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The question

Is the employee entitled to claim the penalty clause stipulated in his contract, amounting to six months' salary, if the company terminates his employment before the end of the agreed contract period, knowing that the contract is not officially registered and that the company based its refusal on reasons such as the imminent expiration of the contract or its financial situation?

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Source: FtawySummarized from the full answer at Ftawy · reviewed Sep 2, 20261 min readAlso available in العربية
The answer

The questioner does not have the right to claim the value of the penalty clause because the company had a valid excuse for ceasing its operations, and because the questioner did not suffer any harm from it. On the contrary, the company fulfilled its obligations by paying him the salary for the remaining period and the end-of-service gratuity. A penalty clause is not valid as a means of illicit gain, nor is it enforced if the breach of contract was due to circumstances beyond control, or if the aggrieved party did not suffer any harm.

Summarized from the full answer at Ftawy · reviewed Sep 2, 2026

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