The mahr is a compulsory part of an Islamic marriage contract. The other words for mahr generally used in the Qur'an are sadaqah and ajr, meaning reward or gift to the bride in which there is profit but no loss, and faridah, literally that which has been made obligatory, or an appointed portion. Allah commanded: 'Give women their faridah as a free gift.' (4:4) (Unfortunately the word is frequently incorrectly translated as 'dowry).
It is a gift of money, possessions or property made by the husband to the wife, which becomes her exclusive property. It is an admission of her independence, for she becomes the owner of the money or property immediately, even though she may have owned nothing before. It has nothing to do with either of their parents, except that a husband might need to take a loan. This should only be done with the intention of repayment. It is also intended as a token of the husband's willing acceptance of the responsibility of bearing all the necessary expenses of his wife.
Even if the wife owned no property or money of her own before her marriage, she is given this money or property when she marries so that she commences her married life in her new status with money or property of her own. The wife gives herself and her services to her husband, and in return he gives her property to own herself, even if she had nothing before, and pledges that he will maintain her. Muslim women are placed in charge of the internal arrangement of the household, while Muslim men are responsible for its financing (even if the wife earns her own money subsequent to her marriage).
The Prophet gave each of his wives a payment of mahr, ranging from token sums, the granting of freedom from slavery when being made a wife, to the payment of 400-500 dirhams. His wife Umm Habibah's mahr consisted of 4000 dirhams, this sum having been fixed by Najashi, the Negus (a Christian ruler) of Abyssinia. (Abu Dawud, Kitab an-Nikah, 2:235).
There was in fact no fixed upper limit for mahr. Allah required the provision to depend upon the circumstances of the husband:
'…the wealthy according to his means, and the straitened in circumstances according to his means. The gift of a reasonable amount is necessary from those who wish to act in the right way.' (2:236).
In a famous case, the second Caliph, Umar b. al-Khattab, once gave a public sermon in which he asked the congregation to refrain from fixing heavy mahrs, and stated that the Prophet had declared no-one should give more than 400 dirhams. A woman immediately stood up and challenged him, quoting the verse 4:20 from the Qur'an: 'But if you decide to take a wife in place of another, even if you had given the first a heap of gold (quintar) for a dowry, you shall not take the least bit back.' Umar went back to the minbar and withdrew his words stating 'the woman is right, and Umar is wrong. Whoever wishes may give as much property as he wishes to give.' (Ibn Hajar al-Athqalani, Fath al-Bari, 9:167).