Islamic Fiqh > Companies and leases > The conditions of the company (shirkat al-amwal) > Second: the conditions of the two contracting parties
Contents
Updated on 25 September 2026 at 6:57 PM
This part belongs to the full section: All sections of this part.
This first part presents the conditions (shurut) of the partnership of capitals (shirkat al-amwal) according to the four Sunni schools. After a note on authorization, it covers the conditions of the two contracting parties and of the capital, then the rules on the proportion of profit and loss, the mixing of capitals, their presence, and the acts a partner may perform on the company's capital without his partner's authorization. School positions are sourced in the classical fiqh collections cited in parentheses, and the hadiths and reports are given with their transmission.
The text opens with a reminder: if the authorization is given in absolute terms, without specifying the object of the dispositions, it is valid on the most correct view, as in the qirad (commenda) (al-'Ubbab, p. 677; Rawdat al-Talibin, 3/474; Mughni al-Muhtaj, 3/185; Nihayat al-Muhtaj, 5/6; al-Dibaj, 2/296-297; al-Najm al-Wahhaj, 5/10-11; al-Insaf, 5/412). Al-Mardawi adds that, according to Imam Ahmad, a term explicitly indicating the authorization is required, a view recorded in al-Talkhis and preferred in advance in al-Ri'aya al-Kubra.
The four schools require of each contracting party the capacity to appoint an agent and to act as an agent (al-tawkil and al-tawakkul), for each of the two is the other's agent and appoints him in turn. Each must therefore be sane, adult and not interdicted over his property, since every partner disposes of the partnership's capital: of his own right over his own property, and as an agent, that is with authorization, over the property of the other. Each is thus at once appointer and appointee.
The Hanafis require of the two contracting parties the capacity of agency, for representation is necessary to both: each becomes his partner's agent to sell, buy and accept works. For the 'inan partnership they do not require the capacity of guarantee (kafala): it is valid on the part of one whose guarantee would not be valid, such as the authorized child, the authorized slave and the mukatab (slave freed by contract). As for the mufawada partnership, they require of the parties freedom, Islam and majority: the free adult holds both the power of disposal and that of guarantee, the slave holds neither without his master's authorization, and the child never holds the guarantee and disposes only upon his guardian's authorization (Bada'i' al-Sana'i', 6/59; al-Jawhara al-Nayyira, 3/421; al-Lubab, 1/525).
The Malikis teach that the partnership is valid only from one who has the capacity to appoint an agent and to be appointed, that is the free, adult and sane man (rashid), for each of the two contracting parties is his partner's agent and appoints him; whoever can appoint and be appointed may partner, and whoever may dispose for himself may appoint and partner. The slave therefore partners only upon his master's authorization, or if he had already been authorized for trade; the same applies to the other persons under interdiction: the minor, the insane and the spendthrift (safih) (al-Sharh al-Kabir with Hashiyat al-Dasuqi, 5/4; Mawahib al-Jalil, 7/52 and 54; al-Taj wa-l-Iklil, 4/140; Sharh Mukhtasar Khalil, 6/39; al-Tahbir, 4/238; al-Sharh al-Saghir with Hashiyat al-Sawi, 7/481).
The partnership is also valid for a guardian over the property of his ward, like the qirad, when the partner is trustworthy (amin) to the point that the orphan's wealth may be deposited with him and no doubt weighs on his fortune if he returns the deposit. The guardian therefore cannot partner with a wrongdoer (fasiq), since the partner must be such that entrusting him with the ward's wealth is permissible. This is when the partner is the one disposing; otherwise it is when the guardian is the one disposing. And if one of the two partners dies leaving an heir not yet mature, and the guardian sees benefit in it, the partnership continues (al-'Ubbab, p. 677; Rawdat al-Talibin, 3/473; Mughni al-Muhtaj, 3/185; Nihayat al-Muhtaj, 5/6; al-Dibaj, 2/297; al-Najm al-Wahhaj, 5/11).
The Hanbalis teach that no type of partnership is valid except from one to whom disposal is lawful, that is the free, adult and sane man, for it is a contract upon the disposal of property; it is therefore not valid from one to whom it is not, as in sale (al-Mughni, 5/3; Sharh Muntaha al-Iradat, 3/549; Kashshaf al-Qina', 3/581).
Second condition: to be Muslim. The jurists asked whether the Islam of both partners is required, or whether a partnership is valid between a Muslim and a dhimmi (non-Muslim under Islamic protection).
The Hanafis: the partnership is either mufawada or 'inan; the 'inan partnership is valid between a Muslim and a dhimmi, by unanimous agreement among them. As for the mufawada partnership, it is not valid according to Abu Hanifa and Muhammad between a Muslim and a dhimmi, for the two are not equal in disposal: the dhimmi may indeed deal in wine and pork, unlike the Muslim; the contract then becomes 'inan, since 'inan is valid between them by consensus.
Abu Yusuf, may Allah have mercy on him, holds that the mufawada partnership is valid between a Muslim and a dhimmi, for both are free and guarantee and agency apply to them; yet he disapproves of it, because the dhimmi does not discern lawful contracts and it is feared he would feed his partner riba (interest). If two dhimmis conclude a mufawada, it is valid even if their religions differ, for they are equal in disposal; the same applies if one is a People of the Book (kitabi) and the other a Magian. But he disapproves of the Muslim partnering the dhimmi, for the latter practises contracts forbidden in Islam, so that his gain would come from a prohibited thing; hence it is disapproved for the Muslim to entrust agency to a dhimmi; and if he partners him in an 'inan partnership, it is valid, just as if he appointed him agent (al-Mabsut, 11/196-197; al-Jawhara al-Nayyira, 3/423; Bada'i' al-Sana'i', 6/61-62; al-Lubab, 1/525).
The Malikis in the preferred view and the Hanbalis disapprove of partnership with a People of the Book member, even one outside Islamic protection, for one is not safe from their usurious dealings and corrupt contracts; unless the Muslim manages the transactions, or the dhimmi disposes in the Muslim's presence, not absenting himself from him to buy, sell or collect payment; the partnership is then not disapproved, for one is safe from riba: the dhimmi who manages the purchase sells by the rule of his religion and introduces into the Muslim's wealth what is not permitted him, whereas the Muslim is forbidden to make his wealth a vehicle for riba, wine and pork (Sharh Ibn Battal, 7/18-19; Mawahib al-Jalil, 7/52 and 54; Minh al-Jalil, 6/250; al-Mughni, 5/3; al-Kafi, 2/257; al-Mubda', 5/4; Kashshaf al-Qina', 3/581; Matalib Uli al-Nuha, 3/495).
The Shafi'is disapprove of partnering the dhimmi absolutely, as well as anyone who does not guard against riba, whether he is the one transacting the sale and purchase, or the Muslim is the one disposing, according to what is reported from Ibn 'Abbas, may Allah be pleased with them both: « I disapprove of the Muslim partnering the Jew and the Christian », with no counter-report. It is also because they do not abstain from riba or from the sale of intoxicants, and one cannot guarantee that the wealth on which the partnership was concluded is not such; nevertheless, if the contract has been made, it is valid, for the presumption is that what they hold belongs to them, and the Prophet (peace be upon him) did buy barley on credit from a Jew, giving his armor in pledge.
The Prophet (peace be upon him) bought barley on credit from a Jew and gave his armor in pledge.Reported by al-Bukhari and Muslim
Ibn al-Qayyim, may Allah have mercy on him, said: those who disapprove of partnering them have two arguments. The first: they permit what the Muslim forbids, namely riba and corrupt contracts; on this basis the disapproval ceases as soon as the Muslim manages the sale and purchase. The second: partnering them leads to mixing with them, which leads to affection for them; hence al-Shafi'i disapproved absolutely. It is also reported from Ibn 'Abbas: « I disapprove of the Muslim partnering the Jew »; he only disapproved of partnering them because of their usurious dealings, as al-Athram and others report through the chain of Abu Jamra: « Partner never a Jew, nor a Christian, nor a Magian, for they practise riba, and riba is not lawful. »
Some scholars made the ugliness of their earnings the cause of this disapproval, since they sell wine and pork; but this cause does not entail disapproval: 'Umar ibn al-Khattab, may Allah be pleased with him, said indeed: « Appoint them to sell it, and take its price. » What they had sold of wine and pork before the Muslim partnered them: the partnership is valid upon its price, and the price is lawful since they believed it lawful. As for what they sell or buy with the partnership's capital, the contract is corrupt: the partner is an agent, and the contract takes effect for the appointer; and the Muslim's ownership of wine and pork cannot be established (Ahkam Ahl al-Dhimma, 1/206-207).
First requirement: that the capital be from the two monies, gold and silver. The jurists asked whether the partnership's capital must be from the two monies, or whether it is valid with fungibles and goods.
The Hanafis, the Hanbalis in the school, and the Shafi'is in one view hold that the capital must be from the monies, that is dirhams and dinars, to the exclusion of everything else; the partnership is therefore not valid on goods.
The Hanafis: the partnership is contracted only in dirhams, dinars and circulating copper coinage; beyond that it is not permitted, unless people transacted with gold dust (tibr) and raw silver (naqra): the partnership is then valid upon them, for they resemble goods in one respect, not being prices, and resemble dirhams and dinars in another, for the contract upon them is an exchange (sarf); both resemblances were therefore applied to them, and the people's custom in transactions was taken into account: if they use them, they are classed with the dirhams; if not, with other things (Bada'i' al-Sana'i', 6/59; al-Mabsut, 11/196-197; al-Jawhara al-Nayyira, 3/426-427; al-Lubab, 1/527-528).
The Hanbalis require the capital to be from the two struck monies, for they are the price of sales and the value of wealth, and people have partnered with them from the time of the Prophet (peace be upon him) to ours without anyone contesting it. The 'inan partnership, like the mudaraba, is therefore not valid on goods, even fungibles such as wheat or silk: its value may indeed rise before its sale, and the other would then share in the growth of a property that remains the sole owner's (Kashshaf al-Qina', 3/582; Sharh Muntaha al-Iradat, 3/547; al-Rawd al-Murr, 2/69).
The Shafi'is in the school: the partnership is valid on every fungible. Upon the two monies it is by consensus, for they are the value of destroyed things and, mostly, the price of things; by them the values of wealth and the profits are known. As for what is not of the two monies, such as wheat, barley or iron, the partnership is valid on the sound view of the school, for these are two capitals which, once mixed, can no longer be told apart: the contract of partnership is validly concluded upon them, as upon dirhams and dinars.
The second view forbids it: al-Shafi'i, may Allah have mercy on him, said that the partnership is not valid on goods nor on what resembles them, for it is a partnership upon goods, and it is not valid, as upon clothes or animals. On the school, the partnership is valid upon them: if their values are equal, each takes back the like of his goods on the day of dissolution, and they share the remaining profit; if the values differ, for instance if one's wheat is of good quality and the other's wormy, each keeps the value of his wheat on the day of the contract, and they share the remaining profit.
On this basis, equality of values is not required on the sound view: if they differ, as when one's irdabb is worth ten and the other's five, the two are partners by thirds. All this if the contract was concluded on distinct goods belonging to each; but if they pooled them through inheritance, purchase or otherwise, the partnership is valid, whether the property is fungible or non-fungible (Rawdat al-Talibin, 3/474; al-Bayan, 6/364; Mughni al-Muhtaj, 3/186; al-Najm al-Wahhaj, 5/12).
Partnership in goods consists in one bringing goods that are appraised and the other bringing goods that are appraised, then partnering upon the two values, so that both goods are between them: if they profit, the gain is shared; if they lose, the loss is common (al-Hawi al-Kabir, 6/473).
The jurists differ on the validity of this partnership. The majority, namely the Hanafis, the Shafi'is in the school and the Hanbalis in the school, judge it invalid; Ibn al-Mundhir even reported a consensus on it, but that report is not sound, as will be seen (al-Ijma', no. 515).
The Hanafis explain the prohibition by the fact that the agency embedded in the partnership is not valid in this form: consider one who says to another: « Sell your goods on condition that the price be between us »: this is not valid. The agency, being among the necessities of the partnership, being thus impossible, the partnership is not contracted, unlike with dirhams and dinars: if a man says to another: « Buy with a thousand of your money on condition that what you buy is between us, and I buy with a thousand of my money on condition that what I buy is between us », that is permitted. Indeed, the first act upon goods is selling, while upon monies it is buying: selling one's property on condition that the other share in its price is not permitted, while buying with one's money a thing that will be between oneself and another is lawful.
Moreover, partnership in goods leads to ignorance of the profit at the time of division: the capital there is the value of the goods, not their substance, and that value is unknown, since it is known only by conjecture; the profit becomes unknown, whence disputes at division. Nothing of the sort with dirhams and dinars, whose capital, at division, presents itself in substance. The Prophet (peace be upon him) indeed forbade profiting from what is not guaranteed, and partnership in goods leads to a profit upon what is not guaranteed: the goods are not guaranteed against loss, since whoever buys specific goods guarantees nothing if they perish before delivery, for goods are specified by their specification and the sale is thereby void; not being guaranteed, the partnership leads to a profit upon what is not guaranteed, and that is forbidden. The monies, on the contrary, are guaranteed against loss, for they are not specified by their specification: partnership upon them yields a profit upon what is guaranteed (Bada'i' al-Sana'i', 6/59; al-Mabsut, 11/196-197; al-Jawhara al-Nayyira, 3/426-427; al-Lubab, 1/527-528).
The Shafi'is, for their part, say: the partnership is not valid on non-fungible goods, for mixing is impossible in things each of which has its individuality; in that case one's property may perish or diminish, and it becomes impossible to divide the other's. The partnership's purpose is that neither partner alone appropriate the profit of his own property; yet this partnership leads to that: the value of one's goods may rise without the other's rising, and the one whose value has not grown would share at dissolution in the other's gain, which is inconceivable.
If each of the two owns a slave worth one hundred and they wish to partner, one sells half his slave for half the other's slave, then they exchange mutual releases (muqassa), and each authorizes the other to dispose. If one's value is two hundred and the other's one hundred, the one whose slave is worth two hundred sells a third of his slave for two-thirds of the other's. If they wish, each may also sell his partner part of his goods for a deferred price, then exchange mutual releases; or they may together buy goods from a man for a deferred price, then hand over their two goods in settlement of their debt.
The partnership is, however, valid on the fungible, such as wheat, barley and iron, as has been set out (al-Hawi al-Kabir, 6/474; al-Bayan, 6/364; Rawdat al-Talibin, 3/474; Mughni al-Muhtaj, 3/186; Nihayat al-Muhtaj, 5/7; al-Najm al-Wahhaj, 5/12; al-Dibaj, 2/297).
The Hanbalis ground the prohibition thus: the partnership bears either upon the substance of the goods, or upon their value, or upon their price. It cannot bear upon the substance: the partnership requires that at dissolution each recover his capital or its like, and goods have no like to which to return it; moreover the value of one's kind may rise without the other's, which then absorbs all the profit or all the capital, or fall, and one ends up sharing in the price of a property that is not a profit. It cannot bear upon the value: the latter has no determinate amount, which leads to dispute, and a thing may be worth more than its appraised value; furthermore the value may rise on one side before the sale, and the other would then share in the substance owned by him.
Nor can it bear upon their price: at the moment of the contract that price does not exist and does not belong to them. If it is the price at which the goods were bought, it has left the buyer's patrimony for the seller's; if it is the price at which they will sell them, the partnership becomes suspended upon a condition, the sale of the goods, and that is not permitted (al-Mughni, 5/10-11; al-Insaf, 5/410; Kashshaf al-Qina', 3/582; Sharh Muntaha al-Iradat, 3/547; al-Rawd al-Murr, 2/69).
The Malikis, and Ahmad in one narration, judge partnership in goods valid. The Malikis: it is valid with a substance on one side and goods on the other, provided one brings food or goods and the other dinars or dirhams, and they partner upon the values; if the value of the food or goods balances the money, profit and loss are shared equally, and labour too in proportion to the capitals. It is likewise valid between two goods, whether of the same category or different, such as a slave and a donkey, or a garment. Also included are food on one side and goods on the other. Each contribution is appraised by its value on the day of the contract: if the value of the goods equals the substance, they are partners by halves; if it is double, by a third and two-thirds; for two goods, according to the value of each: if they are equal, by halves; otherwise in proportion, if the partnership is valid.
Qadi 'Abd al-Wahhab, may Allah have mercy on him, said: we permitted partnership in goods only in this form: that one bring a garment and the other a garment or any other goods, and that they conclude between them a contract in which the profit is in proportion to the capital; this is valid with us even if they do not mention the prices and do not say « the value of this garment is such and such »; the contract is then concluded upon the value of the goods, which becomes each one's capital, whether the goods are such that their substance is distinguishable, like garments, or black dirhams with white ones, or such as cannot be distinguished, like wheat or honey. Our proof is the word of Allah the Most High:
« Fulfil the covenants. »
Surah al-Ma'idah, 1
Goods are indeed properties in substance, and partnership therefore applies to them, even without naming their prices, even should they not be distinguishable. The reality of partnership is that each conveys to the other half of his goods, so that the hands of both hold the whole of the capital, which exists in our case, just as if he had said expressly: « I sold you half my garment for half of yours » (al-Ishraf, 3/66, no. 925; al-Mu'una, 2/143; Mawahib al-Jalil, 7/61; al-Tahbir, 4/238-239; al-Sharh al-Kabir, 5/5; al-Sharh al-Saghir with Hashiyat al-Sawi, 7/486).
Ibn Rushd, may Allah have mercy on him, says: as for partnership on food of a single category, Ibn al-Qasim permitted it by analogy with their consensus on its validity for a single category of gold or silver. Malik forbade it in one of his two views, the more famous, because of the immediate delivery (munajaza) it involves, since he held that the principle is not to draw an analogy, in the place of a concession, upon the basis of a consensus. It has also been said: Malik disapproved of it because partnership requires equality of values and sale equality of measures; partnership on two foods of one category would therefore require at once equality of value and of measure, which is hardly achievable (Bidayat al-Mujtahid, 2/190; Sharh Mukhtasar Khalil, 6/40; al-Dhakhira, 8/42).
Ibn 'Abd al-Barr, may Allah have mercy on him, specifies: the partnership is not valid on foods of different kinds, such as wheat and barley, one category of wheat against another, lentils against beans, dates against raisins, oil against butter or honey, cow butter against sheep butter, red oil against black oil, or anything not like the other in value, quality and condition; and the partnership is not valid on all of that, nor on what resembles them, neither by measure nor by value (al-Kafi, 1/391).
Imam Ahmad, may Allah have mercy on him, is reported to have said in the other narration, chosen by many of his companions, that the partnership is valid on goods: the purpose of partnership is that the two may dispose of both capitals and that the profit be between them, which is obtained on goods without gharar (uncertainty), as upon the monies; the capital is made the value of the goods at the time of the contract, so that the partner may return the capital in case of preference, just as we made the amount of their zakat their value, whether the goods are fungibles like grains or not (al-Mughni, 5/11; Ighathat al-Lahfan, 2/44; al-Mubda', 5/5). In al-Insaf (5/410): from him, the partnership is valid on goods. Ibn Razin said in his commentary: and it is the more apparent view. Abu Bakr, Abu al-Khattab and Ibn 'Abdus in his Tadhkira chose it, as did the author of al-Fa'iq; it was asserted categorically in al-Manthur and preferred in al-Muharrar and al-Nazm. I say: it is the correct view.
The jurists who forbade this partnership mentioned several devices to make it valid. According to the Hanafis, if each of the two owns goods, each sells half his property for half his companion's: each one's property then becomes doubled, a co-ownership (shirkat al-milk) is established between them, and they then conclude the contract of partnership, which is valid without dispute.
If their values are unequal, the owner of the lesser sells in proportion to what fixes the partnership: if one's goods are worth four hundred and the other's one hundred, the owner of the lesser sells four fifths of his goods for a fifth of the other's; the whole of the goods then falls into fifths, and the profit is between them in proportion to their two capitals. The contract of partnership after the co-ownership serves to establish that each is his partner's agent to sell his share. If one holds dirhams and the other goods, the device is that the owner of the goods sell half of them for half his companion's dirhams, then they take mutual possession and mix the whole, until the dirhams and the goods are between the two; they then conclude upon them the contract of partnership, which is permitted (Bada'i' al-Sana'i', 6/59; al-Hidaya Sharh al-Bidaya, 3/7; al-'Inaya, 8/269 and 272; Tabyin al-Haqa'iq, 3/317; al-Jawhara al-Nayyira, 3/427-428; al-Bahr al-Ra'iq, 5/187; Ibn 'Abidin, 4/310).
The Shafi'is mentioned two devices. The first, that of al-Muzani: each sells half his goods for half his companion's and they take mutual possession; each of the two goods then becomes a partnership by halves between them; then each authorizes the other for trade. This is the path to the validity of partnership in goods when they do not sell making the partnership a condition. The second, that of the Basrans: each buys half his companion's goods for a deferred price, then they exchange mutual releases of the price or exchange it; each of the two goods then becomes a partnership by halves between them (al-Hawi al-Kabir, 6/474; Mughni al-Muhtaj, 3/187; Nihayat al-Muhtaj, 5/9; al-Najm al-Wahhaj, 5/14). Al-'Umari reports in al-Bayan (6/364) the same example as before: if each of the two owns a slave worth one hundred and they wish to partner, one sells half his slave for half his companion's, then they exchange mutual releases and each authorizes the other to dispose; and if one's value is two hundred and the other's one hundred, the one whose value is two hundred sells a third of his slave for two-thirds of the other's.
The jurists asked whether the two capitals must be mixed to the point of being indistinguishable. The Shafi'is and Zufar, according to one of the two narrations from him, require the mixing so that the meaning of partnership be realized, for partnership is the expression of a mixture, and that is realized only in ownership; now, in every contract, it is the meaning evoked by the name of that contract that is decisive, as in the hawala (transfer of debt), the kafala (guarantee) and the sarf (exchange). If the two capitals are mixed so that one can no longer be told from the other, the partnership is established; before the mixing it is not established: if one's capital perishes, it perishes upon him alone, and the partnership of the contract is not established, the meaning of the mixture not having been realized intentionally.
The mixing must take place before the contract: if it occurs in the same sitting after the contract, it does not make the partnership valid on the sound view, since there was no pooling at the moment of the contract; the contract must be repeated. On the second view, it is valid if it occurs within the sitting, for it stands in place of the contract. If the mixing occurs after the sitting, it does not avail on either view, which constitute the sound view of the school; Imam al-Haramayn (al-Juwayni), however, inclined to its validity, because the partnership is agency and trust. The mere mixing of two distinct kinds, such as dirhams and dinars, does not suffice: if one's share perishes, it perishes upon him alone, and the partnership becomes impossible on the remainder (Nihayat al-Matlab, 7/24; Rawdat al-Talibin, 3/475; Mughni al-Muhtaj, 3/186; Nihayat al-Muhtaj, 5/8; al-Najm al-Wahhaj, 5/14).
The Hanafis and the Hanbalis hold that the mixing is not required: the partnership is valid even if each one's capital remains in his hand, once they have specified the capital and brought it, for it is a contract aiming at profit, in which mixing is not a condition, as in the mudaraba; and it is a contract upon disposal, in which it is not required that the hands of both be upon the property, as in simple agency. The partnership includes agency: what is permitted in agency is permitted in partnership, and agency is valid upon the two capitals before mixing. Moreover, the entitlement to profit rests on the contract, not on the capital, since the contract bears the name of partnership and the meaning of that name must be realized in it; and dirhams and dinars are not specified by their specification, so that the profit comes not from the capital itself but from the disposal: in one half each is owner, in the other agent; the partnership being realized in the disposal without mixing, it is realized in the profit, and the situation becomes like the mudaraba (Bada'i' al-Sana'i', 6/60; al-Mabsut, 11/152; al-Bahr al-Ra'iq, 5/189; al-Jawhara al-Nayyira, 3/432; al-Lubab, 1/531; al-Mughni, 5/12; al-Kafi, 2/258).
The Hanafis and the Hanbalis then differ if the capital perishes before the mixing. The Hanafis: if the whole of the partnership's capital perishes, the partnership is void; likewise if one of the two capitals perishes before the mixing and before the purchase: it perishes from its owner alone, whether it perished in his hand or in his partner's, for it is a deposit (amana) there, unlike what comes after the mixing, where it perishes upon both for lack of being able to tell them apart, and the partnership is void. Each one's capital indeed remains his property before the purchase and before the mixing; and if the partnership is void, it is because the object of the contract is the specified capital, which is specified by its specification in partnership as in gift and bequest; the loss of the object voids the contract, as in sale, unlike the mudaraba and simple agency.
This is evident when both capitals perish, as when only one perishes: the partner whose property did not perish only consented to his companion sharing in his property so as to share in turn in the latter's property should it remain; that failing, the contract bears upon what the partnership did not consent to and is void for want of benefit, namely the sharing of what is acquired. But if one of the two buys with his capital and the other's capital perishes afterwards, the purchased thing remains between them according to their condition, for ownership arose in common at the moment of purchase, the partnership being in force at the purchase and no loss having occurred before it to void it; the buyer does not have exclusivity over his purchase, and the ruling of the partnership is not changed by the loss of the other's capital afterwards (Bada'i' al-Sana'i', 6/60; Sharh Fath al-Qadir, 6/179-180; al-Hidaya, 3/8; al-Jawhara al-Nayyira, 3/431; Majma' al-Damanat, no. 640; al-Hindiyya, 2/320).
The Hanbalis: if one of the two capitals, or part of one of them, perishes, even before the mixing, the loss is chargeable to both, for the partnership entailed the establishment of each one's ownership over half his companion's capital: its loss and its growth are shared. The loss, even affecting one of the capitals before the mixing, is therefore upon both in proportion to the capital, for it is a diminution of the capital, which is tied to a determinate amount: the diminution comes from him, not from another; whether the loss be by destruction or by a fall in value (al-Mughni, 5/12; Kashshaf al-Qina', 3/584).
Among the Malikis, the transmission and the preference differ, the question being whether the partnership binds by the contract even without mixing, or whether the mixing of the capitals is necessary even if only juridically. Qadi 'Abd al-Wahhab said: the partnership is not valid if each remains sole holder of his capital without the other's hand being upon it, until they place the whole in a common chest, in their shop, or in the keeping of a common agent: the partnership is then valid even without mixing, even should the properties be distinct. Abu Hanifa said: the partnership is valid even if each one's capital remains in his hand, provided they have specified the capital and brought it; but if one of the two capitals perishes before the mixing, it perishes upon its owner. Al-Shafi'i said: the partnership is not valid unless the capitals are mixed to the point of being indistinguishable.
Our proof against Abu Hanifa is that the partnership requires their equality in the sharing of the capital; if one remains alone with his hand established upon his property, the reality of the partnership does not occur: they remain as they were, each alone with his capital, and nothing comes of it but words, which have no effect; proof of this is that if they concluded a contract of partnership on property without specifying it, it would not be concluded, for the partnership does not bear upon property upon which their hands have not been established; and each capital perishes upon its owner's property, without the partnership being established upon the rest of his properties, unlike the case where they mix them or where both their hands are upon them; each capital in its owner's hand is like a partnership upon foods; and they agree with us that the loss is not shared, so the profit must be likewise, partnership being one of the two types of partnership. Our proof against al-Shafi'i: their hands have been established upon the two capitals as if they had mixed them (al-Ishraf, 3/67-68, no. 926; al-Mu'una, 2/140-141).
But on the preferred Maliki view, that of Ibn al-Qasim, the partnership binds by the contract, that is by whatever custom attaches to it, be it a word (« we partnered ») or an act, such as mixing the capitals or being together. The view that mixing is a condition of this binding is that of Sahnun, followed in it by Qadi 'Abd al-Wahhab in the previously quoted view, against the preferred one. The sound view is that mixing is a condition of the guarantee: what perishes of the partnership's capital before the mixing is chargeable to its owner alone, to the exclusion of his companion, if the capital is a fungible, such as animals; otherwise if the loss follows the mixing, or if the capital is goods: the guarantee is then common to both. And if a thing perishes before the mixing, which we say is chargeable to its owner alone, the partnership is not thereby rescinded, for it binds by the contract. What was bought with the intact capital is between them according to the agreed sharing, half or otherwise; and the perished capital owes the price of its share in the partnership, half, less or more: if one buys goods for one hundred with the intact capital, the one whose capital perished owes half of the hundred when the partnership is by halves. No difference is made between a physical mixing, where one's property can no longer be told from the other's, and a juridical mixing: placing the whole of the two capitals in one house with two locks, each holding the other's key; or putting each one's gold in a purse and placing both under one man's hand, in his chest or his saddlebag. Nor is there any harm in a partner being alone with part of the partnership's capital and trading with it separately, in another quarter of the town or in another town, the profit of each portion remaining between them according to the agreement (al-Sharh al-Kabir with Hashiyat al-Dasuqi, 5/6-7; Sharh Mukhtasar Khalil, 6/41; al-Tahbir, 4/239-241; Mawahib al-Jalil, 7/61-62; al-Taj wa-l-Iklil, 4/143-144; al-Bahja fi Sharh al-Tuhfa, 2/251; al-Sharh al-Saghir with Hashiyat al-Sawi, 7/491).
The jurists ask whether the capitals must be of one kind or whether the partnership is valid with capitals of different kinds, one bringing dirhams and the other dinars. The Hanafis, the Hanbalis and the majority of the Malikis hold that it is not a condition: the capital may be in dirhams with one and in dinars with the other, for dirhams and dinars have been treated as one kind in many rulings, proof of which is that one of them is combined with the other in zakat: the contract upon them is as a contract upon a single kind.
The Shafi'is and Zufar require a single kind: the partnership is not valid if one brings dirhams and the other dinars, for they become distinguishable after mixing, and what becomes distinguishable after mixing does not found a partnership, like goods (Bada'i' al-Sana'i', 6/60; al-Hidaya, 3/8; al-Jawhara al-Nayyira, 3/430; al-Lubab, 1/530; Mukhtasar al-Wiqaya, 2/181; al-Kafi, 1/390; al-Hawi al-Kabir, 6/481; Mughni al-Muhtaj, 3/186; Nihayat al-Muhtaj, 5/8; al-Najm al-Wahhaj, 5/12; al-Dibaj, 2/298; Kashshaf al-Qina', 3/584; Sharh Muntaha al-Iradat, 3/547; al-Ifsah, 1/444; Manar al-Sabil, 2/179).
The Malikis specify: the partnership is valid only between two contributions of gold, even of different mintings, or two contributions of silver alike at the moment of the contract in weight, in minting and in quality. If one's capital is gold and the other's silver, the partnership is not valid on the preferred view, for there would be at once exchange (sarf) and partnership: partnership, from the standpoint of each selling part of the other's capital without regard to gold or silver; and sarf, from the standpoint of one selling with the other's capital, considered with regard to the gold-silver specificity; the sale of gold for silver would thus be both partnership and sarf, two distinct considerations. If the two work, each takes back his capital; and the profit is apportioned, for instance, one dinar for every ten dinars and one dirham for every ten dirhams. The partnership is also valid with gold and silver combined on both sides: one brings ten dinars and ten dirhams, the other the same; equality is then appraised between the gold of one and the gold of the other in weight, minting and value, and likewise for the silver, for equality avoids the forbidden combination, since there is at once sarf and partnership (al-Sharh al-Kabir with Hashiyat al-Dasuqi, 5/4-5; Sharh Mukhtasar Khalil, 6/39; al-Tahbir, 4/238; Mawahib al-Jalil, 7/60; al-Taj wa-l-Iklil, 4/140-141; al-Sharh al-Saghir with Hashiyat al-Sawi, 7/489).
The jurists differ: must profit and loss be in proportion to the capitals, or is a difference permitted in the profit with equal capitals, or equality in the profit with unequal capitals? They agree, however, that the loss can only be in proportion to the capitals, for it attaches only to the capital, proof being the mudaraba: the manager there is a trustee, and requiring a guarantee from a trustee is not valid.
Ibn Qudama explains it in al-Mughni (5/22-23): the loss is in proportion to the capital, each bearing it according to his contribution; equal capitals, the loss is by halves; capitals by thirds, the loss is by thirds; no known difference exists among the scholars on this point, and it is the view of Abu Hanifa, al-Shafi'i and others. In the partnership of workers (shirkat al-wujuh), the loss is in proportion to their share in the thing bought, whether the profit is shared likewise or not, and whether it comes from destruction or a fall in value. In the mudaraba, the loss touches the capital alone, nothing touches the manager, for it is the diminution of the capital, which belongs to the owner alone; they share only the growth, in the manner of the agricultural sharecropping (musaqat): the owner of the land and the tree shares with the cultivator the crops and the fruit; if the tree perishes or the land is damaged by a flood or otherwise, nothing falls upon the cultivator.
As for the profit, they differ according to this detail: the Malikis, the Shafi'is and Zufar hold that profit and loss are divided in proportion to the capitals, the profit being the growth of their properties and the loss their diminution. If they stipulate a difference in the profit with equal capitals, or equality in the profit with unequal capitals, the contract is not valid: it is a condition contradicting the requirement of partnership, as if they made the profit conditional for one of them alone.
According to the Shafi'is, if they dispose despite this condition, the disposal is valid on the sound view: the condition does not remove the authorization; whether profit or loss, they are divided in proportion, for the gain comes from their capitals, like palm trees bearing fruit. On the second view, the authorization is void through the voidness of the condition: neither may then dispose of the whole capital, and should he do so, he is like one disposing of common property arising from a corrupt partnership. On the school, each recovers from his companion the wage of his like work (ujrat al-mithl) upon the latter's capital: if they are equal in capital and labour, half of each one's labour corresponds to his own capital, without wage, and the other half to the companion's capital, which deserves its counterpart; the whole is set off. If they differ in labour with equal capitals, for instance if one's labour is worth two hundred and the other's one hundred: if the one conditioned for the increase works more, half his labour is worth one hundred and half his companion's fifty, and fifty remain to him after compensation. If it is the companion who works more, the recovery of the fifty by the one conditioned for the increase admits of two views: the recovery, as in a corrupt qirad, or the prohibition, which is the sounder view. These two views also apply when the partnership is corrupt and one has reserved to himself the disposal and the work alone: does he recover half the wage of his work from the other?
If the capitals are unequal, one a thousand and the other two thousand, and the labours differ in the same direction, for instance if the labour of the one who contributed more is worth two hundred and the other's one hundred: the proportions follow the capitals, two thirds of each one's labour being upon his own capital and one third upon the companion's; it follows that the owner of the greater capital has against the lesser one third of two hundred, and the lesser has against the greater two thirds of one hundred; the two sums are equal and are set off. If it is the holder of the lesser capital who works more, the proportions are reversed and one hundred remain to him after compensation. If they are equal in labour, the holder of the lesser capital has against the other two thirds of one hundred, and the other against him one third of one hundred: the third is set off and one third of one hundred remains to him.
The second view, that of voidance, repeats: the authorization is void through the invalidity of the condition, and neither may dispose of the whole capital. And if a third of the capital belongs to one and two thirds to the other, and they stipulate that the profit be by halves while the holder of the third trades alone, it is valid on one view: the partnership becomes at once a partnership and a bodily mudaraba, for the worker takes the third by way of ownership and the whole of the half by way of labour, passing from the regime of preference to that of the mudaraba. On the second view, which is the sound view of the school, this is not valid, as if a difference in the loss were stipulated: that difference is removed and the loss distributed upon the capital; nor can the contract be turned into a mudaraba, for there the labour bears upon the capital of a single owner, whereas here upon that of the two owners (al-Iqna' of al-Mawardi, p. 108; al-Hawi al-Kabir, 6/477; al-Muhadhdhab, 1/346; al-Tanbih, p. 107; Nihayat al-Matlab, 7/24-25; al-Bayan, 6/369; Rawdat al-Talibin, 3/481 and 483; Mughni al-Muhtaj, 3/189; Nihayat al-Muhtaj, 5/13; al-Najm al-Wahhaj, 5/17; al-Dibaj, 2/300).
The Malikis: the labour between the two must be in proportion to the capitals, like the profit and the loss, whether the partnership is by halves or otherwise; it is valid whether they agreed upon that or remained silent, and they are judged accordingly, each holding half and having a proof. The partnership is corrupted by a condition of inequality formulated at the contract, for instance if one brings a thousand and the other two thousand while stipulating equality in profit and labour. If this is discovered before the work, the contract is rescinded; after the work, the profit is divided in proportion to the capitals, without regard to their corrupt condition: the owner of the two thousand recovers the surplus of the profit, namely his sixth, from the owner of the thousand if he took it, to complete his two thirds; and the owner of the thousand recovers the surplus of his labour, namely the sixth of the total wage. One of the two recovers from the other the wage of like labour, for the contract of partnership seeks the sharing of the profit to come; being corrupt, the worker deserves the wage of his like labour from another employer, as in the qirad. Proportionality to the capital is imposed because it is established that the contract of partnership gives to each a share of the profit and of the loss, and they agree that it is not permitted to stipulate that one partner bear alone a part of the loss; the same applies to a part of the profit, since the capitals made the partnership's property fructify, which imposes proportionate equality: the price of the profit is the capital and the capital its origin, so that it is apportioned according to ownership, like the rent of a building. Stipulating an increase in labour amounts to hiring from the claimant the surplus of the profit of the other's capital, which is gharar; and he who forgoes working deserves, by right of the partnership, the surplus profit of the capital he relinquished, as if the labour were stipulated upon the owner of the two thousand with the profit by halves, or more profit for the one who does not work and less for the one who works.
After a valid contract, each may confer on his companion a share of the profit or the labour, but not during nor at the moment of the contract, for that would be a loan drawing a deferred benefit (salaf jarra naf'a). If they stipulate that the holder of the third receive the third of the profit and owe the third of the labour, the contract is valid; he may afterwards work half or more, and the holder of the two thirds may confer on him a share of his profit, in kindness and maintenance of ties. He also has the right to make him a gift and to lend him something after the valid contract, but not within it (al-Kafi, 1/391; al-Ishraf, 3/73-74, no. 932; al-Mu'una, 2/141; al-Sharh al-Kabir with Hashiyat al-Dasuqi, 5/13-14; al-Dhakhira, 8/52; Sharh Mukhtasar Khalil, 6/45; al-Tahbir, 4/247; Mawahib al-Jalil, 7/67; al-Taj wa-l-Iklil, 4/149-150; al-Sharh al-Saghir with Hashiyat al-Sawi, 8/3 and 5; al-Ifsah, 1/445).
Al-Mudawwana reports, concerning the partnership on unequal capitals with equality of profit and loss, a dialogue: « If I contribute a thousand dirhams and another two thousand, and we partner on condition that profit and loss be by halves? He was answered: I have told you that this is corrupt according to Malik. And if they work on this basis and gain? The profit is then, according to Malik, in proportion to their capitals, and the holder of the lesser capital retains a wage claim against his companion as described. And if they lose half the capital? The loss is, according to Malik, upon both in proportion to the capitals, for the excess by which a partner surpasses his capital is the guarantee of the one to whom that excess belongs: his partner guaranteed him none of it, and the profit of that excess belongs to him alone, as its misfortune concerns him. And if the capital disappears entirely, or they incur three thousand dinars of debt from their trade after losing all the capital, whereas their condition provided for a loss by halves, whereas the partnership is corrupt? I judge that the debt of their trade weighs upon them in proportion to the capitals: upon the holder of the thousand a third of the debt, upon the holder of the two thousand two thirds, for the partnership takes place between them only through the capital, not through their persons: the debt is apportioned to the capital through which the partnership took place. And he added: this last point I did not hear from Malik, but it is my opinion, like what Malik told me of the loss upon the capital (al-Mudawwana al-Kubra, 5/64).
The Hanafis and the Hanbalis judge on the contrary that they may differ in the profit with equal capitals, or be equal in the profit with unequal capitals, for labour earns the profit: the difference is permitted when there is labour from both, as with two mudaribs of a single funder; one may indeed be more expert in trade and more capable, and refuse equality: the need for difference follows, and he may stipulate an increase of profit in return for his labour, as a profit is stipulated for the mudarib's labour. The partnership is contracted upon the capital and the labour together, and each has a share of profit when alone, which carries over when they are together. As for the loss, it is only in proportion to the capitals, by the agreement of the four schools, for it attaches only to the capital, proof being the mudaraba: the manager is a trustee, and requiring a guarantee of him is not valid (Bada'i' al-Sana'i', 6/63; al-Ikhtiyar, 3/18; al-Hidaya, 3/8; al-Jawhara al-Nayyira, 3/429; Tabyin al-Haqa'iq, 3/318; al-Lubab, 1/530; al-'Inaya, 8/275-276; Mukhtasar al-Wiqaya, 2/181; al-Mughni, 5/19; Sharh al-Zarkashi, 2/146; Kashshaf al-Qina', 3/583; Sharh Muntaha al-Iradat, 3/548; al-Ifsah, 1/445; Manar al-Sabil, 2/180).
Al-Kasani, may Allah have mercy on him, elaborates: the 'inan partnership does not take the conditions of the mufawada: the capacity of guarantee is not required there, for these conditions there rest on the equality implied by the name, which has no place in 'inan; one may there differ or be equal. The principle is that profit is earned only by capital, labour or guarantee. By capital: the profit is the growth of the capital, hence to the owner, whence the owner's entitlement in the mudaraba. By labour: the mudarib earns the profit by his labour, and so does the partner. By guarantee: if the capital is guaranteed against the mudarib, he earns the whole profit, the counterpart of the guarantee being the profit, according to the word of the Prophet (peace be upon him):
Profit goes hand in hand with liability.Reported by Abu Dawud and al-Tirmidhi
The proof is the hired worker who accepts work for a wage, then does not perform it himself but has it done by another for less: the surplus is lawful for him, and no cause other than the guarantee can account for this entitlement. Each of these three causes thus earns the profit; without one of them, nothing is earned: proof of this is one who says to another: « Dispose of your property with me sharing in part of its profit »: that is not permitted, for there is neither capital, nor labour, nor guarantee. If the two stipulate the profit in proportion to the capitals, equal or unequal, that goes without saying; as for the loss, it is in proportion to the capitals, for it denotes a destroyed part of the capital. If the capitals are equal and they stipulate a surplus of profit for one: if the labour is required of both, it is valid, and the profit follows the condition according to the three companions; according to Zufar, one cannot stipulate for one more than the profit of his capital, and al-Shafi'i took that view; there is no disagreement that, in the partnership of ownership, the increase is in proportion to the capital, to the point that if two partners over livestock stipulate for one a surplus of offspring and milk, it is forbidden by consensus. The disagreement with Zufar bears on the principle: for him, the profit is earned only by capital, like the offspring and the milk; for us, it is earned at times by the capital, at times by the labour, at times by the guarantee, whether both work or only one: the profit follows the condition, for entitlement in the partnership rests on the condition of labour, not on its existence, proof being the mudarib who deputizes the owner of the capital and earns the profit although the latter performs no labour, the condition of labour existing (Bada'i' al-Sana'i', 6/62-63).
If they stipulate the labour upon one of them: if it is upon the one for whom the surplus of profit was stipulated, it is valid, and he earns the profit of his capital by his capital and the surplus by his labour. If the labour is stipulated upon the one who receives the lesser profit, it is not permitted, for the increase of profit in his favour has facing it neither capital, nor labour, nor guarantee. If the capitals are unequal and they stipulate equality of profit, it is valid with the three companions when the labour is required of both, the increase of one being at the measure of his capital by his labour; according to Zufar, it is not permitted, the proportion of the profit having to follow that of the capitals. And if the labour is stipulated upon one: if it is upon the holder of the lesser capital, it is valid, and he earns the profit of his capital and the surplus by his labour; if it is upon the holder of the greater, it is not permitted, for the increase of profit in favour of the lesser has facing it neither capital nor labour nor guarantee (Bada'i' al-Sana'i', 6/62-63).