Ethica Institute of Islamic Finance™

Is it lawful for the bank to agree from the beginning of the lease that the lessee will purchase supplies and equipment from the bank at the end of any year from among the years of a lease contract?

It is not lawful for the bank to agree from the beginning of the lease that the lessee will purchase supplies and equipment from the bank at the end of any year from among the years of a lease contract since it would create gharar (contractual ambiguity leading to dispute) about the duration of the lease period and when it is to begin.

This, however, does not prevent the two parties from agreeing that the second party will have an option to choose at the end of the first year and at the end of each subsequent year within the lease period, to consider purchasing the leased equipment.

If the lessee decides to purchase the leased equipment, he must agree to make the installment payments for the entire period he benefited from the usufruct of the goods. With the exercise of such an option by the lessee, the lease contract will stand immediately terminated.

7 Day Free Islamic Finance Course

Please enter your first name and email address to start receiving your CIFE™ lessons instantly!

We value your privacy. We will never rent, sell, or spam email addresses.

1,000+ scholar-approved answers and growing...

7 Day Free Islamic Finance Course

ASK AN ISLAMIC FINANCE QUESTION

SEARCH ISLAMIC FINANCE Q&As

What’s New at Ethica