The amount of money that is paid by a potential buyer to the seller at the time of contract (aqd al-bay’) so that the buyer will have the option (khiyar) to revoke the contract during the agreed period of time. If the buyer chooses to proceed with the contract, the earnest money will be deemed part of the price. Otherwise, if the buyer doesn’t proceed to conclude the contract or fails to pay the remaining part of the price during the stipulated period of time, the seller is entitled to forfeit the earnest money.
Earnest money can be paid in cash or in kind or even in the form of a usufruct (manfa’ah). It is not confined to contracts of sales, but also applies to contracts of ijarah (aqd al-ijarah), istisna’a, etc.
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