judge with justice.” (Q. 4: 58) And Allah alone grants success.

• Resolution of the International Islamic Fiqh Academy on the penalty clause:

The International Islamic Fiqh Academy, operating under the Organization of the Islamic Conference, at its twelfth session held in Riyadh, Kingdom of Saudi Arabia, from 25 Jumada al-Akhirah 1421 AH to 1 Rajab 1421 AH (23–28 September 2000),

after examining the research papers submitted to the Academy on the subject of the “penalty clause,” and after hearing the discussions that took place with the participation of the Academy’s members, its experts, and a number of jurists,

decided the following:

First: In civil law, a penalty clause is an agreement between the two contracting parties that predetermines the compensation owed to the party in whose favor the clause is stipulated for the harm he sustains if the other party fails to fulfill, or delays in fulfilling, his obligation.

Second: The Council reaffirms its previous resolutions concerning the penalty clause, namely:
• its ruling on salam, Resolution (85) (2/9), which states: “It is impermissible to stipulate a penalty for delay in delivering the subject of salam, because it is a debt, and it is not permissible to stipulate any increase in debts upon delay”;
• its ruling on istisnaʿ, Resolution (65) (3/7), which states: “An istisnaʿ contract may include a penalty clause in accordance with what the two parties agree upon, provided that no force-majeure circumstances arise”; and
• its ruling on sale by instalments, Resolution (51) (2/6), which states: “If the indebted purchaser delays payment of the instalments beyond the appointed time, he may not be required to pay any increase on the debt, whether such an increase was stipulated beforehand or not, for that constitutes prohibited usury.”

Third: The penalty clause may be attached to the original contract, and it is likewise permissible to