Ash-Sharikah (The Partnership)
Among the dealings is the partnership. The one who wants to make a partnership needs to learn the rules pertaining to that before doing it. Many people today make invalid partnerships because they do not learn the rules.
Partnership means a contract (^aqd) by which two or more people would have the ownership (or the right of ownership) of one article without specifying the part that each one owns. Ex: two people are partners in owning a house ½ by ½, it means each one owns ½ of it–without specifying, for example, the eastern half is X’s and the western half is Y’s. No they are both partners in the ownership of the house.
The valid partnership is done by two or more people, each one brings his money, the money of both is mixed–a physical mixture, and then each one gives the other permission to act with the money. That is how the partnership is established.
Ex: Two people want to do a partnership to trade in clothes. Each brings his money, they mix the money, and each gives the other permission to buy and sell. This is how the partnership is established.
However, what some do, ex: 4 people work as taxi drivers. They make a contract together that each day they gather the money they acquired and divide it into 4 equals parts. That is, they make a contract which means the HAVE TO do that. This is an invalid contract. This is not a valid partnership because it is not established (based) on the mixture of the money. Another type that is invalid is for example, there are three partners in a business. We get a 4th person and tell him we will make you a partner in the business, rather than put money, you do all the work, and your share is 10 percent of it. This is not a valid partnership. The valid partnership is the partnership based on the mixing of the money.
Both quantities of money mixed need to be (mithliyyan), that is measured either by weight or volume, and could be well described. After mixing them, the mixing needs to be in a way that you do not recognize whose share is whose in the mixture. If they are not similar, you can still differentiate whose share is whose. They have to be similar. So, if they are not similar in the first place, you can still recognize what each one brought initially. If I bring dollars from the 100 bills, and you bring dollars from the 20s and we mix them, after mixing them, we can still differentiate what bills I brought and what bills you brought.
To be considered a valid partnership the two amounts of belongings (not only currency can be mixed) on both sides need to be from the kind which can be well described, and it is not unknown any more, and it is either measured by weight or by volume. Ex: watermelons are not considered measured neither by weight or volume, so cannot establish a partnership with watermelons (they are sold by the piece). However, barley is measurable, and can be well-described. So if two people bring barley from the same type, mix them together, a partnership is established. If I bring 1/3 of the weight and you bring 2/3 of the weight, my share is 1/3 and your share is 2/3 of partnership. With golden dinars, silver currency, or dollars, the mixing works. With dollars it works (bring the same type of bills). Dollars originally are paper, and paper is sold by weight. Paper currency in the religious context are just like wheat and barely. They are not the base of currency. The base is golden and silver currency, so dollars are paper and are treated exactly like barely and wheat. That’s why, If you run a trade, what do you do to pay zakat? You check the value in gold or silver depending on the rules and you pay the due zakat in that. You do not check it in dollars or Euros or the like.
With sheep the mixing does not work. I have five sheep and you have ten. We mix them together, it does not work, because sheep are not measured by weight or volume. You cannot establish a partnership based on mixing two flocks of sheep.
If the partnership is established, no one of them is entitled to sell with less than the market price–except with the permission of the partner. Without the permission of the partner, he is not entitled to sell for less than market price. For example, X is a partner in a store. His daughter comes to the store and wants to buy something. So X, because it is his daughter, sells it to her for less than the market price. This is not permissible—except with the permission of the partner. Without the permission of the partner, I am not entitled to do this.
Also, it is not permissible for any partner to sell the item with any price, even if it is the market price, while there is another person who wants to pay more for that item. Even if the market price is X, I am not entitled to sell it for X when there is someone who wants to buy it for more than X, except by the permission of the partner.
If there is a profit or loss in the partnership, the profit or loss is the same as the share each partner put in. if I put in ¼, I get ¼ of the profits. Same applies to the loss. I get ¼ of the loss.
Each partner is entitled to breach the partnership whenever he wants. If one of the partners dies, then the partnership is breached. Likewise if he becomes crazy. If one of the partners becomes crazy, then the partnership is breached.
And Allah knows best.
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-Likewise selling for a loss or even traveling with the money of the partnership outside of the country, all that requires the permission of the partners.
– 6 partners, one wants to break the partnership, it is broken for him. The partnership stays for the other five
– one partner cannot hire the partner. They can both hire someone else.