Musharakah Contract

Fatwa ID: 03591

Answered by: Maulana Mohammed Kamran Abid

 

Question

Assalaamu alikum,

 

Two friends, F1 and F2, started a garment business. The conditions were that F1 will be the silent partner, he will provide the shop for business and would get 40% of the profit amount. F2 will be the active partner i.e. he will be working physically in the shop and will invest the amount to buy goods.

 

They started the business as per abovementioned agreement. After a year, F2 told F1 to get his share from the profit. F1 told F2 to invest his share in the business as he did not need it now. Now, F2 invested his own share and F1’s share in the business for the next year.

 

Due to some political issue, there was a complete shutdown for 6-7 months in the whole area. All business units were down for the same period. Now, when things returned to normal, they started the business again after a few months. F2 told F1 that ‘business is very slow now, I do not want to continue’ to which F1 agreed.

 

Now F2 sold all the garments that were present at the shop to some wholesaler on a very low rate, maybe even lower than the purchasing rate. The question is, the money that F2 receives from the wholesaler, is there not any share in it for F1?

F2 claims that there has been a loss in business, so I do not have to pay F1 anything, rather F1 has to pay for his losses.

Kindly have a look and state what is the ruling of Shariah in this.

 

بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم

In the name of Allah, the Most Gracious, the Most Merciful

 

Answer:

Wa alykumus Salaam,

The abovementioned scenario sounds like a Musharakah contract. In the Musharakah contract, each partner suffers the loss exactly according to the ratio of his investment.[1] For example, if a person has invested 40% of the capital, he must suffer 40% of the loss, not more or less. In your case, you have to see how much percentage of money of F1 has invested and calculated how much loss he will incur. To read about all the conditions of the Musharakah contract, please see the link below.

http://daruliftabirmingham.co.uk/musharakah-contract/

 

 

Only Allah knows best

Written by Maulana Mohammed Kamran Abid

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 


[1] Extracted from An Introduction to Islamic Finance, Mufti Taqi Usmani, p.35- p.39

 

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