Derivatives
Amortizing Cap
March 7, 2021
Islamic Finance
Ujrat ul-Mithl
March 8, 2021

A rent or wage amount or consideration (ujrah or ajr) that is determined by an arbitrator or judge (if disputed), or with respect to a market reference or prevailing rate. For instance, in ijarah contracts which involve voidable or defective conditions (rendering the contract, per se, invalid), the lessee is bound to pay ujrat al-mithl whatever it amounts to. That means, in case the lessee has actually benefited from the underlying property for some time or the whole term of ijarah, and it turned out that the contract is defective, he is obligated to pay the lessor a rent equal to the prevailing rate. Then the contract terminates.

Ujrat al-mithl (also ajr al-mithl or ‘iwad al-mithl) is an Arabic term which literally means an equivalent/ comparable/ prevailing rent or wage.

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