Silent Partnership: Validity of a Silent Partnership with Musālahah Adjustment on Profits
Practical Laws of Islam as per the teachings of Imam Khamenei
Silent Partnership: Validity of a Silent Partnership with Musālahah Adjustment on Profits
English:
Question #1893:
A businessman received a sum of money from another as part of the capital of a silent partnership. It was agreed that the recipient gives the provider of the money a particular percentage of the profit. The businessman added the received amount to his existing capital and carried on doing business with the combined funds. However, at the outset he knew that it would be difficult to determine the monthly ratio of the profit the added amount could make. Thus, both the parties agreed to do muṣālaḥah over any decrease/ increase in the amount. Is the silent partnership contract legally sound?
Answer #1893:
The inability to determine the amount of the monthly profit that could be made from the invested capital should not affect the validity of the silent partnership contract provided that it fulfils all the other conditions that are necessary for its validity. So, there is no objection to that if the two parties agreed on investing the money by way of a silent partnership according to the legal framework and then agreed to make muṣālaḥah regarding dividing the made profit, i.e. after they gained the profit, the capital owner agrees to exchange his share of the profit for a certain amount of money in a ṣulḥ contract.
-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Silent Partnership