Partnership: Transactions Conducted in an Invalid Partnership

Practical Laws of Islam as per the teachings of Ayatullah Sistani

Ruling 2169

If one of the partners conducts a transaction with the partnership capital and later realises that the partnership was invalid, in the event that permission for the transaction was not contingent on the validity of the partnership in the sense that had they known that the partnership was not valid they would still have consented for the others to have disposal over the property, the transaction is valid. In such a case, whatever is acquired from the transaction belongs to all of them. However, if it was not such [i.e. permission for the transaction was contingent on the validity of the partnership], then, if those who did not consent for the others to have disposal say, ‘We consent to the transaction’, the transaction is valid; otherwise, it is void. In each case, whoever from among them worked for the partnership and did so without an intention to work for free can take wages for his efforts at the standard rate, taking into consideration the shares of the other partners. However, in the event that the standard rate is more than the amount of profit he would take on the assumption that the partnership was valid, then he can only take that amount of the profit.

-Ayatullah Sistani, Practical Laws of Islam, Partnership (Shirkah)