Book of Qirāḍ

Chapter One: The Subject-Matter of Qirāḍ

There is no disagreement among the Muslims over the permissibility of qirāḍ; it was practiced in the pre-Islamic period and Islam confirmed it. They are unanimously agreed that its form is for one man to hand over capital to another so that he may trade with it, the worker taking a known share of the profit—whatever fraction the two stipulate, whether a third, a quarter, or one half. They further concur that this is an exception to the general rule that unknown hire is forbidden, and that the concession here exists only to facilitate people’s affairs. They also agree that the worker bears no liability for any loss of principal so long as he has not been negligent, though they differ over what exactly counts as negligence and what does not.

They likewise agree, in broad terms, that no stipulation may be attached that would increase the indeterminacy of the profit or the risk already inherent in the contract, even though they differ as to which particular conditions would entail that increase and which would not.

They also concur that qirāḍ is valid when the capital consists of gold dinars or silver dirhams, but they differ with respect to other forms of capital.

In short, the discussion concerns its definition, its subject-matter, its conditions, and its legal rulings, and in the chapters devoted to these three headings we shall mention its well-known issues.

Chapter One
Regarding its subject-matter

As for its definition, that has already been set out, and there is unanimous agreement on it.

With respect to its subject-matter, all agree that it is valid when the capital is in dinars or dirhams, but they differ concerning commodities. The majority of the jurists in the various regions hold that qirāḍ with commodities is impermissible, whereas Ibn Abī Laylā considers it permissible.

The majority’s argument is that if the principal consists of commodities, gharar is involved: the agent receives the goods at one value and returns them at another, so both the principal and the profit remain unknown.

If, however, the principal is the very currency for which such commodities are sold, Mālik—and al-Shāfiʿī as well—forbid it, while Abū Ḥanīfah permits it.

Mālik’s principal reason is that the investor has contracted a qirāḍ on the price for which the merchandise will be sold and on the sale of the merchandise itself; thus it becomes a qirāḍ combined with an additional benefit. Moreover, the price at which the goods will be sold is unknown, so it is as though he has entered into qirāḍ on an unknown principal. It also appears that he forbade qirāḍ based on the value of commodities because of the effort the agent must expend in selling them, for only then does the capital of the qirāḍ become liquid. The same applies if the investor hands over the very commodity he bought. Yet this opinion is closest to permissibility, and it is probably what Ibn Abī Laylā allowed; indeed, this is evident from their statements, for they report that he considered it permissible for a man to give another a garment to sell, with whatever profit arises to be shared between them—and this only