Explanation of Article 565
The article refers to a number of reasons related to the person of the speculator or the capital owner that lead to the termination of the Mudaraba contract; the first paragraph specifies four reasons:
The first reason: The death of the contracting party; the Mudaraba contract ends with the death of one of the contracting parties, as the personality of the contracting party is considered in this contract.
The second reason: The interdiction of the contracting party; the Mudaraba contract ends if the contracting party is interdicted due to loss of capacity for insanity, or due to prodigality or negligence, because the contract is based on the personal consideration of the contracting party himself and not his representative.
The third and fourth reasons: Insolvency of the contracting party or the initiation of liquidation proceedings; the Mudaraba contract ends if the contracting party becomes legally insolvent or liquidation proceedings of his assets are initiated. The termination of the Mudaraba due to insolvency or the initiation of liquidation proceedings is based on the same considerations as the termination of the Mudaraba contract due to the interdiction of one of the contracting parties, as the Mudaraba contract is based on personal consideration, taking into account personal considerations in the contracting party himself, not in his representative.
It is noted that the provisions related to the reasons for the termination of the Mudaraba in this article do not differ from the reasons related to the termination of the partnership contract mentioned in Article (547), due to the similarity between the two contracts. Accordingly, it may be stipulated in the Mudaraba contract that in the event of the death of one of the contracting parties, the Mudaraba continues, and his heirs take his place, even if among them is someone lacking capacity or with diminished capacity without the need for court permission. However, it is not permissible to agree that in the event of the interdiction of one of the contracting parties, his insolvency, or the initiation of liquidation proceedings, the Mudaraba continues between the representative of this contracting party and the other contracting party; because the contracting party can obligate his heirs to take his place in the Mudaraba, but he cannot obligate his representative to do so in the event of his interdiction, insolvency, or the initiation of liquidation proceedings.
The second paragraph outlines two obligations on the heirs of the speculator in the event of his death if they have the capacity, or their representative if they do not have the capacity, and if the heirs or the representative are aware of the Mudaraba, which are:
The first obligation is to promptly inform the capital owner of the death of the deceased, so that the capital owner can take the necessary measures to preserve his money.
The second obligation is to take the measures required by the situation to preserve the money; for example, if the Mudaraba funds are livestock, they should take the necessary measures to prevent them from perishing due to lack of feeding, and so on.
Related To
Article 565
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A mudaraba contract shall terminate upon a contracting party’s death, interdiction, or insolvency, or upon the initiation of a liquidation proceeding against him.
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If the mudaraba contract terminates upon the death of the mudaraba agent, his heirs, if competent, or their agent shall, if they have knowledge of such contract, inform the capital owner of the death of their testator and shall take all the measures necessary to protect the capital.