Entering into a Mudhaarabah without fixing the portion of profit

30-6-2009 | IslamWeb

Question:

Assdalamo Alaikum,
Please inform that the following manner of MUDARABAH is HARAM or PERMITTED.
Mr. “A” is doing business. Mr. “B” invest money with “A”. The “A” says, that after conclusion of the business segment, in which I am going to invest your money, I will calculate the profit and I will give you a suitable portion of the profit to you ( do not say that I will give you, one third / one fourth / one fifth / one sixth etc, like this statement).
After completion of the business circle, “A” gives to “B” some amount ( out of what he earned from the lawful business) plus his actual amount. “B” takes the amount and do not make any remarks ( like the amount of profit is less or ok etc)

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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 is His slave and Messenger.

 

The transaction that took place between these two men is a Mudhaarabah, and among the conditions of Mudhaarabah is that the amount of profit should be known, like a half, two-thirds, one-fourth and the like, because the contract is basically concluded on the profit, and since the profit is unknown, then this makes the contract void. For more benefit, please refer to Fatwa 94668.

Therefore, according to the view of the majority of the scholars this Mudhaarabah is void. In such a case, [which is when the Mudhaarabah is void], all the profit is for the owner of the capital money and the Mudhaararib [i.e. the one who manages the Mudhaarabah] is entitled to the wages of a person who does the same job like him or according to another opinion, he is entitled to a share from the profit equal to the share of that person.

However, if the owner of the capital money and the Mudhaararib agree after the end of the Mudhaarabah transaction on the division of the profit, then this is permissible as it is a permissible reconciliation.

Allaah Knows best.