Please advise on the following situation according to the shari’ah and islamic business practice….
Assuming that I have a contract drawn up with someone who is owing money to me eg. rent, goods puchased on account etc. In the contract, it is clearly stipulated (and known by the other party) that, should the other party default payment in any way, any costs incurred by me in the subsequent recovery of the monies (eg legal fees, petties, etc.), will be added to the debtors account ie. will be added to the total outstanding amount. This clause was included as a deterrent to defaulting payments.
Legally, this is enforcable and valid.
Q. Should that clause be enforced, would the ‘additional’ money (ie. incidental in the recovery of the initial amount) eventually received by me be permissible to use according to the Shari’ah???
I ask because clauses to the above effect are not uncommon in general business today, sometimes even adding interest to the equation.My contract clearly does NOT mention interest (as this is obviously haraam) but only refers to my costs incurred.
According to the Shari’ah, any costs incurred by the creditor in recovering monies owed to him could be claimed from the debtor. This is a Shar’ee right of the Creditor and could also be included in the contract.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai