Is Business Partner Entitled to Profit Only After Selling Goods?
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Is Business Partner Entitled to Profit Only After Selling Goods?

Questioner

Luqman

Reply Date

Nov 28, 2017

Question

I have signed a contract of partnership with someone. Is he entitled to any profit in case goods were not sold, knowing that entitlement to the profit is earned after goods are sold?

Mufti

Answer


Is Business Partner Entitled to Profit Only After Selling Goods?

In the Name of Allah, Most Gracious, Most Merciful. 

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.


In this fatwa:

1- The business partner is not entitled to receive the profit save after the goods are sold and converted into cash.

2- Nevertheless, it is permissible that partners agree on dividing profit, upon selling the goods, as down payments.


Answering your question, the General Iftaa’ Department in Jordan, states the following:

In principle, profit should not 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 cannot 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.

 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 is not 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 did not 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.

Almighty Allah knows best.

Source: https://www.aliftaa.jo/QuestionEn.aspx?QuestionId=3337#.WhwSbkqWbIU

 




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