Article 555 of the Saudi Civil Transactions Law
المادة 555 من نظام المعاملات المدنية · الفرع الثاني: آثار عقد المضاربة
If a mudaraba contract is restricted by time, place, type of work or otherwise, the mudarib is bound by the restriction; if it is unrestricted, he may work according to custom.
Official text (Arabic)
This article has not been amended since the law was issued.
1- إذا كان عقد المضاربة مقيدًا بزمان أو مكان أو نوع من العمل أو غير ذلك؛ لزم المضارب ما قُيّد به العقد.
2- إذا كان عقد المضاربة مطلقًا كان المضارب مأذونًا له في العمل وفقًا لما جرى عليه العرف.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 555 explained in plain English
This article distinguishes between two kinds of mudaraba according to the limits on the mudarib's work.
First: the restricted mudaraba. If the contract restricts the mudarib by a restriction, such as:
- a particular time.
- a particular place.
- a particular type of work.
- or other restrictions.
then the mudarib is bound by what the contract restricts him to and may not depart from it.
Second: the unrestricted mudaraba. If the contract contains no restrictions, the mudarib is permitted to work according to what custom has established. That is, being unrestricted does not mean unlimited freedom; it is governed by the custom prevailing in that kind of business.
The article is linked to Article 556, which prevents the mudarib from mixing the mudaraba money with his own or handing it to another as a mudaraba, unless custom allows it or the capital owner authorizes him to work as he sees fit. It is also linked to Article 554, which obliges the mudarib to provide the capital owner with information and render an account, through which the capital owner can verify that the mudarib has complied with the restrictions.
To determine whether a particular act departs from the restriction or from custom, you can consult a lawyer who specializes in commercial contracts.
Practical example
Ahmed handed money to his partner to work with as a mudaraba on condition that the trade is in foodstuffs within the city of Dammam. The mudarib may not use the money in the electronics trade or in another city, because he is bound by what the contract restricts him to. Had the contract mentioned no restriction, he could have worked according to what custom has established.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 555 of the Saudi Civil Transactions Law
What is the difference between a restricted and an unrestricted mudaraba?
In a restricted one the mudarib is bound by what the contract restricts him to, such as time, place, type of work or otherwise; in an unrestricted one he is permitted to work according to custom.
May the mudarib depart from the restrictions stated in the contract?
No. The article provides that he is bound by what the contract restricts him to.
What governs the mudarib's work if the contract sets no restrictions?
What custom has established.
More articles on Partnership and Mudaraba
- Article 528
The article requires partnership contracts and their amendments to be in writing or be void, while barring reliance on the voidness against third parties and limiting its effect between the contracting parties to the period after a voidness claim is filed.
1- يجب أن تكون عقود المشاركة الواردة في هذا الباب مكتوبة، وإلا كانت باطلة، ولا يجوز أن يحتج المتعاقد بالبطلان تجاه الغير، ولا يكون للبطلان أثر فيما بين المتعاقد
- Article 529
The article defines the partnership as a contract under which two or more partners contribute a share of money, work, or both to a project in order to divide its profit or loss, and excludes partnerships governed by special legal provisions.
1- الشركة عقد يسهم بمقتضاه شريكان أو أكثر بتقديم حصة من مال أو عمل أو منهما معًا في مشروع لاقتسام ما ينشأ عنه من ربح أو خسارة. 2- لا تسري أحكام هذا الفصل على ال
- Article 530
The article bars a partner's influence, reputation or financial credibility from being his share, explains how a non-cash share is valued, and says when a partner's obligation ends if his share is a debt owed by a third party.
1- لا يصح أن تكون الحصة أو بعضها ما للشريك من نفوذ أو سمعة أو ثقة مالية. 2- إذا كانت حصة الشريك غير نقدية، قُدرت الحصة بقيمتها عند التعاقد أو بما يتفق عليه الشر
- Article 531
The article allows a partnership to be based on the partners' joint liability for what they undertake in their obligations for its benefit, makes each partner's share in the capital equal to what he undertook unless otherwise agreed, and allows partners to differ in their obligations.
1- يصح أن تقوم الشركة على أساس تضامن الشركاء فيما يلتزمون به في ذممهم من مال أو عملٍ لمصلحة الشركة، وتكون حصة كل منهم في رأس مال الشركة بقدر ما التزم به في ذمته
- Article 532
The article provides that each partner's share is determined by what he undertook in the partnership contract, and that he may not increase it except with the consent of the other partners.
تتحدد حصة كل شريك بالحصة التي التزم بها في عقد الشركة، ولا يجوز للشريك زيادة حصته عن الحصة المحددة في عقد الشركة إلا بموافقة باقي الشركاء.
- Article 533
The article subjects the guarantee of a partner's share to the rules of sale if it is a right of ownership or another real right, and to the rules of lease if it is merely the use of property.
إذا كانت حصة الشريك حق ملكية أو أي حق عينيّ آخر فإن أحكام البيع هي التي تسري على ضمان الحصة إذا هلكت أو استحقت أو ظهر فيها عيب، وإذا كانت الحصة مجرد الانتفاع با
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.