Written by: Fatāwā of the Saudi Fatwa Committee
Penal clauses in contracts are permissible under specific circumstances. For instance:
◈ In an agreement with a contractor, it is allowed to include a condition that if the contractor delays in delivering the materials or project, the contract may be cancelled.
◈ Similarly, in contracts with teachers or employees, it is permissible to stipulate that deductions may be made or the contract may be terminated in case of violations.
Such conditions serve as disciplinary measures and are valid under Islamic law when used appropriately and justly within contractual agreements.
[ʿAbd al-Razzāq ʿAfīfī: Fatāwā: 212/1]
✦ Ruling on Penal Clauses in Agreements
Penal clauses in contracts are permissible under specific circumstances. For instance:
◈ In an agreement with a contractor, it is allowed to include a condition that if the contractor delays in delivering the materials or project, the contract may be cancelled.
◈ Similarly, in contracts with teachers or employees, it is permissible to stipulate that deductions may be made or the contract may be terminated in case of violations.
Such conditions serve as disciplinary measures and are valid under Islamic law when used appropriately and justly within contractual agreements.
[ʿAbd al-Razzāq ʿAfīfī: Fatāwā: 212/1]
