Summary of Feqh - Section 1: Valid stipulations:

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Section 1: Valid stipulations:

Firstly: Stipulating things that are intrinsic to the contract
Stipulating things that are intrinsic to the contract is permissible

Evidence:

(1) Scholarly Consensus
A consensus on this issue was related from al-Maziri, Ibn al-Qayyim, Ibn Qudamah, who said that it does not affect the contract, and Nawawi.
(2) Because it emphasises and clarifies what the contract entails.
(3) Because the default position regarding contracts and conditions is permissibility and validity. Prohibition and invalidation only occur when indicated by an explicit text or through analogical reasoning for those who accept that method.

Secondly: Stipulating a characteristic of the commodity
Stipulating a characteristic of the commodity is valid.
Evidence:

(1) Scholarly Consensus
A consensus on this issue was related from Ibn Qudamah, Ibn Taymiyyah, and Mardawi.
(2) Because this stipulation is merely an obligation related to an existing matter at the time of the contract and is not contingent on the establishment of a future event, so it is valid.
(3) Because the default position regarding contracts and conditions is permissibility and validity. Prohibition and invalidation only occur when indicated by an explicit text or through analogical reasoning for those who accept that method.

Thirdly: Stipulating things related to the benefit of the two parties to the contract
Stipulating things related to the benefit of the two parties to the contract, such as the term of the agreement, option to annul the agreement, collateral security, and guarantee of the commodity is permissible.
Evidence:

(1) Scholarly Consensus
A consensus on this issue was related from Ibn Qudamah, Ibn al-Qayyim, Nawawi, and al-Kamal ibn al-Humam.
(2) Because the default position regarding contracts and conditions is permissibility and validity. Prohibition and invalidation only occur when indicated by an explicit text or through analogical reasoning for those who accept that method.

Fourthly: Stipulating a benefit for one of the parties in a trade
Stipulating a benefit for one of the parties in a trade is valid, and this was the position of the Malikis and Hanbalis , a view of the Shafi`is, the view of a group of the predecessors, and the preferred opinion of Bukhari, Ibn al-Mundhir, Ibn Taymiyyah, Ibn al-Qayyim, San`ani, and Ibn `Uthaymin.
Evidence:
(1) From the Sunnah
Jabir narrated that he was riding a camel that had become exhausted. The Prophet passed by, struck it, and supplicated for him. The camel then started walking with a pace like no other. Jabir narrated, “The Prophet then said, ‘Sell it to me for one uqiyyah.’ ‘No’, I replied. ‘Sell it to me for one uqiyyah,’ he repeated. So, I sold it, but I excluded riding it back to my family. When we arrived, I brought the camel to him, and he gave me its price. I then left, but he sent someone after me, and when I got back to him he said, ‘I would not have taken your camel. Take that camel of yours, for it is your property.’” Shu`bah narrated from Mughirah, from `Amir, from Jabir, “The Messenger of Allah lent me the camel’s back until Medina.” Jabir excluded the riding of the camel back to his family for himself, which was a benefit of the commodity. The Prophet did not object to this; rather, he allowed it and did not invalidate the trade.
(2) Because most of what is delayed in its delivery has a known duration, so it is valid, as would be the case with selling a rented house.
(3) As would be the case with someone selling a date palm tree with unripe fruits and excluding the fruits for himself, the trade is valid, and the fruits remain on the palm tree until they ripen, and this is an exclusion for the benefit of the seller.
(4) Because the default position regarding contracts and conditions is permissibility and validity. Prohibition and invalidation only occur when indicated by an explicit text or through analogical reasoning for those who accept that method.

Fifthly: Stipulating a contract other than a loan in a sales agreement
Stipulating a contract other than a loan in a sales agreement is permissible, and this was the view of Ashhab from the Malikis and the preferred opinion of Ibn Taymiyyah, Ibn al-Qayyim, and Ibn `Uthaymin.
Evidence:
(1) From the Book:
The Statement of Allah Exalted, “O believers! Honour your obligations.”
Allah Exalted commanded the honouring of obligations, and this is a general command with no exclusions, unless there is a specific proof indicating an exception.
(2) Because when honouring and upholding covenants is commanded, it is known that the default position regarding contracts and stipulations is validity. There is no meaning in validation unless it leads to the intended result and accomplishes its purpose, and the purpose of a contract is its fulfilment.
(3) Because contracts and conditions fall under the category of ordinary actions, and the default status for them is non-prohibition. The absence of prohibition is presumed until there is evidence indicating prohibition. Prohibition and invalidation only occur when the Shariah indicates this through an explicit text or through analogical reasoning for those who accept that method.
(4) Because when a permissible contract includes two separate matters (i.e., two separate contracts), each of them is also individually permissible.

Sixthly: Multiple valid stipulations in a trade
It is valid to have multiple stipulations in a trade, even if they are connected to the benefit of one of the parties, and this was a statement related from Ahmad and the preferred opinion of Ibn Taymiyyah, Ibn al-Qayyim, and Ibn `Uthaymin.
This is for the following reasons:

(1) Because the default position regarding contracts and conditions is permissibility and validity. Prohibition and invalidation only occur when this is indicated through an explicit text or analogy.
(2) Because valid conditions do not affect the sale even if they are numerous, whilst an invalid one does even if it is singular.

Seventhly: Stipulating the option to annul a trade for a known duration, even if it is lengthy
Stipulating the option to annul a trade for a known duration, even if it is lengthy, is permissible.

Eighthly: Penalty clauses in contracts
(1) Defining a “penalty clause”
The penalty clause is an agreement between the contracting parties to determine the compensation that one is entitled to if the other party causes harm by failing to fulfil or delaying in fulfilling their commitment.
(2) Ruling on penalty clauses in exchange for delaying work
It is permissible to stipulate a penalty clause in exchange for delaying work, and this was the view of some of the predecessors, the preferred opinion of Bukhari and Abu al-Layth al-Samarqandi from the Hanafis, and the decision of the Islamic Fiqh Academy, the Council of Senior Scholars, and the Al-Azhar Islamic Research Academy.
Evidence:
(A) From the Quran:
The Statement of Allah Exalted, “O believers! Honour your obligations.”
(B) From the Sunnah:
The generality of the statement of the Prophet, “Muslims are bound by their stipulations.”
(C) From narrations:
`Umar ibn al-Khattab said, “Indeed, rights are subject to stipulations, and you are entitled to that which you stipulate.”
(D) Because violating contracts causes harm and loss of benefits, so it is appropriate for that to be countered by a penalty clause.
(E) Because the default position regarding stipulations is that they are valid.
(F) The penalty clause closes the doors to chaos and violation of the rights of the servants of Allah.
(G) The penalty clause acts as an incentive to complete contracts within their specified time and honour agreements.
(3) Ruling on penalty clauses in exchange for delaying the repayment of a debt
A penalty clause is not permissible in contracts in which the original obligation was a debt, and this was stated by the Islamic Fiqh Academy and the Al-Azhar Islamic Research Academy This is because it is considered an additional debt, and stipulating an increase in a debt due to a delay in repayment is outright usury.

(1) [942] There is a distinction between stipulations of trade and stipulations in trade from four perspectives: Firstly, stipulations of trade are set by the Legislator, and stipulations in trade are set by the contracting parties. Secondly, stipulations of trade affect the validity of the trade, whereas stipulations in trade affect the binding nature of the agreement. If the latter are not met, the trade is still valid, but it is not binding, because if a party’s stipulation is not fulfilled, then they will have the option [to proceed or not]. Thirdly, stipulations of trade cannot be waived, whereas stipulations in trade can. And fourthly, all stipulations of trade are valid and taken into account, because they are set by Shariah, whereas some stipulations in trade are valid and taken into account whilst others are not, because they are set by humans, and humans can make mistakes or be correct. See Al-Sharh al-Mumti` by Ibn `Uthaymin (8/223).

(2) [943] For example, stipulating that the seller must deliver the commodity and the buyer must deliver the price, that the two parties have the option of annulling the agreement within the same sitting, that the buyer can return the commodity if it has a defect, and other such things that do not require a stipulation. Ibn `Uthaymin said: “Valid stipulations are divided into three categories: Firstly, fixed stipulations. These are valid regardless of whether they are [explicitly] stipulated or not, as they are inherent to the contract. Examples include the seller’s delivery of the commodity and the buyer’s payment of the price, [the payment of] the price being immediate, and other similar conditions that do not need to be [explicitly] stipulated. If these conditions are stipulated, it is a form of affirmation, and even if 1000 such conditions were attached to an agreement, it would still be valid. Secondly, stipulations that are connected to benefitting the contract and are not independent benefits in and of themselves. Meaning, they do not benefit the buyer or seller, but they contribute to the wellbeing of the contract. Examples include stipulations related to collateral and the stipulation of the servant being a scribe, the female servant being a virgin, the animal being well-trained, and so on. And thirdly, stipulations that benefit either the buyer or seller. An example of a stipulation that benefits the seller is a condition that they are allowed to continue living in a house for a month after its sale, and an example of a stipulation that benefits the buyer is a condition that the seller must carry firewood [after its sale], and things that resemble that.” Al-Sharh al-Mumti` (8/236).

(3) [944] Zurqani said: “Maziri stated: ‘Stipulations are of three types. [The first type is] stipulations of the contract, such as delivery and disposal. There is no difference of opinion regarding their permissibility and binding nature, even if they are not [explicitly] stipulated.” Sharh al-Muwatta’ (4/158).

(4) [945] Ibn al-Qayyim said: “If something is stipulated that is inherent to the contract or is related to its benefit, such as collateral, deferral, guarantee, or such-and-such cash, then it is permissible, and there is no difference of opinion concerning this, regardless of whether there was one or many stipulations.” Tahdhib al-Sunan (9/295).

(5) [946] Ibn Qudamah said: “Stipulations that are inherent to the contract do not affect it, and there is no difference of opinion concerning this.” Al-Mughni (4/170).

(6) [947] Nawawi said: “Stipulations fall into five categories. [One of them is] stipulations that are inherent to the contract, such as selling with the stipulation of the choice of the assembly, delivery of the commodity, the right to return due to a defect, the option of returning with a warranty, the buyer’s right to use the commodity as they wish, and so on. These stipulations do not invalidate the contract, and there is no difference of opinion on this matter.” Al-Majmu` (9/364).

(7) [948] Al-Majmu` by Nawawi (9/364).

(8) [949] Majmu` al-Fatawa by Ibn Taymiyyah (29/132).

(9) [950] For example, stipulating that a bird be sonorous.

(10) [951] Ibn Qudamah said: “Stipulations are divided into four types… The second type is related to the benefit of the contracting parties, such as the term, the option… or stipulating a specific characteristic in what is being sold, such as craftsmanship, literacy, and so on. This type of condition is permissible and must be fulfilled, and we do not know of any difference of opinion regarding the validity of these two types.” Al-Mughni (4/170).

(11) [952] Ibn Taymiyyah said: “The well-known scholars – and as far as I know without any difference of opinion – unanimously agree that stipulating a particular characteristic in the commodity, such as stipulating that a servant be a scribe or craftsman, or stipulating the length of a garment, the size of a piece of land, and so on, is a valid stipulation.” Majmu` al-Fatawa (29/132).

(12) [953] Mardawi said: “Secondly, stipulations that are related to the benefit of the contract, such as stipulating a characteristic in the price, like its deferral, or collateral or a guarantee for it, or stipulating a characteristic in the commodity, such as a stipulation that a servant be a scribe, eunuch, craftsman, or Muslim; that a female slave be a virgin; or that an animal be well-trained or a leopard be a hunter. Such stipulations are valid without dispute.” Al-Insaf (4/245).

(13) [954] Mughni al-Muhtaj by Shirbini (2/34).

(14) [955] Majmu` al-Fatawa by Ibn Taymiyyah (29/132).

(15) [956] Ibn Qudamah said: “The second type is related to the benefit of the contracting parties, such as the term, the option, collateral, a guarantee, or witnessing, or stipulating a specific characteristic in what is being sold, such as craftsmanship, literacy, and so on. This type of condition is permissible and must be fulfilled, and we do not know of any difference of opinion regarding the validity of these two types.” Al-Mughni (4/170).

(16) [957] Ibn al-Qayyim said: “If something is stipulated that is inherent to the contract or is related to its benefit, such as collateral, deferral, guarantee, or such-and-such cash, then it is permissible, and there is no difference of opinion concerning this, regardless of whether there was one or many stipulations.” Hashiyat Ibn al-Qayyim ma` `Awn al-Ma`bud (9/295).

(17) [958] Nawawi said: “[The second type is] for someone to set a stipulation that is not inherent to the contract but is beneficial to the contracting parties, like the option of three, deferred term, collateral, guarantee, witnessing, and so on, or a stipulation that a servant being sold be a tailor or scribe. The contract is not invalidated, and there is no difference of opinion regarding this; rather, it remains valid and its stipulations are upheld.” Al-Majmu` (9/364).

(18) [959] Al-Kamal ibn al-Humam said: “The statement, ‘Then the generalisation of the matter regarding it (i.e., the stipulation) is either that the contract requires it’, such as a stipulation that the commodity be withheld until taking possession of the price, and so on. Such a stipulation is permissible, because it either emphasises the obligations of the contract, or it is not required but is established as valid according to the Shariah with no room for rejection, like the condition of deferment in the price and commodity in a salam trade or a condition related to the option. In this way, it is valid because of the consensus on its validity according to the Shariah.” Fath al-Qadir (6/442).

(19) [960] Majmu` al-Fatawa by Ibn Taymiyyah (29/132).

(20) [961] For example, a person selling their car and stipulating that they be allowed to ride it to a particular place, or a person selling their house and stipulating that they be allowed to live in it for a specified duration. Or, the stipulation could be set by the buyer. For example, if a person buys firewood and stipulates that the seller carries it to their house or chops it up [on their behalf].

(21) [962] The Malikis stipulate a maximum duration for the buyer’s continued use of the thing they have sold, stating that the period [of use] should not exceed one year for a house, ten years for land, or three days for an animal. Hashiyat al-Dasuqi ?ala al-Sharh al-Kabir (4/13), Al-Kafi fi Fiqh Ahl al-Madinah by Ibn `Abd al-Barr (2/682), and Minah al-Jalil by `Ulaysh (7/466).

(22) [963] The Hanbalis restrict this permissibility to benefits that are known and lawful. Al-Insaf by Mardawi (4/248), Kashshaf al-Qina` by Bahuti (2/79), and Al-Majmu` by Nawawi (9/369).

(23) [964] Al-Majmu` by Nawawi (9/369).

(24) [965] Ibn al-Mundhir said: “There is a difference of opinion regarding a man selling an animal and stipulating that he be allowed to ride it to a known place or for a specific duration. Some scholars hold the view that the trade is valid and that the exception is upheld. Amongst those who permitted it were al-Awza`i, Ahmad, Ishaq, Abu Thawr, Ibn Nasr, and the scholars of Hadith, and they supported their stance with the narration of Jabir.” Al-Awsat (10/318).

(25) [966] Bukhari said: “Chapter: A seller stipulating that they be allowed to ride the animal [they have sold] to a named location is permissible.” Sahih al-Bukhari (3/189).

(26) [967] Ibn al-Mundhir said: “Based on the established Sunnah, I say that it is not permissible for a Muslim who knows of a confirmed Sunnah from the Messenger of Allah to deviate from following it. In this way, a house can be sold with an exception of its occupancy for a specified time and a slave can be sold with an exception of a known service. All that has been mentioned involves an exception of a known benefit for which rent is [usually] taken, and all that has been mentioned falls within the meaning of the narration of Jabir ibn `Abdullah.” Al-Awsat (10/319). See also Al-Majmu` by Nawawi (9/369).

(27) [968] Ibn Taymiyyah said: “The seller is allowed to exempt some of the benefits of the commodity, such as the service of a slave, dwelling in a house, and other similar things, if those benefits are things that are permissible to be retained in someone else’s property. This is in accordance with the narration of Jabir, when he sold his camel to the Prophet but excluded the right to ride it up to Madinah.” Majmu` al-Fatawa (29/134). See also Al-Fatawa al-Kubra (4/80).

(28) [969] Ibn al-Qayyim said: “It is permissible for any seller to exempt from the benefits of the commodity whatever he has a legitimate purpose for. For example, if he sells a property and exempts its occupancy for a specific period or sells an animal and exempts its back (i.e., the right to ride it). This is not exclusive to sales; if someone gives a gift and exempts its benefit for a period, emancipates a slave and exempts his service for a certain period, or donates a well as charitable endowment for a well and exempts its water for himself for the duration of his life, all of these are permissible.” I`lam al-Muqi`in (3/209).

(29) [970] San`ani said: “The validity of selling an animal and exempting its riding has been a matter of disagreement among scholars. The first opinion, attributed to Ahmad, holds that such a stipulation is valid. This is the preponderant view. Any condition that can be separated from the contract is valid, such as delivering the sold item to a specific location, tailoring a garment, or exempting living rights in the case of selling a property, and it has been related that `Uthman sold a house and exempted its dwelling for one month.” Subul al-Salam (3/8).

(30) [971] Ibn `Uthaymin said: “If the seller stipulates the right to live in the [sold] house for a month, this condition is valid. For example, if someone says, ‘I hereby sell you my house for 100,000 dirhams, with the condition that I will live in it for one month,’ the sale is valid, and so is the stipulation. The evidence for this is both general and specific.” Al-Sharh al-Mumti` (8/231).

(31) [972] Reported by Bukhari (2718) and Muslim (715). The wording here is from Bukhari.

(32) [973] See Majmu` al-Fatawa by Ibn Taymiyyah (29/133) and I`lam al-Muqi`in by Ibn al-Qayyim (3/209).

(33) [974] Kashshaf al-Qina` by Bahuti (3/190).

(34) [975] Al-Majmu` by Nawawi (9/378) and Majmu` al-Fatawa by Ibn Taymiyyah (20/545).

(35) [976] Majmu` al-Fatawa by Ibn Taymiyyah (29/132).

(36) [977] For example, for the seller to sell something on the condition that the buyer sells them another specific item. If the seller was to say, for example, “I sell you my car on the condition that you sell me your car.” Or, it can be a combination of selling and renting. If the seller was to say, for example, “I sell you my house on the condition that I can live in it – or on the condition that you accommodate me in your house – for the duration of one month or one year.”

(37) [978] If the condition is a loan, however, then it is impermissible by consensus. This will be discussed in the section on invalid stipulations.

(38) [979] Al-Qawanin al-Fiqhiyyah by Ibn Juzayy, p. 172; Mawahib al-Jalil by Hattab (4/313); and Hashiyat al-Dasuqi ?ala al-Sharh al-Kabir (3/32).

(39) [980] Ibn Taymiyyah said: “The statement that says, ‘I sell you my garment for one hundred on the condition that you sell me your garment for one hundred’, provided that both parties want the trade, validates a contract. This is somewhat analogous the concept of the [prohibited] ‘quid-pro-quo marriage’. However, what is the evidence for the invalidity of this [analogy]? For example, if one person said, ‘I rent you my house for one hundred on the condition that your house becomes rented to me for one hundred’, then in this case, each of the rental agreements is compensated by one hundred, and the rental of the other is valid, just as the sale of the other is valid. Prohibiting this requires explicit textual evidence or a scholarly consensus to validate the analogy.” Al-`Uqud, p. 189. See also Majmu` al-Fatawa by Ibn Taymiyyah (29/150).

(40) [981] Ibn al-Qayyim said: “If it is said: ‘However, in this contract, there are two concerns. One of them is that it combines both sale and lease, and the other is that the subject matter of the lease might be entirely or partially occupied.’ It can be argued: ‘There is no issue with combining two contracts; each of them is individually permissible, as would be the case if someone sold a commodity and separately rented out their house for a month for one hundred dirhams.” I`lam al-Muqi`in (3/265).

(41) [982] Ibn `Uthaymin said: “The second opinion regarding the matter is that this is valid: to sell you this house on the condition that you let me live in your house for either a month or year, depending on what we agree upon. They said: ‘The most extreme interpretation of this is that it is a contract that combines both sale and lease.’ There is no evidence prohibiting the combination of these two contracts. Therefore, it is permissible to say, ‘I sell you my house on the condition that you sell me your house at a known price’, and there is no evidence to prohibit this.” Fath Dhi al-Jalal wa al-Ikram bi Sharh Bulugh al-Maram (3/491).

(42) [983]

(43) (al-Ma’idah, 1)

(44) [984] Majmu` al-Fatawa by Ibn Taymiyyah (29/138).

(45) [985] Majmu` al-Fatawa by Ibn Taymiyyah (29/135).

(46) [986] Majmu` al-Fatawa by Ibn Taymiyyah (29/132, 146).

(47) [987] Hashiyat al-Dasuqi ?ala al-Sharh al-Kabir (3/32).

(48) [988] If they are stipulations that are intrinsic to the contract, such as delivering the commodity or price or returning defective items, or for its benefit, such as deferred payment, collateral security, or a guarantor, then there is no question that it is acceptable to have more than one of such stipulations. The area of contention is multiple stipulations that benefit one of the parties to the agreement, such as stipulating the chopping up and carrying of purchased wood, because they differed firstly as to whether it is permissible to have such stipulations, with the Malikis and Hanbalis allowing it, and then they differed regarding multiple stipulations of this nature.

(49) [989] Al-Insaf by Mardawi (4/251).

(50) [990] Majmu` al-Fatawa by Ibn Taymiyyah (29/160) and Al-Fatawa al-Kubra by Ibn Taymiyyah (4/79).

(51) [991] Ibn al-Qayyim said: “If something is stipulated that is inherent to the contract or is related to its benefit, such as collateral, deferral, guarantee, or such-and-such cash, then it is permissible, and there is no difference of opinion concerning this, regardless of whether there was one or many stipulations.” Tahdhib al-Sunan (9/295). See also I`lam al-Muqi`in by Ibn al-Qayyim (1/401).

(52) [992] Ibn `Uthaymin said: “His statement, ‘And there are no two conditions in a [single] trade’, and if the buyer conditions carrying and breaking the firewood, this is a case of two conditions in a [single] trade, or if the seller stipulates the right to occupy a [sold] house or shop for a month, it is not valid. However, using this evidence in this way is invalid. The correct view is that it is permissible to combine two conditions. Rather, even combining three or four conditions is permissible, depending on what has been agreed upon.” Al-Sharh al-Mumti` (8/235).

(53) [993] Al-Fatawa al-Kubra by Ibn Taymiyyah (4/79, 80).

(54) [994] Al-Mughni by Ibn Qudamah (4/170).

(55) [995] The decision of the International Islamic Fiqh Academy of the Organisation of Islamic Cooperation, no. 109 (3/12), on the topic of “Penalty clauses”. See also Mu`jam al-Mustalhat al-Maliyyah wa al-Iqtisadiyyah fi Lughat al-Fuqaha’ by Nazih Hammad, p. 257.

(56) [996] In contracts other than those where the original commitment was a debt. See also Majallah Majma` al-Fiqh al-Islami, issue 12, (2/306).

(57) [997] The penalty clause is invalidated in the presence of a valid excuse, such as when the delay is due to reasons beyond one’s control, or if the party for whom the condition was stipulated does not suffer any harm. The decision of the Fiqh Academy included the following: “The penalty clause is not enforced if the party upon whom the condition is imposed can prove that their failure to fulfil the contract was due to reasons beyond their control, or if it is established that the party for whom the stipulation was set did not suffer any harm from the breach of the contract.” Decision of the Islamic Fiqh Academy, no. 109 (3/12), on the topic of “Penalty clauses”. The decisions of the Council of Senior Scholars included the following: “The council decides by consensus that the penalty clause stipulated in contracts is a valid and effective condition, and it must be adhered to unless there is a valid excuse for non-compliance. The excuse, according to the Shariah, can nullify the obligation imposed by the penalty clause until it is resolved.” Abhath Hay’at Kibar al-`Ulama (1/295).

(58) [998] Like Ibn Sirin and Shurayh al-Qadi. See Sahih al-Bukhari (3/198) and Al-Musannaf by `Abd al-Razzaq (8/59, no. 14303).

(59) [999] Bukhari said: “Chapter: Stipulations that are permissible and those that are known amongst people. If someone says, ‘One hundred, except one or two’, Ibn Sirin reported that a man said to someone he disliked, ‘Prepare your riding animals. If I do not accompany you on such-and-such day, you will receive one hundred dirhams.’ The person did not come out. Shurayh said, ‘Whoever imposes a condition on himself without being forced to do so must adhere to it.’ Ayyub narrated from Ibn Sirin that there was a man who sold some food and said, ‘If I do not deliver it to you on Wednesday, then there is no trade between us (i.e., the sale is void).’ He did not show up, so Shurayh said, ‘You have erred’, and ruled against him.” Sahih al-Bukhari (3/198).

(60) [1000] `Uyun al-Masa’il by Samarqandi, p. 451.

(61) [1001] The decision of the Islamic Fiqh Academy, no. 109 (3/12), on the topic of “Penalty clauses” at the twelfth session in Riyadh, Saudi Arabia, from 25 Jumada al-Akhirah until the beginning of Rajab 1421 AH / 23-28 September 2000 CE, stated: “Thirdly, it is permissible for the penalty clause to be tied to the original contract, just as it is allowed for it to be part of a subsequent agreement before the occurrence of harm. Fourthly, the penalty clause is permissible in all financial contracts except those where the original obligation is a debt, as this would involve explicit usury. Based on this, this type of stipulation is permissible, for example, in construction contracts concerning the contractors, supply contracts concerning the supplier, and manufacturing contracts concerning the manufacturer if they fail to fulfil their commitments or are delayed in doing so.” Majallah Majma` al-Fiqh al-Islami, issue 12, (2/306).

(62) [1002] The decisions of the Council of Senior Scholars included the following: “The council unanimously confirms that the penalty clause stipulated in contracts is valid and recognised stipulation. It must be adhered to unless there is a valid excuse for non-compliance. The excuse, according to the Shariah, can nullify the obligation imposed by the penalty clause until it is resolved. In cases where the penalty clause is widely known and primarily serves as a financial threat and is therefore far removed from the principles of Shariah, it is necessary to return to justice and fairness. This involves compensating for any missed benefit or addressing any harm incurred. The determination of such matters, in cases of disagreement, falls under the jurisdiction of the judge, who relies on the expertise and insight of those knowledgeable in the field. This is a direct application of the Statement of Allah Exalted, ‘when you judge between people, judge with fairness’, and His Statement c, ‘Do not let the hatred of a people lead you to injustice. Be just! That is closer to righteousness.’” Abhath Hay’at Kibar al-`Ulama (1/295).

(63) [1003] The verdict of the Al-Azhar Islamic Research Academy included the following: “It is permissible to stipulate a penalty clause in financial contracts, except for contracts where the primary commitment involves a debt. Therefore, this stipulation can be included in construction agreements for contractors and supply contracts for suppliers.” The Official Website of the Al-Azhar Islamic Research Academy.

(64) [1004]

(65) (al-Ma’idah, 1)

(66) [1005] Reported by Bukhari in an emphatic form (sighat al-jazm) before hadith no. (2274), by Abu Dawud (3594) in a mawsul narration, and by Hakim (2309) from Abu Hurayrah h. Authenticated by Ibn Hibban in his Sahih (5091), and `Abd al-Haqq al-Ishbili authenticated its chain in Al-Ahkam al-Sughra (718). Nawawi said in Al-Majmu` (9/368): “Its chain is either hasan or sahih.” Ibn al-Muqallin graded its chain hasan in Khalasat al-Badr al-Munir (2/69), as did Ibn Kathir in Irshad al-Faqih (2/54). Albani said in Sahih Sunan Abu Dawud (3594): “Hasan sahih.”

(67) [1006] Reported by Bukhari in an emphatic form before hadith no. (5151) and hadith no. (2721), by Ibn Abi Shaybah (16706) in a mawsul narration, and by Sa`id ibn al-Mansur in Al-Sunan (663). Albani graded its chain sahih according to the conditions of the two Shaykhs in Irwa’ al-Ghalil (6/304), as well as authenticating it (1891) with the wording: “Rights are subject to stipulations.”

(68) [1007] Abhath Hay’at Kibar al-`Ulama (1/295).

(69) [1008] Majallah Majma` al-Fiqh al-Islami, issue 12, (1/728).

(70) [1009] Abhath Hay’at Kibar al-`Ulama (1/295).

(71) [1010] Majallah Majma` al-Fiqh al-Islami, issue 12, (1/728).

(72) [1011] The decision of the Islamic Fiqh Academy, no. 109 (3/12), on the topic of “Penalty clauses” stated: “The penalty clause for delay in delivering the deferred item is not permissible because it constitutes an additional debt, and it is not allowed to stipulate an increase in debt in the case of delay.” Majallah Majma` al-Fiqh al-Islami, issue 12, (2/305). It also stated: “Fourthly, it is permissible to stipulate a penalty clause in all financial contracts except for contracts in which the original commitment is a debt, as that would constitute explicit usury. Therefore, this clause is allowed, for example, in construction agreement for the contractor, in supply contracts for the supplier, and in manufacturing contracts for the manufacturer if they fail to fulfil their obligations or delay in doing so. However, it is not allowed, for instance, in trades by instalment for the debtor’s delay in paying the remaining instalments, regardless of whether that is due to insolvency or procrastination.” Majallah Majma` al-Fiqh al-Islami, issue 12, (2/306). Decision no. 53 (2/6), on the topic of “Trade by instalment”, included the following: “If the buyer who is in debt is delayed in paying the instalments beyond the specified date, it is not permissible to impose on them any increase beyond the debt, whether through a prior condition or without a condition, because that would constitute forbidden usury.” Majallah Majma` al-Fiqh al-Islami, issue 12, (1/728).

(73) [1012] The verdict of the Al-Azhar Islamic Research Academy included the following: “It is permissible to stipulate a penalty clause in financial contracts, except for contracts where the primary commitment involves a debt. Therefore, this stipulation can be included in construction agreements for contractors and supply contracts for suppliers.” The Official Website of the Al-Azhar Islamic Research Academy.

(74) [1013] Majallah Majma` al-Fiqh al-Islami, issue 12, (2/305).