WAKALAH ( AGENCY )

Wakalah as the delegation of one person (the

principle) for another (the agent) to take his place in
a known and permissible dealing.
AAOIFI shariah standard has also defined agency as
the act of one party delegating the other to act on his
behalf in what can be subject matter of delegation
This is a contract whereby a person (principal) asks
another party to act on his behalf (as his agent) for a
specific task. The person who takes on the task is an
agent who will be paid a fee for his services.
For example, A customer asks a bank to pay
someone under certain terms. The bank is therefore
the agent for carrying out the financial transaction
and the bank will be paid a fee for its services.

CONDITIONS

The principle (muwakkil)

is the contractual party in the agency relationship.
(principle)
The agent (wakil)
is a person who has the power to affect the legal
position of another person.
The offer (ijab) and acceptance (qabul)
are the essential elements of making a contract.
Must be clear for the contract to be valid.
The subject matter (muwakkal bih)
Things or subject matter that is being entrusted for,
or the business deals involved

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Condition related to contracting parties :
o The agent must be someone that is
capable of performing the responsibility
and fulfill the minimum requirement
o Principle should know the agent
o The wakalah contract ends with the
accomplishment of the entrusted task
or mission.

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Condition related to the object of agency
contract:
The subject matter must be clearly
specified in the contract by the
authorizer.
Should be eligible for legal
authorization.
The entrusted agent will not be held
responsible for any damage expect for
cases of proven negligence or
ignorance on part of the agent.

MODUS OPERANDI
1.

2.

The customer deposit some amount of

money
The bank invest the fund

Bank work as an agent to invest the

money

TYPES OF WAKALAH ;

Wakalah can be divided as follows;

(al-Wakalah al-`Ammah) General Wakalah
This refers to a general delegation of power. For example, if
the principal says: I delegate to you all my affairs. In this
case, the principal has transferred and delegated the power
to the agent. The exemption of the delegated power covers
harmful things to the principal like gift (hibah) or divorce.
Thereby, the agent has no authority to divorce the
principals wife unless the later specifically mentioned that
in the contract.
(al-wakalah al-Khassah) Specific Wakalah
Particular wakalah is made only for certain known
transactions for example, buying or selling certain known
house or a car. The agent is bound to sell or buy that
particular house or car.

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(al-Wakalah al-Muqayyadah) Restricted Wakalah

This is wakalah where the agent has to act within
definite conditions. For example, I delegate you to buy
a house at such a price, or until such a time or based
on instalments. The agent has to strictly observe these
conditions. If the conditions are not met, the
transaction is not binding on the principal.

(al-Wakalah al-Mutlaqah) Unrestricted Wakalah

This is where there is no condition put in place for the
transaction. For example, if the principal says to his
agent: I delegate you to buy a land. Without
mentioning specific price or type, in this case,
according to the majority of jurists and two companions
of Abu Hanifah,( Abu Yusuf and Muhammad alShaibani).

CONTINUES (AL-WAKALAH AL-MUTLAQAH) UNRESTRICTED WAKALAH

the agent has the authority to buy land

within the prevailing practices and customs.
And if he acts contrary to the custom, then
the transaction depends on the approval of
the principal Meaning to say, the agent has
to buy that land in such a way that the
principal will not be cheated. However, Abu
Hanifah argues that an agent is not bound
by the customs as custom differs from one
place to another

MODERN APPLICATION

In the contemporary application, wakalah

contract is widely used in structuring
various Islamic banking, capital market
and takaful fee-based products.
Application of wakalah contract includes:
Wakalah bi al-istismar (agency for
investment)
Sukuk
Letter of Credit