The document discusses agency contracts and the roles of principals and agents. It defines key terms like principal, agent, and agency contract. It describes different types of agencies and provides examples. It outlines elements of agency contracts like subject matter and parties. It discusses conditions on principals, agents, and subject matter. It also covers agent commitments and contract termination.

1. Group Members:
Madiha Rafiq
M.Wahaj Ashraf
Fahad Mehmood
Shahnawaz Bhamani
Syed Bilal Wasti

2. INTRODUCTION
Agency Contract
Contract which creates relationship between a principal and
the agent is called agency contract

3. 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.

4. EXAMPLES
 A order b to buy 10 kg sugar on behalf of A
 Someone hire agent to purchase house on his behalf
 Person hires an agent to sell his watch
 A person appoints an agent to make contracts for him
 A person appoints lawyer to appear in the court on his
behalf

5. ELEMENTS OF AGENCY
 Subject matter
 Parties to the contract
 Form of agency

6. Forms of agency
 Immediate 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.

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 Two things to focus
 Interest of principal
 Customary practice
 Limited Agency
 Agent have to work according to specific limitations
 Disposing through defined conditions

8. Conditions on the agent
 Minor and lunatic cannot become an agent
 The agent should be aware of his status as an agent
 The acts of agent should be as prescribed in the
agency contract
Conditions on the principal
 The 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.

9. 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.

10. Types of Agency
 General 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

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 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.

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 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.

13.  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.

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 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.

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 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.

16. Commitments of Principal
 Price 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.

17. Commitments of Agent
 Incase 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.

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 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.

19. Conditions on the Agent
 Deal with self and relatives
Deal 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.

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 Monitoring of the Provision and the Right of
Contract
Monitoring the provision of the contract is the
responsibility of principal whereas monitoring the
activities stipulates in the contract is the responsibility
an agent.

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 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.

22. Appointing a Sub-Agent
 Agent 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.

23. 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.

24. Expiry of Agency
 Contract 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.

25. 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.

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 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;