Sending capital to trade on a gratuitous basis (ibda')

Ibda' (sending capital) is sending money with someone who trades with it as a gift, the whole profit belonging to the owner. The word bidaa'a names the capital sent for trade, and ibda' names the contract itself. ¹

Qirad, called mudaraba in Iraqi usage, is handing over money to trade with on the basis that the worker takes a shared part of the profit. It is a profit partnership, whereas ibda' has no partnership: it is a gift of trading work from the worker to the owner. A loan (qard) is giving money out of kindness to someone who will return an equal sum. Agency (wakala) is one person standing in another's place in whatever may be delegated, whereas ibda' is an agency limited to capital the owner hands over for trade. ¹

Ibda' is a valid contract, since it is completed without any uncertainty; if mudaraba, which carries some uncertainty, is valid, ibda' is more so. It may stand alone or follow a mudaraba, as when the worker hands the money to another worker as ibda'. It is a common practice among merchants and answers a need: an owner may not be skilled at buying and selling, may be unable to go to the market, may not be fit for trade because he is a woman or someone who would be mocked for it, and so he appoints another. It is agency without a fee, a path to kindness and to strengthened ties among merchants. It may also grow the worker's own capital, if he enters with the owner with a shared capital and the profit is divided between them. ^{1 2}

The jurists agree that offer and acceptance are a pillar of every contract. The wording may be explicit, using the word ibda' or bidaa'a, or implicit, as in "take this money as a mudaraba, all the profit to me". That case is disputed. The Hanbalis call it a void mudaraba, because the word mudaraba implies a shared profit while "all the profit to me" contradicts it, and because an explicit term does not turn into an implicit one in another context. The Hanafis call it a valid ibda', since the meaning of ibda' is present, and contracts are judged by their meanings. The Malikis allow making the whole profit of a qirad belong to one party as a gift, but say that calling it qirad is a figure of speech; they agree with the Hanafis in ruling and differ only in name. On the first view the worker is owed nothing, being a volunteer; on the second he is owed the customary wage. Some Shafi'is, citing Ibn 'Abbas, distinguish a worker who does not know that he is owed neither a wage nor a share, who is owed the customary wage. ^{2 4}

Where the Hanbalis say a mudaraba with "all the profit to me" is void, they grant no wage, since the worker accepted the work without consideration, like one who helped in something and was appointed without a fee. The Encyclopedia gives examples that create an ibda' without the word: "take this money and trade with it, or dispose of it, or take it with all the profit to me"; the Shafi'is and Hanbalis treat these as ibda', since the wording allows qirad, loan and ibda' and the ibda' ruling is attached to it. "Add a thousand of your own to this and trade with it, and the profit is shared half and half" is also ibda'. ⁴

If the owner hands over half the money as ibda' and half as mudaraba, and the worker accepts, it is valid. The money is as they agreed, the loss falls on the owner, and half the profit is his, the other half being as they agreed, since the shared nature of the capital does not prevent work with it as mudaraba and ibda' together. The loss falls on the owner because neither the one who sends as ibda' nor the mudarib is liable for loss in a mudaraba or in ibda'. ⁴

The conditions for a valid ibda' in general are those required for mudaraba, except those relating to profit, and the worker must be competent to give. ⁴

The owner may send capital with a worker as ibda'; that is the basic case. A mudarib may send the capital to another, since the purpose of mudaraba is profit and ibda' is a route to it; and since he may hire, ibda' is more fitting, as hiring uses property for a price and ibda' uses it without one. Some hold that the mudarib needs no authority for this, since ibda' follows from the mudaraba contract. A partner may send from the joint capital, according to the Hanafis, Malikis and the sound Hanbali view, while the Shafi'is require the partner's consent. ⁵

The worker in ibda' is a trustee for what he receives from the owner, because the contract is one of trust, and he is liable only for neglect or transgression. He is the owner's agent in the owner's property and may buy and sell as merchants customarily do for growing the capital, without specific authority. To send the capital on to someone else requires the owner's authority, by analogy with mudaraba; so does anything beyond a merchant's usual practice, such as lending, gifts and charity out of capital set aside for trade. ⁵

The worker may not trade with the capital for himself, as a mudarib may not. The Malikis state that if the worker buys for himself, the owner may choose, if he learns of it before the goods are sold, between taking what was bought or holding the worker to the capital; if the goods are lost, the profit belongs to the owner and the loss falls on the worker. The Shafi'is take the same view of transgression, and the Hanbalis hold that any profit belongs to the owner and any loss to the worker, for his transgression. ^{5 6}

Ibda' is a trust contract, so the one holding the money is not liable if it is lost or suffers a loss without neglect or transgression, and his word is accepted on the claim of destruction or loss. He is not liable even if the owner says "you must guarantee it", because the contract implies trust. A report from the two companions of Abu Hanifa on the shared worker holds that his word on destruction is not accepted without a sign of its truth, such as a common fire, a thief breaking in, or a powerful enemy; they say that this is juristic preference because people's circumstances have changed; the capital in the hands of an ibda' worker is in trust like that of a craftsman, so the analogy is possible. ⁶

If the worker claims the money was taken as mudaraba and the owner says it was ibda', the Hanafis, Malikis and Shafi'is hold that the owner's word with his oath is accepted, since he is the one denying the claim. The Malikis add that the worker is owed the customary wage, unless it exceeds half the qirad profit, in which case he is not given more than he claimed. If the owner refuses the oath, the worker's word with his oath is accepted. The Hanbalis have two views: that the worker's word is accepted, since the work is his, or that they swear to each other, the worker receiving the lesser of his share of the profit or the customary wage. If each produces a proof, the Hanbalis say this is not a conflict of proofs, and each swears to deny the opponent's claim, and the worker is owed the wage for his work. The reverse case, where the worker claims ibda' and the owner claims mudaraba, is impossible by custom except as a favour to the owner. ^{6 7}

If the worker claims mudaraba and the owner claims ibda' for a known wage, the worker's word with his oath is accepted, and he takes his share. The Malikis set five conditions for this: the dispute comes after the work that makes the qirad binding; the worker is one who would work on qirad and the capital is of a kind given on qirad; the share claimed exceeds the agreed wage; the share claimed is plausible for such a worker; and custom does not match the owner's claim. When the worker claims ibda' for a wage and the owner claims a mudaraba with a known share, the worker's word is accepted, according to the Malikis. When each claims the whole profit, the Hanbalis have them swear mutually, the worker receives his wage only and the rest belongs to the owner; the Hanafis and Malikis hold the owner's word, with his oath, is accepted and the proof is the worker's. ⁷

Ibda' ends in the same ways as mudaraba, generally. It ends with the end of the principal contract, or after its stated term if it has one; and if it follows another contract such as a mudaraba, it ends with that. It ends by dissolution, whether the owner dismisses the worker or the worker dismisses himself, since it is not binding on either side. It ends by termination, through death, loss of capacity, or the destruction of the object. ³