Definition of wakalah

The word “wakalah” has literally several meanings including looking after, delegation, authorization, preservation and performing a task on behalf of other. Technically, wakalah refers to a type of contract in which one person (the principal) delegates another person to perform some tasks on behalf of him. In other words, it’s an agency contract which authorizes an agent to perform and undertake some dealings on behalf of a principal. There are two contracting parties in wakalah contract: the principal (also known as muwakkil) and the agent (also termed as wakeel). Basically, wakalah is a kind of responsibility whereas the agent has to discharge his delegated task in the way the trustee discharges his responsibility.

Why wakalah is needed?

The Muslim scholars have reached the consensus on the permissibility of wakalah based on evidences from the Quran and the Sunnah of the Prophet Muhammad (peace be upon him). This is due to the fact the people need an assistance to perform certain tasks which they are unable to do themselves. The main purpose of an agency (wakalah) contract is to facilitate economic exchanges and transactions between a principal and third party when the principal is unable to do it personally or he is not willing to perform by himself. Likewise, the agency contract is also needed due to the fact that several times the principal doesn’t have required knowledge, expertise or time to perform certain tasks. In this kind of situation, he needs to delegate someone to discharge some responsibilities on his behalf. For instance, a real estate agent is appointed to sell or purchase a certain property on behalf of the principal. The agency contract is also required in some cases in which someone has to deal with various customers in their different locations. For instance, the takaful (Islamic insurance) agents or travel agents are appointed to deal different customers in different locations.

Types of wakalah

The contract of agency (wakalah) can be divided into two types: general agency and specific agency

General agency (Unrestricted wakalah)

 A general agency is a type of contract in which a principal delegates full authority to an agent to perform a series of transactions on his behalf. For example, a principal may delegate an agent to purchase the house, lease it to others and collect the rental on monthly basis. A director of a company could be an example of general agency. Because he has full authority to perform a series of tasks on behalf of the company.

Specific agency (Restricted wakalah)

It’s a type of agency in which a principal authorizes an agent to do a specific task on behalf of him. For example, someone delegates an agent to sell his car at certain price. In this case, the agent’s authority is limited to sell that particular car at given price.