Agency in contracting is one of the fundamental legal concepts widely used in civil and commercial transactions. It refers to a situation where a person (the agent) enters into a contract on behalf of another person (the principal), with the legal effects of the contract being directly attributed to the principal. The Saudi Civil Transactions Law has precisely regulated this matter, affirming in Article (87) the validity of agency-based contracting, whether the agency is contractual (such as power of attorney), judicial (such as guardianship), or statutory (such as a judge’s authority), unless a specific legal provision prohibits it.
Under the Saudi legal system, an agent does not have absolute discretion in their actions but is instead bound by the limits outlined in the instrument establishing the agency, whether it is a contract, a court ruling, or a statutory provision. Article (88) explicitly states: “An agent may not exceed the limits of their agency as defined in the instrument establishing it.” This restriction serves to protect the interests of the principal and ensures that the agent remains committed to the specific duties assigned, preventing any abuse of authority.
Regarding defects in consent in agency-based contracting, Article (89) stipulates that the agent’s awareness and intent are the determining factors in assessing contract validity concerning issues like mistake, fraud, duress, and knowledge of relevant circumstances. This means that the agent’s awareness of certain conditions affecting the contract is legally binding, and the principal cannot claim ignorance of such matters if the agent was aware of them.
Dual Representation in a Contract
One of the key issues addressed by the Saudi Civil Transactions Law in this context is the matter of an agent representing both contracting parties simultaneously. This issue is explicitly regulated in Article (93), which states:
“An agent may not contract with themselves under their agency unless explicitly authorized to do so, whether they contract with themselves for their own benefit or on behalf of another. However, the principal may approve the contract.”
This ruling aligns with Islamic jurisprudence, where scholars have taken two different positions on this matter:
- The first position: The Hanafi and Shafi’i schools prohibit dual representation entirely, arguing that a contract requires two independent wills and that allowing one person to represent both parties creates risks of manipulation and unfair dealings.
- The second position: The Maliki and Hanbali schools permit dual representation if explicitly authorized, considering that the primary reason for prohibition is suspicion of bias. If such suspicion is removed through clear authorization, then there is no justification for prohibition.
Based on the provisions of the Saudi Civil Transactions Law, its stance aligns more closely with the Maliki and Hanbali schools. The law allows an agent to represent both parties only with explicit authorization or subsequent approval by the principal, striking a balance between flexibility in transactions and preventing abuse or conflicts of interest.
This approach reflects the objectives of Islamic law in regulating contracts and ensuring fairness between contracting parties. The Saudi legal framework neither imposes an absolute prohibition like some juristic opinions nor permits it unconditionally, as unrestricted dual representation could lead to exploitation. Instead, it establishes a balanced and flexible principle that protects parties’ rights while maintaining the integrity of transactions.