13 – The Book of Muḍāraba (Silent Partnership)

Muḍāraba is a partnership contract in which one partner provides the capital while the other provides the labour. A muḍāraba is valid only with assets that are acceptable as capital in an ordinary partnership.

Among its conditions are: the profit must be shared between them as an undivided proportion; neither party may reserve for himself a fixed sum of dirhams. The capital must be handed over to the working partner, and the investor must have a share in whatever profit results.

When the muḍāraba is unrestricted, the agent may buy and sell, travel, consign merchandise, and appoint deputies. He may not, however, re-invest the capital in another muḍāraba unless the owner of the capital expressly allows it.

If the owner limits the transactions to a specific town or to a particular commodity, the agent may not exceed that limit. Likewise, if he sets a definite term for the muḍāraba, that is permissible, and the contract lapses when the term expires.

The agent may not purchase the investor’s father, son, or anyone whose purchase would automatically free him for the investor; if he nonetheless buys them, the purchase counts as his own, not the partnership’s. If the capital already shows a profit, the agent is likewise barred from buying anyone whose purchase would oblige him to manumit them; should he do so, he becomes liable for the muḍāraba capital. If no profit exists, he may buy them, and if their value subsequently rises, his proportional share in them is freed without liability to the investor, while the emancipated person must work to reimburse the investor for his share of the price.

If the agent gives the capital to a second person as a muḍāraba without the investor’s permission, he does not incur liability merely by handing it over, nor by the second agent’s dealings, until profit is earned; once profit is realised, the first agent becomes liable for the capital.

And if the capital is handed over to him as a muḍāraba,