Ijarah and Ijarah Muntahia Bittamleek — practice questions

Correct answer: B. Clause 2/3: The Institution may require a sum to ensure the customer’s seriousness, but may deduct from it only the actual damage suffered on breach of the promise. For an operating Ijarah, the damage is the difference between the cost of acquisition and the total selling price if the asset is sold to a third party; otherwise, i.e. if it is not sold, the promisee is not entitled to any compensation. (For Ijarah Muntahia Bittamleek, the damage is the difference between the asset’s cost and total rentals when leased to a third party.) Lost rentals and estimated value declines are not recoverable.

Correct answer: D. Clause 2/4: The amount deposited as security for the customer’s commitment may be held on trust in the Institution’s custody, in which case the Institution cannot invest it, or on an investment trust basis whereby the customer permits the Institution to invest it on a Mudarabah basis between them. Upon execution of the lease, it may be agreed that the amount be treated as an advance payment of rental. It is not ’Arboun (which is taken only at execution of the lease under Clause 4/1/4), and the Institution has no entitlement to its returns as compensation.

Correct answer: A. Clauses 3/1/2 and 3/2: An asset may be acquired from a party and then leased to that same party, but the Ijarah transaction should not be stipulated as a condition of the purchase contract by which the Institution acquires the asset. The Ijarah contract may not be executed until the Institution has acquired the asset, even if title is not yet registered in its name. Combining purchase and lease in one contract or leasing before acquisition contradicts these requirements, and the Standard imposes no rental formula tied to the purchase price.