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Madiha Rafiq
M.Wahaj Ashraf
Fahad Mehmood
Shahnawaz Bhamani
Syed Bilal Wasti
INTRODUCTION
Agency 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.
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
ELEMENTS OF AGENCY
 Subject matter
 Parties to the contract
 Form of agency
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.
Continue…
 Two things to focus
 Interest of principal
 Customary practice
 Limited Agency
 Agent have to work according to specific limitations
 Disposing through defined conditions
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.
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 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
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 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.
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.
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 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.
Continue…
 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.
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-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.
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 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.
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;

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Agency and the act of an Uncommissioned Agent (Fadooli)

  • 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.
  • 7. Continue…  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
  • 11. 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.
  • 12. 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.
  • 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.
  • 14. 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.
  • 15. 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.
  • 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.
  • 18. 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.
  • 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.
  • 20. Continue…  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.
  • 21. 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.
  • 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.
  • 26. 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;