The Legitimacy of Late Payment Penalties from the Perspective of Contemporary Islamic Jurisprudence

Abstract

This study examines the legitimacy of late payment penalties in contemporary Islamic jurisprudence and their application in debt contracts as a contractual mechanism intended to oblige parties to fulfill their obligations within the specified timeframes. It also explores the concept of late payment penalties and distinguishes them from related concepts such as penalty clauses, agreed compensation, fees, taxes, and default interest, due to the differences in legal characterization and Sharīʿah rulings that may arise from confusion among these concepts. The study aims to analyze the concept of late payment penalties and clarify the jurisprudential foundations related to them, while reviewing the opinions of contemporary jurists and their evidences regarding debt contracts. The significance of the study lies in addressing the jurisprudential issue resulting from the apparent similarity between late payment penalties and certain contemporary financial concepts, and the impact of this similarity on the Sharīʿah ruling. The study adopts a descriptive-analytical approach through examining the sources of contemporary Islamic financial jurisprudence and analyzing the relevant juristic opinions in order to identify contemporary jurisprudential trends concerning the legitimacy of late payment penalties in debt contracts.

Keyword:. Late payment penalty, debt, loan, debtor, creditor, compensation