Mudaraba (profit-sharing) contract template

Mudaraba (Profit-Sharing) Contract

Contract no.: Contract number

Date: Contract date

Place: City of signing

Parties

First Party (Capital Owner): First party name, national ID / iqama no. First party ID, national address: First party address, e-mail: First party e-mail, mobile: First party mobile.

Second Party (Manager): Second party name, national ID / iqama no. Second party ID, national address: Second party address, e-mail: Second party e-mail, mobile: Second party mobile.

Article 1: Recitals and definitions

1.1 Whereas the Capital Owner has money to invest, and the Manager has experience in Business field, the parties agree this mudaraba.

1.2 The recitals and schedules form an integral part of this Contract and are read with it. In a conflict, this Contract prevails, then the schedules in numerical order.

1.3 "Business Day" means any day other than Friday, Saturday and an official holiday in the Kingdom of Saudi Arabia. "Laws" means the laws and regulations in force in the Kingdom.

1.4 This Contract follows Islamic Sharia and the Civil Transactions Law, and contains no interest or stipulated increase on a debt. Any term to the contrary is void, without voiding the Contract unless it was the reason for it.

1.5 Each party confirms that it has legal capacity to contract, that its signatory is authorised, and that entering into this Contract breaches no other obligation binding on it.

Article 2: Capital

2.1 The Capital Owner shall provide SAR Capital (in words: Value in words) in known cash, handed to the Manager or placed in the business account: Business account, on Delivery date.

2.2 The capital is held on trust by the Manager; it is not a loan to it, and it rises only with the Capital Owner's consent after settling what came before or by written agreement.

Article 3: Business and management

3.1 Business: Business description; place: Business location; term: Contract term, from Start date.

3.2 The Manager manages with its expertise, within the agreed business: Management limits, lawfully and with licences. Its documents are in the business's name, with proper books and the mudaraba kept apart from its own money.

3.3 The Manager may not, without written consent: borrow for the business, give guarantees, mix the money with its own, give it to another manager, make gifts, or sell to a relative off-market.

Article 4: Profit and loss

| Item | Share |

| --- | --- |

| Capital Owner's share | Capital owner share% of actual net profit |

| Manager's share | Manager share% of actual net profit |

4.1 Profit is a shared percentage of actual net profit after costs, zakat and tax, and cannot be a fixed sum or a percentage of capital. Any such term is void.

4.2 Loss of capital is on the Capital Owner, and the Manager loses its effort, unless the loss is due to misuse, neglect or breach of the terms, when it answers for the result. The Manager guarantees neither capital nor profit, and no one stands in for it by stipulation.

4.3 Profit is paid every Distribution frequency, after it is realised and the capital is intact. Payments on account are allowed, and if a later loss appears what was paid is returned to that extent.

Article 5: Reports and oversight

5.1 The Manager reports every Reporting period on revenue, costs and assets, and lets the Capital Owner see documents and books on request without disrupting the business.

5.2 The Capital Owner does not interfere in daily management unless agreed. Final accounts are prepared yearly, at the business's cost.

Article 6: Ending and winding up

6.1 The Contract ends at expiry, on completion of the work or by agreement. Neither party may withdraw before expiry except by application to the court for an acceptable reason, compensating the other for any harm. The Manager brings existing deals to a point where the capital and profit are not at risk.

6.2 At the end, assets are turned into cash and final accounts are given within Winding-up time days; capital is returned first, then profit is split, and any shortfall is a loss as above.

6.3 The Contract ends on a party's death, interdiction or insolvency or on liquidation proceedings against it, and winding up is done with that party or the heirs, unless they agree to continue under a new contract. The heirs of the Manager shall tell the other party of the death and take the steps needed to protect the capital.

Article 7: Representations and warranties

7.1 The Capital Owner and the Manager each confirm the following at signing, and shall tell the other at once if any of it changes:

• the details and documents it has provided are true and complete on everything affecting the other's decision, and it has hidden nothing it knows to be material.

• no claim, seizure, disposal ban, bankruptcy or legal bar prevents performance of this Contract.

• the source of funds and purpose of contracting are lawful, and this Contract is no cover for any prohibited dealing.

• it holds the licences, approvals and legal capacity needed to sign and perform this Contract, and will keep them valid throughout.

7.2 An untrue material statement is a breach of this Contract, subject to its terms and the Civil Transactions Law; deliberately misleading information is deceit that allows annulment and compensation to be sought.

Article 8: Breach and its effects

8.1 A breach notice is in writing, states the obligation breached, what is needed to cure it and a reasonable time of at least 15 days, unless this Contract sets another period. No notice is needed if cure is impossible or the party at fault has said it will not perform.

8.2 Each party may withhold its corresponding obligation that has fallen due if the other has not performed its own, unless that would run against good faith or the failure is minor, under the Civil Transactions Law.

8.3 The injured party shall make reasonable efforts to limit its loss and is not compensated for what it could have avoided. Compensation follows proved loss. Nothing is charged as compensation or increase merely for lateness in paying a sum of money, and the actual costs awarded by the competent authority may be claimed.

8.4 On termination the parties are restored as far as possible, each answering for what it actually benefited from. This Contract does not affect statutory limitation periods or the terms that survive its end by their nature.

Article 9: Documents, correspondence and proof

9.1 Each party keeps a copy of this Contract, its schedules, payment receipts and handover reports for at least 5 years after it ends, or any longer statutory period.

9.2 Correspondence through the e-mail or mobile at the head of this Contract, and approved government platforms, is proof where it can be attributed to its sender, under the Electronic Transactions Law and the Evidence Law. Nothing said orally changes this Contract.

9.3 The party receiving money gives a receipt for each sum, stating what it covers. No payment is a final release unless that is stated in writing.

Article 10: Confidentiality

10.1 Each party shall keep the other's non-public information confidential, use it only to perform this Contract, and disclose it only to staff and advisers who need it and are bound by confidentiality.

10.2 This excludes information that is public through no fault of the recipient, or that a competent authority lawfully requires, provided the other party is told where possible. The duty lasts 3 years after the Contract ends, and information is returned or destroyed on request.

Article 11: Force majeure and exceptional circumstances

11.1 A party is not liable for delay or failure caused by an event beyond its control that was unforeseeable and unavoidable, provided it notifies the other within 7 days and makes reasonable efforts to limit the effect. Force majeure does not excuse paying what fell due before it occurred.

11.2 Affected obligations are suspended for the duration. If the event lasts more than 60 days, either party may terminate by written notice, with payment for work actually performed.

11.3 If unforeseeable general exceptional circumstances make performance so onerous as to threaten a heavy loss, the affected party may request renegotiation without delay while continuing to perform, as provided by the Civil Transactions Law.

Article 12: General provisions

12.1 Notices are in writing and sent to the addresses at the head of this Contract; the registered e-mail is valid, and a notice counts as received on the next Business Day. Each party shall report any change of address.

12.2 Neither party may assign this Contract or subcontract without the other's prior written approval, and it remains responsible for its subcontractors.

12.3 Delay in using a right does not waive it, and this Contract changes only by a signed written annex. If a provision is void the rest stays in force, unless that provision was the reason for contracting.

12.4 The parties shall comply with the rules against bribery, corruption and money laundering.

12.5 This Contract may be signed electronically under the Electronic Transactions Law, and electronic signatures and records have their legal force. It is made in two copies, one for each party.

Article 13: Governing law and disputes

13.1 This Contract is governed by the laws of the Kingdom of Saudi Arabia, including the Civil Transactions Law, and in a manner consistent with Islamic Sharia.

13.2 The parties shall try to settle any dispute amicably through their representatives within 30 days of notice, and may then use conciliation through the Taradhi platform.

13.3 If it remains unresolved, it shall be decided by: Forum: the competent courts in the city of ... / arbitration under the rules of the Saudi Center for Commercial Arbitration, seated in .... The parties shall keep performing whatever the dispute does not affect.

13.4 Where made in Arabic and English, the Arabic text prevails in any difference.

Schedules

• Schedule 1: business plan and budget.

• Schedule 2: financial report form.

Signatures

The parties sign this Contract after reading and accepting all of its terms.

| First Party (Capital Owner) | Second Party (Manager) |

| --- | --- |

| Name: First party name | Name: Second party name |

| Signature: First party signature | Signature: Second party signature |

| Date: Signing date | Date: Signing date |

| First witness | Second witness |

| --- | --- |

| Name: First witness name | Name: Second witness name |

| ID: First witness ID | ID: Second witness ID |

| Signature: First witness signature | Signature: Second witness signature |