’Arboun (Earnest Money) — practice questions

Correct answer: B. Clauses 1 and 2: ’Arboun is paid by the buyer (or lessee or Istisna’a purchaser) to the seller at the time of contract on the basis that the buyer may revoke within an agreed period; if he confirms, it is credited to the price, and if he does not confirm or fails to pay the balance in time, the seller may forfeit it. An agreement to sell in the future is a promise, not a contract, so money paid with it is not ’Arboun. The Standard does not cover refundable security deposits or advances under contracts without options. ’Arboun may be paid in cash, in kind or as a usufruct.

Correct answer: D. Clauses 3/1 and 3/2: ’Arboun is permissible in commutative contracts that do not require spot payment of one or both countervalues, whether the item is identified or sold by description for future delivery, such as sales, Istisna’a, leases of identified assets and leases of described assets (Ijarah Mawsufah fi al-Dhimmah). It is not permissible in Salam and currency exchange contracts, which require spot payment of the capital or of both countervalues.

Correct answer: A. Clauses 4, 5/1 and 5/2: The option period must be specified by stipulation or existing custom. The buyer loses his right to revoke if he informs the seller of confirmation or disposes of the item in a manner indicating confirmation. If the option period expires without the buyer paying the remaining price and without an extension agreed by the seller, the contract is considered revoked and the buyer is not entitled to recover the ’Arboun.