English
In a previous entry, we saw how wakalah agreements – a Shariah-compliant agency contract where one party has the authority to act or represent another – can be broadly applicable to any number of activities so long as they meet certain criteria and follow the principles of Shariah.
As such, there is a variety of wakalah agreements. These can generally be divided into four types, governing scope, payment, results and activity. These can be used in combination to better achieve the desired service.
Read more about: The Basic Guide of Wakalah Contracts
Definition: In a wakalah mutlaqah (or unrestricted wakalah), the agent (or wakeel) has the ability to act on behalf of the principal in various matters without specific limitations or restrictions being set. It is very wide in scope, with the agent being allowed to take a wide range decisions and actions that are within the general scope of the agreement.
Type: Scope.
Use cases: This is an equivalent agreement to a power of attorney – a commonly-used legal agreement that grants a lawyer, trustee or appointed guardian, the power to manage an estate of a client. In a business context,
this can include having a business manager or chief executive acting on behalf of the owners in day-to-day operations. In the context of finance, asset managers can use it to manage the portfolio of a client without needing to consult with them on activities.
Definition: A wakalah Muqayadah (or restricted wakalah) runs counter to the walalah mutlaqah, as the agent is restricted in scope and activity to very narrow parameters laid out in the agreement.
In it, the agent is limited to specific tasks, assignments and transactions and cannot deviate from them. If necessary they must seek the approval of the client.
Type: Scope.
Use cases: An example of this form of agreement is any type of brokerage agreement where the agent must purchase or invest in a single asset, such as buying an apartment.
Definition: As noted previously, payment is not a requirement in a wakalah unless specifically laid out. Any type of wakalah that does involve payment, however, will generally fall under a wakalah bel ujrah (wakalah with a fee), as it governs payment conditions.
In it, the client and the wakeel agree on the amount, mode and method of payment, which can include a fixed fee paid out in cash, or a performance-based arrangement, whereby the wakeel is paid on commission.
Type: Payment.
Use cases: This can be applied in type of wakalah where payment is concerned, including brokerage fees, lawyer fees, or commissions paid to real estate agents.
Definition: In a wakala bel istithmar (investment wakalah), the agent is hired to invest the funds on behalf of the principal in a Shariah-compliant manner.
Type: Activity.
Use cases: Financial institutions (banks, investment banks, mutual funds, hedge funds, etc.), fund and asset managers are typically hired through this to invest client assets.
Definition: This agreement sees the agent act on behalf of the client to help them obtain financing, whether its to find and obtain grants or interest-free loans, setting up any shariah-compliant financing agreements, structuring financing deals or issuing sukuk.
Type: Activity.
Use cases: This is used when hiring an Islamic bank that can arrange financing and issue sukuk.
Definition: In this agreement, the client hires a wakil to procure goods and services on their behalf. In it, the agent is responsible for sourcing, purchasing and delivering the good or service assigned to them in this agreement.
Type: Activity.
Use cases: This can be used by businesses when hiring a procurement agent, who can source their goods for them. It can also be used for hiring agents, who can staff up their businesses.
Definition: In this agreement, the agent is hired to sell, advertise market and promote the activities of the principal. In it, the agent may receive payment based on commission.
Type: Activity.
Use cases: This can be used to hire a sales team to sell the wares of the client, or it can be used to hire an advertising agency to market the client’s goods and services.
Definition: A wakalah qada’ia (legal wakalah) is used when a client looks to hire legal representation. In it, the agent acts on their behalf in lawsuits, legal formalities and other legal matters.
The wakil can sign documents on behalf of the client, negotiate settlements, represent them in court, and act on their behalf in legal proceedings.
Type: Activity.
Use cases: This is used when hiring lawyers, and other legal representatives.
Definition: A Wakalah bel waqf (endowments wakalah) involves the hiring of an agent to manage the Islamic endowments and charitable activities and funds of the client. The agent is tasked with administering the endowments to meet the objectives and causes of the principal.
Type: Activity
Use cases: This is used when hiring a manager for an Islamic charitable foundation or hiring an administrator for a school or mosque that is owned by a charitable endowment.
Definition: A wakalah bel kafala (guarantee wakalah) is a combination of a wakalah agreement and a kafala agreement, whereby the agent not only guarentees the provision of a good or service but must also guarantee a result.
In there is compensation involved, the compensation will be contingent on the performance and outcome of the agent.
This agreement can come in handy when considering that the agent in a wakalah is not personally liable for any losses. This could be a way to incentivize the agent to perform as promised.
Type: Results-based.
Use cases: Any activity whereby the client wants to ensure that the activity of the agent has generated results.
Disclamer:
This post is for educational purposes only, and the Firm does not directly or indirectly provide these services.
