What is the ruling if one thousand of the capital perishes before the Mudarib purchases assets with it, or if only a portion of the capital perishes?
General Chapter
Al-Mughni
Book of Partnership
Primary text
If one thousand of the capital perishes before the Mudarib purchases anything with it, or if a portion of it perishes, the Mudarabah contract is dissolved concerning the perished amount, and the remaining capital alone continues as the capital base.
Supporting text
Some Shafi'is state that the ruling of Al-Shafi'i is that the loss is covered from both the profit and the two thousand of capital simultaneously, arguing that capital only becomes Mudarabah capital upon physical reception, so there is no distinction between its perishing before or after trading. However, the correct position is that capital perishing before trade is treated as a loss of capital, distinguishing it from loss after trade, which has entered into profit-generating commerce.