Agency and brokerage are fundamental contracts in Kuwaiti commercial life. Anyone buying property, closing a deal through a broker or appointing a lawyer needs to know the limits of authority, when an agency ends and how commission is calculated.
Common mistake: signing a general unrestricted power of attorney without specifying powers — the principal may later discover that the agent disposed of assets in ways they did not intend.
Contents
1) Definition and Types of Agency
Agency is a contract by which one person (the principal) appoints another (the agent) to act in their place in a known, lawful transaction.
General agency
Covers all the principal's affairs — but authorises only acts of administration. Dispositions involving transfer of ownership or creation of a real right require a special agency.
Special agency
Confined to a specific transaction or class of transactions. Required for sale, purchase, mortgage and settlement.
Key rule: an agent holding a general power of attorney may not sell, mortgage, donate or settle. Any act beyond the scope of the agency is not binding on the principal unless ratified.
2) Limits of the Agent's Authority
- The agent is bound by the scope of the agency — no expansive interpretation is permitted.
- If the principal sets a selling price the agent may not sell for less.
- The agent may not contract with themselves without the principal's express permission.
- Where multiple agents are appointed, none may act alone unless authorised to do so.
Acts beyond authority: anything the agent does outside the scope of the agency is suspended pending the principal's ratification. If ratified it is effective; if not, the agent is personally liable to the third party.
3) Duties of Agent and Principal
Agent's duties
- Carry out the agency within its limits with the diligence of a reasonable person.
- Keep the principal informed of all actions taken.
- Render an account of the administration and return sums received.
- Not use the principal's funds for personal benefit.
Principal's duties
- Pay the agent's fee if the agency is for consideration.
- Reimburse reasonable expenses incurred by the agent.
- Compensate the agent for damage suffered in performing the agency.
- Honour the obligations of contracts the agent concluded within authority.
Gratuitous vs paid agency: civil agency is gratuitous by default unless otherwise agreed. Commercial agency is paid by default.
4) Termination and Revocation
- Revocation by the principal: the principal may revoke the agency at any time — but if the agency is in the interest of the agent or a third party, revocation requires their consent or a court order.
- Renunciation by the agent: the agent may renounce provided they give the principal reasonable notice.
- Death of either party: the agency terminates — unless its subject matter requires completion.
- Loss of capacity of either party.
- Completion of the task or expiry of the term.
Irrevocable agency: commonly used in real-estate transactions. But it does not mean absolute immunity — if the agent abuses their authority the principal may apply to the court to terminate it.
5) The Brokerage Contract
A broker is a person who mediates between the parties to a transaction to bring it to conclusion in return for commission.
- The broker is not a party to the underlying contract — and is not an agent in the strict sense.
- Their role is limited to bringing the parties together and facilitating the agreement.
- They do not guarantee performance of the contract they facilitated unless specially agreed.
- They must disclose all information known to them that would affect the transaction.
Key distinction: an agent acts in the name of the principal; a broker does not act in anyone's name — they are merely an intermediary facilitating agreement between two independent parties.
6) Entitlement to Commission
- The broker earns commission upon conclusion of the contract between the parties through their mediation.
- If the contract is not concluded, no commission is due — unless the failure was caused by the party who engaged the broker.
- If the commission amount is not fixed, reference is made to commercial custom.
- Commission is borne by the party who engaged the broker unless otherwise agreed.
Common dispute: parties often deny the broker's role after the deal closes. It is therefore essential to document the brokerage agreement in writing specifying the commission rate and the conditions for entitlement.
7) Common Disputes
Agency disputes
- Agent exceeding the scope of authority.
- Revocation of an irrevocable agency.
- Agent's liability for damage.
- Agent's account and sums received.
Brokerage disputes
- Denial of the broker's role after the deal.
- Disagreement over the commission rate.
- Whether the deal concluded "through" the broker.
- Broker concealing material information.
Proof: the brokerage contract is a commercial contract provable by all means of evidence including testimony and presumptions. But a written agreement remains the strongest proof. See evidence in civil and commercial matters.
8) Practical Guidance
When appointing an agent
- Define the agency's scope precisely and avoid general unrestricted powers.
- Set a time limit for the agency.
- Require your prior approval for material dispositions.
- Keep an authenticated copy of the power of attorney.
When dealing with a broker
- Document the agreement in writing with the commission rate.
- Specify whether commission is payable by buyer, seller or split.
- Stipulate that commission is due only on completion of the contract.
- Verify the broker's licence if the activity requires one.
Beware irrevocable powers of attorney: do not sign one unless you understand the legal consequences — you may find yourself unable to deal with your own property for years.
Have a dispute over an agency or brokerage commission? Contact Attorney Meshari Obaid Al-Enezi — Yumnaak Law Firm.
