PENALTY in Islamic Perspective

written by Gerry Octaviano


Do you think penalty is halal or haram ?
It can be both depends on the way you implement penalty.

Usually, companies already set up the amount of penalty in the beginning of the contract and it is agreed by mutual consent. However, it is prohibited to set up the penalty by bilateral agreement.

What is it supposed to be?
1. It is supposed to be by unilateral (set by creditor) ;thus, can not be included in the contract.
2. It depends on the situations
3. You have to give more time to your debtor
4. If still does not pay, you can impose penalty
5. But, you have to justify the penalty is it for.

for example:

A (seller) sells a car to B (buyer)at deferred payment (4 years installment).
After 4 years B still can not finish it the payment.
A has to respite or give more time to B.
If, B still does not pay, B can impose penalty.
However, B has to justify the amount of penalty.
Since, A does not deserve profit more than they have to get. Hence, the penalty belongs to CHARITY.

Wa Allah A'lam