Question

Salam. My question is in regards to extended warranties. I read a fatwa a while ago which stated that warranties bought at the time when purchasing a product are permissible.
Therefore, I agreed an extended warranty on my fridge/freezer for an indefinite period, ie I pay a monthly amount to Domestic and General.
However, as the product is getting older the monthly payment is increasing. Please advise if this is still permissible.
جزاك الله خيرًا

Answer

If a product comes with a fixed warranty for a set duration it will be permissible to utilise this warranty in case the product becomes faulty. The price paid is in consideration of the product and the seller or manufacturer is providing additional assurance from their side that up to a certain duration the product should not become faulty and if it does then they will repair it. It is permissible to include such a condition within the original sale contract as these types of conditions have become customarily acceptable.

On the other hand to pay an additional sum for extra cover, beyond the default warranty, would be impermissible. Here the two parties are engaging in a new warranty contract and warranty contracts conflict with the principles of shari’ah. The main issue with this contract is that it is not known whether the individual making payments will receive anything in return for their payments. If the product becomes faulty they will receive a service, however, if the product does not become faulty the money spent provides no value to them. This uncertainty of outcome is known as gharar and is impermissible.

Some scholars have suggested that if the warranty is purchased at the time of purchasing the product then it will be permissible on the basis that the warranty will be considered subordinate to the sale contract, however, this would only be valid if the warranty was actually subordinate. Is most cases the warranty will legally be a separate contract with an independent payment which indicates that in reality it is not subordinate to the sale contract.

For these reasons purchasing an extended warranty, or a warranty independent to the sale contract will not be permissible.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel