Laws of Partnership
2150. If two persons make an agreement that they would trade as partners, and their goods are mixed with each other such that it is not possible to distinguish one from other, and they pronounce the formula in Arabic or any other language, or express their intention of becoming each other’s partner by conduct, their partnership will be valid.
2151. If a few people enter in a partnership to share the wages of their labor, like barbers who agree mutually to divide between themselves their earned wages, their partnership is not valid, and each of them will own the wage of his own labor, but if they wish to divide their earned wage with mutual consent, then it is permissible.
2152. If a person who purchases a commodity, is requested by another person to make him a partner, and that person pronounces with the intention of making him a partner: “I make you my partner”; and he says in return, “I agree”; then this partnership is valid. And the one who has become a partner should necessarily give half of his earning to the other; and similarly, if one assigns the other as his representative (Wakil) for the purpose of purchasing a commodity on credit, then each partner purchases a commodity for himself and his partner since both of them have become indebted, such a partnership is valid; but if two persons become partners while each of them purchases a commodity for himself and becomes solely indebted to pay its price, but the commodity that has been purchased by each of them and have partnered to utilize it, is not valid.
2153. The persons who become partners under the rules of partnership, must be adult and sane, and should have intention and free volition for becoming partners. And they should also be able to exercise discretion over their properties. Hence, if a feebleminded person who spends his wealth impudently, enters into a partnership, it is not in order, because such a person has no right of disposal over his property.
2154. If such a condition is laid down in an agreement of partnership, that the partner who works, or does more work than the other partner, will get the larger share of profit, it is necessary that he should be given this share as agreed upon. Although, if it is agreed that the person who does not work, or does not work more than the other partner, will get the larger share of profit, such condition is not valid but their partnership will remain in order, and the profit will be shared among the partners as per the capital; but if it is kept as a condition which will permit disposal over the mutual property, then in such case, their partnership is invalid.
2155. If it is agreed that the entire profit will be appropriated by one person, or the entire loss will be borne by one of them, such an agreement is invalid while the partnership itself remains in order; and the profit and loss will be divided among the partners as per the capital, but according to the aforementioned rule.
2156. If it is not agreed that one of the partners will receive more profit, and if the investment of each of them is equal, they must share profit and loss equally. And if their investment is not equal, they should divide the profit and loss in proportion to their capital. For example, if two persons become partners, and the capital of one of them is double the capital of the other, his share in the profit and loss will also be double of the other, irrespective of whether both of them do equal work, or one of them does less work, or does not work at all.
2157. If it is laid down in the agreement of partnership, that both the partners will buy and sell together, or each of them will conclude transaction individually, or only one of them will conclude the transaction, they should act as agreed upon.
2158. If it is not specified that which one of the two partners will buy and sell with the capital, then none one of them has the right to transact with the property without the permission of the other.
2159. The partner who has been given the right of discretion over the capital, should act according to the agreement of partnership. For example, if it is agreed that he will purchase on credit, or will sell against cash payment, or will purchase the property from a particular place, he should act according to the agreement. However, if no such agreement is made with him, he should conclude transactions in the usual manner, and carry on in such a way that no loss is suffered in the partnership. Hence, for example, if he has agreed to sell against cash payment, or not carry with him any property belonging to the partnership while travelling, he should act according to the agreement; or if he has agreed to sell against credit, or carry the property while travelling, then he should act accordingly.
2160. If a partner who transacts business with the capital of the partnership, sells or purchases contrary to the agreement made with him and the transaction results in a loss, he will be held responsible for the loss. But if he acts upon the agreement made with him later, then his transaction will be correct. And even if no agreement is made with him, but he concludes the transaction in a manner which is not normal, he will be held responsible. But if he acts according to the usual manner later, his transaction will be correct, unless the partners keep such a clause that he should not act contrary to the agreement made with him in the first case nor against the usual manner as in the second case, because as per this clause, the transaction made by the partner after both the first and the second case will be useless, and as he is not granted permission, he can withdraw his own capital, and if it perishes, he can take its compensation instead.
2161. If a partner who trades with the capital of the partnership, does not go beyond the bounds of his authority, nor is he negligent in looking after the capital, yet unexpectedly the entire capital or a part of it perishes, he is not responsible.
2162. If a partner who trades with the capital of the partnership, declares that the capital has perished and swears on his declaration before a Mujtahid, his word should be trusted.
2163. If all the partners withdraw the permission given by them to one another, for the right of discretion over their respective shares held in partnership, none of them will be allowed the right of discretion over them. And if one of them withdraws the permission accorded by him, the other partners do not have the right of discretion, but the one who withdraws his permission can exercise his right of discretion over the property of the partnership.
2164. If one of the partners demands that the capital invested in the partnership should be divided, others should accept his demand even if the period fixed for the partnership may not have expired.
2165. If one of the partners dies, or becomes insane, or unconscious, other partners cannot continue to exercise right of discretion over investment held in the partnership. And the same rule applies if one of them becomes feeble-minded, i.e. spends his property without any consideration; or if discretion over his property is forbidden by the Mujtahid because of his bankruptcy.
2166. If a partner purchases a thing on credit for himself, its profit and loss belongs to him. However, if he purchases it for partnership, and if the agreement allows credit dealing, its profit and loss belongs to both of them.
2167. If the partners conclude a transaction with a joint capital investment, and they understand later that their partnership was not valid, if the validity of the transaction was not dependent on the mutual consent, i.e. if they would have known that the partnership was not valid, they would have still agreed to have the right of discretion over the property of each other, the transaction will be considered valid, and whatever is gained or lost from the transaction will be shared by both of them. But if the partners would not have disposed agreement to exercise discretion over the property or stock of each other if they would have known that the partnership was invalid, yet if they approve the transaction, it will be valid, and if they disapprove, it will be invalid. And in either case, if any partner has worked for the partnership without the previous intention to work for free, he can collect the wages for his services at the usual rate. Yes, if the act performed by him is useless, he does not deserve any wage, even if the owner of the capital approves of the transaction.