I agreed with the contractor that if he delays beyond the actual period, he will pay 500 riyals for each day. What is the ruling?

Question:
Honorable Shaykh, may Allah grant you success. He says: I asked a contractor to build me a house and set a period of four months for him, and we agreed on that. We agreed that if he exceeds the period, he owes a penalty of five hundred riyals for each day. He says: He has now delayed for a full year. Is my demand for the penalty in this case permissible in the Shari'ah?

Answer:
This is not permissible if this contractor takes contracts from you and from others. This is a shared worker. This is a shared worker, and it is not permissible to set a time limit for the work, because the work may be difficult, it may require a certain period, and it is not permissible to set a time limit for the work.
As for if the contractor has no work for anyone else, but he is taking the contract for you only, taking the contract for you only, and he delayed without an excuse, he delayed without an excuse, then this penalty clause, they say, is permissible to prevent harm to the first party. This is a penalty clause without an excuse; rather, this contractor is stalling.