Is lay-by permissible and how does it work?
Layaway (lay-by in Australia, New Zealand and South Africa) is a way of purchasing an item without paying an entire cost at once. However, rather than taking the item and then repaying the debt on a regular schedule, as in most installment plans or hire purchases, the layaway costumer does not receive the item until it is completely paid for. There is sometimes a fee associated, since the seller must “lay” the item “away” in storage until the payments are completed. If the transaction is not completed, the item is returned to stock and the costumer’s money is returned minus a fee. (en.m.wikipedia.org/wiki/layaway)
According to the principles of Islamic finance and economics, the money paid as a deposit by the customer will be regarded as an Amanat (trust) in the hands of the seller and will only be regarded as a payment for the purchased item when the last installment is paid off. The reason being that when a person places a deposit for an item, he is in essence merely reserving that particular item for himself and not purchasing it. (as Ijaab and Qabool doesn’t take place). Thus it will be permissible to purchase an item on lay-by.
The following laws will also apply in this transaction:
1. If in the event that the customer decides not to purchase the item, his deposit will have to be returned to him. It is an Amanat in the hands of the seller, which on demand must be returned in full.
2. If the customer does not return to pay the installments until the designated grace period, then the item may be sold to another customer and all deposited monies returned to the original customer. It would however be preferable to give the original customer a bit more respite and to try and make contact with him, so as to remind him to come and conclude the deal.
3. If the customer does not come to collect his deposit, then in principle the seller is not permitted to give it away in Sadaqah or to any Madrasah. The seller will have to keep the deposit by himself till the owner dies or he comes to collect it. However, in this era it might be difficult upon one to keep the deposits of a person till the owner dies or comes to collect it. Thus the ruling will be that the seller should strive in looking for the owner or any of his relatives (if the owner has died) until the seller loses all hopes in finding them. If he cannot get hold of the owner or any of his relatives after looking for them then he should give away the amount in Sadaqah or to a Madrasah. If the seller himself is a Faqeer (pauper), then he may utilize the money for his needs. In both cases, if the owner returns the seller will have to return that much amount to him.
4. If perchance the customer fails to pay the instalments within the agreed time, then it will not be permissible for the seller to charge him an extra penalty fee.
5. The seller must not use any words of sale such as “the item is now sold to you.” The customer merely saying “keep the item for me as lay by” does not constitute a sale/business contract.
6. The seller is allowed to charge the customer a fee for keeping his money as a trust.
Checked and Approved By:
Mufti Muhammed Saeed Motara Saheb D.B.
و ان كان الثمن مؤجلا فليس للبائع ان يحبس المبيع قبل حلول الأجل ولابعده
(هندية ج٣ ص ١٥)
االمودع اذا شرط الأجرة للمودع على حفظ الوديعة صح و لزم عليه
(Imdadul Ahkam 3/624, Fatawa Uthmani 3/474)