access and benefit from them.

    Objective: To facilitate public needs and provide ease in life.

    2. Literal vs. Technical Meaning

    Literal Meaning: Ijarah comes from the root word ’ajjara, which means to recompense, compensate, or give a return. It essentially means "reward for service rendered".

    Technical Meaning: In Islamic law, Ijarah covers two distinct types of contracts.

    3. The Two Types of Ijarah

    Type A: Hiring Persons (Services)
    This refers to employing a person for wages in exchange for their work (e.g., a doctor, lawyer, or teacher).
    • Employer: Called the Musta’jir.
    • Employee: Called the Ajir.

    Type B: Leasing Assets (Usufruct)
    This refers to transferring the usufruct (the right to use/benefit) of a property to another person in exchange for rent.
    • Lessor: Called the Mu’jir.
    • Lessee: Called the Musta’jir.
    • Rent: The payment is called Ujrah.

    4. Key Exam Distinction

    Sale vs. Ijarah:

    In a Sale, the corpus (the actual body/ownership) of the property is transferred to the buyer.

    In Ijarah, the corpus remains with the owner; only the usufruct (benefit) is transferred.

    Classical Jurist Definitions



    1. Definitions by School of Thought
    You need to know how the different schools define Ijarah slightly differently:

    The Hanafis: They define it simply as a contract pertaining to usufruct with compensation.

    The Shafi’is: They are more specific. They define it as a contract over a usufruct that must be desirable, known, permissible, and accessible, in exchange for a known compensation.

    The Malikis and Hanbalis: They define it as the transfer of ownership of a permitted usufruct for a known period in exchange for compensation.

    2. Common Ground
    Despite the small differences, all definitions agree that Ijarah is a bilateral contract where the use of a corporeal object (a physical item) is exchanged for a price.


    Authority & Evidence of Ijarah



    1. Qur’anic Evidence
    You can cite these verses to prove Ijarah is valid in the eyes of Allah:

    Story of Moses (Surah Al-Qasas 28: 26-27):
    One of the women said, "O my father! Hire him! Verily, the best of men for you to hire is the strong, the trustworthy."
    • Context: This verse shows a contract based on service for a specific period (serving for eight or ten years) in exchange for marriage.

    Recompense for Suckling (Surah At-Talaq 65:6):
    "And if they suckle your (offspring), give them their recompense." 
    • Significance: This validates paying for a service (suckling).

    Recompense for Work (Surah Al-Kahf 18:77):
    When Moses fixed a wall, he was told, "If thou hadst wished, surely thou couldst have exacted some recompense for it!" 
    • Significance: This implies that asking for payment for work done is permissible.

    2. Sunnah Evidence (Hadith)
    These Hadiths set the rules for paying wages and defining the contract:

    Timing of Payment: The Prophet (pbuh) said: "Pay the hired worker his wages before his sweat dries off." 

    Legal Rule: This indicates the validity of hiring for a specific time and the obligation to pay promptly.

    Certainty of Fee: The Prophet (pbuh) said: "He who hires a person should inform him of his fee." 

    Legal Rule: The price/wage must be known (ma'lum) to avoid uncertainty

    Warning Against Non-Payment: The Prophet (pbuh) stated that on Doomsday, he will be an enemy to: 
    "A man who hired a worker to carry out some work for him, but did not give him his wage." 


    3. Juristic Consensus (Ijma’)

    Unanimous Approval: Ijarah is approved by prominent jurists of all recognized schools of Islamic law.

    The Reasoning:
    • The need to utilize the usufruct (benefit) of goods is just as important as the need to utilize the assets themselves.
    • It facilitates the standard of life by allowing people to use assets they do not own.
    • Consideration for the needs of the people is a basic principle in legalising contracts.

    Classifications of Ijarah



    1. Based on Subject Matter

    Tangible Asset (Ayn):
    • This refers to physical assets like properties, transport facilities, and factories.
    • The term Ayn is generally used as the opposite of Dayn (debt).

    Labour / Non-tangible Asset (Amal):
    • This refers to work or services. It is executed by two types of workers:

    Ajir Khas: An employee (works for one person exclusively).

    Ajir Mushtarak: An independent contractor (can work for multiple people).

    2. Based on Specification of Subject Matter

    Ijarah Muayyanah (Specific Source):
    • The lease is related to a specific piece of property, such as a particular car or shop.

    Ijarah Mawsufa fi al-dhimmah (Liability/Pledge):
    • A contract based on a liability to provide a service/benefit, rather than a specific object.
    • The lessor assumes the liability to fulfill the defined usufruct.

    3. Based on Timing (When it becomes effective)

    Ijarah Munjjazah (Instant Lease):
    • Comes into effect immediately after the offer is accepted.
    • It is not tied to a future event.

    Ijarah Mudafah (Lease at a Future Date):
    • The effect of the lease is delayed to a fixed future date.

    Ijarah Muallaqah (Contingent Lease):
    • Effectiveness is tied to the fulfilment of certain conditions or a future event.
    • Exam Note: The Majority of jurists consider this type invalid.

    4. Based on Contractual Relationship
    Ijarah Tashghiliyyah (Operating Lease):
    • Usually conducted by business companies or IFIs.
    • Key criteria: It is not tied with a purchasing agreement.

    Ijarah Tamwiliyyah (Financing Lease):
    • Usually conducted by IFIs (Islamic Financial Institutions).
    • Key criteria: It is tied to purchasing or gifting the asset at the end.
    • Widely used in real estate, machinery, and equipment.


    Conditions of Ijarah Contract



    1. General Contract Conditions

    Known Consideration: Both parties must precisely know the consideration (payment/wage), whether it is for the usufruct of a service or the usufruct of an asset.

    Fixed Duration & Purpose:
    • The period of the contract must be fixed (e.g., 1 year, 6 months).
    • The purpose of the lease must be clearly specified (e.g., "for residence," "for storage").
    • Ownership Requirement: The lessor (Mu'jir) must be the absolute owner of the rented item, or a valid agent or guardian of the owner.

    2. Responsibilities of the Parties
    Lessor’s Responsibility (Maintenance):
    • It is the duty of the lessor to maintain the leased property.
    • They must ensure the property remains in a condition that allows the lessee to retain the benefit of it.

    Lessee’s Responsibility (Damages):
    • If the lessee intentionally damages the leased property, the lessor has the right to:

    Terminate the lease agreement.
    • Seek compensation for the damage.

    3. Specific Rules for Sub-letting & Services
    Sub-letting:
    • The lessee is allowed to sub-let immovable property (like a house or land).
    • Condition: This is valid provided there is no restriction forbidding it in the original agreement.

    Ijarah of Services:
    • For service contracts, the benefit/work must be made known by a statement describing the nature of the service being offered.

    Applications & Issues



    1. Ijarah Thumma al-Bai’ (Lease Ending with Ownership)
    • Concept: This is a hybrid contract where the intention of the lessor is to keep ownership only until the end of the lease duration.
    • Transfer: Upon completion of the Ijarah, the ownership is transferred to the tenant/lessee.
    • Modes of Transfer: There are four common ways this transfer is achieved :
    • Automatic Transfer: If rents are paid fully, the lessee automatically gets ownership.
    • Token Price: Lessee is entitled to purchase the asset for a token price after paying full rent.
    • Market Price: Lessee is entitled to purchase the asset at the prevailing market price.
    • Promise to Sell: The lessor promises to sell the asset at real market value upon completion.

    2. Sale and Lease Back (Sukuk Ijarah)
    • Definition: This involves the sale of property to sukuk holders, and subsequently leasing back the asset from them, with a promise to buy back the asset upon maturity.
    • Key Issues:
    • The legality of selling the corpus (asset body) with a condition to lease it back.
    • The repurchasing of the asset by the issuer at the maturity date.


    3. The 'Inah' Controversy
    This is a major area of debate regarding Sale and Lease Back structures.
    • Definition of Inah: Inah generally refers to a sale and buyback arrangement (often used to bypass interest). It is applicable to both the corpus and the usufruct.

    • The Majority View:
    • They do not consider Sale and Lease Back as Inah, implying it is permissible.

    • The Opposing View (Minority):
    • They consider this transaction akin to Inah and therefore nullify (invalidate) it.

    • Reasoning: They argue it is not permissible to sell an asset for cash with a stipulation to lease it back if the total rental payments plus the repurchase price exceed the original cash price paid by the sukuk holders.