Guide to wakalah in trading — the agent sells on behalf of the principal

In-Depth Analysis

Complementing the purchase agency discussed previously, the author now examines the selling side of Wakalah in trading — where the Muwakkil appoints a Wakeel to sell goods, commodities, or assets on the principal's behalf. This form of agency is prevalent in commodity Murabahah structures, where an Islamic bank that has purchased commodities needs an agent to sell them on the open market, as well as in real estate, trade finance, and corporate disposals. When appointing a Wakeel to sell, the Muwakkil must specify the goods to be sold, the minimum acceptable price (or a fixed price), and any conditions regarding the identity of the buyer, the terms of payment, and the timeframe within which the sale must be completed. If the Muwakkil sets a minimum price and the Wakeel manages to sell above that price, classical Shariah scholars have differed on who is entitled to the surplus. The Hanafi position is that the surplus belongs to the Muwakkil, since the agent was acting on the principal's behalf and the proceeds of the sale rightfully belong to the principal. However, some scholars permit the Wakeel to retain the surplus if this was explicitly agreed upon as part of the compensation arrangement. The Wakeel's authority in a sale agency also extends to ancillary matters such as accepting payment, granting credit to the buyer (if authorized), and executing the transfer of possession. Critically, the Wakeel must not sell the principal's goods to himself or to a related party at a price below market value, as this would constitute a conflict of interest and breach of fiduciary duty. The Hanbali and Shafi'i schools are particularly strict on this point, holding that any self-dealing transaction by the agent is void unless the principal provides explicit, informed consent. In modern Islamic banking, the sell-side Wakalah is an integral part of the Tawarruq (commodity Murabahah) process. The bank purchases commodities on the London Metal Exchange or other platforms and then appoints a broker as its Wakeel to sell those commodities to a third party. The sale proceeds are then used to fund the customer's financing needs. The integrity of this sell-side Wakalah — particularly the genuine agency relationship and the real sale of actual commodities — has been the subject of extensive Shariah debate, with the AAOIFI and OIC Fiqh Academy both issuing guidance on the permissibility conditions.