What are the valid types of Mufawadah partnership?
General Chapter
Al-Mughni
Book of Partnership
Primary text
The Mufawadah partnership is of two types. The first type, where partners combine all forms of partnership such as 'Inan (capital), Wujuh (guaranty), and Abdan (labor), is valid because each component type is valid individually. The second type, where partners agree to share in assets acquired by inheritance, buried treasure (Rikaz), or lost property (Luqatah), and where each partner is liable for the financial consequences of the other's actions such as indemnity for injury (Arsh), guarantee for usurpation (Daman Ghasb), value of destroyed property, guarantee payments, or suretyship, is invalid.
Supporting text
Scholars holding the view that the second type is invalid include Al-Shafi'i. Conversely, Al-Thawri, Al-Awza'i, and Abu Hanifah validated it, and this view is also attributed to Malik. Abu Hanifah stipulated conditions for its validity: both partners must be free Muslims, their initial capital must be equal, and they must include all their assets of the partnership's type, specifically dirhams and dinars. They used as evidence the report that the Prophet commanded excellence in negotiation ('Ifawadamtum, fa-ahsinu al-mufawadah'). The rebuttal against this invalidity argues that since the contract is invalid between a Muslim and a non-Muslim or between two non-Muslims, it must be invalid between Muslims, similar to other void contracts. Furthermore, it contains uncertainty (Gharar), as one may be obligated for actions one cannot cover, and it includes rare acquisitions not supported by known evidence.