A relative of mine partnered with me in money on the condition that I give her 5% of the profit of her money, and I return her principal if I incur a loss?

Question:
He says: Honorable Shaykh, may Allah grant you success. A questioner says: A relative of mine partnered with me with some money on the condition that I trade with it along with my money. She partnered with me from it. One of my relatives. My relatives, yes. With some money on the condition that I trade with it along with my money, on the condition that I give her five percent of the profit of her money, and that I am required to return her principal even if the trade incurs a loss, as a favor to her. Is this transaction permissible in the Shari'ah?

Answer:
No, this is a mudarabah (profit-sharing partnership) that is not permissible if it is stipulated that her principal is returned to her in full. This is not permissible because the principal may be lost or entirely gone, so the principal is not returned to her. If the principal exists, it is returned to her, or if some of it exists, the remainder is returned. But committing to return the principal, this is not permissible. As for the five percent, the phrase "five percent" should not be used; if he said "half of a tenth," he said: "Trade with this money for half a tenth of the profit," because five percent means half a tenth of the profit, yes.