To begin with, I would like to extend my greetings to readers at the advent of the holy month of Ramadan. A scholar friend who is also a good runner sent me a different Ramadan greeting. He said: “Sohail, the Taqwa (piety) marathon has just commenced, so try your best to reach the finish line on time.”
We are discussing Wakalah or agency and you are reading the 9th article on the subject. Moving on, I will explain a few other aspects on Wakalah in this article.
Once an agent has been selected to be appointed by the principal to carry out a certain assignment for and on behalf of the principal, the agent may request the principal prior to signing the agency contract to grant him the permission to appoint a subagent.
The situation arises when the agent believes that he will need a specialist to accomplish part of the assignment without which the agent shall not be able to deliver the goods to the principal in a desired manner.
An example could be a rent-collecting agent who may find a tenant a hard nut to crack since he has failed to square up the bounced cheques for the defaulted rent amount despite frequent visits and requests by the agent. Here, the agent shall need to appoint a legal counsel as the subagent to deal with the matter by sending a notice of initiating criminal proceedings against the tenant. Obviously, such a notice cannot be sent by the agent himself.
An agent cannot appoint a subagent if the agency contract does not contain granting such permission to the agent. This is akin to an Ijarah (lease) agreement which may not allow the lessee to sublease the asset to a third party.
However, if the agency contract is devoid of such permission and a situation arises, the agent may request the principal at that time to grant him the permission and if the principal approves, the agent can hire the subagent. The same thing is allowable in Ijarah too where the lessor can allow the lessee to sublease the property based on an ad-hoc consent.
What if the subagent defaults in completing the assigned task? Of course, the main agent shall bear his performance risk since the appointment of the subagent is always at the risk and responsibility of the main agent who acts as the subprincipal in the subagency agreement. Also note that there is no contractual relationship between the first principal and the subagent.
Nonetheless, the situation shall be different if the principal choses the subagent and instructs the agent to appoint him as the subagent. In this case, your guess is correct that the main agent shall not be responsible if the subagent defaults since it was not chosen by the main agent.
As for the fee paid to the subagent, the main agent shall share part of the fee it received from the principal with the subagent. If you remember the discussion on agency fee, the subagent may also be appointed without a fee but then it will heighten the risk unnecessarily since the subagent shall not be bound to complete the task and may abandon it incomplete.
Another point I would like to explain today is whether Shariah allows appointing numerous agents at the same time by a principal for different assignments/tasks. Yes, it is permitted provided each of them focuses on the given assignment without poking their noses into what the other agents are doing or how they are faring.
The multiple agents can sign one agency agreement with the principal or seek separate contracts for the sake of clarity over the assignment, avoidance of legal implications if one of the appointed agents defaults and the confidentiality aspect since no agent would like to exhibit the commercial aspect of the agency or his strength or specialization in such close environs.
There may also be a possibility that the principal appoints one of the agents as the main agent with the mandate to control the other agents who all have entered into the same agency contract.
If that happens, the other agents shall be the subagents to that agent but without entering into a contractual relationship between them. If any of the agents defaults, he will be directly liable to the principal and not to any other agent.
What do you think happens if the principal or the agent or the subagent dies — if they are humans — and any one of them goes bankrupt or is wound up in the case of an entity?
Bye for now until we meet again.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of the Dubai Islamic Economy Development Centre, nor the official policy or position of the government of the UAE or any of its entities. The purpose of this article is not to hurt any religious sentiments either consciously or even unwittingly.
Sohail Zubairi is the senior advisor with the Dubai Islamic Economy Development Centre. He can be contacted at [email protected].
Next week: Discussion on the subject of Wakalah shall continue.