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Fatwa CenterRuling on determining time for Mudhaarabah
Question
To what extent is the following partnership valid under Sharee‘ah? I have a factory of sawing stone and marble. A friend offered to invest a certain sum in it, in return for one-third (of the profits) for one year. The question is: what is the destiny of the invested sum of my friend after the year is over?
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.
This process is included in the Mudhaarabah, which is to give a certain sum to somebody for investment in return for a share in the profit. That is the reality of the transaction about which the question is raised.
In this respect, it should be known at first that determining a time for the Mudhaarabah before which it should not be repealed, and beyond which it should not go, is debatable among scholars. According to the majority, it invalidates the Mudhaarabah, for it constricts the matter on the investor, and increases the harm on him for the commodities might become unsalable, which forces him, on the approach of the appointed term, to sell them while there is a little demand for them, thereby harming him greatly. Besides, there are other theoretical evidences in support of that.
Imaam Abu Haneefah, May Allaah Have mercy upon him, and the Hanbali scholars of Fiqh, in one of the two narrations handed down from them, however, are of the opinion that it is permissible to determine a time for the Mudhaarabah, due to its resemblance to hiring on the one hand, and because it is a kind of disposal (of the invested property), which makes it permissible to specify it with certain goods, as well as to time it with a limited period of time, just like deputation.
What is preponderant in our opinion, and Allaah Knows best, is the latter opinion, so long as determining a limited period of time comes in response to the wish of the owner of the money, provided that it does not lead to any harm on the other party (the investor), whose consent is necessary, due to the Statement of Allaah Almighty (which means): {but only [in lawful] business by mutual consent.}[Quran 4:29] and the statement of the Messenger of Allaah, sallallaahu ‘alayhi wa salam: "Muslims should abide by the conditions they lay down." [Al-Bukhari and At-Tirmithi]
Being so, to give the sum to the owner of the factory to invest it for one year after which he is to return it along with an agreed upon share in the profit is permissible according to the preponderant opinion, provided that it should be given in full to the owner of the money, according to the condition put on it, i.e. to return to him, by the end of the year, the capital along with the profit. This transaction, as we have previously mentioned, is a kind of Mudhaarabah which is subject to its rulings, concerning the no-warranty ruling, provided that there should be neither negligence nor transgression, to the end of the rulings.
Allaah Knows best.
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