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Rules of Muzarebah

Muzarebah is a kind of contract and agreement between two persons in which one person gives a property to the other to do business with that and the proceeds are divided according to their agreement. The one who gives the capital is owner (Malik) and the other one who does business and trading is called agent or Amil.

It is noteworthy that the holy religion of Islam pay attention to economics and daily affairs of people the same as divine and prayer issues because it is believed “there is no Maad (resurrection) for those who have not Maash (livelihood),” and it is obvious that the basis of individual and social prosperity is obeying Allah along with working business and economic activity. The foundation of greatness and glory of Muslims is their link to the Creator and along with that, reasonable and healthy economic activity and working and business. It has been reported in the Holy Qur’an: “Men whom neither merchandise nor selling diverts from the remembrance of Allah and the keeping up of prayer” (Surah Alnoor, Ayah 37), and “But when the prayer is ended, then disperse abroad in the land and seek of Allah’s grace and remember Allah much” (Surah Friday, Ayah 10) and “Those who seek Halal activities, Allah the Almighty assists their works” (Al-Kafi, vol.4, p.12). it is
clear that the aim of Muzarebah is economic growth and integration of wealth in economic process and avoidance of recession in Muslims’ business and market.

The main cause of Muzarebah in making use of energetic and productive forces and avoidance of being idle among Muslim competent and merited persons.

Also, the aim of it is getting profit and Halal and legitimate earnings and avoidance of Reba and seeking wealth from illegitimate ways.

On the other side, Amil (agent) should note that Muzarebah is not only taking others properties and wealth and making money with that, but it is also a collection of Shariah rules which contain heavy and delicate responsibilities, and if any proceeds are earned, Amil is the partner of Malik and if Muzarebah is void or corrupt, Amil will be only entitled to get usual wages and in fact he is hired by Malik. And if no proceeds are earned, Amil has no right and he is only the trustee of Malik and if he disregards concerned conditions, he is usurper and sinful and responsible for compensation of property loss and finally, he is only agent and Wakil of Malik in any disposal or transaction of properties and also he must observe the rules which will be explained here, God willing.

2450. Muzarebah is valid on several conditions:

First, the owner (Malik) and agent (Amil) should be Baligh, sane, and under no pressure and owner should not be barred from right of discretion over his/her property;

Second, proposal by Malik and acceptance by agent (Amil) (by words or otherwise, in Arabic or any other language);

Third, the capital must be at hand readily and Muzarebah is not correct with debts, but if creditor makes debtor his Wakil in payment and also acceptance of Muzarebah contract on his behalf and the debtor does that and accepts himself, Muzarebah is correct;

Fourth, the proceeds must be shared by Malik and Amil only and if they set a condition to pay something to a third party, it is not correct, unless the other party does something except than what is related to trade and Muzarebah and in this case there is no hindrance in sharing proceeds;

Fifth, profits of Amil and Malik’s share must be specified and it is done in tow correct way:

a) they agree on percentage of proceeds for Malik and Amil;

b) they agree that a certain amount of proceeds is devoted Amil and the rest goes to Malik or vice versa, but the second one is only correct if there is certainty about more proceeds than set figure, otherwise, it is not correct;

Sixth, Amil is entitled and able to do trade and transaction;

Seventh, profits are taken from trade and buying and selling. Therefore, if Malik gives money and capital to do farming or to cover expenses of a shop or repair a car, Muzarebah is not in order.

2451. In the fifth condition which was mentioned, determination of profits are done in two ways and the second way is to agree to give a certain amount of proceeds to Amil and the rest to Malik or vice versa. But if the estimated profits does not realize, and for example, it was agreed to pay 10 thousand tomans of profit to Amil and the rest goes to Malik, but actually the total profits is 10 thousand or less; in this case, all profits goes to Amil and there is nothing left for Malik or vice versa. If the share of Malik is fixed and nothing more than that figure was earned, and total profit goes to Malik and there is nothing left for Amil. If some figure is fixed for both of them and profits are less the total of those figures, the profits will be divided according to agreement (if they agree that, for example, 5 thousand tomans of profits goes to Malik and 10 thousand to Amil and the rest is divided equally and the total profits are less than 15 thousand tomans, then it was be divided according to the same figures relatively, namely 5 and 10).

2452. It is not obligatory to have contract formula in Muzarebah, and it can be done by handing over what is concerned (Moatat).

2453. It is not obligatory for the capital to be coined gold and silver; and bank notes and other common types of money are accepted.

2454. If one enters into Muzarebah with others money without their permission or the permission of their guardians, it is an unauthorized (Fozoli) act which can only be accepted if the owners approve it. If the approval is given, the proceeds will be divided according to agreement between the owner and agent (Amil) and if any loss occurs, it will be born by Malik. But if it is not approved, the transactions is void and the property is returned to owners and naturally there is no proceeds.

2455. Muzarebah is a Jaez contract which means both sides can call it off and even if they agree a fixed period for contract, it will not turn into a Lazem contract (binding contract), but if they fix a period and that period is over, right of discretion of Amil over the concerned capital is subject to permission of owner and without such authorization he cannot do anything with capital from Shariah point of view. If they want to call it off, it does not matter whether it is done before or after beginning of trade activities and whether it is before or after any trade activities and whether it is before or after any profit earnings. If there is a profit and they wish to call it off, they must divide it up to time of cancellation according to terms of agreement.

2456. If it is agreed in a Muzarebah contract or any other contract (whether binding or Jaez) that they should not abrogate Muzarebah contract in a fixed period of time, it is obligatory to respect this condition but if there is violation and it is called off, then Muzarebah is actually abrogated, although a sinful act is committed.

2457. It is obligatory for Amil to do business activities, which are authorized by Malik and otherwise, the occurring transaction is an unauthorized one (Fozoli) and its correctness is subject to authorization and endorsement of it by the owner.

2458. If the purchase of a particular thing is agreed in Muzarebah contract and Amil acts against that condition, he is responsible for the capital and its possible loss partly and totally. But if the transaction is later authorized by owner, he (owner) will be responsible for loss of capital.

2459. If Amil does not commit any act, which is considered as neglect or out of agreed terms, he is not responsible for loss in transaction.

2460. If it is stated by owner in the Muzarebah contract that Amil is also responsible for loss along with owner, this condition is void; but the original contract remains valid. If in a Muzarebah contract and any other contract, whether binding or Jaez, it is stated that if any loss occurs, half of it will be born by Amil personally, this condition is correct and it should be honored.

2461. If owner or agent (Amil) dies, Muzarebah is void and the heirs can agree with the other side to renew the contract of Muzarebah.

2462. Amil cannot take Wakil (agent) or hire another person and get assistance without permission of the owner.

2463. If some of capital is lost or burned or it is stolen or something like that happens without any neglect by Amil, he is not responsible and the loss is born by Malik. But if Amil betrays, he is responsible.

2464. If the owner has set a condition that a particular trade or a special method must be used, Amil is obliged to respect it; but if there is no such arrangement, Amil should act according to usual norms of trade and if credit transactions are customary and it is not excluded in contract, that kind of transaction is also permissible.

2465. If Amil acts contrary to common ways or against set conditions of Malik, and then any profit is earned, it must be divided according to Muzarebah contract, but if capital is lost partly or totally, or any damages occur, Amil is responsible.

2466. If the concerned capital is in hands of people in the form of credit, for example, some credit transactions are done and then Muzarebah is void or cancelled, as an obligatory precaution, Amil must collect credit, and hand them over to owner, especially if Amil has called it off.

2467. It is not permissible for Amil to mix the capital with his or others money without owner’s permission. And if he does it, he has committed a sin, but Muzarebah is not void and if there is any profit it will be divided according to concerned person’s capital, and if there is a loss, he is responsible personally.

2468. Amil may mix the capital with owner’s explicit implied permission (like telling him: “do whatever you deem suitable”) with his or other capital, and do business with them.

2469. Amil is not entitled to spend any part of capital for his own expenditure, even if it is negligible, but if he travels with owner’s permission, he may take usual amount and in his level from capital, unless Malik has set a condition that he must pay travel expenses out of his own pocket.

2470. If capital is lost before or during the trade, Muzarebah is cancelled ipso facto.

2471. If part of capital is stolen or burned or lost in business or something like them happens, but there is some profit out of other parts of capital, first the capital must be completed out of profit and then if anything remains, it should be divided between Amil and Malik according to contract. But if any loss of capital occurs after cancellation of Muzarebah, owner will bore it, not Amil.

2472. If it is known that Muzarebah is void because of some defect and Amil has done a business although he has been aware of the situation, all profits belong to owner, but Amil will get only his wages and nothing more and if his wages are more than profits, he has no right to claim extra profit, and if there is no profit, he has no share.

2473. If Amil hesitates after getting the capital and it is lost, he is responsible for that and he has committed a sin and owner may claim and get back his original capital and no more.

2474. If Amil receives the capital and did not do any business for a while, owner may got back his capital and no more, but Amil has committed a sinful act because of failure to act according to Muzarebah contract.

2475. If the owner and agent (Malik and Amil) have contradictory claims and quarrel about the amount of capital and they do not have substantial evidences regarding their respective claims, the word of Amil under oath has priority and there it does not matter that capital is lost or not, and Amil is responsible.

2476. If capital is lost or some loss or damage is caused and the owner claims that Amil has cheated or neglected his duties or he has acted contrary to set conditions and he has no evidence for his claims and Amil denies the charges, the word of Amil under oath is preferred.

2477. If Amil claims that he was authorized by owner to do some business and the owner denies that and he has no evidence, the word of Malik under oath is preferred and if Malik claims that he has prohibited some transactions and Amil denies that, the word of Amil under oath is preferred.

2478. If Malik claims that Amil has cheated or neglected or done something out of contract and Amil denies that, the word of Amil under oath is preferred.

2479. If Amil claims that the property is lost or loss has occurred and Malik denies that, and he (owner) has no evidence, the word of Amil under oath is preferred.

2480. If Amil is permitted to enter into credit transactions and he claims that the proceeds are not collected yet, and Malik denies that, and he has no evidence, the word of Amil under oath is preferred.

2481. If Amil claims that first some profits are earned and later losses of the same amount have occurred, his word is preferred (like previous one) and also if there is difference of opinion about the amount of profit or capital and they do not have evidence, the word of Amil under oath is preferred.

2482. If Malik and Amil have different views about the share of Amil, for example, the owner thinks it is one third and Amil wants half and they do not have evidence, the word of Malik under oath is preferred.

2483. If Malik and Amil have different views regarding validity or invalidity of Muzarebah, and one claims that it is valid and the other one claims that it is void and they do not have evidences, the word of the person who claims it is valid is preferred under oath.

2484. If Amil claims that he has returned the capital to Malik and he has no evidence and Malik denies it, the word of Malik under oath is preferred.

2485. Father and paternal grandfather of a minor must enter into Muzarebah on his behalf without any cheating and taking his interests into consideration. The same applies to guardian of a minor, if they are sure that the property is not lost and it is to his (minor’s) interest and they may divide the proceeds according to contract and deposit minor’s share in his account.

2486. Muzarebah with credits is not correct, but the creditor may give permission to debtor to do business with debt money and whatever profits are earned, they are divided for example 50/50 or by one third or one fourth and this is a Joaleh contract which has Muzarebah’s advantages but it is not subject to Muzarebah rules.

2487. Taking into consideration that people usually deposit their money in Islamic loan funds (Gharzol Hasanah) and deliver them to members of the board of directors, the same board may enter into Muzarebah contract with businessmen or the members of the board may personally do business with that money and earn the expenses of those funds and use the rest as it is agreed and it is proper.

2488. If one gives his car to another person and authorizes him to transport passengers or goods and sets a condition that half or one third of fares should be given to him, this has no harm from Shariah point of view, and such an agreement is authorization for taking possession of a property and conditional usage with consideration. They share proceeds, but it is not Muzarebah and it is not subject to its rules.