Mudhaarabah contract according to Hanafi Fiqh
Q: Please comment on the following from Maliki Fiqh disallowing sleeping partners in an Islamic Contract.
Please give the Hanafi position with proofs.
The only formula for a silent investor is a business loan or Qirad. In a partnership all the partners have to work, they are all equally owners and therefore equally responsible.
I said: “What is your opinion of an arrangement in which I place a person in a stall and say to him: ‘I will accept the goods and you will do the work on the condition that whatever God grants us will be shared between us equally?’” He said: ”According to Malik, this is not permissible.” (Sahnun, Mudawwana, 12: 41).
I said: “What is your opinion of a partnership between three people in which one provides the millstone, the other the house, and the other the work-animal, on the condition that the owner of the animal does all the work?” He said: “The entire proceeds of the work are to go to the owner of the animal who executes the work, and he is obligated to pay the rental fee for the millstones and house.” I said: “Is this also the case even if he does not earn anything?” He said “Yes, even if he does not earn anything.”(Sahnun, Mudawwana, 12: 45).
Ibn Qasim rejects the validity of a partnership based in cash only which stipulates that all the work be done by only one of the partners. He explains his rejection as follows:
“The basis for this is that according to Malik, a partnership is not permissible unless they combine in its work proportionally to their respective shares in the joint capital.”(Sahnun, Mudawwana, 12: 60).
A: An example of a sleeping partner is mudhaarabah. Our fiqh kitaabs contain and support the mudhaarabah contract. The definition of mudharabah is a shirkat with an understanding that one partner will finance and the other will do the work. All the laws of shirkat will apply i.e. none of the partners will be entitled to a fixed amount; they will share the profits percentage wise. The fiqh is supported by hadeeth. Refer to Sunan Abi Dawood, Sunan Tirmizi etc.
And Allah Ta'ala (الله تعالى) knows best.
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