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Islamic Finance




Khiyar al-Faskh


Arabic (خيار الفسخ) for option (khiyar) to revoke a contract (aqd) should a party encounter unforeseen hardships and difficulties (that hinder fulfillment of a party’s obligations). For example, a construction company (contractor) may not be bound to continue the contract if the piece of land, on which construction is being carried out, proves to be not worthy for construction just contrary to what was initially concluded by examination. The contractor will have the option to unilaterally terminate the contract (through faskh or faskh al-aqd). Upon unilateral termination, the contractor is entitled to a portion of the contractual amount in proportion to the percentage of work completion.



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