Subject : A Partner is Entitled to Profit only after Goods are Sold
Fatwa Number : 3337
Date : 21-11-2017
Classified : Partnership in Business
Fatwa Type : Search Fatawaa

Question :

I have signed a contract of partnership with someone. Is he entitled to any profit in case goods weren`t sold, knowing that entitlement to the profit is earned after goods are sold?

The Answer :

All perfect praise be to Allah, The Lord of The Worlds, and may His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

In principle, profit shouldn`t be divided amongst partners save after the goods are sold, converted into cash and profit achieved because profit protects capital against loss, and this is achievable after concluding the business upon which the partnership was established. Moreover, profit can`t be estimated for sure before the goods are sold.

Consequently, a partner becomes entitled to the profit after that. However, if partners agreed on dividing profit before selling the goods, then that is permissible, and these sums are considered down payments. This was approved by Hanbali jurists. For more details, please check {Moghni al-Mohtajj, 545} by Ibn Qodama. Also, it was stated in {Khashaf al-Qhina`, 3/519}: "If the two partners have agreed on dividing the profit or part of it or that each of them takes a certain amount daily, then that is permissible."

In conclusion, the partner isn`t entitled to receive the profit save after the goods are sold and converted into cash. Nevertheless, it is permissible that partners agree on dividing profit, upon selling the goods, as down payments. Therefore, if the selling didn`t take place, then no profits should be divided because the partnership contract rests on sharing profit as well as loss, and that can only materialize after the goods are sold. And Allah knows best.



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