Sharika (partnership: ownership and contract, its kinds, conditions, effects and end)

In language sharika is the mixing of two shares. The technical sense has two kinds: ownership partnership, in which two or more hold one thing or its equivalent in common, and contract partnership, by which two properties are mixed in fact or by ruling so that each partner may dispose of the other's share. ¹

Ownership partnership divides into a debt held jointly (such as a sum owed by a merchant to two people) and a non-debt partnership (in goods or benefits); and into voluntary and compulsory forms, the compulsory form arising when bags burst and their contents mix. ^{2 9} If one partner mixes another's property with his own without permission, the Hanafis, Malikis, most Shafi'is and Hanbalis hold that he owns it and owes its equivalent; some jurists hold the property stays shared. ⁹ Each partner may sell his share to his partner, and a shared property is not given away without division unless it cannot be divided. A partner may sell his share to an outsider without consent according to the Hanafis and Shafi'is, except where harm follows. ¹⁰ A partner may not use the shared property in the presence of the other without his leave; one who plants shared land without leave is treated as a usurper. ^{11 12} For upkeep of an indivisible shared thing, such as a single animal, a well or a canal, the partner may be compelled to share the cost according to the Hanafis and Malikis, and the Shafi'is and Hanbalis hold so in one view. ^{12 13 14} When a partner collects part of a shared debt, it counts as collected for the whole, and the silent partner may claim his share from the collector. ^{15 16}

By equality, contract partnership is mufawada (full partnership), in which the Hanafis require equality in capital, disposal, profit, surety and capacity to act, and 'inan (limited), in which no such equality is required; the Hanbalis do not require it in 'inan. ¹⁷ The Malikis do not require equality in mufawada and let each partner authorise the other to act without consulting him at each step. The Hanbalis give mufawada two senses: all four kinds together, or joint liability for everything that falls to both, provided neither takes rare gains or fines. ^{18 19} By generality, the Hanafis divide it into unrestricted and restricted. In mufawada every trade is open to the partners; the Malikis alone recognise the compelled partnership (sharikat al-jabr), in which a bidder may enter a purchase in the market, subject to conditions such as trading in the place of purchase and not outbidding the buyer. ^{19 20}

The contract is formed by offer and acceptance. The Hanafis, Malikis and Hanbalis accept an action that shows consent in place of words, while the Shafi'is do not accept action in place of words. ^{20 21}

A partnership requires that the matter contracted on be deputisable, and that each partner be competent to appoint and be appointed, so a minor not licensed to trade cannot enter one; and it cannot be formed over free-for-all acts such as cutting firewood, gathering wood or hunting, according to the Hanafis. ^{3 22} The profit must be a known proportion of the whole; if not, the contract is void. A fixed sum of profit for one partner is void: the Hanafis hold a fixed wage paid from outside the capital valid while the condition is void, and Ibn al-Mundhir reports agreement that no partnership stands with a fixed sum of profit for one partner. ⁴ Mufawada requires capacity for surety; a minor cannot enter it even with his guardian's leave. ²³

Abu Yusuf requires equality only in capacity for agency and surety, and so allows a mufawada between a Muslim and a dhimmi; he sees no difference except disapproval, since a non-Muslim does not guard against forbidden dealings. The Shafi'is disapprove of a partnership between a Muslim and a non-Muslim; the Malikis and Hanbalis allow it on condition that the non-Muslim acts only in the presence of his Muslim partner, and the Hanbalis hold the non-Muslim liable where a forbidden contract is shown. ²⁴ The Hanafis also require that work is not imposed on one of the two partners: if it is, the mufawada is void, since that contradicts equality. ^{24 25}

These conditions apply to both mufawada and 'inan:

• The capital must be a present thing, not a debt, since the trade by which profit is gained cannot be conducted with debt. ²⁵
• The capital must be money (athman): the minted gold and silver, or currency in use. The Hanafis hold that goods cannot be capital. Muhammad and most Shafi'is distinguish measured, weighed and countable fungible goods, which they allow once mixed within one kind. The Hanbalis and some Shafi'is require minted coin; the Malikis allow gold and silver, and goods with money; Ibn Abi Layla allows goods in general. ^{25 26 27}
• The capital must be present: the Hanafis require presence at the purchase, not at the contract; the Hanbalis require presence at the contract; the Malikis treat the absence of a cash capital as voiding the partnership unless the trade had not yet begun. ^{26 27 28}
• Mixing: the Hanafis and Hanbalis do not require it; the Malikis do not require it for validity, treating constructive mixing (such as keeping both sums in one custody) as enough; the Shafi'is require it, so that unmixed sums make no partnership. ^{27 28}

• Equality in capital: the Hanafis require it for as long as the partnership lasts. If one partner inherits or otherwise receives money, the partnership turns into 'inan. Goods that are not money do not break it, and collecting debts in money does. The Malikis and Hanbalis do not require equality in capital. ^{28 29 30}
• Capital must include all the property of both partners that is fit for it; if one keeps a suitable item outside the capital, the partnership becomes 'inan. ^{29 30}
• Unrestricted disposal: each partner may trade in any kind of trade. This is a Hanafi condition; a partnership restricted to certain trades becomes 'inan. The Malikis and Hanbalis do not hold this condition. ^{30 31}

• The subject must be work, since work is the capital here. It is enough that the partners agree to undertake contracts, either for both or one of them. If one partner undertakes a job and does it alone, the wage is shared equally in mufawada and as agreed in 'inan. ^{30 31}
• Example of invalidity: a laundering partnership in which one partner supplies the equipment and the other does all the work. The Hanafis hold it void, so the worker takes the wage and owes the equipment owner the fair rent; the Hanbalis allow it. Partnerships in which the work is done with one partner's equipment in the other's premises are valid by all, and the wage is shared. ^{31 32}
• The Malikis require the equipment to match the partner's share in the work; Sahnun and his circle require the equipment to be jointly owned. The Shafi'is void the partnership whenever work is imposed on one or some partners. ³²
• The work must be something that can be hired: forbidden acts (such as funeral wailing, indecent songs, and preaching or witnessing for pay) cannot be partnered. Later jurists allowed teaching the Qur'an and religious sciences for necessity. ^{32 33}

The Hanafis, with al-Qadi and Ibn Aqil among the Hanbalis, require that profit follow the partners' shares in the price guaranteed; the shares follow the agreement at formation. The Hanbalis hold that profit follows what they agreed, since trade is work that varies in quality and quantity. ^{33 5}

General effects

• Joint ownership: the subject of the contract, and what it yields, becomes shared between the two contracting partners. ⁵
• The contract is not binding, except in Malikite doctrine. Either partner may end it alone. The Hanafis hold that ending takes effect only from the other's knowledge of it, while the Shafi'is and Hanbalis do not require his knowledge. Al-Tahawi, Ibn Rushd and some Hanbalis require the capital to be in cash for ending; the Malikis hold the partnership binding until the money is realised or the work is done. ^{5 34}
• If the capital is goods when the partnership ends, the partners may divide it or sell it and divide the price; if one asks for division and the other for sale, division is granted, according to the Hanbalis. ³⁴
• A partner's hand is a trust (yad amana), so he is not liable unless he transgresses or is negligent. His word on the amount of profit and loss, and on the loss of the capital, is accepted with an oath. He need not give a detailed account; a general statement and an oath suffice. ^{34 35}
• Transgression includes breaking a partner's instruction: one who sells on credit after being forbidden must pay his partner's share. A partner who dies without disclosing the state of the trust property is liable from his estate, except where the heir knows the facts; the Malikis drop the liability after ten years. ^{35 6}
• Profit is due only by capital, by work or by guarantee. It cannot be stipulated that one partner alone takes the profit without capital, work or guarantee. ⁶
• In capital partnerships, profit follows capital, and loss always follows capital. In mufawada profit is equal; in 'inan it follows the capital, or a share may be set for the partner who takes on the work. The Hanafis allow a difference in profit with equal capital if work is imposed on both; the Malikis and Shafi'is require profit in proportion to capital. ^{6 36 37}

Effects common to mufawada and 'inan

• Both remain valid with different kinds or qualities of capital, according to the Hanafis; the Malikis require the same kind of money. ³⁷
• Both remain valid without mixing (Hanafis, Malikis, Hanbalis) and without delivery of the capital, unlike a mudaraba. ^{37 38}
• Each partner may buy and sell for cash or on credit, appoint agents, hire workers, deposit the capital, travel with it without leave when the road is safe (Abu Hanifa, Muhammad and the Hanbalis), and cancel a sale. The Shafi'is forbid sales on credit without leave and forbid appointing agents without leave. ^{38 39 40 41 42}
• A partner may not give or lend partnership property without express leave. Later jurists allowed gifts of food and drink and what people customarily exchange. A partner may not pay another's zakat without leave, nor mix partnership property with his own without leave. A general permission covers ordinary trade acts such as pledging, travel and mixing, but not gifts, loans or any destruction or transfer without return. ^{42 43}

Effects specific to mufawada

• The two partners are treated as one person for trade and its incidents, since mufawada includes agency and surety: each is agent for the other in what is due to him and surety for him in what is due from him. ⁴³
• Whatever one partner buys is for the partnership, except the essential needs of the partner and his household, which he pays for himself. The Malikis disregard a partner's personal expenses when the two households are of similar size and standing. ^{43 44}
• A partner's admission of a trade debt binds the other as surety, according to the Hanafis; the Malikis limit this to admissions made while the partnership lasts, and an admission of property or a debt after it ends binds only the partner's own share. ^{44 45}
• The rights of a contract are shared: either partner may demand delivery, collect the price, return defective goods or claim against a stolen sale, whether or not he made the contract. A sale in the partnership's name binds both. The Malikis hold that a transaction against the partnership's interest binds the other only if he ratifies it. ^{45 46}
• A mufawada partner may join another partnership in part of the partnership's property, but this is not allowed by al-Hasan's report of Abu Hanifa's view; the Malikis allow a fixed portion. ^{46 47 48}

Effects specific to 'inan

• Not everything one partner buys belongs to the partnership: a partner without capital in hand cannot buy for it, and four conditions must hold for a purchase to bind the partnership: he holds enough of the capital to pay, the money is in cash if he buys for cash, the goods are of the trade's kind, and his partner has not expressly excluded him. ^{48 49}
• The Shafi'is and Malikis accept a partner's claim that he bought for himself, and the Hanafis hold that a debt a partner incurs does not bind the other unless he stands surety. ^{49 50}
• The rights of a contract belong to the partner who made it, not to the other or to outsiders. Pledging or taking a pledge of partnership property needs the contracting partner's leave. A partner may not sell below the fair price; if he does, the sale binds his own share and the buyer or seller has the option to cancel. ^{50 51 52}
• One partner may not join another partnership without leave, since a thing does not extend its like. He may appoint an agent, and handing partnership property to an outsider to work on it without leave is a breach. ⁵²

Effects of work and joint-standing partnerships

• A work 'inan takes the rules of mufawada in two matters: a contract accepted by one partner binds both jointly, and damage or defect caused by one binds both. The liability is joint for each of these. ^{52 53}
• In other matters a work partnership is like 'inan: under Hanafi doctrine, an admission of debt binds only the one who admits it unless the partnership is mufawada; the Hanbalis give effect to an admission only for property in the partner's hand. ⁵³
• Profit follows the agreed shares; loss is shared only in proportion to the work each has undertaken. The Hanbalis take silence as equal shares, the Malikis insist on proportion to work. ^{53 54 55}
• The Hanafis and Hanbalis do not require the work to be of one kind or in one place; the Malikis require one kind, and later Malikis drop the condition of one place. ^{54 55 56}

An invalid partnership is one lacking a condition of validity, such as capacity to appoint and be appointed, a subject fit for agency, or a known proportion of profit. ⁵⁶ Examples include partnership in taking free-for-all resources (firewood, reeds, hunting, drawing water). The Hanafis hold it void; the Malikis and Hanbalis allow it. Partnership in an animal or vehicle owned by one partner and worked by the other for a share of its income is void for the Hanafis, Malikis and Shafi'is, and the worker has the fair wage. Partnership in animals, silkworms or hens for their produce is void for most jurists; Ahmad and al-Awza'i allowed it. ^{56 57 58} Another example is the partnership of debts, in which each buys on credit and the other is a partner: for the Shafi'is each buys for himself; for the Malikis what they buy together is shared. ⁵⁹ Effects: the Hanafis hold that an invalid partnership does not give partners the powers of a valid one; the Shafi'is treat it as a contract of agency that continues. Where one partner owns the capital, the income belongs to him, and the other receives a fair wage; where both supply capital, income is shared by capital, and each partner recovers the fair wage for work done for the other unless he gave it free. ^{58 60 61 62} Appendix: where one partner of an invalid partnership is absent and the other buys from a seller, the Malikis distinguish whether the seller knew the partnership was invalid (then he claims only the share), knew of the partnership but not its invalidity (then he claims the whole price), or knew nothing of it (then he claims the whole from the partner who bought, or only the share from the other). ^{62 7}

General causes

• Withdrawal by one partner, discussed above under the non-binding character of the contract. ⁷
• Denial of the partnership by one partner ends it for the Hanafis; a partner who then trades with the other's share is liable for it. The Shafi'is hold that deliberate denial ends it, by analogy with agency. ⁷
• Madness of one partner: a total madness lasting a month or a year (the jurists differ on the period) ends the partnership, since it rests on agency. ⁷
• Death of one partner ends it for the dead partner; if others survive, it continues among them. An adult heir may choose between division and renewal; if the estate owes debts or bequests, renewal waits for them to be settled. ^{63 64}
• Apostasy: according to the Hanafis, a judicial ruling that the partner has joined the abode of war ends the partnership as a legal death; apostasy alone suspends it, and if the partner returns to Islam it resumes; if he dies or is killed, it is shown to have ended from the day of apostasy. ^{63 64}
• Breach of the contract's terms, such as going beyond the place it was limited to, which voids it in proportion to the breach. The Malikis attach only a right to reverse the transaction and to hold the breaching partner liable. ^{64 65}
• Imposition of guardianship on a partner for prodigality; the Shafi'is add guardianship for insolvency, which is partial. ⁶⁵

Specific causes

• Loss of capital in capital partnerships: the Hanafis hold that loss of all the capital voids the partnership, because the object of the contract has perished; if one partner's capital is lost before purchase, the other keeps his capital for himself. The Hanbalis hold that a loss falls on the partnership in general. The Malikis take a middle view: loss of one partner's capital is his own, and the partnership continues. ^{65 8}
• Loss of equality in mufawada, in capital or in capacity, turns it into 'inan for the Hanafis. ⁸
• Expiry of a limited term: the Hanafis (apart from al-Tahawi) and the other jurists accept time limits. ⁸

The next heading on p.10064 is شروع (commencement), which is a separate headword.