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It is Impermissible for a Partner to Stipulate Bearing no Loss

Answered according to Shafi'i Fiqh by Darul Iftaa Jordan
Is a partnership, where a partner stipulates receiving 1.5% as a profit, and not bearing any loss, permissible?

Answer:
All perfect praise be to Allah, The Lord of The Worlds; and may his blessings and peace be upon our Prophet Mohammad and upon all his family and companions. In terms of Sharia, profits should be divided in line with each partner`s share in the capital. However, it is valid for the partners to agree upon increasing the percentage of profits for some of them. Al-Imam Al-Khasani said, "If the two partners have agreed that the profit should be based on each one`s share in the capital, equally, or unequally, then this is undoubtedly permissible. Therefore, the profit should be divided as agreed, whether both did the work, or one of them. However, both should be liable for loss, each according to his share."{Bdai` Assana`ei Fi Tarteebishara`ei 6/62}. As regards loss, it should be incurred by both, each according to his share, and it is impermissible that any bears more than that according to the consensus of the Muslim scholars. In this regard, Ibn Qudamah says, "In case of loss, both are liable, each according to his share; therefore, if they had equal shares, then each bears a half. However, if the shares were in thirds, then the loss is borne accordingly, as agreed by the Muslim scholars."{Al-Moghni 5/25}. In conclusion, if the (1.5%) is conditioned from the profits, then that is permissible, but if it is conditioned from the capital, then that is considered a form of usury, and such condition is invalid and invalidates the Mudarabah(Co-partnership) as well. Moreover, it is impermissible for a partner to stipulate not to bear any loss, and in the meantime take a share from the profits, because such a condition is null and void. The Sharia maxim in this regard states that both parties should be liable to loss and profit. And Allah knows best.

This answer was collected from the official government Iftaa Department of Jordan.

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