Hire Purchase under Shirkatul Melk is a Special type of contract which has been developed through practice
Actually, it is a synthesis of three contracts viz.: i)Shirkat ii) Ijarah and iii) Sale
These may be defined as follows:
Shirkatul Melk: The term ‘Ijarah’ has been derived from the Arabic words (Ajr) and (Ujrat). ‘Shirkat’ means partnership. ‘Shirkatul Melk’ means share in ownership. When two or more persons supply equity, purchase an asset, own the same jointly, and share the benefit as per agreement and bear the loss in proportion to their respective equity, the contract is called ‘Shirkatul Melk contract’.
Ijarah:This means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of service of an asset. Ijarah has been defined as a contract between two parties, the Hire and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the Hire. It is a hire agreement under which a certain asset is hired out by the Hire to a Hirer against fixed rent or rentals for a specified period.