Lease Contract
The term “lease” derives from the Arabic root of the verb which means to grant a reward for work done. In a legal context, a lease is defined as a contract that grants ownership of a specific, intended benefit, which must be able to be both provided and enjoyed, in exchange for a stipulated compensation. The legitimacy of leasing is affirmed in the Quran, where Allah (SWT) states: (One of them said, “O my father, hire him. Indeed, the best one you can hire is the strong and the trustworthy.” He said, “I want to marry you one of these daughters on the condition that you hire me for eight years. If you complete ten, it will be from you.”) Additionally, it is supported by a saying of the Prophet Muhammad (PBUH): (Pay the laborer his wages before his sweat dries). This concept is unanimously accepted by Islamic scholars. It is also important to note the following:
- Leases can be categorized into two types:
- The first type involves leasing a physical asset, for example, renting a house for a specified amount.
- The second type involves leasing services, such as hiring someone to build a wall or till the land.
- A lease is only permissible if it involves a benefit that can be enjoyed while retaining the asset itself, or if it can be sold, provided there is no legal restriction against such sale.
- Valid leasing contracts establish two key entitlements, provided that all conditions and elements are met:
- First, the lessee gains ownership of the benefit, thereby allowing them to utilize it.
- Second, the lessor holds ownership of the rental value, known as the lease payment.
Elements and Conditions of the Lease Contract
Elements of the Lease Contract
The essential elements of a lease contract include the following four components:
- The parties involved: The lessor, who provides the benefit, and the lessee, who pays the rental fee.
- The contract formulation: This consists of an offer from the lessor to lease the benefit in exchange for compensation, followed by the acceptance from the lessee, indicating their agreement.
- The rental fee: This is the amount paid by the lessee in exchange for the benefit conferred by the lessor.
- The benefit: The service or asset that is the subject of the lease agreement.
Conditions for Validating the Lease Contract
For a lease contract to be valid, the following conditions must be fulfilled:
- Conditions for the contracting parties: Both parties must be qualified to engage in contractual agreements, meaning they should be of sound mind and legal age; contracts are invalid if entered into by minors or the mentally incompetent.
- Conditions for the contract formulation: There are two key conditions:
- The acceptance must align with the offer; for instance, if the lessor states, “I lease you my house for one hundred dinars,” the lessee cannot respond with, “I accept for ninety.”
- There should not be an excessive delay between the offer and acceptance, nor should irrelevant dialogue intervene, as this may indicate a rejection of the contract.
- Conditions for the rental fee: The following rules apply:
- The rental fee must be deliverable; it cannot be something unattainable or hypothetical.
- Both parties must clearly understand the agreed-upon rental fee.
- The fee must be lawful; contracts are not valid if the payment involves illicit items like pork or dogs.
- Conditions for the benefit: The following criteria must be met:
- The benefit must be legally recognized and valid in customary terms, such as renting a house for living or a car for transportation.
- The lessor must be capable of delivering the benefit to the lessee.
- The fulfillment of the benefit must advantage the lessee and not the lessor.
- Both parties must have a clear understanding of the benefit being leased.
- The lease must not involve the consumption or total depletion of the asset; leasing an orchard solely for its fruit or a sheep for its milk constitutes exhaustion of the asset, not mere utilization.