Explanation of Article 556
The article addresses another obligation on the part of the mudarib, branching from his obligation to exercise due diligence in managing and disposing of the funds, which is a negative obligation to refrain from an act. The first paragraph stipulates the mudarib's obligation to refrain from two types of actions:
The first type: Mixing the mudaraba funds with his own funds; because this mixing may lead to account intermingling; in addition to the fact that it will compete with the mudaraba funds for available investment opportunities.
The second type: Handing over the funds to others for the purpose of mudaraba; i.e., sub-mudaraba; because the mudaraba contract is based on personal consideration, and the person of the mudarib is essential in the contract.
The prohibition of these two matters is based on the enforcement of the contracting parties' will in the mudaraba contract; hence, the end of the paragraph clarifies that if the fund owner permits the mudarib to do these two things, he is allowed to do so, whether the permission is explicit or implicit. Implicit permission includes when it is customary for the mudarib to mix the mudaraba funds with his own funds or when it is customary for the mudarib to engage in mudaraba with others using the mudaraba funds, or if the fund owner has authorized him to act as he sees fit, this is considered implicit permission for these two matters.
In this regard, what is required by the care of a reasonable person for the mudaraba funds must be observed, including, if the mudarib mixes the mudaraba funds with his own, he must separate the mudaraba funds from his own accountably, in a way that allows knowing what profit the mudaraba funds have achieved independently from his own funds, and he must comply with what is contained in Article (552) that "the mudarib must provide the fund owner with information related to the mudaraba activities and present an account of them," and take measures to preserve the fund owner's rights, establish them, and make them known in the event of the mudarib's death or loss of capacity or otherwise.
Similarly, if the mudarib is authorized to pay the mudaraba funds to others for mudaraba according to what is contained in the article; this does not mean the absence of his responsibility towards the fund owner; according to the general rules of bearing responsibility for error, and what the system has decided in the agency contract in Article (489); the mudarib remains responsible for his error, including his error in choosing the other mudarib, or in the instructions he issued that caused the damage.
The effect of the mudarib's violation of any of the above is that he is responsible for the damage caused to the fund owner due to his transgression and is obliged to compensate for the damage.
The second paragraph explained the mechanism for calculating profit when the mudarib mixes the mudaraba funds with his own; by calculating the profit of each fund according to its proportion of the mixed funds, and distributing the share due to the mudaraba funds between the contracting parties according to the provisions of this chapter; and the basis for maintaining the independence of the two funds is that the mudarib does not benefit from the mudaraba capital beyond his stipulated share in the mudaraba contract. If the mudaraba funds are one hundred thousand riyals and the mudarib's funds are one hundred thousand riyals, and the funds are mixed, achieving a profit of 50, i.e., one hundred thousand riyals, the mudarib is entitled to the profit of his funds, then the profit of the mudaraba funds is distributed between the contracting parties.
Related To
Article 556
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A mudaraba agent may not commingle the mudaraba capital with his own property, nor deliver such capital to a third party for the purpose of mudaraba, unless accepted according to custom or the capital owner authorized him to act at his discretion.
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In cases where the mudaraba agent is authorized to commingle the mudaraba capital with his own property, the profit shall be calculated pro rata to the commingled capital and shall be distributed among the contracting parties in accordance with the provisions of this Section.