Explanation of Article 555
The article clarified an obligation on the part of the speculator, stemming from his duty to exercise due diligence in managing and disposing of the funds, which is to adhere to the terms contained in the Mudaraba contract. The Mudaraba contract, in this regard, does not lack two scenarios:
The first scenario: A restricted Mudaraba contract.
The second scenario: An unrestricted Mudaraba contract.
The first paragraph clarified the provisions related to the restricted Mudaraba contract, whether the restriction is by time, place, type of work, or otherwise; and it explained that the speculator is obliged to adhere to the restrictions of the contract; if he violates this, he is considered negligent and liable for compensation. For example, a time restriction might limit the Mudaraba to the date season only, a place restriction might limit it to trading in the city of Riyadh only, and a type of work restriction might limit it to Mudaraba in cars only. It may combine all these restrictions, such as limiting it to Mudaraba in dates during the date season in the city of Riyadh only, or it may impose other restrictions, such as stipulating that dealings should only be with commercial institutions and not individuals, or with institutions with a good credit rating, and so on. All these restrictions may be explicitly included in the contract or implicitly derived from the circumstances of the contract.
The second paragraph clarified the provisions related to the unrestricted Mudaraba contract; that is, without restricting the Mudaraba by time, place, specific work, or otherwise; the contract is not void because the subject matter is determinable; the speculator is bound in his work by what is customary and guided by the circumstances of the contract. In this way, the Mudaraba contract differs from the agency contract; as previously stated in Article (482) regarding the agency contract, it is not valid with general terms that do not specify the type of legal action. The difference between them is that the speculator's actions here are restricted to the funds he received only and by what is customary in Mudaraba activities aimed at profit, while the general agency extends to all the principal's funds and includes all actions; thus, the risk in it is apparent.
Related To
Article 555
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If a mudaraba contract is bound by time, place, type of activity, or the like, the mudaraba agent shall comply with such limitations.
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If a mudaraba contract is absolute, the mudaraba agent shall be authorized to act according to custom.