Article 562 of the Saudi Civil Transactions Law
المادة 562 من نظام المعاملات المدنية · الفرع الثالث: انتهاء عقد المضاربة
A party may withdraw from a mudaraba of unspecified duration by giving reasonable prior notice, without bad faith or bad timing; from a fixed-term one only by asking the court, with compensation.
Official text (Arabic)
This article has not been amended since the law was issued.
1- إذا كان عقد المضاربة غير معين المدة؛ جاز للمتعاقد أن ينسحب منه في أي وقت على أن يعلم المتعاقد الآخر بإرادته الانسحاب قبل حصوله بمدة معقولة وألا يكون الانسحاب عن غش أو في وقت غير مناسب.
2- إذا كان عقد المضاربة معين المدة؛ فليس للمتعاقد أن ينسحب منه قبل انقضاء المدة، وله أن يطلب ذلك من المحكمة إذا تقدم بأسباب مقبولة، على أن يعوض المتعاقد الآخر عن أي ضرر يلحقه بسبب ذلك.
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 562 explained in plain English
This article regulates a party's withdrawal from the mudaraba contract, and distinguishes between two cases.
Case one: a mudaraba of unspecified duration. A party may withdraw from it at any time, on conditions:
- that he informs the other party of his intention to withdraw.
- that the notice is given a reasonable period before withdrawal.
- that the withdrawal is not made in bad faith.
- that it is not at an unsuitable time.
The article does not specify the length of the reasonable period or the criterion for an unsuitable time, so they are considered according to the circumstances of each case.
Case two: a mudaraba of fixed duration. A party may not withdraw before the term expires, but he may ask the court for that if he puts forward acceptable reasons, provided he compensates the other party for any harm he suffers because of it.
The article is linked to Article 561, which provides that a mudaraba ends on expiry of its term in a fixed-term contract or on completion of the work for which it was made. It is also linked to Article 563, which obliges the mudarib, when the contract ends, to bring the work he started to a state in which the assets or profits are not exposed to damage or shortfall, and prevents him from dealing with the mudaraba assets after it ends.
Before withdrawing or applying to the court, you can consult a lawyer who specializes in commercial contracts.
Practical example
Waleed entered into a gift-trade mudaraba with a mudarib in Riyadh without fixing a term. After a year he decided to take out his money, so he sent the mudarib a notice two months before withdrawing, and avoided doing so right before the Eid season, when the goods are at their peak of sale. Had the contract been fixed at three years, he could not have withdrawn before then except at the request of the court for acceptable reasons, with compensation to the mudarib for his harm.
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 562 of the Saudi Civil Transactions Law
May a party withdraw from a mudaraba at any time?
Yes, if the contract is of unspecified duration, provided the other party is informed a reasonable period before withdrawal and the withdrawal is not in bad faith or at an unsuitable time.
Can one leave a fixed-term mudaraba before it ends?
A party may not do so, but he may ask the court if he puts forward acceptable reasons, provided he compensates the other party for any harm he suffers.
What is a reasonable notice period for withdrawing from a mudaraba?
The article does not specify a particular period; it only requires that it be reasonable.
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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.