The scholars of Iraq base their position on an analogy with qirāḍ (muḍārabah). They argue that since, in qirāḍ, the working partner may lawfully take whatever share of profit the two parties agree upon—even though he offers nothing in return but his labor—it is all the more fitting, in a partnership where each side supplies both capital and effort, to allot part of the profit in return for the excess of one partner’s work over the other’s, for people differ in diligence just as they differ in everything else.
[The Third Pillar: Assessing Labor in an ʿInān Partnership]
As for the third pillar, labor itself: Mālik treats it as subordinate to capital and therefore does not consider it independently, whereas Abū Ḥanīfah evaluates it alongside capital. I am inclined to think that some jurists permit the partnership only when the two capitals are identical, taking labor into account on the assumption that the partners’ efforts will generally be equal; if the capitals are unequal, one of them will inevitably be short-changed with respect to his work.
For this reason Ibn al-Mundhir said: “The scholars are unanimously agreed on the permissibility of a partnership in which each of the two partners contributes a sum of money equal to that of his companion— namely, silver dirhams or gold dinars—then the two sums are mixed until they become a single, indistinguishable fund. They may then buy and sell in whatever lines of trade they choose, and any surplus or loss is divided equally between them, provided that each conducts his sales in the presence of the other.” His requirement of mutual presence shows that the point is disputed, for the well-known view among the majority is that it is not a condition for every sale to be made in the other partner’s presence.
A Discussion of the Mufāwaḍah Partnership
The jurists differed over the mufāwaḍah partnership. Mālik and Abū Ḥanīfah, in general, held it permissible—though they disagreed on some of its conditions—whereas al-Shāfiʿī declared it impermissible.
A mufāwaḍah partnership is one in which each of the two partners grants the other unrestricted authority to dispose of his property, whether he is present or absent, and this applies, in their view, to every type of asset.
Al-Shāfiʿī’s evidence is that the term “partnership” applies only when the capitals themselves are commingled. Profit is a subordinate branch and cannot be shared unless the principal is shared. If, therefore, each partner assigns part of the profit from property that remains solely his to the other, the contract involves gharar and is invalid; such, he says, is the very nature of the mufāwaḍah partnership.
Mālik, on the other hand, maintains that each partner has effectively sold a portion of his own wealth for a corresponding portion of his colleague’s, after which each appoints the other as agent over the part that remains in his hand. Al-Shāfiʿī responds that partnership is neither sale nor agency.
Abū Ḥanīfah, for his part, reverts here to his basic principle that in an ʿinān partnership only cash capital is taken into consideration.
As for the points on which Mālik and Abū Ḥanīfah differ with respect to the conditions of this partnership: Abū Ḥanīfah requires equality of capital as a pre-condition for mufāwaḍah, whereas Mālik does not, drawing an analogy with the ʿinān partnership.