What causes the termination (fasakh) of a Mudarabah contract?

General Chapter

Al-Mughni

Book of Partnership

Book 18 · Issue 1 · Bab 1

Open in Qurani

Primary text

The Mudarabah contract is a permissible contract that terminates upon the mutual decision of either party to dissolve it, regardless of who initiates the dissolution. It also terminates upon the death, insanity, or legal incapacitation (Hajr) due to foolishness of either party. This is analogous to agency because the working partner (Amil) acts with the permission of the capital provider (Rabb al-Mal) concerning another's property. This rule applies both before and after the execution of the disposition of funds.