This document shows a small Mudarabah contract I drafted some years ago when some muslims wanted to embark on a joint venture to launch a computer centre. The profits wrer to be shared between the finance provider and the association running the centre. I hope that this can
This document shows a small Mudarabah contract I drafted some years ago when some muslims wanted to embark on a joint venture to launch a computer centre. The profits wrer to be shared between the finance provider and the association running the centre. I hope that this can
This document shows a small Mudarabah contract I drafted some years ago when some muslims wanted to embark on a joint venture to launch a computer centre. The profits wrer to be shared between the finance provider and the association running the centre. I hope that this can
Ngubong Engineering and Contracts Commercial, Industrial and Engineering Consultant) AH 1425 A Mudaraba Contract For the running of a computer centre Sheikh Mohammed Ngubong
A copy of the contract between Alhaji XXX (SM) and Association YYY (Mu) Page 2 of 5
Having considered the various form of Islamic joint ventures, namely: Mudarabah (profit sharing), Musharakah (Partnerships), Murabaha (March-up financing), Bay-al-Muajjal (deferred payment), Bay-assalam (advanced payment), Ijara (leasing) Ijara wa Igtina (hire purchase), Qard Hassan (Interest free loan), as well as the requirement associated with the investment this represents, not forgetting the opportunity cost of capital, the time value of money and inflation. Alhaji XXX hereafter called sahibul Maal abbreviated SM, consents to place in cash and kind a financial outlay of five million francs XAF. These shall be made up of computers in working condition, accessories also in working condition rehabilitation works all amounting to the sum of five million francs XAF. On this date of two thousand and four of the Gregorian calendar (one thousand four hundred and twenty five on the Islamic calendar). This amount can be broken down as follows: (The amounts are in thousands of francs XAF). Computers and their accessories (printers, scanners, photocopiers etc
Furniture, air conditioners and other purchased equipment Consumed materials such as cement, paint etc Fiscal expenses, transport and communication expenses Labour costs and unforeseen expenses Cash in hand for trial run and initial operations Total investment outlay. 5,000
The said invested funds are to be managed by Association YYY hereafter called Mudarib (abbreviated Mu) regulated by the present contract. 1) Association YYY (An Islamic association in Cameroon) will be expected to act and to adopt policies which must not stifle or jeopardise the future of the activity initiated by the SM while meeting its other commitments and activities. 2) The profits from the investment of the SM and associates must be shared between the SM and Mu in the ratio of.................(x) for the SM and .....................(y) for the Mu. The sharing must be done and documented every .................(z) months. Both the SM and the Mu must sign and receive a copy of the sharing transaction. 3) The Mu must maintain a properly entered and balanced accounting system with accounting document following an internationally recognised accounting system such as GAAP account system. It is with this system that the profits must be calculated. 4) The SM consents that he may if the Mu requests it, provide the Mu with a Qard Hassan loan to enabler the salaries and other expenses associated with the managing and running the equipment on a regular basis to be met. 5) The SM insists that his approval must be sought before appointing anybody to manage or work in roles associated with the running of the equipment, their repair or renovation. For those working on a regular bases (meaning repeating their Page 3 of 5
supplies of goods or services without the need for a new contract appointing them or those on a wage or salary or receiving fees, the approval of the SM must be renewed every three months. Failure to carry out this renewal, the Mu will be given two weeks to toe the line or terminate the contract with the said worker, company or bureau within one month from the date of non renewal of the SMs consent. The Mu must have taken steps before that, to replace the workers to be fired with new and different workers to which the SM consents. 6) The SM should and must be free to provide further investment at profit sharing ratios which should decrease with increasing investment according to the following formula. Let a be the initial fraction of the profit which was received by the Mu, and C i the initial capital, or the capital when the investment was being done, in case this is higher than the initial investment. C = Ci + I, is the new capital after an extra investment I has been added. The new fraction of the profit going to the Mu b, should be given by h = a_ C| C| +I _ = a_1 + I C| _ -1 (1)
C i is either the initial capital or the new value to which the capital has grown to if that is higher than the initial outlay. Should it be less than the initial outlay, then the initial outlay will be used in the above equation. This is to ensure that the Mu is rewarded if he grows the business, but is not penalised if he brings about losses. That is because in a Mudarabah, losses are born by the SM or As-habul Maal alone. Every quarter, C is calculated and the Mu fraction of the profits for the next quarter calculated and specified> 7) The Mu undertakes to offer all those directly involved with managing and running the investment of the SM with continuous and regular training administered by qualified institutions, personalities or consultants firms approved by the SM. Where payment is required the Mu is free to charge the trainees as these skills once acquired become an asset for the trainees. The Mu should increase the revenue of the employees as their skills improve, and as time passes in accordance with the rate of inflation and the national and world economic growth. 8) Every item of equipment must be named and monthly reports must be sent to the SM specifying all interventions and/or modifications on every item of equipment as well as their performances and state of well-being. 9) Any new person wanting to join the SM, or Mu must accept to follow the Islamic guiding principles and that any litigation must be settled following this contract and general Islamic principles, not civil courts. An arbitrating Islamic body must be agreed upon by the SM and the Mu before the start of operations. Once agreed, both parties pledge to accept the judgement of the arbitrator in case of litigation. Page 4 of 5
10) Should the Mu wish to collaborate with another person or organisational in a sector which overlaps the activities of the SM, the consent of the later must be sought and obtained before accepting any such collaboration. 11) The original copy of this contract is in English. In case of conflicting meaning, the meaning in the English copy predominates. 12) The SM is willing to prematurely terminate this Mudarabah contract and negotiate and undertake a Musharakah, Murabahah, Ijara or Ijara wa Igtina contract with the Mu, in case the Mudarib receives a grant or loan or Waqf they wish to invest in a sector or activity overlapping with the investment of the SM. 13) The present Murabahah value of the initial outlay by the SM is XAF five million francs. The attached Table 1 gives the estimated life span of the present equipment, as estimated by material accounting experts. The same figure 1 gives the scrap value of each item of equipment at the end of its useful life as well as the estimated life span. 14) The Mu is free to create after getting the consent of the SM or As-habul Maal, Mudaraba certificates to raise funds from the Muslim public. These certificates could be sold to the entire Muslim community who will then have shares in the undertaking. 15) The consent of the Mu must be sought and obtained in writing before any national or foreign person joints the SM or As-habul maal. 16) The Mu and the SM must never contribute to anti-Islamic activities. In case of disagreement on the Islamic or anti-Islamic nature of the activity or any other litigation between the SM or As-habul maal and the Mu, both parties consent to accept the judgement of the arbitrator. The main arbitrator is free to call outside help in case the matter requires mastery of things he is not too comfortable with. The SM or As-habul maal and the Mu are free to constitute a list of Fuqaha or Fuqaha organisations by discipline. The arbitrator must be given the power to change or terminate the contract. 17) Neither party should jeopardise or tarnish the dignity, honour, prestige or personality of the other deliberately. 18) The Mudarib agrees not to deliberately pursue a policy which will strangle the activities of the equipment of the SM, For whatever reason. Such as finding an advantage in forcing the SM to terminate or change the contract. If the mutually pre- agreed judge decides on the event to a complaint written and submitted that this was the case then he could ask one party or the other to pay damages. 19) Similarly the SM must not sabotage or strangle the activities of the Mu. He must not use unorthodox methods to force the hand of the Mu. For instance using the Qard Hassan loan as bait to force the Mu to do what he wants. Should the Mu complain to this effect to the judge, he could order a certain percentage of the profits to be kept in a separate account under his control and used to pay for what the Qard Hassan Page 5 of 5 loans could was to be used for to time as he accesses whether it is adequate or not. 20) The amounts of fees, salaries and wages pa written approval of the SM 21) The SM specifies the overall orientation of the activity he financed every six months. This duration can be changed by the judge if either party complains. Table 1 Item of equipment Computer number 1 Computer number 2 Computer number 3 Computer number 4 Computer number 5 Computer number 6 Computer number 7
loans could was to be used for. The judge is free to review this percentage from time to time as he accesses whether it is adequate or not. The amounts of fees, salaries and wages paid by the Mu must have received the SM. specifies the overall orientation of the activity he financed every six months. This duration can be changed by the judge if either party complains. Sheikh Mohammed Ngubong Tel:237-99917337 or 237 Email: Ngubong_engineering@ Website: www.ngubong-engine Initial value Scrap value Life span Comments
. The judge is free to review this percentage from time must have received the specifies the overall orientation of the activity he financed every six months.
Sheikh Mohammed Ngubong 7-78856211 @yahoo.com eering.biz.nf Comments