Answer
(Fatwa: 511/385/D=1431)
The abovementioned condition is known as “Muzaribah” (speculation) in the terminology of fiqh, in which in case of loss, the loss shall be remunerated from profit if some profit is earned earlier i.e. it shall be covered from the profit of both i.e. the owner of capital and the work partner. And if there is no profit or the loss is more than the profit, in this case the additional loss shall be compensated from the capital of owner. The loss will not be included in expenses. Yes, if some profit was earned and was divided earlier, so the owner of capital and the working partner both would share the loss to the extant of profit quantity; hence if some percentage of profit is saved with mutual understanding so that any loss in future is remunerated by it, so doing so is lawful.
Allah (Subhana Wa Ta’ala) knows Best
Darul Ifta,
Darul Uloom Deoband