Agency and the Act of an Uncommissioned Agent (Fodooli): The Shariah Basis for the Standard

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1. Shari ’ah Standard No. (23): Agency and the Act of an Uncommissioned Agent (Fodooli) Appendix (B) The Shari’ah Basis for the Standard ■ Permissibility of agency by Shari’ah is demonstrated in the noble Qur`an, where Allah, Exalted be He, says: {“...So send one of you with this silver coin of yours to the town, and let him find out which is the good lawful food...”}.(2) Similitude of this incidence to agency is that the one who was sent to the town to buy the food was the agent of the others.(3) In Sunnah, a Hadith was narrated by Urwah Al-Bariqi (may Allah be pleased with him) who said that the Prophet (peace be upon him) had given him one dinar to purchase a sacrificial sheep for the Prophet,(4) an incidence that involves agency. As regards to Ijma’ (consensus (consensus of Fuqaha Fuqaha), ), the author of the “Al-Bahr Al-Bahr Al-Zakhkhar Al-Zakhkhar” and others have demonstrated permissibility of agency. Also, in common sense agency is well demonstrated in terms of the help of others that one may sometimes need, especially for things that he cannot do himself.(5) ■ Permissibility of initiating agency in any wording which indicates initiation thereof is based on the fiqh principle that “What matters in contracts are intentions and meanings rather than wording and constructions”. Therefore, whatever indicates delegation, which is the essence of agency, is acceptable for initiating the contract. The underlying reason for consideration of silence as acceptance in case of non-paid agency is that acceptance in this case is considered to have been given implicitly(6). Effectiveness of the agency contract can be linked to fulfillment of a certain condition or to a future date because agency is delegation of power rather than an act of ownership (2) [Al-Kahf (The Cave): 19]. (3) Related by Al-Bukhari, Abu Dawud and Al-Tirmidhi: “Al-Talkhis Al-Habir” [3: 304]. (4) “Nayl Al-Awtar” [5: 352]; “Fath Al-Qadir” by Ibn Al-Humam [6: 554]; “Al-Mughni” by Ibn Qudamah [5: 203]; and “Al-Bahr Al-Zakhkhar” Al-Zakhkhar”. (5) “Al-Bahr Al-Ra`iq” by Ibn Nujaym [7: 153]. (6) “Al-Minhaj” by Al-Nawawi [2: 164]; and “Fath Al-Qadir” [6: 553]. 624
2. Shari ’ah Standard No. (23): Agency and the Act of an Uncommissioned Agent (Fodooli) ■ ■ ■ ■ ■ ■ transfer that could be required immediately. On the contrary, a person may need to tie delegation to the occurrence of a certain incidence, or to a specific date in the future. The principal shall possess the right of disposing of the asset in question because the agent is going to derive such right from him; hence the former cannot delegate a right that he does not own(7). As for the detailed rulings pertaining to partial legal capacity of the agent, these rulings hold true for all dealings including agency. The ruling that agency should be known to the agent is manifested in the fact that knowledge in this case is a necessity for completion of the process of offer and acceptance, and hence distinction between a real agent and an uncommissioned agent. Imposition of four conditions on the subject matter of agency is necessary to facilitate conclusion and validity of the contract that cannot be attained without these four conditions namely: existence of the asset, asset ownership by the principal, possibility of disposing of the asset through agency and the absence of any Shari’ah restriction that prevents the deal. Permissibility of paid agency stems from the fact that agency is a useful work for which the agent has the right to ask remuneration. An agent who is known to be providing agency services only against payment is entitled to remuneration even when remuneration is not explicitly mentioned in the contract, because a customary practice is acceptable as long as it does not encounter a Shari’ah restriction. Non-paid agency is also permissible because it is considered, in this case, as a form of donation. The justification for the clauses relating to remuneration of the agent is that such clauses are essential to make remuneration well known at either the time of the contract conclusion or in the future. Temporary uncertainty about the exact amount of the remuneration is overlooked because knowledge of the amount in the future will leave no room for dispute.(8) Permissibility of adding a certain share of the profit to the principal remuneration rests on the fact that such addition does not distort knowledge of the principal (7) “Al-Lubab” by Al-Maydani [2: 139]. (8) “Al-Insaf ” [5: 403]; “Al-Rawdah” “Al-Rawdah” by Al-Nawawi [4: 301]; “Al-Khurashi” [7: 5]; “Al-Fatawa Al-Hamidiyyah” [1: 324]; and “Tadhkirat Al-Fuqaha`” by Al-Hilli [2: 114]. 625
3. Shari ’ah Standard No. (23): Agency and the Act of an Uncommissioned Agent (Fodooli) ■ ■ ■ ■ ■ ■ amount. In this case, the commitment to offer the agent a certain share of the profit is in the sense of a pledge to offer donation. Thus, the offered share of the profit can be considered as a conditional gift, or as Ju’alah. There is another viewpoint that considers the pledged share of the profit as a subsidiary addition to the principal remuneration, and concludes that in a subsidiary we can overlook what we cannot overlook in the principal. Agency is, originally, non-binding because it is an act of delegation that neither the principal nor the agent should be forced to continue. The exceptional cases of binding agency have been dealt with to preserve whatever rights of others involved therein. Moreover, an exceptional treatment is also needed for paid agency that should be subjected to the rulings on Ijarah, as well as the case when there is a pledge not to revoke the contract within a specific period because breaching such commitment may cause injury to others. It is permissible to specify a time limit for agency, because agency is nothing but a contract that could have a specific duration, like Ijarah for instance. The justification for defining the commitments of the principal and the agent is – as set out in the Standard- the need to honor contractual obligations of agency and pursue the acts and liabilities that emerge from it. The agent is considered as a trustee in holding the asset because he works for the interest of others (the principal) and trusteeship is the normal status in similar engagements. Moreover, the principal’s act of choosing the agent for the purpose in question is an indication of his good faith on him, and therefore the principal should not reverse that good faith, except for misconduct, negligence or breach of the contract’s limitations. Impermissibility of combining agency and guarantee in the same contract, is based on their opposing implications, in addition to the fact that guarantee by the agent entails a suspicion of Riba (usury). Therefore, the status of the agent as a trustee contradicts with provision of guarantee. Impermissibility for the agent to represent both parties to the contract – as per the Hanafi School and the predominant view in the Shafi’i School – is to avoid assigning both offer and acceptance to the same party, and hence prevent any probable self bias. Adopting the viewpoint of these two Schools is, therefore, most suitable for Institutions to avoid malpractices and 626
4. Shari ’ah Standard No. (23): Agency and the Act of an Uncommissioned Agent (Fodooli) ■ ■ ■ ■ ■ misleading formalism in making transactions and prevent overlapping of guarantees. Monitoring of the contract’s provisions is assigned to the principal because he is the principal party of the contract, whereas the agent, who is just a contractor, has to monitor the activities of the contract. Suspension of an agent act that breach the contract without adding to the benefit of the principal, until obtaining the principal’s approval conforms to the normal Shari’ah practice of exerting the best possible effort to rectify an act of a Muslim.(9) The act here remains pending approval of the principal to safeguard him against injury. An agent who breaches the contract by selling or buying at a price other than the price agreed upon has to indemnify the principal for the difference between the price he accepted/offered, and the market price. The justification for this ruling is the need to establish justice and compensate the principal for loss, without committing the Shari’ah-banned practice of accepting capital on pre-fixed return, which entails a suspicion of Riba. This case has been discussed in “Al-Mughni” by Ibn Qudamah, who referred also to another viewpoint that suggests revocation of the deal.(10) Agency in selling a mortgaged asset is treated as an exceptional case where the contract does not expire on the death of the agent (agency to be pursued by inheritors), in order to preserve the rights of the mortgagee. Moreover, such agency is originally irrevocable before fulfillment of its purpose, for thereto is attached others’ rights. The justification for adopting the fiqh viewpoint that advocates suspending the act of the uncommissioned agent rather than revoking the deal (for uncertainty about its confirmation by the principal), is the fact that an act of a Muslim should, as far as possible, be preserved from cancellation.(11) Preservation of the act against cancellation is possible here through suspension, in addition to the fact that the act may prove to be useful to the (9) “Al-Mughni” by Ibn Qudamah [5: 135-136]. (10) Ibid. (11) In “Al-Bada`i’” [5: 177], it is stated: “The act of the Muslim should, as far as possible, be perceived as correct”; and in “Fath Al-Qadir” [2: 445], it is stated: “Making the best possible effort to rectify the act of the Muslim”. 627
5. Shari ’ah Standard No. (23): Agency and the Act of an Uncommissioned Agent (Fodooli) owner of the property in question. In this connection, Ibn Al-Humam said: “When the case is viewed from the standpoint of Gharar (uncertainty), the contract appears to be invalid, whereas if it is viewed from the standpoint of benefit and absence of harm the contract appears to be permissible. Therefore, Ibnul Humam supports reconciliation of the two standpoints by suggesting permissibility with suspension.”(12) It has also been narrated that the Prophet (peace be upon him) said: “Whoever can offer a benefit to his Muslim brother, should do so”. If, however, the act turned to be harmful to the principal, he can revoke it by virtue of the right he has. Moreover, permissibility of suspending the act of the uncommissioned agent until approval of the principal can also be derived from the Hadith narrated by Hakim Ibn Hizam (May Allah be pleased with him) stating that the Prophet (peace be upon him) gave him one dinar so as to buy a sheep that the Prophet (peace be upon him) wanted to sacrifice. Hakim purchased the sheep for one dinar and sold it for two. Then he purchased another sheep for the Prophet (peace be upon him) for one dinar and handed over the remaining dinar to him. The Prophet (peace be upon him) took the remaining dinar and spent it on charity and then prayed to Allah to bless Hakim’s trading business.(13) (12) “Fath Al-Qadir” [5: 317]. (13) Related by Abu Dawud and Al-Tirmidhi. 628