It depends on what the deposit is doing. Where a customer cancels and you have genuinely incurred cost - materials bought, time spent, a slot held that you could not fill - keeping the amount that covers that loss is compensation, and most scholars permit it. Keeping the entire deposit regardless of what you actually lost is a penalty rather than compensation, and scholars are much more cautious about that, because you would be taking wealth beyond any harm suffered. There is a recognised classical arrangement close to this: arbun, an earnest payment where the buyer may withdraw and the seller keeps the deposit, which the Hanbali school permits explicitly and AAOIFI has adopted for Islamic finance. The practical resolution most scholars point to is to size the deposit to the real cost of a cancellation, state clearly at booking what happens if the customer cancels and when, and return anything above your actual loss.
Current direction: Needs Scholar Review. This page needs a qualified scholar to verify the exact ruling before a reader relies on it.
Educational guidance only, not a fatwa. Consult a qualified scholar for your specific case. Page created August 30, 2026.
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Not automatically. Keeping the portion covering your actual loss is compensation and is permitted. Keeping the rest, when you suffered no loss, is a penalty - and compensation restores what was lost rather than creating a profit from someone's change of circumstances. Contractual wording does not convert one into the other.
Materials already bought, work already done, a supplier deposit you cannot recover, staff scheduled, and a booking slot you turned other customers away for. These are genuine detriment caused by the cancellation. What does not count is the profit you would have made, or an amount set because the market tolerates it.
Yes - arbun, where a buyer pays for the right to complete or withdraw, with the seller keeping it if they withdraw. The Hanbali school permits it explicitly and AAOIFI has adopted it in Islamic finance. The other three schools have historically been more restrictive. So it has real support, but as a school-dependent position rather than a settled one.
Charge what the timing actually costs you
Setting retention by how close the cancellation falls to the date - little far out, more as commitments are made - tracks real loss rather than applying one figure regardless. Fairer to the customer and considerably easier to defend.
State the scale at booking, not in terms the customer sees only after paying.
Evidence used to explain the general principle. These references do not replace personal scholar review.
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Compare the general position and the details scholars usually check.
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