They formed a partnership for trade, one of them supplying the capital and the other supplying a space and equipment, and his labour, then they incurred loss; who should bear the loss?

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Principles of Fiqh

Jurisprudence and Islamic Rulings

Transactions

Business and Financial Transactions

Business Partnerships

They formed a partnership for trade, one of them supplying the capital and the other supplying a space and equipment, and his labour, then they incurred loss; who should bear the loss?

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EN

Question

 

I formed a partnership with a friend of mine to trade in sheep. The conditions were that he would supply the capital, and I would supply the space and equipment, and labour, and profits and losses were to be shared, fifty-fifty. In the end, because the price of sheep dropped, the project ended in loss. After reading your fatwas, I realize that it is not permissible to share the loss and that the loss is only to be borne by the one who supplied the capital. What should we do? Can I give him half of what he lost, so that he will not be harmed? If we want to carry on with the project and buy more sheep, can we work out the profit after subtracting it from the previous capital, as if the project is still ongoing?

Answer

Praise be to Allah.

 

Firstly:

 

The basic principle with regard to partnerships is that losses are to be borne commensurate with the share of money invested. As for profits, they are to be shared according to what the partners have agreed upon.

 

If two people contribute capital to the project, then losses are to be borne commensurate with the share that each of them put into it.

 

If two people form a partnership, one of them contributing c

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