How is profit divided when a partnership contract (Musharakah or similar arrangement) is deemed invalid (fasid)?
General Chapter
Al-Mughni
Book of Partnership
Primary text
When a partnership contract is invalid, the profit is divided based on the ratio of the initial capital investments (r'uus al-amwal). Furthermore, each party is entitled to claim compensation for their labor (ajr 'amalihi) from the other. This ruling is explicitly stated by Ahmad (Hanbal) concerning Mudarabah, and it is chosen by Al-Qadi. This aligns with the position of Abu Hanifa and Al-Shafi'i. The justification is that the stipulated condition for profit sharing (al-musamma) is nullified in an invalid contract, similar to how a sale contract is nullified if the sold item perishes in the buyer's possession. However, if the capital of each partner is distinct and their profit share is known (ma'lum), then each receives the profit corresponding to their capital. If a distinct profit share arises from a portion of the capital while the rest is mixed, they receive that clearly distinguished profit share, and their share of the profit from the remainder of the capital.
Supporting text
Al-Sharif Abu Ja'far holds that the profit should be divided according to the initial stipulation, and neither party is entitled to claim compensation for labor from the other. He treats the invalid contract as valid in all its rulings. His evidence rests on Ahmad's statement that if they partner in goods (urud), the profit is divided according to their stipulation, arguing that since this contract can be valid despite uncertainty (jahalah), the stipulated term remains effective in the invalid contract, analogous to marriage contracts.