Buying and Selling: Ruling on Compensation Clause for Revocation in Sale Contracts

Practical Laws of Islam as per the teachings of Imam Khamenei

Buying and Selling: Ruling on Compensation Clause for Revocation in Sale Contracts

English:

Question #1526:

A sale contract contains the clause: “If either party revokes this agreement, they should pay to the second party (x) amount of money in compensation”:

1. Can this clause be regarded as a stipulation of the right of revocation?

2. Is such a condition valid?

3. If it is invalid, would the entire contract be so as well?

Answer #1526:

This is not a stipulation of the right of revocation. Rather, it is a condition to pay a certain amount of money in the event of the other party changing their mind and not going ahead with completing the deal. There is no harm in it if it became binding by way of a blinding contract between the two parties, or the blinding contract was based and concluded on it. However, a period of time has to be set for the fulfilment of such conditions which have a bearing on the price of the sold property. Otherwise, it is invalid.

-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Buying and Selling