Explanation of Article 566
The article defines the contract of participation in the output and refers to the essential elements that constitute this contract as follows:
First: The subject of the obligation of the capital provider. The capital provider is obliged to deliver to the worker something that is non-consumable; this obligation requires enabling the worker to exploit that thing throughout the duration of the contract. In this respect, the contract of participation in the output resembles a lease contract; the obligations of the capital provider are similar to those of the lessor, as he is obliged to deliver and enable the worker to work with the continuation of this obligation until the end of the contract.
Second: The subject of the worker's obligation: The worker is obliged to exploit the thing delivered to him by the capital provider by working on it in a manner that achieves the output. In this respect, the contract of participation in the output resembles a Mudaraba contract; the obligations of the worker are similar to those of the Mudarib, as his obligation is not limited to preserving the thing only as in a lease; rather, it involves working on it to exploit it to achieve the output.
Third: The productive thing, which is what the capital provider delivers to the worker to work on, and for the contract to be a participation in the output, the productive thing must meet two conditions: The first condition: It must be non-consumable, which is anything that can be used repeatedly while remaining; as for consumable things like food, money, goods, and the like, they are not subject to the contract of participation in the output, because the intention is for the thing to remain generating its output, and this can only be achieved with non-consumable things. The second condition: The thing must generate output; like trees that produce fruit, agricultural land that produces crops, and similarly, manufacturing machines that produce industrial, food, pharmaceutical, or textile products, and the like; as for things that do not naturally generate output like buildings and cars, they cannot be the subject of this contract.
Fourth: The output, which here refers to what is generated from the productive thing; thus excluding the profit achieved from trading the thing, and the rent achieved from benefiting from the thing whether by using or exploiting it.
Fifth: Sharing in the output, which distinguishes this contract from others; this contract requires the establishment of a joint ownership between the contracting parties not in the original capital as in a partnership contract but in the output upon its appearance; it becomes jointly owned by them, and from the time the output appears, each of them has a real right in it according to their share.
Accordingly, it is not considered participation in the output if a person provides another with a property to exploit in exchange for a percentage of the rent or yield achieved, or if a person provides another with a car to work on in exchange for a percentage of the wage or earnings achieved.
The most apparent forms of participation in the output are agricultural participation, as explained in the second section, where the contracting parties share in the output of the land, which is the crop, or the output of the trees, which is the fruit. Participation in the output may also occur in other forms, especially in production machines; for example, if a person provides another with a production machine to work on, and its output, upon appearance, is jointly owned by them; and if the agreement includes the worker selling the achieved output and sharing its price according to each one's share, this agreement is in addition to the requirements of the contract of participation in the output; in it, each contracting party's ownership of their share is established as soon as the output is achieved, according to articles (568, 576).
In the contract of participation in the output, the division of the output between the partners must be on a joint basis; the provisions of this will be explained in the explanation of article (573), and it is valid to agree on the division of the output according to any suitable basis for determination, including what was mentioned in article (559) of permissible forms for dividing profit in Mudaraba, such as agreeing to share the output at a known percentage and any excess over a certain limit is exclusive to one of them, or agreeing that each one's share of the output changes according to what the participation achieves from output according to suitable bases, or agreeing that one of them has a known wage for a specific work in addition to his entitlement to his share of the output.
Related To
Article 566
Output sharing is a contract under which a capital owner delivers a nonconsumable thing to a person to utilize for a common share of the output.