Is entrusting children with working capital, one of them borrowing with interest and making payments from it, the worker building a house for one of his children with funds of undetermined source, and buying a car and selling it at a loss for non-business purposes, considered negligence and transgression that excludes the non-guarantee of capital in a valid contract?

The Mudarib (agent in a Mudarabah (definition) contract) acts as an agent for the capital owners and does not own what is in his possession. He may dispose of it in three ways: what he is authorized to do by virtue of the Mudarabah contract itself, as is customary among merchants; what he is authorized to do if he is told, "Act according to your judgment," such as mixing the capital with his own money or with the money of others; and what he is not authorized to do unless explicitly stated, such as giving out loans, gifts, or charity. Disputes in these cases are resolved through the Sharia (definition) court.