English
One of the most common types of contractual relationships in the Islamic world is wakalah. Derived from the Arabic word to act, protect or remedy on behalf of someone else, it is the act of contractually conferring authority to someone else to act within certain, legally-defined parameters in service of someone else.
Wakalah is used in a host of interactions, whether they be commercial – as is used by banks, traders, lawyers, brokers, and others – and social, such in a marriage contract.
As such, it is more than likely that someone interacting in the Islamic world would run into one form or another, and so, understanding its fundamentals and guidelines would be crucial.
Wakalah is basically a service contract in the vein of an agency. In it, a principal (or client) hires the services of an agent (or wakeel) to perform a service on their behalf that the client cannot perform for themselves (either because of lack of time, ability, knowledge or expertise).
A wakalah contract will be set for a duration of time and may possibly include a fee for their labor (though that is not necessarily required). As noted above, business services that can be offered under a wakalah contract run the gamut of sale and purchase, leasing, hiring, borrowing and lending, guarantees, pledging and gifting, receiving and making payments, and litigation, etc.
A wakalah contract can be for a specific task or assignment as well as for something general – akin to a power of attorney when it comes to a client’s assets. Although for some commercial tasks, such as buying or selling or borrowing, it is best that the details of the contract, such as the condition, quality and date of delivery be agreed upon in order to avoid disputes.
A wakeel can only act within the parameters set by the client. Any activity restricted by the client cannot be undertaken. In the absence of any details, the wakeel can act in whatever manner they see fit to achieve the terms of the wakalah provided they meet the validity conditions, which we note below.
The contract fee for an agent’s services must be agreed upon on the outset of the contract. This may come in the form of a cash payment or commission. The fee can also be fixed or it can be performance-based, ensuring that certain metrics are achieved for the payment to occur. It is worth noting, that payment for service is not necessarily required, unless it is specifically mentioned in a wakalah.
A wakil can be usually appointed without pay in matters concerning family, such as appointing a member of the family to manage family assets or appointing a family member to engage in social agreements, such as a marriage contract.
A wakeel cannot be held personally liable for any adverse outcomes that may occur when acting as an agent for the client – especially if they acted within the scope and limitations set by the client in the wakalah agreement.
Any losses that may take place in furtherance of their duties and within the scope of the contract will be incurred by the principal.
A wakalah can be terminated at any point in time by the principal or the wakeel. The only exception is through a Binding Wakalah, where certain terms and conditions must be met before the contract is considered terminated. Unless stipulated otherwise, the death of either party typically nullifies a wakalah.
A wakeel is allowed to sub-contract services to another agent if they deem it necessary to achieve the objectives of the wakalah. This, however, can only be done in conjunction with and the approval of the principal.
For a wakalah to be considered valid, it must follow the principles of Shariah. Tasks and activities laid out in the wakalah agreement must not include dealing in haram products or illegal activities, engaging in any interest-bearing debt, engaging in overly excessive speculation and gambling.
The relationship in a wakalah must be built on mutual consent and must be entered into voluntarily by the principal. Any wakalah signed under duress would not be considered legally valid.
The principal of the wakalah must be of sound mind and must be able to consent to the contract. A principal who is not legally sane or a minor cannot enter into a wakalah.
The wakalah contract is also built on mutual trust and assurances that the wakeel will act in the best interest of the principal in any situation and must discharge their duties honestly, faithfully, and with integrity.
The wakeel must also ensure they do not exceed their mandate. The wakeel is accountable to the client for their actions under the wakalah and is legally responsible for breaching any terms in the contract.
In keeping with the condition of trust and accountability, the wakeel may not partake in any actions that could constitute a conflict of interest. For example, if a wakeel has been hired to conduct a sale of a good on behalf of the client, they may not be the buyer in the transaction.
Disclamer:
This post is for educational purposes only, and the Firm does not directly or indirectly provide these services.
