An ambiguous partnership contract

27-4-2011 | IslamWeb

Question:

A Limousine company is offering a proposal whereby we have to pay 50% of the cost of New vehicle and the other 50% is being financed by them through Vehicle Hypothecation. They are entering into a 5 year contract with me by agreeing to pay a monthly rental amount of xyz, and the EMI and other expenses are being paid by them. Can I enter into the deal, though interest is being paid to the bank through EMI by the Limousine company, but I am only getting rental equivalent to my share of investment ?? JAZAK.Allah, Early reply awaited.

Answer:

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger

The question is ambiguous but if what you mean is that the car will be co-owned by you and the Limousine company on the basis that you pay in advance 50% of the price whereas the company will pay its portion of the price in installments and it will bear interest due to that, and that the company will use the car and pay you a monthly known rent for your share in the car, and it will bear the expenses of the use of the car, like petrol and the like, or the cost of repairing any damage caused by it due to its negligence, then this is permissible.

However, if what you mean is that you will buy the car and pay half of its price in cash and the remaining amount will be paid by the bank on your behalf and then the bank will get the amount from you with interest whereby the company will take the responsibility of paying the installments and the interests, then this contract is forbidden and it is not permissible to enter it in principle whether you will pay the interest or it is a third party that will pay it.

In any case, the question is ambiguous in regard to the role of the bank in the transaction and the nature of the contract between you and the Limousine company whether it will be a co-owner of the car or that this transaction is a diminishing partnership through which you will own the car in the end, or that the company is just renting the car while the car is totally owned by you whereas the rental money is what is paid to you and to the bank on your behalf.

So, we cannot issue a ruling about the matter as it is impossible to give a ruling on something which we do not know. It is only after reading the terms and conditions of the contract and the agreement between you and the company that we may have a clear idea about this transaction, but you did not provide us with these details.

Allaah Knows best.

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