I shared a folder with another user and gave him edit permission. I put a zip file in the folder. The user reported that he was unable to extract the zip file directly in the shared folder. When he moved the folder outside the shared folder, he was able to extract the contents without any problem. I was also able to extract the contents directly in the shared folder.
FYI I'm on windows and the other user is on Mac. We are both using Office 365.