---
title: "What is Shart jaza'i (penalty clause in istisna)? | IslamicOpenFinance™"
description: "An agreed charge on a manufacturer or contractor for late delivery, permitted in istisna and supply contracts."
url: https://islamicopenfinance.com/glossary/shart-jazai/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Sale-based contracts](https://islamicopenfinance.com/glossary/#sales)

Sale-based contracts

# Shart jaza'i (penalty clause in istisna)

An agreed charge on a manufacturer or contractor for late delivery, permitted in istisna and supply contracts.

Shart jaza'i is a penalty clause: an agreed amount payable if a party fails to perform on time. AAOIFI's standard on the procrastinating debtor permits penalty clauses in construction, istisna and supply contracts, while not permitting them for delay in paying a debt. Bank Negara Malaysia's istisna policy document likewise allows parties to agree a late delivery charge on the seller, which may be recognised as income to the purchaser. The distinction matters: a charge for late delivery of an asset is treated differently from a charge for late payment of money.

## Sources

- [Bank Negara Malaysia, Istisna\` policy document, 2015: late delivery charge (shart jaza'i)](https://www.bnm.gov.my/documents/20124/938039/Istisna_PD_29122015.pdf)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Istisna** A contract to manufacture or build a specified asset for delivery on a set date, with the price paid in stages or as a lump sum.](https://islamicopenfinance.com/glossary/istisna/) [**Parallel istisna** A second, independent istisna in which a bank that has agreed to deliver an asset orders it from a manufacturer or contractor.](https://islamicopenfinance.com/glossary/parallel-istisna/) [**Ta'widh (compensation for actual loss)** Compensation for the actual loss a creditor suffers from late payment, accepted by some authorities and rejected by others.](https://islamicopenfinance.com/glossary/tawidh/) [**Gharamah (late-payment penalty paid to charity)** A penalty for late payment that the creditor may not keep as income and must direct to charitable purposes.](https://islamicopenfinance.com/glossary/gharamah/)

**Sale-based contracts**

1. [Murabaha](https://islamicopenfinance.com/glossary/murabaha/)
2. [Musawamah](https://islamicopenfinance.com/glossary/musawamah/)
3. [Bay al-muajjal (deferred-payment sale)](https://islamicopenfinance.com/glossary/bay-muajjal/)
4. [Salam](https://islamicopenfinance.com/glossary/salam/)
5. [Istisna](https://islamicopenfinance.com/glossary/istisna/)
6. [Tawarruq](https://islamicopenfinance.com/glossary/tawarruq/)
7. [Bay al-sarf (currency exchange)](https://islamicopenfinance.com/glossary/bay-al-sarf/)
8. [Murabaha to the purchase orderer](https://islamicopenfinance.com/glossary/murabaha-purchase-orderer/)

[All 221 terms](https://islamicopenfinance.com/glossary/)