Book of Qirāḍ (Silent Partnership)

Qirāḍ, also called muḍāraba, is an agreement in which one party places a sum of money with another so that he may trade with it; any profit is to be shared between them.

For the contract to be valid the capital must consist exclusively of sound silver or gold coins. It may not be raw bullion, jewellery, debased coinage, or merchandise. The amount has to be known and specifically identified. Some jurists, however, allow it when the investor says, “Choose either of these two sealed purses.”

The capital must also be delivered to the agent; it is invalid to stipulate that it remain in the owner’s possession or that the owner work alongside him. According to the sounder view, it is permissible to stipulate that the owner’s slave-boy work with the agent.

The agent’s task is trading and everything directly connected to it, such as displaying cloth and folding it. Hence, if the owner instructs him to buy wheat, mill it, and bake bread, or to buy yarn, weave it, and then sell the cloth, the qirāḍ is void. Likewise, one may not bind him to purchase a particular article, a commodity that is rarely available, or to deal with a specific individual.

Stipulating a fixed term is unnecessary. If a term is mentioned and the owner then forbids all transactions after it, the contract is invalid; but if he merely forbids further purchases after that date, the more reliable opinion is that the qirāḍ remains intact.

Both parties must be exclusively entitled to the profit and must share in it. Therefore, if the owner says, “I enter into qirāḍ with you on the condition that all the profit is yours,” the contract is void—though another opinion holds it valid. If he says, “All the profit is mine,” it is void; some call this arrangement ibdāʿ (commission agency).

The share of each party must be fixed as a proportion. Thus, saying “You will have a share” or “a portion” renders the contract invalid. If he says, “The profit is between us,” the sounder view is that it is valid and taken to mean half and half. Saying “Half is mine” makes it invalid on the stronger opinion, whereas “Half is yours” is valid according to the preferred view. If either partner is given a fixed ten coins, or the profit of a particular commodity, the contract is invalid.