Conditions for Ijara Contract to be Valid - ijaraCDC

Conditions for Ijara Contract to be Valid

What are the Conditions for an Ijara Contract to be Valid?

The widespread prevalence of the various modes of Islamic finance has attracted debates and research into their working principles and benefits. The ijara, being one of the most popular of all the different forms of financial arrangements permitted under the rules of the Sharia, has understandably attracted the most attention. The  conditions for an ijara Contract to be valid have probably been the most scrutinized and this understanding is crucial to be able to appreciate the myriad benefits that this form of financing arrangement brings to both parties who have entered into the contract.

The Conditions for an Ijara Contract to be Valid

The conditions for an ijara contract to be valid are rooted in the fundamentals of the Sharia law and thus have earned approval from Islamic scholars all over the world.

An analysis of the conditions for an ijara contract to be valid reiterates the fact that the popularity and widespread prevalence of this mode of Islamic financial agreement are due to its simplicity, transparency, and integrity. There are also numerous benefits for both the lessor and lessee when they enter into an ijara contract. Some of the conditions for an ijara contract to be valid are described below and they will make clear from wherein stem the various benefits of this mode of Islamic financial arrangement.

One of the primary conditions for an ijara contract to be valid is that the asset to be leased should have a tangible presence, be visible, and capable of being transferred back to the lessor after the termination of the contract. Furthermore, the asset should have some usage value. From here it follows that the lessor should transfer the asset to the lessee, for use only, in a condition that enables it to be used to achieve its stated objectives. In this context, it is worth mentioning that lessee should put to use the asset only in the way specified in the ijara contract.

An Asset that needs to Last

From the above specifications, stem other notable conditions for an ijara contract to be valid. For instance, the lessee will pay the first installment of the rent only after he has fully acquired the asset or the right to use it. The lessee should also be convinced that the asset is in a condition to lend itself to usage, before he makes the first lease payment. One of the most critical conditions for an ijara contract to be valid is that the asset under the contract must not perish in use during the leasing period.

The conditions for an ijara contract to be valid that ensure transparency in the transaction process include the following—the amount and frequency of the rental payments should be determined right at the time of entering into the contract. The schedule and the amount to be tendered as rent may or may not be uniform throughout the entire leasing period. In fact, if agreed to by both the lessor and the lessee, the amount of rental payment may even be modified during the term of the contract.

Obligations of Owning the Asset

Other obvious conditions for an ijara contract to be valid include the following—the lessor must have full possession and absolute right of ownership of the asset before he enters into an ijara contract. He must also agree to bear the maintenance costs and risks associated with owning the asset. However, as per the conditions for an ijara contract to be valid, the lessor is entitled to claim compensation if the asset under the contract has sustained damages due to the negligence of the lessee, furthermore it is permissible for the lessor and lessee to enter into an agreement whereby the lessee is responsible for the maintenance costs associated with owning the asset.

Cannot be Similar

The simplicity and ease of comprehension and execution of this mode of Islamic financing can be readily gauged from these conditions for an ijara contract to be valid—the rental payment cannot be made from an object manufactured and the rent, on the part of the lessor, cannot be a similar right of use for an identical asset.

Conclusion

The afore-mentioned conditions for an ijara contract to be valid once again prove the soundness and ethicality of the working principles of this mode of Islamic financing. It is hardly surprising that ijara is growing in popularity all over the world, and its prevalence is not only limited to Islamic countries but has spread to other parts of the world as well, where Islam is not the dominant religion.