JEDDAH: The Jeddah General Court has nullified a contract between two Saudi nationals who formulated it based on the Saher system, which increases fines if they are not paid in a certain amount of time, sources told Okaz/Saudi Gazette. The judge considered the imposition of a SR50,000 fine for every month of delay as null and void and described it “pre-Islam usury,” sources said. A businessman loaned another Saudi SR500,000 to be paid back in three months, with a fine of SR50,000 for every month's delay and the arrangement was signed in the presence of witnesses, according to sources. The borrower delayed repaying the loan for six months, which led the businessman to file a lawsuit demanding that the debtor pay SR650,000, sources said. The judge received the case file and held a number of sessions in which he studied the contract and listened to both the parties. His verdict rendered the contract null and void and forced the debtor to pay SR500,000 to the businessman, sources said. The judge based his verdict on a ruling issued by the Islamic Fiqh Academy that if a fine is stipulated for any delay in paying back a loan, the loan is null and void, and should not be fulfilled, sources added. This applies to all loans including those from banks because it is considered Riba Al-Jahiliah, pre-Islamic usury, which the Holy Qur'an has clearly forbidden. Sources told Okaz/Saudi Gazette that the businessman objected to the verdict and demanded an appeal against it. He insisted that the contract is binding on the two parties that have signed it and that Muslims must comply with agreed-upon conditions. He stressed that the contract he signed with the debtor is based on Saher system, which increases the fine if it is not paid in a certain time, sources said. The General Court referred the verdict to the Court of Appeal for a final determination.
