Is a condition requiring the working partner to guarantee the capital or bear part of the loss (Wadi'ah) valid in a Mudarabah contract?
General Chapter
Al-Mughni
Book of Partnership
Primary text
The condition imposed upon the working partner requiring him to guarantee the capital or bear a portion of the loss is void. There is no known disagreement on this point, and the contract remains valid. This is explicitly stated by Ahmad, and it is the position of Abu Hanifa and Malik. The evidence is that this condition does not affect the ambiguity of the profit share, therefore it does not invalidate the contract, unlike if a fixed sum of dirhams was stipulated for one party, which invalidates the contract because in that case, upon invalidation of the condition, the profit share for each party remains unknown.
Supporting text
It is narrated from Ahmad, and attributed to Al-Shafi'i, that the contract is nullified by such a condition because it is a void stipulation, which corrupts the Mudarabah, similar to stipulating an excess amount of dirhams for one party.