Explanation of Article 557
This article addresses the provisions regarding the bearing of loss in Mudarabah, and the following articles (258 - 260) pertain to the provisions of profit division. This article clarifies the provisions for bearing the loss in Mudarabah. Based on what Article (553) has established, the obligation of the Mudarib in a Mudarabah contract is an obligation to exert effort, not to achieve a result. The first paragraph of this article establishes the general principle in bearing the loss, which is that the capital owner alone bears the consequence of the capital reduction in Mudarabah. This ruling is a matter of public policy and cannot be agreed otherwise. It is not permissible to agree that the Mudarib bears the capital reduction because the contract would not be considered Mudarabah in this case, as Mudarabah is based on the profit or loss of the capital. This ruling aligns with the nature of the Mudarabah contract, where each party loses what they contributed. The Mudarib does not have a share in the capital; rather, they provide work without capital. In the event of a loss, they lose the work they provided, while the capital owner provides the capital without work, thus bearing the entire loss of the reduced capital alone.
After the first paragraph established the inadmissibility of stipulating that the Mudarib bears the consequence of the capital reduction, the second and third paragraphs explain the effect of the capital reduction if it occurs. The paragraphs assume two scenarios: The first scenario: The reduction in capital occurs without any transgression or negligence by the Mudarib. The second scenario: The reduction is due to the Mudarib's transgression or negligence. The second paragraph clarifies the ruling of the first scenario, which is when the reduction in capital occurs without any transgression or negligence by the Mudarib. In this case, the Mudarib is not required to guarantee the reduction or compensate the capital owner for it, as the Mudarib's obligation is to exert effort, not to achieve a result. Therefore, they are not responsible for the capital reduction or the failure to achieve profit as long as they have exerted the due diligence required of them.
Related To
Article 557
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The capital owner shall solely bear any loss in the mudaraba capital, and any condition to the contrary shall be deemed null and void.
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If a loss in the mudaraba capital occurs while in the custody of the mudaraba agent without any transgression or negligence on his part, he shall not be required to compensate the capital owner.
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In the event of any transgression or negligence on the part of the mudaraba agent, he shall compensate the capital owner for any loss in the mudaraba capital and any resulting harm.