Agency And The Act Of An Un-commissioned Agent (Fodooli)

Group Members:

Madiha RafiqM.Wahaj Ashraf

Fahad MehmoodShahnawaz Bhamani

Syed Bilal Wasti

INTRODUCTIONAgency Contract

Contract which creates relationship between a principal and the agent is called agency contract

Principal:The person who authorizes another

person to act on his behalf is called principal.

Agent:A person who acts on behalf of another

person is called agent.

EXAMPLESA order b to buy 10 kg sugar on behalf of ASomeone hire agent to purchase house on his

behalfPerson hires an agent to sell his watch A person appoints an agent to make contracts for

himA person appoints lawyer to appear in the court

on his behalf

ELEMENTS OF AGENCY

Subject matterParties to the contractForm of agency

Forms of agencyImmediate agency: contract become

effective as soon as it is entered.Conditional agency: here the validity of

contract is made subject to fulfillment of certain condition

Future agency: contracts become valid at specific date.

Free or limited agency: in case of free agency ,the agency is free of conditions.

Continue…Two things to focus

Interest of principalCustomary practice

Limited AgencyAgent have to work according to specific

limitationsDisposing through defined conditions

Conditions on the agentMinor and lunatic cannot become an agentThe agent should be aware of his status as an agentThe acts of agent should be as prescribed in the

agency contractConditions on the principalThe principal should possess legal capacity to enter

into the contract.Lunatic person and minor(partially capable) cannot

become the principal, if minor becomes then agreement proceeds with the approval of guardian.

Conditions on the subject matter

The subject matter should be known to agent e.g. : problem in car.

It should be owned by principal e.g. of house.

It should be something that can be disposed of through agency e.g. any kind of financial contract.

Subject matter should be permissible by shari’ah and it should not involve shari’ah banned practices e.g. buying of alcoholic drinks or criminal activities.

Types of AgencyGeneral Agency:

Includes all methods of disposing of assets. Interest of the principal and customary

practice well observed.Donation is not permissible unless principal tell

to do so. Example; Insurance Agent

Continue…Absolute Agency:

Selling or purchasing at low or high price than market price not permissible.

Neither barter nor differed payment sales cannot perform unless with consent of principal.

Bounded by customary practices and interest of principal.

Continue…Paid Agency:

Permissible in Shari’a.

Remuneration could be predefined in the contract or to be paid accordance with the customary service.

To leave remuneration for agency undetermined and allow agent to take unspecified amount from principal is not permissible.

More than specified remuneration can be paid to agent as a

motivation.

If the agent refrain the contract for no reasonable excuse and has done beneficial part of work, than he would be paid for the specific part of job he had performed.

Incase of any loss due to the refusal of agent, he will be liable to indemnify the principal.

If principal forces the agent to discontinue job with any reasonable excuse, then principal have to pay full remuneration on which they agreed.

In case of damage of the subject matter, principal however will pay remuneration to agency.

If damage has occur by agency then agency will indemnify.

Continue…Binding versus Non-Binding Agency:

Agency is not binding as both parties have right to revoke the contract.

However, it can bind in the following circumstances. When agency is paid. When the certain time period is defined. When it involves the right of others.(e.g. Repayment of

Loan) Unless agent or principal not able to perform the task

because of injury.

Continue…Temporary Agency:

Agency has no time limit.Agent can be terminated any time. After a certain time (defined in the contract),

agency become invalid without any request from both parties.

Due to time limit, agency restrain the agent to start new operations.

Commitments of PrincipalPrice and expenses should be borne by

principal in contract (transportation, taxation, storage, maintenance, insurance e.t.c).

Principal should repay the amount of remuneration to agent.

Commitments of AgentIncase of any damage to the subject matter,

agent is not liable to indemnify unless he is responsible for that loss.

Breach of contract must not involve the interest of principal like selling at higher price or buying at low price.

In shari’a,It is not permissible to work for both parties at

the same time.Conflict will occur.

Continue…Agent must not guarantor of investment or it

turns into interest based transaction.

Could provide personal guarantee independently(of the agency contract) if guarantee is not stipulated in the contract.

In this case agent will remain liable as guarantor even he discharged from acting as an agent.

Conditions on the AgentDeal with self and relativesDeal with relatives which are not under the his

guardianship and nor agent’s spouse is permissible.Unless with the permission of principal and without

any injustice and favoritism.Agent cannot deal with himself, son/daughter under

guardianship or with his partner in the same contract.

Agent should not act for both parties.An agent may purchase what he has bought for

principal by way of offer and acceptance.

Continue…Monitoring of the Provision and the

Right of ContractMonitoring the provision of the contract is

the responsibility of principal whereas monitoring the activities stipulates in the contract is the responsibility an agent.

Continue…Breach of the Contract Stipulations

In the case if agent breaches the contract, principal will latter continue the contract or declare as invalid.

For example: price, on spot or differed payment, possession or transfer of ownership.

Agent cannot purchase or sale at low/high price than market or price set by principal, if agent do so than he has to compensate.

Appointing a Sub-AgentAgent has no right to appoint sub-agent

without permission of principal.

Termination of subagent does not impact on the first agent, however, principal can terminate him.

Appointing more than one Agent

If more than one agent appointed in same contract but they cannot take sole decision unless principal tell to do so.

If they have been appointed by separate contract, agents have right to perform individual responsibilities unless principal require joint action.

Expiry of AgencyContract will expire;

When agent or principal will die or loses legal capacity.

When principal terminate the agent.When agent refuse to continue the work.When agent complete the task or principal

perform task himself.When the principal no longer owns the assets.When incidence has occur which lead to expiry

of contract.

Un commissioned Agent(Fodooli)An un commissioned agent is a person who

intervenes or interferes in others' affairs without being invited or called on.

In shari’ah terminology, an un commissioned agent sale is a type of sale undertaken by a person who is not a principal, agent or custodian with respect to the sale contract. 

Act of an un commissioned agent depend on the approval of owner.

Continue…In case of approval contract becomes

effective.In case of denial un commissioned agent have

to indemnify the owner.The ruling of the un commissioned agent are

applicable to all financial contracts.Example;