If one party requests the division of the profit before the recovery of the principal capital, and the other refuses, whose opinion prevails?

General Chapter

Al-Mughni

Book of Partnership

Book 18 · Issue 3 · Bab 1

Open in Qurani

Primary text

The opinion of the refusing party prevails. If the capital owner refuses, it is because he must ensure the security of his principal capital, which the profit is meant to guarantee. If the operating partner (Mudārib) refuses, it is because he might be forced to return what he took at a time when he is unable to do so. However, if both parties consent to the division, it is permissible because the right belongs to them both. This permissibility applies whether they agree to divide all or part of the profit, or if they agree that each takes a known, specified amount for expenditure. If a loss or total destruction of capital occurs afterward, the operating partner must return the lesser of two amounts: either what he took or half the loss of the capital, assuming they divided the profit equally. This is the position held by Al-Thawri, Al-Shafi'i, and Ishaq.

Supporting text

Abu Hanifah maintains that the division is invalid until the capital owner has fully recovered his principal capital. Most scholars agree that if the profit is divided before the capital is repaid, the operating partner must return the profit until the capital owner has recovered his principal.