Musharakah is a profit and loss sharing contract whereby two or parties or more pool and invest their capital (cash, in kind, etc) and share in the outcome of their venture, whether profit or loss. By nature, it is a mudarabah contract, and hence it is binding upon all partners.
The arkan/ elements of musharakah are:
- Wording/ sighat al-aqd (offer/ ijab and acceptance/ qabool).
- Contracting parties (the partners). The partners can participate in funding and/ or work, and no party has the right to block the participation of any other party.
- Subject matter of the contract or agreement: funding and work. Funding may include cash, tangible and intangible assets (examples of intangible assets are goodwill, patents, rights, etc.). In-kind funding (tangible and intangible assets) is valued at cash equivalent value (CEV) as agreed by the partner at inception.
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