Islamic Fiqh > Companies and leases > Mudaraba (capital-management partnership) > The Form of the Contract: Offer and Acceptance
Contents
Updated on 25 September 2026 at 6:57 PM
This part belongs to the full section: All sections of this part.
The mudaraba, also called qirad or muqarada, is a contract by which the owner of a capital (rabb al-mal) entrusts it to a worker (mudarib) so that he may trade with it, the parties sharing the profit according to a stipulated clause while loss falls on the capital alone. The jurists of the four schools have laid down its conditions concerning the form of the contract, the two parties, the capital, the profit and the work. This chapter sets out these rules and their differences, according to the classical sources of each school.
The jurists agree that offer (ijab) and acceptance (qabul) are required in the form of the contract, but no specific wording is required: the mudaraba is concluded by any expression that indicates it.
The Hanafis say: the pillar of the contract is the offer and the acceptance, by words that express them. The offer is the word "mudaraba", "muqarada" or "mu'amala", or any statement carrying that meaning, when the capital owner says: "I have handed you this capital in mudaraba, in mu'amala or in muqarada", or: "Take this capital and work with it in mudaraba, so that whatever Allah grants shall be between us at such a rate: half, quarter, third or any other known share", or: "Buy merchandise with it, and the surplus shall be yours at such a rate", or: "Take this for half". The worker replies: "I accept", "I have taken it" or "I am content".
If he says: "Take this capital and work with it, so that whatever Allah grants shall be between us at such a rate", without adding more, the formula is valid, for he has used a term conveying the meaning of this contract. What matters in contracts is their meanings, not the outward form of the words: sale is concluded by the word of transferring ownership without disagreement, and marriage, in our view, is concluded by the words of sale, gift and transfer of ownership.
The base text states: if the owner says: "Take this thousand, buy merchandise with it, and half the surplus is yours", and the worker merely accepts this, the mudaraba takes place by juristic preference (istihsan), while analogy (qiyas) requires that it not take place. The reason for analogy: he mentioned buying but not selling, while the meaning of the mudaraba is realized only through buying and selling. The reason for istihsan: he mentioned the surplus, which is obtained only through buying and selling, so the mention of buying amounts to a mention of selling, and this is the very meaning of the mudaraba ( "Bada'i' as-Sana'i'", 6/79-80 ; "al-Ikhtiyar", 3/22 ; "al-'Inaya", 12/128 ; "al-Bahr ar-Ra'iq", 7/263 ; "al-Jawhara an-Nayyira", 3/441 ; Ibn Abidin, 8/277 ).
Likewise, if he says: "Take this thousand for half", without adding more, the mudaraba takes place by istihsan; analogy requires that it not take place, for he mentioned neither buying nor selling. The istihsan lies in the fact that "taking" (al-akhdh) is not work that earns compensation; compensation is earned only by working on the thing taken, namely buying and selling, so the mention of taking carries the mention of buying and selling ( same sources ).
The Malikis say: a formula indicating the contract is required, even coming from only one of the parties while the other expresses consent; no specific wording is required, as in sale and hire: concluding by conduct (mu'ata) suffices, for commerce accommodates conduct, like sale when a supporting indication (qarina) exists ( "Hashiyat ad-Dasuqi on ash-Sharh al-Kabir", 5/280 ; "Hashiyat as-Sawi on ash-Sharh as-Saghir", 8/384 ).
The Shafi'is say: for the validity of the qirad, a formula consisting of an offer and an acceptance is required, such as: "I propose qirad to you", "I have contracted partnership with you in mudaraba", "I have entrusted you with a mu'amala", or: "Sell and buy, the profit being between us in halves".
The formula must be immediate: it is not valid to suspend it on a condition, such as: "When Ramadan comes, I propose qirad to you". Likewise, the acceptance must follow the offer in continuity, according to the usage recognized in sale: a long silence between the two, or words unrelated to the contract, breaks it.
It has also been said that acceptance by act suffices, as in agency (wakala) and ja'ala, when the offer is imperative: "Take this thousand and trade with it, the profit between us in halves": taking the dirhams, for instance, suffices, with no verbal acceptance required. But if the offer is a word of contract ("I propose qirad to you"), acceptance requires a spoken word. The soundest view forbids this absolutely: the qirad is an exchange contract requiring a determined person, and it resembles neither agency, which is a mere permission, nor ja'ala, which does not require a specific person.
If the owner says: "I propose qirad to you on condition that half the profit is mine", and the worker remains silent, this is not valid on the soundest view; it has been said: it is valid, and the halves apply between them. If he says: "On condition that half is yours", remaining silent about himself, or: "Half is yours and a sixth mine", remaining silent about the rest, it is valid on the sound (sahih) view, and the halves apply between them ( "Rawdat at-Talibin", 3/746 ; "Mughni al-Muhtaj", 3/347-348 ; "Nihayat al-Muhtaj", 5/260 ; "ad-Dibaj", 2/432 ; "an-Najm al-Wahhaj", 5/269 ).
The Hanbalis say: the mudaraba is concluded by any words conveying its meaning, for what is intended is the meaning. The verbal acceptance ("I accept") is not considered: the worker's taking up the work suffices and counts as acceptance, as in agency ( "Kushaf al-Qina'", 3/595 ; "Sharh Muntaha al-Iradat", 3/565 ).
The contract brings together two parties: the working partner (mudarib) and the capital owner. Each of them must meet conditions the jurists consider indispensable.
1. The capacity to appoint and to be appointed. The majority of jurists require, in both contracting parties (the capital owner and the mudarib), the capacity to grant agency and to act as agent, that is, the fitness to appoint another and to be appointed for another. Each of the two contracting parties is indeed the agent of his counterpart and appoints him: whoever may appoint and be appointed may conclude the mudaraba, and whoever lacks this capacity lacks it as well. The mudarib acts on the order of the capital owner, which is the meaning of agency; and it is a contract involving disposition over wealth, which is not valid from one not permitted to dispose of wealth, as in sale ( "Bada'i' as-Sana'i'", 6/81 ; "ash-Sharh al-Kabir with Hashiyat ad-Dasuqi", 5/4 ; "Mawahib al-Jalil", 7/52, 54 ; "at-Taj wal-Iklil", 4/140 ; "Sharh Mukhtasar Khalil", 6/39 ; "Tahbir al-Mukhtasar", 4/238 ; "ash-Sharh as-Saghir with Hashiyat as-Sawi", 7/481 ; "Rawdat at-Talibin", 3/746 ; "Mughni al-Muhtaj", 3/348 ; "Nihayat al-Muhtaj", 5/260 ; "ad-Dibaj", 2/432 ; "an-Najm al-Wahhaj", 5/270 ; "al-Mughni", 5/3 ; "Sharh Muntaha al-Iradat", 3/549 ; "Kushaf al-Qina'", 3/581 ).
The Shafi'is add: it is permissible for the guardian of a person under interdiction (minor, insane person, prodigal) to propose qirad to one to whom the orphan's wealth may be entrusted, and there is no doubt regarding his capital as long as his master's wealth is preserved from it. The guardian must therefore not enter partnership with a sinner (fasiq), since the partner must be one with whom the interdicted person's wealth may be deposited.
This applies whether the guardian is the father, the grandfather, the executor, the judge or the administrator. As for the one interdicted for prodigality, he cannot validly propose the qirad, but he may validly be the worker.
The qirad is valid from a sick person; and if more than the customary rate is stipulated for the worker, the excess over the like-wage is not counted from the third of the estate, for what is counted from the third is what he loses of his own wealth, while profit is not an acquired thing: it is only an expected gain which, if it comes, comes through the worker's action. This differs from musaqat (irrigation-share partnership), when the worker is given fruit exceeding his wage: there the excess is counted from the third, for the fruits are part of the wealth itself, unlike this case ( "Rawdat at-Talibin", 3/746 ; "al-Bayan", 7/189-190 ; "Mughni al-Muhtaj", 3/348 ; "Nihayat al-Muhtaj", 5/260 ; "ad-Dibaj", 2/432 ; "an-Najm al-Wahhaj", 5/270 ).
2. The Islam of the worker and the capital owner. The Hanafis say: their Islam is not a condition. The mudaraba is therefore valid between two protected People of the Book (dhimmis), between a Muslim and a dhimmi, and with the resident of enemy territory holding safe-conduct (harbi musta'man): even if a harbi enters the land of Islam under safe-conduct and hands his capital to a Muslim in mudaraba, or a Muslim hands him his capital, this is permitted; for the aman-holding person in our land has the status of a dhimmi, and the mudaraba with a dhimmi is permitted, so likewise with the safe-conduct holder.
If the mudarib is this Muslim who enters the land of war under safe-conduct to work the capital, this is permitted: he has entered the land of the capital owner, the difference of abodes disappears, and the two are as if in one land. If the mudarib is the harbi and returns to his land of war: if he returns without the capital owner's permission, the mudaraba is void; if with his permission, it is permitted and he remains subject to the mudaraba; the profit is theirs as stipulated if he returns to the land of Islam, as a Muslim, as a treaty holder (mu'ahad), or, by istihsan, under safe-conduct; analogy requires that the mudaraba be void.
The reason for analogy: back in the land of war, his protection has lapsed and he is again subject to the regime of war; the capital owner's order lapses with the difference of abodes, so his disposal is for himself and he appropriates what he has disposed of. The reason for istihsan: having gone out by the capital owner's order, it is as if the owner entered with him; and had the owner entered with him into the land of war, the mudaraba would not be void. So it is when he enters by his order, unlike entering without his order: when permission to enter is withheld, the capital owner's authority over him is cut off, his disposal becomes his own and he takes control of the matter.
Regarding the Muslim who enters the land of war under safe-conduct and to whom a harbi hands one hundred dirhams in mudaraba, they said: on the view of Abu Hanifa and Muhammad it is permitted; if the mudarib buys with it and gains or loses, the loss falls on the capital owner and the profit is as stipulated; the mudarib first takes his hundred dirhams, the remainder belonging to the capital owner; if the profit is only one hundred, all of it belongs to the mudarib; if less than one hundred, that too belongs to the mudarib, and the mudarib has no claim against the capital owner, for the owner stipulated the hundred only out of the profit. On the view of Abu Yusuf, however, the mudaraba is defective and the mudarib is entitled to a like-wage. This is a branch of their disagreement over the validity of riba in the land of war ( "Bada'i' as-Sana'i'", 6/81-82 ).
The Malikis, on the well-known view, and the Hanbalis: partnership with a Person of the Book is disapproved (makruh), even if not a dhimmi, and likewise with a majusi (Zoroastrian). The Hanbalis explain: one is not safe from their riba dealings and defective contracts, unless the Muslim handles the dispositions, or the dhimmi disposes in his presence without being absent from him in any buying, selling or collecting. Otherwise riba is feared: the dhimmi, when handling the purchase, sells according to his religion and brings into the Muslim's wealth what is not lawful for him; and the Muslim is forbidden to make his wealth a vehicle of riba, wine or pork ( "Sharh Ibn Batal", 7/18-19 ; "Mawahib al-Jalil", 7/52, 54 ; "Minh al-Jalil", 6/250 ; "al-Mughni", 5/3 ; "al-Kafi", 2/257 ; "al-Mubda'", 5/4 ; "Kushaf al-Qina'", 3/581 ; "Matalib Uli an-Nuha", 3/495 ).
There appears in the "Muddawwana", on the qirad of one who does not know the lawful from the unlawful: Malik said: "I do not like a man to propose qirad to another unless he is a man who knows the lawful from the unlawful; even if he is a Muslim, I do not like him to propose qirad to one who deems some unlawful thing lawful in selling and buying." It is related that Sa'id ibn al-Musayyib said: "It is not fitting for a man to propose qirad to a Jew or a Christian," the saying of Layth; and Rabi'a said: "It is not fitting for him to propose qirad to one whose religion permits him to consume the unlawful" ( "al-Mudawwana al-Kubra", 12/107 ).
The Shafi'is say: partnership with a dhimmi is disapproved absolutely, as with anyone who does not guard against riba and the like, whether he himself handles the selling and buying or the Muslim does. They cite Ibn 'Abbas (may Allah be pleased with him and his father): "I dislike that a Muslim enter partnership with a Jew or a Christian," with no dissenting voice.
They argue: these people do not refrain from riba or from selling wine, and it cannot be guaranteed that the wealth contracted over is not of that kind, hence the disapproval; but if the partnership is concluded it is valid, for what is in their hands is presumed to be their property, and:
The Prophet (peace and blessings of Allah be upon him) borrowed barley from a Jew and pawned his armor as security.Reported by al-Bukhari and Muslim
( "Rawdat at-Talibin", 3/473 ; "al-Bayan", 6/363 ; "Mughni al-Muhtaj", 3/186 ; "an-Najm al-Wahhaj", 5/12 ).
Third: the capital. The following conditions apply to the capital of the qirad.
1. It must consist of money (the two currencies); it is not valid with commodities. The people of knowledge agree that the qirad in dinars and dirhams is permitted, for these are the price of goods and the value of destroyed things, and people have entered partnership through them from the time of the Prophet (peace and blessings of Allah be upon him) to our own without any objection ( "al-Ijma'", 527 ).
The jurists of the four schools, together with the Zahiris, agree that the mudaraba is not valid with commodities, even fungible goods such as wheat or silk. Their value may rise before they are sold, and the other would then share in the growth of a substance that belongs to the owner. Moreover, the qirad is inherently uncertain (gharar): it is a hire whose object is unknown, the worker not knowing how much he will profit from the wealth, or even whether he will profit at all; the Lawgiver permitted it only out of necessity and people's need to transact upon it, so only as much as the Law permitted may be allowed of it, and whatever exceeds that must be forbidden in principle.
The qirad over commodities admits of only four readings: making the commodity itself the capital; its sale price; its value on the day of the contract; or its value on the day of liquidation. Knowing the capital and its amount is indispensable in the qirad, so that the worker knows upon what he is working.
Thus all these readings lead to gharar and corruption ( "al-Muqaddimat al-Mumahhadat", 3/16-17 ; "al-Ma'una", 2/123-124 ).
Another argument: the object of the qirad is that the capital owner remain alone in possession of his capital, the right to profit being shared between him and the worker on their stipulation. Permitting the qirad over commodities would lead the worker to share in the capital owner's capital, the owner to take the profit alone, and the worker's labor to be wasted. Capital, if it is a commodity, either has an equivalent or has none.
If it has an equivalent, such as food, the worker must, upon liquidation, return its equivalent. They may conclude the qirad over a kor (measure) of wheat worth ten dinars at the time of the contract; the worker works and gains another ten dinars; at liquidation the price may have risen to twenty dinars, and the capital owner then takes capital and profit alone; or it may have fallen to five dinars, and the worker then shares in cutting into the capital owner's capital. If it has no equivalent, its value is considered, at the time of the contract or at liquidation; considering it at contract time leads to what has been said, and so does considering it at liquidation: it must therefore be forbidden ( "al-Ishraf", 3/161-162, no. 1011 ; "Bada'i' as-Sana'i'", 6/82-83 ; "al-Ikhtiyar", 3/22 ; "al-Jawhara an-Nayyira", 3/443 ; "Rawdat at-Talibin", 3/739 ; "Mughni al-Muhtaj", 3/342 ; "Nihayat al-Muhtaj", 5/252 ; "an-Najm al-Wahhaj", 5/260 ; "Kushaf al-Qina'", 3/582 ; "Sharh Muntaha al-Iradat", 3/547 ; "ar-Rawd al-Murbi'", 2/69 ; "al-Muhalla", 8/247 ).
2. The capital must be a tangible asset ('ayn), not a debt. The majority of jurists, the Hanafis, Malikis, Shafi'is and, within the madhhab, the Hanbalis, require the capital to be a determined, present thing, not a debt on the liability side (in the dhimma); if it is a debt, the mudaraba is not valid.
A mudaraba over a debt is either over a debt owed by the worker or over a debt owed by someone other than him.
a) Mudaraba over a debt owed by the worker. The generality of jurists (Hanafis, Malikis, Shafi'is and, within the madhhab, Hanbalis), and Ibn al-Mundhir, who reports consensus on it, hold that a mudaraba over a debt owed by the worker to the capital owner is not valid: if the owner has a claim against a man and says to him: "Work with my claim you hold, in mudaraba, for half or a third", the mudaraba is defective.
Ibn al-Mundhir (may Allah have mercy on him) said: all those whose words we preserve among the people of knowledge agree that a man may not make a claim he holds against another into a mudaraba, because the wealth is in the hand of the debtor and becomes the creditor's only upon taking possession (qabd), which does not occur here. Among those from whom they preserved this: 'Ata', al-Hakam, Hammad, Malik, ath-Thawri, Ishaq, Abu Thawr and the proponents of personal reasoning (ashab ar-ra'y); and al-Shafi'i said the same ( "al-Awsat", 5/707 ; "al-Ishraf", 6/203 ).
Some Hanbalis say: the mudaraba is valid; for if he buys something for the mudaraba, he has bought with the capital owner's permission and handed the debt to the one who authorized him to hand it over, releasing his liability; and it becomes as if the owner handed him a commodity saying: "Sell it and conduct the mudaraba with its price".
The jurists then differed over the case where the worker works with the debt owed by him. If he buys and sells: his profit is his and the loss upon him, the debt remaining on his liability in all cases according to Abu Hanifa, the Malikis and the Hanbalis. Abu Yusuf and Muhammad say: what he bought and sold belongs to the capital owner, who is entitled to the profit and bears the loss.
On Abu Hanifa's view, whoever appoints a man to buy for him with a debt owed by the appointer produces no valid appointment: even if he buys, the appointer is not released from his liability; and if buying with what is on the liability side is not valid, attaching the mudaraba to what is on the liability side is not valid either. On the view of Abu Yusuf and Muhammad, the appointment is valid but the mudaraba is not: the purchase takes effect for the appointer, and the mudaraba then becomes a mudaraba over commodities; it is as if he appointed him to buy commodities and then handed them to him in mudaraba, which becomes a mudaraba over commodities, hence invalid.
The Malikis say: the capital of the qirad may be neither a debt, nor a pledged asset, nor a deposit (wadi'a) with the worker or with anyone else, such as a trustee; none of these three can be a qirad.
If the qirad took place over a debt owed by the worker, the owner saying: "Make what you owe me into a qirad, the profit being between us at such a rate", the debt remains a debt upon the worker, who guarantees it to his creditor and takes the profit alone, bearing the loss. Nothing of what they did counts, unless the debt is collected: the owner collects it from the debtor, then hands it back stipulating it as qirad, even from a distance; or the worker presents it to the owner with the testimony of two upright men, or of one upright man and two women, testifying that this wealth he brought is the claim that so-and-so holds against him; the owner then hands it over as qirad, and this is permitted.
The Shafi'is say: if the worker disposes in this situation, one examines: if he buys the specific asset for the mudaraba, he is like the intermeddler (fuduli) buying for another with his own wealth. If he buys on credit (on the liability side), there are two views: the sounder one with al-Baghawi is that the purchase is for the owner, since he bought for him with his permission; the sounder one with Abu Hamid is that it is for the worker, since the owner never held the price ( "Bada'i' as-Sana'i'", 6/83 ; "al-Ikhtiyar", 3/22 ; "ash-Sharh al-Kabir", 5/281 ; "Tahbir al-Mukhtasar", 4/505 ; "Sharh Mukhtasar Khalil", 6/204 ; "at-Taj wal-Iklil", 4/410 ; "ash-Sharh as-Saghir", 8/387 ; "Rawdat at-Talibin", 3/740 ; "Mughni al-Muhtaj", 3/342 ; "Nihayat al-Muhtaj", 5/253 ; "al-Mughni", 5/43 ; "al-Kafi", 2/269 ; "Sharh az-Zarkashi", 2/147 ; "al-Mubda'", 5/22 ; "al-Insaf", 5/431 ; "Kushaf al-Qina'", 3/600 ).
The Shafi'is add: attaching the mudaraba to a specific sum held in trust by the mudarib, of dirhams and dinars, by saying to the depositary: "Work with what is in your hand in mudaraba, for half", is valid ( "Bada'i' as-Sana'i'", 6/83 ; "al-Awsat", 5/707 ; "Rawdat at-Talibin", 3/740 ; "al-Bayan", 7/189 ; "an-Najm al-Wahhaj", 5/261 ; "Kushaf al-Qina'", 3/594, 600 ; "Sharh Muntaha al-Iradat", 3/563-564 ; "ar-Rawd al-Murbi'", 2/72 ).
The Malikis object: the capital of the qirad may not be a deposit (nor a pledge) with the worker or with any other trustee, for the depositary may have spent it, in which case it becomes a debt. If the owner says to him: "Trade with what you hold in deposit, the profit being between us at such a rate", the profit belongs to the capital owner, the loss is upon him, and the worker is entitled to a like-wage. Nothing of what they did counts, unless the deposit is collected: the owner takes it back from the depositary, then hands it to him stipulating it as qirad, even from a distance; or the depositary presents it to the owner with the testimony of two upright men, or of one upright man and two women, testifying that this wealth is the deposit of so-and-so, then hands it over in mudaraba, and this is permitted ( "ash-Sharh al-Kabir", 5/281 ; "Tahbir al-Mukhtasar", 4/505-506 ; "Sharh Mukhtasar Khalil", 6/204 ; "at-Taj wal-Iklil", 4/410-411 ; "ash-Sharh as-Saghir", 8/387-388 ).
d) Mudaraba with usurped wealth. Abu Yusuf and al-Hasan ibn Ziyad among the Hanafis, the Shafi'is on the sounder view, and the Hanbalis, permit the mudaraba with usurped wealth held in the usurper's hand. If he says: "Conduct the mudaraba with this wealth of mine that you usurped from me", that is valid, for it amounts to a handing over.
The mere conclusion of the mudaraba contract lifts the liability for the usurpation: the wealth becomes a trust in the mudarib's hand, by virtue of the owner's permission for it to remain in his hand, and because what is in his hand is guaranteed until he takes it to work with it. Once he takes it to work with it, namely to buy, it becomes a trust in his hand and the meaning of the mudaraba is realized: the contract is valid.
Zufar, among the Hanafis, the view opposite to the sounder one among the Shafi'is, held that it is not valid: the mudaraba requires the wealth to be a trust in the mudarib's hand, whereas usurped wealth, in his hand, is guaranteed against him; the two are mutually exclusive, the disposition for the mudaraba is therefore not realized, and the contract is invalid ( "Bada'i' as-Sana'i'", 6/83 ; "al-Awsat", 5/707 ; "Rawdat at-Talibin", 3/740 ; "al-Bayan", 7/188 ; "an-Najm al-Wahhaj", 5/260 ; "Mughni al-Muhtaj", 3/342 ; "al-Insaf", 5/408 ; "Kushaf al-Qina'", 3/582 ; "Sharh Muntaha al-Iradat", 3/547 ; "Matalib Uli an-Nuha", 3/497 ; "Manar as-Sabil", 2/180 ).
3. The capital must be known. The jurists require the capital to be known to both contracting parties at the time of the contract. The mudaraba is therefore not valid over an unknown amount, to forestall uncertainty of profit, nor over an unknown description, nor an indeterminate kind; for ignorance of the capital entails ignorance of the profit, and the profit being known is a condition of the mudaraba's validity.
If the owner proposes the qirad over a load or a handful of dirhams, or over money of unknown amount in a purse, or hands him a garment saying: "Sell it, and I have proposed qirad to you over its price", that is not valid, because of the gharar: the Prophet (peace and blessings of Allah be upon him) forbade gharar, and the qirad over wealth whose amount both parties do not know involves uncertainty, for the capital owner does not know what he will return to at liquidation, besides the ignorance of the profit ( "Bada'i' as-Sana'i'", 6/82 ; "ash-Sharh al-Kabir", 5/281 ; "Tahbir al-Mukhtasar", 4/505 ; "Sharh Mukhtasar Khalil", 6/204 ; "at-Taj wal-Iklil", 4/410 ; "Rawdat at-Talibin", 3/740 ; "al-Bayan", 7/189 ; "an-Najm al-Wahhaj", 5/261 ; "Kushaf al-Qina'", 3/594, 600 ; "Sharh Muntaha al-Iradat", 3/563-564 ; "ar-Rawd al-Murbi'", 2/72 ).
4. The capital must be handed over to the mudarib. The majority of jurists (Hanafis, Malikis, Shafi'is) require the capital of the mudaraba to be handed over to the mudarib, the worker, so that he may dispose of it. Stipulating that the capital remain in the owner's hand is therefore not valid: the purpose of the qirad is freedom of deployment, which absence of delivery contradicts, for the worker may not find the capital when he needs it. The mudarib's hand over the wealth must be a hand of trust (amana): the mudaraba is valid only with delivery, which is a release of custody, like the deposit.
The Shafi'is clarify: what is meant is not delivery at the moment of the contract or within the session, but that non-delivery not be stipulated ( "Bada'i' as-Sana'i'", 6/84 ; "Mukhtasar al-Waqaya", 2/189 ; "al-Jawhara an-Nayyira", 3/445 ; "al-Lubab", 1/541 ; "ash-Sharh al-Kabir", 5/280 ; "Tahbir al-Mukhtasar", 4/505 ; "Rawdat at-Talibin", 3/741 ; "Mughni al-Muhtaj", 3/343 ; "an-Najm al-Wahhaj", 5/262 ).
The Hanbalis hold: the worker's taking possession of the capital is not a condition of the mudaraba's validity: the contract is valid even if the wealth is in its owner's hand, for the object of the contract is the work ( "Sharh Muntaha al-Iradat", 3/565 ; "Matalib Uli an-Nuha", 3/514 ).
5. The worker must be independent in disposition. The majority of jurists (Hanafis, Malikis, Shafi'is) require the worker to be independent in disposition.
The Hanafis say: delivery of the capital to the mudarib is required, for the wealth is held in trust and is valid only by delivery, a release of custody like the deposit; it is not valid while the deliverer's hand remains over the wealth, for lack of delivery. Even if the owner's hand remaining over the wealth is stipulated, the mudaraba is defective.
There is a difference here with partnership (sharika), which is valid while the capital owner's hand remains over his wealth. The reason: the mudaraba is concluded upon capital from one side only and upon work from the other, and work is not realized until the wealth leaves the capital owner's hand; this condition is therefore in keeping with the contract's requirement. Partnership, by contrast, is concluded upon work from both sides: stipulating the departure of the owner's hand would contradict the contract's requirement. Likewise, stipulating the capital owner's work in the mudaraba voids it, whether he works alongside the mudarib or not, for stipulating his work with him amounts to stipulating his hand remaining over the wealth, a defective condition.
If the mudarib hands the capital to the owner without stipulating his work, then seeks his help in the work, or hands him the wealth as merchandise, that is permitted: seeking help does not remove the wealth from the owner's hand. Whether he is a contracting party or not, the capital owner's hand must depart from his wealth for the mudaraba to be valid. Thus the father or executor who hands over a minor's wealth in mudaraba while stipulating the minor's work produces an invalid mudaraba: the minor's hand remains by virtue of his ownership, preventing delivery. But if the father and executor stipulate that they themselves will work alongside the mudarib, that is valid: they are not owners of the wealth and are like two strangers, each of whom may take the minor's wealth in mudaraba ( "Bada'i' as-Sana'i'", 6/84-85 ; "Mukhtasar al-Waqaya", 2/189 ; "al-Jawhara an-Nayyira", 3/445 ; "al-Lubab", 1/541 ).
The Malikis say: if the capital owner stipulates that the worker's hand be with his in selling, buying, taking and giving in what pertains to the qirad, or stipulates that he consult him so that he does no act except with his permission, or places a trustee alongside him, the qirad is defective: it contains a restraining and a narrowing contrary to the sunna of the qirad. The worker is then owed a like-wage: not having trusted him with the capital of the qirad and having placed a trustee over him, the worker has become like a hired man ( "ash-Sharh al-Kabir with Hashiyat ad-Dasuqi", 5/285-286 ; "Sharh Mukhtasar Khalil", 6/270 ; "Tahbir al-Mukhtasar", 4/509-510 ).
The Shafi'is say: the worker must be independent in disposition by an absolute authorization. It is therefore not permitted: to stipulate that the wealth remain in the owner's hand or another's, so that he hands over the price of what the worker buys; to stipulate his consultation in disposition absolutely; to stipulate, on the sound view, a supervisor who watches over his work without consulting him; nor to stipulate the work of the owner, or of another, alongside the worker, for dividing the disposition leads to dividing the hand, and it contradicts the worker's independence in the work: the object of the qirad is that the wealth come from the capital owner and the work from the worker. All these conditions corrupt the qirad contract. But if it is stipulated that he give him a mount to load, or the work of the owner's slave alongside him, that is permitted on the madhhab ( "Rawdat at-Talibin", 3/741 ; "Mughni al-Muhtaj", 3/343 ; "Nihayat al-Muhtaj", 5/254 ; "an-Najm al-Wahhaj", 5/262 ; "ad-Dibaj", 2/428-429 ; "Kifayat al-Akhyar", 341 ; "Hashiyat al-Bajuri on Sharh Ibn Qasim", 2/44 ).
The Hanbalis say: if the work of the owner alongside the worker, or that of his slave, is stipulated in the mudaraba (as in musaqat), the contract and the condition are valid, like stipulating that the worker ride the owner's beast and the like. And the owner's working alongside the worker without any stipulation does no harm: it does not void the mudaraba or the musaqat ( "al-Furu'", 4/290 ; "al-Insaf", 5/433 ; "Kushaf al-Qina'", 3/600 ; "Sharh Muntaha al-Iradat", 3/571 ).
Abu Yahya al-Balkhi, of the Shafi'is, said: if it is stipulated that the owner himself work alongside him, that is permitted by way of assistance and subordination. This disagreement concerns the case of stipulation; as for his working alongside and helping without a condition, it is valid by consensus. Ibn al-Mundhir (may Allah have mercy on him) said: the people of knowledge agree that if a man hands wealth to another in mudaraba and the capital owner helps him without a condition, it is permitted ( "Rawdat at-Talibin", 3/741 ; "al-Ijma'", 533 ).
Fourth: the profit. The following conditions apply to the profit.
1. The profit must be known. The jurists agree that the validity of the mudaraba requires a known profit, the share of each (owner and mudarib) being determined at the contract: its half, its third or its quarter; for the subject of the contract is the profit, and ignorance of the subject voids the contract.
The Hanafis, the Malikis, the Shafi'is on the sounder view and the Hanbalis say: if the owner hands over known wealth saying: "Trade with it, and the profit is between us", the contract is valid and the profit is divided in halves, the wording attaching to both by a single link, neither of them being favored by it. The Hanafis add: if he hands him a thousand dirhams stipulating that they share the profit without stating its amount, that is permitted and the profit is divided in halves, for partnership requires equality. Allah, exalted be His standing, said:
"They are both partners in the third."
Surah An-Nisa, 12
If the owner stipulates for the mudarib "a shirk" (a share) of the profit, that is permitted on the view of Abu Yusuf and 'Abd al-Malik of the Malikis, and the profit is divided in halves. Muhammad, the Malikis and the Shafi'is say the mudaraba is defective. Muhammad's reasoning: "ash-sharika" means the share. Allah said:
"Or have they a share in the heavens?"
Surah Fatir, 40
that is, a share; and He said:
"they have no share therein"
Surah Saba, 22
that is, a share. He has thus been given a share of the profit, and the share is unknown, so the profit becomes unknown. Abu Yusuf's reasoning: "ash-shirk" means partnership; one says: "I entered with him into this matter, and he was made my partner in association and sharing," and the poet says, in the sense of a share (paraphrase): "We shared with Quraysh its survival, and in its lineages, a sharing of the reins." The word is also used in the sense of a share; but carrying it to partnership renders the contract sound, and it is so interpreted.
The Malikis say: if the owner says: "Work, and you shall have a shirk of the profit", while no custom between them determines the portion in that qirad, the qirad is defective and becomes a like-qirad (qirad al-mithl) in the profit; but if they have a custom determining the use of "shirk" for, say, half or a third, that custom is applied. If the owner says: "The profit is shared between us", or "a partnership", it is evident on the face of it that half is his, usage conveying equality; unlike "a share is yours", which suggests "a portion is yours" ( "ash-Sharh al-Kabir", 5/283 ; "Tahbir al-Mukhtasar", 4/508 ; "Sharh Mukhtasar Khalil", 6/206 ; "ash-Sharh as-Saghir with Hashiyat as-Sawi", 8/394 ; "Bada'i' as-Sana'i'", 6/85 ; "Rawdat at-Talibin", 3/745 ; "Mughni al-Muhtaj", 3/346 ; "an-Najm al-Wahhaj", 5/267-268 ; "ad-Dibaj", 2/431 ; "Kushaf al-Qina'", 3/596 ; "Sharh Muntaha al-Iradat", 3/548 ; "ar-Rawd al-Murbi'", 2/70 ; "Manar as-Sabil", 2/181 ).
The jurists differed over the case where the worker entered upon a named profit, after which the two agree on more or less: is that permitted?
The Malikis, against Ibn Habib and Abu Hanifa (as al-'Imrani the Shafi'i transmits from him), hold that after the qirad they may agree on any portion, less or more, even though they had previously entered upon a known portion; for profit, being unrealized, excuses this. This is against Ibn Habib, who forbids the increase once work has begun. As for after the contract but before the work, no prohibition is even conceivable, since the contract is not binding: it is as if they were beginning the contract at that very moment.
The Shafi'is and Ibn Habib of the Malikis hold that the increase is not permitted once work has begun. Al-'Imrani (may Allah have mercy on him) said in "al-'Umda": if half the profit was stipulated for the worker, and after some days it was reduced to a third or a quarter, that is not permitted so long as they have not rescinded the first contract and concluded another, against Abu Hanifa (may Allah have mercy on him). Our proof: a valid mudaraba contract does not admit a change in the stipulated profit; so it is not valid, just as if one of them changed it alone ( "al-Bayan fi madhhab al-Imam ash-Shafi'i", 7/196-197 ; "ash-Sharh al-Kabir", 5/288 ; "Sharh Mukhtasar Khalil", 6/209 ; "Mawahib al-Jalil", 7/348 ; "at-Taj wal-Iklil", 4/418 ; "Tahbir al-Mukhtasar", 4/512 ).
2. The profit must be a common share (musha'), determined in fractions. The jurists agree that the profit must be known by fractions, for instance the profit being between them in halves or thirds. If the owner says: "You shall have a share" or "a portion", it is defective, through ignorance of the compensation.
Likewise if a known amount is stipulated for the worker, say a hundred, or the profit of a type of goods, such as the profit of this merchandise: it is defective, for the merchandise may not profit, or another may; the profit may be confined to the hundred or to that type, entitling the worker to all of it; or that type may not profit while another does, so his labor is wasted, contrary to the intent of the contract.
Ibn al-Mundhir (may Allah have mercy on him) said: all those whose words we preserve among the people of knowledge agree on voiding the qirad if either or both stipulate for themselves known dirhams. Among those from whom we preserve this: Malik, al-Awza'i, ash-Shafi'i, Abu Thawr and the proponents of personal reasoning ( "al-Ijma'", 529 ; "al-Ishraf", 6/209 ; "al-Mughni", 5/23 ).
The same applies if a fractional share of the profit and a fixed amount of it are stipulated for the worker, for instance a monthly salary of one thousand, and five percent of the profit: for the reason stated, and because the profit may not exceed what was fixed for him.
From this the corruption of many of people's dealings in our own time becomes clear, where they contract with those who manage their wealth for a fixed monthly salary and a fixed percentage of the profits at the annual closing or otherwise. That is not valid, for two reasons: the first is that if known dirhams are stipulated, it is possible that nothing else is gained, so the person obtains all of the profit; or that he does not gain them and takes a portion of the capital while profit is abundant, and the one stipulated the dirhams is wronged. The second is that the worker's share ought to be known by fractions, since it cannot be known by amount; if the fractions are unknown it is defective, just as if the amount were unknown in what must be known by it. For as soon as the worker stipulates dirhams for himself, he may slacken in seeking profit, finding no interest in it, the benefit going to another, unlike one who has a portion of the profit ( "Bada'i' as-Sana'i'", 6/59, 85 ; "al-Ikhtiyar", 3/22 ; "al-Jawhara an-Nayyira", 3/443 ; "Mukhtasar al-Waqaya", 2/189 ; "al-Lubab", 1/541 ; "al-Fatawa al-Hindiyya", 2/302 ; "ash-Sharh al-Kabir with Hashiyat ad-Dasuqi", 5/280 ; "Tahbir al-Mukhtasar", 4/504 ; "Sharh Mukhtasar Khalil", 6/203 ; "Mawahib al-Jalil", 7/339 ; "ash-Sharh as-Saghir", 8/384 ; "Minh al-Jalil", 5/403 ; "Rawdat at-Talibin", 3/745-746 ; "Mughni al-Muhtaj", 3/346 ; "an-Najm al-Wahhaj", 5/267-268 ; "ad-Dibaj", 2/431 ; "al-Mughni", 5/23 ; "Kushaf al-Qina'", 3/583 ; "Sharh Muntaha al-Iradat", 3/550 ; "ar-Rawd al-Murbi'", 2/70 ; "Manar as-Sabil", 2/181 ).
3. Stipulating all the profit for the mudarib. The jurists differed over the case where all the profit is stipulated for the mudarib.
The Hanafis, the Hanbalis and the Shafi'is (in the mirror of the sounder view) say: if all the profit is stipulated for the mudarib, it is a loan (qard), and if it cannot be corrected as a mudaraba, it is corrected as a loan, for he has produced the meaning of the loan, and what matters in contracts is their meanings. Likewise, if all the profit is stipulated for the capital owner, it is a loan for use (ibda'), the meaning of the loan for use being present.
The Hanbalis say: if he says: "Take it, trade with it, and all the profit is yours", the wealth handed over is a loan, not a qirad; the term suits it and its ruling accompanies it, so it has reverted to it as in transfer of ownership. All the profit belongs to the worker, the capital owner having no right in it, that is, in the profit; and he recovers only the like of what he handed over. The loan for use and the loan are neither partnership nor mudaraba, their meaning not being realized in them. If the capital owner adds to his words: "and all the profit is yours, with no guarantee upon you", it is a loan in which non-guarantee was stipulated, so it does not take effect: a defective condition contradicting the contract's requirement.
The Shafi'is, on the sounder view, say: if he says: "I propose qirad to you on condition that all the profit is mine, or all of it yours", the contract is defective, considering the wording and because it contradicts the contract's requirement: if the worker works and profits, all the profit belongs to the capital owner, being the growth of his wealth; the worker receives a like-wage, having worked for compensation, the wealth not having been delivered to him ( "Rawdat at-Talibin", 3/744-745 ; "al-Bayan", 7/195-196 ; "Mughni al-Muhtaj", 3/346 ; "an-Najm al-Wahhaj", 5/266 ; "ad-Dibaj", 2/430-431 ; "Bada'i' as-Sana'i'", 6/86 ; "Mukhtasar Ikhtilaf al-'Ulama", 4/44-45 ; "Kushaf al-Qina'", 3/596 ; "Sharh Muntaha al-Iradat", 3/565-566 ).
The Malikis say: it is permitted to stipulate all the profit of the qirad for the capital owner, for the worker, or for someone other than the two of them; it belongs to the domain of gratuitous giving (tabarru'), and the use of the word qirad then becomes metaphorical. Fulfillment of it binds both parties if the stipulated beneficiary is a specific person; it has been said: it is enforced by judgment if either of the two withholds it. If the specific person does not accept it, then if there is a custom as to what the worker receives of profit in a similar qirad, it is applied; otherwise, is the profit divided equally between them, or is it like a qirad concluded over a vague portion? If it is for someone unspecified, such as the poor, it is owed without judicial enforcement.
The worker guarantees the wealth if he takes it on condition that all the profit is his, for he then resembles the loan for use, unless he negates the guarantee by saying, at the moment of taking the wealth: "No guarantee upon me if it perishes"; likewise if the wealth is called a "qirad", that is, even if the guarantee is stipulated upon him: it would then be a defective qirad.
Guarantee upon the worker is thus conditional on two conditions. The first: that he not have negated the guarantee of himself, nor the capital owner of him, by saying: "no guarantee upon me", or the owner saying to him: "no guarantee upon you"; he does not then guarantee, for it is an excess of kindness. The other: that he not call that a "qirad"; if the capital owner says: "Work with this wealth on the qirad", no guarantee is upon him on the well-known view, against Sahnun, even if the guarantee is stipulated upon him; but with the guarantee stipulated, it would be a defective qirad, rescindable before the work ( "ash-Sharh al-Kabir with Hashiyat ad-Dasuqi", 5/289-290 ; "Tahbir al-Mukhtasar", 4/513-514 ; "Sharh Mukhtasar Khalil", 6/209 ; "ash-Sharh as-Saghir", 8/402-403 ).