4 - Capacity and Authority to Contract

Summary

this chapter will discuss the regulation of personal capacity (ahliya) and agency under the civil law of Qatar and will not deal with the issue of competence pertinent to foreign investors or specific competence of state (or administrative) entities, even if said competence concerns contractual freedom. The chapter deals with the most important types of agency and hence several are missing from this discussion. It will become clear from the discussion relating to personal capacity that several (but not all) principles underpinning classical Islamic law have been incorporated in the Qatari CC, despite the fact that they are to a large degree antiquated and out of touch with Qatar’s international obligations.

4.1 Introduction

As a liberal legal system, Qatari law provides for significantly broad contractual freedom. Even so, several limitations are placed not so much on the substantive exercise of such freedom, but on its procedural dimension. Hence, natural persons considered under the law as lacking partial or full competence will have their contractual will substituted (and sometimes even replaced) by a guardian. In equal manner, foreign or other entities desirous of trading in Qatar must do so through a registered Qatari commercial agent. As a result, this chapter will discuss the regulation of personal capacity (ahliya) and agency under the civil law of Qatar and will not deal with the issue of competence pertinent to foreign investors,¹ or specific competence of state (or administrative) entities, even if said competence concerns contractual freedom.² The chapter deals with the most important types of agency and hence several are missing from this discussion.³ It will become clear from the discussion relating to personal capacity that several (but not all) principles underpinning classical Islamic law have been incorporated in the Qatari CC, despite the fact that they are to a large degree antiquated and out of touch with Qatar’s international obligations.

4.2 Legal Personality

4.2.1 Legal Personality and Competence to Contract

Legal personality, competence or capacity are all synonyms for the deceptively simple notion of having rights and duties under a legal system and a capacity to enforce or have them enforced against the entity in question. The CC confers such capacity upon both physical (or natural) persons, as well as legal persons – the latter under certain circumstances. Just like other legal systems, the Qatari CC further permits delegation of capacity upon a third entity through a contract of agency. It should be noted from the outset that the rights and duties that comprise one’s personality may vary in quantity and quality from those enjoyed by other entities. By way of illustration, minors cannot, as a rule, enter into real estate transactions in their own name and corporations cannot enter into marriage contracts.

Article 39 CC stipulates that personality commences upon birth – assuming the person is alive – and ceases upon death. These in turn are the outer limits of contractual freedom. Even so, the foetus in utero is capable of rights, provided it is born alive.⁴ There is nothing in Qatari law, however, suggesting that the foetus can contract in its name or through a third entity.

Legal personality, as described above, and competence, although generally synonymous and overlapping in nature, may at times give rise to subtle differences. An entity, such as a physical person, may generally enjoy broad legal personality (i.e. rights and duties) and yet be temporarily prevented from exercising said rights. Such incapacity may come about as a result of consent (e.g. A agrees with B not to engage in business deals with C and D), or by the operation of the law. In the latter case the law might prevent certain people from their ordinary freedom of contract because of perceived defects in their consent, or because of a defective personal status.⁵ Article 109 CC goes on to say that persons declared by law to be totally or partially incapacitated shall not possess legal capacity to conclude a contract. Incapacity will be explored in more detail in a subsequent section of this chapter. Absence or loss of legal capacity, subject to the exceptions mentioned in subsequent sections,⁶ invalidates offer and acceptance.⁷

From the point of view of Qatari private international law, article 11(1) CC provides that the legal capacity of persons is governed by the law of the country to which they belong by reason of their nationality.

Paragraph 2 of article 11 CC, however, goes on to note that in respect of financial transactions concluded and being effective in Qatar, if one of the parties is an incapacitated foreigner, where ‘such incapacity is due to a cause neither apparent to nor easily detected by the other party, such cause shall have no effect on the legal capacity of such foreigner’.

4.2.2 Age of Majority and Discretion

Minors are capable of contracting in their own name. The CC distinguishes between the age of majority (bulūgh) and the age of discretion (rushd) or maturity. The age of majority is 18 years, irrespective of sex.⁸ Article 49(1) CC stipulates that a person that has attained the age of majority and in possession of its mental faculties possesses full legal personality to contract in its own name and perform legal acts.⁹ Such capacity is suspended under the same provision where the courts have imposed guardianship or custody of the minor and its property, or where the minor is otherwise incapacitated.¹⁰ Article 189 of the Qatari Family Law No. 22 of 2006 stipulates that: ‘A person who has attained the age of majority by attaining eighteen years of age shall have full legal capacity, unless he is placed under guardianship’.¹¹ However, considering the nature of the family laws, Welchman reminds us that the setting of an age of full capacity is related to the notion of marriage.

The age of discretion is generally perceived as the milestone in a minor’s life whereby some degree of maturity has been achieved. As a result, the minor is no longer considered worthy of full protection (i.e. guardianship or other mechanism) and can enter into certain contracts in its own name. Although the age of maturity is a matter of assessment on a case-by-case basis, article 50(2) CC makes it clear that no person below seven years is to be considered as having reached the age of discretion. In respect of particular contracts, the CC combines the minor’s age with its discretion/discernment.¹² Hence, article 112 CC stipulates that a discerning sixteen-year old in lawful possession of his or her property may validly undertake any acts related to the management of such property. Article 115(2) CC states that a discerning fifteen-year old possesses partial competence (as the court may place restrictions for the minor’s interest) to dispose of wages earned. Moreover, article 116 CC allows discerning sixteen-year olds to conclude wills.

Maturity or discretion is not only a question of age. Article 50(1) CC clarifies that lack of discretion may also arise by reason of ‘imbecility (al-maʿtūh) or insanity’, in which case the person is considered incompetent to exercise its civil rights, including the absolute freedom to contract. Mental incapacity will be considered more fully in a subsequent section of this chapter.

Article 51 CC further limits capacity to contract by stating that persons attaining discretion but not majority, as well as persons that have achieved majority but who are ‘prodigal or negligent’ lack capacity.¹³ No doubt, the latter limitation (i.e. prodigality [safah] and negligence) can be abused and does not sit well with western notions of contractual freedom. It is important for the higher courts and the legislator to either specifically limit the application of this provision, or otherwise eliminate it.

4.3 Capacity of Minors

‘Minors’ are not defined as such, albeit it is clear that the term encompasses persons that have not attained the age of majority. Article 110 CC specifies that dispositions of property by a minor lacking discretion shall be deemed void. This is clearly the general rule and hence persons contracting with minors must ensure that discretion is fully evident and attested, or that its absence is well compensated by guardianship or other mechanism. Where a minor possesses discretion, disposition of property is valid where its effects as a whole are without doubt to the advantage of the minor.¹⁴ If the effects of such disposition are not overwhelmingly beneficial to the minor, it will be declared void, unless immediately ratified by the minor’s guardian, the courts, or the minor itself after attaining the age of majority.¹⁵ In the previous sections it was pointed out that a discerning sixteen-year old may dispose of property lawfully in its possession. Equally, discerning minors entrusted with the administration of property may validly enter into any contract in respect of said administration, save for lease agreements whose duration is longer than a year.¹⁶ Obligations assumed by minors not authorised to transfer, arising from their signatures on bills of exchange as drawers, endorsers or in any other capacity, shall be null and void. This is true even where the holder of the bill of exchange acted in good faith and without realising that its counterparty was a minor.¹⁷

Apart from capacity to administer and dispose property, which is generally unrestricted, the capacity of discerning minors to conclude an individual employment contract may be limited by a request to the court of the guardian, trustee, or other interested person if this is in the benefit of the minor.¹⁸ In such cases, the courts may terminate the contract.

From the point of view of Qatari private international law, article 22 CC provides that where a person is not Qatari, all matters relating to natural and legal guardianship, trusteeship/receivership and custodianship, and systems established to protect minors, incapacitated persons and absent persons, shall be governed by the law of nationality of the person in question.

4.4 Partial Competence

The CC distinguishes between mental incapacity and incomplete or partial competence. The terminology is not always consistent. Mental incapacity is defined to in article 52 CC as possessing no, or defective, capacity. Incomplete or partial competence concerns the contractual freedom of persons that otherwise possess an effective mental capacity, but who are nonetheless deemed as ‘suffering from inattentiveness or prodigality’.¹⁹ Incomplete competence also arises in those situations where discerning minors possess limited contractual freedom, as is the case with individual employment contracts. Prodigality and inattentiveness are not defined in the CC and do not constitute recognised disabilities or other forms of impairments that inhibit or otherwise disadvantage contractual freedom.²⁰ Prodigality has its origins in classic Islamic law where there was considerable agreement between scholars concerning persons squandering the property of their family, therefore justifying interdiction.²¹ The competence of persons considered prodigal and inattentive is equated mutatis mutandis to that of discerning minors. This is expressly stipulated in articles 120 to 125 CC.

It is not clear how they operate in practice,²² but in any event, they should under no circumstances be employed arbitrarily by the courts to diminish or limit contractual freedom. Limitation of contractual freedom on these two grounds constitutes a significant violation of personal liberty and fundamental human rights²³ and is inconsistent with Qatar’s international obligations. Article 119 CC stipulates that persons with partial (incomplete) competence entering into contracts while claiming to be fully competent may rely on their partial incompetence to escape the legal effects of their offer or acceptance. Exceptionally, however, minors fraudulently concealing their partial incompetence in a way that leads to a reasonable belief of full competence are liable for any damages caused under their contract.

The place of article 126 CC just after the provisions relating to discerning minors suggests that it is applicable thereto and not to the provisions on mental disability which follow. Article 126 CC allows natural guardians (e.g. parents), legal guardians (e.g. kafils)²⁴ and curators (qawama) to contract on behalf of discerning minors within the limits of the law.

4.5 Mental Incapacity

Article 118(1) CC suggests that persons suffering from insanity (junūn) and imbecility,²⁵ (as well as prodigality (safah) and inattentiveness, examined in the previous section) lack contractual freedom altogether. In fact, the courts are under an obligation to interdict (hajr) such persons and the pertinent judgments must be recorded in special registers.²⁶ Although insanity is not defined,²⁷ article 119 CC spells out its effects. A person suffering from insanity and dementia and interdicted on this basis by the courts lacks the competence to enter into contracts. Any contract entered after the interdiction is null and void. Where the contract was entered prior to the judicial interdiction, it shall only be null and void if the other party was aware of the condition or if it was a matter of common knowledge.

The outright and absolute constriction of contractual freedom to persons with mental disabilities constitutes a fundamental violation of article 12 of the UN Convention on the Rights of Persons with Disabilities (CRPD), which has been ratified and supported by Qatar.²⁸ Article 12 CRPD states in relevant part that

1. 2. States Parties shall recognize that persons with disabilities enjoy legal capacity on an equal basis with others in all aspects of life.

2. 3. States Parties shall take appropriate measures to provide access by persons with disabilities to the support they may require in exercising their legal capacity.

3. 5. Subject to the provisions of this article, States Parties shall take all appropriate and effective measures to ensure the equal right of persons with disabilities to own or inherit property, to control their own financial affairs and to have equal access to bank loans, mortgages and other forms of financial credit, and shall ensure that persons with disabilities are not arbitrarily deprived of their property.

Article 12 CRPD clearly suggests that persons with disabilities, and irrespective of the disability, are presumed to possess legal competence and personality no less than non-disabled persons, which necessarily encompasses contractual freedom. That disabled persons may require assistance under certain circumstances does not entail that such assistance should substitute their decision-making authority; rather, it should be merely assistive.²⁹ Article 127 CC seemingly supports decision-making assistance (as opposed to substitute decision-making) to persons with physical, sensory, or mental disabilities, where they are unable to ‘understand the contents or surrounding circumstances of a contract’. In such cases the courts have authority to appoint a judicial assistant to ‘assist such person as may be necessary in its best interests’. Article 128 CC stipulates that where a disabled person under court-ordered judicial assistance undertakes a transaction not authorised by the assistant, this shall be declared invalid. Such an outcome is clearly incompatible with the rationale of assistive decision-making, thus rendering the assistance in article 127 CC in the form of substitute decision-making.³⁰ In extreme cases of ‘severe debilitating illness’ the courts are authorised to substitute the will of the disabled person through that of the judicial assistant, if failure to act threatens the interests of the disabled person.³¹ This is a welcome step towards more assistive decision-making and should be encouraged by the courts in line with Qatar’s obligations under the CRPD.

4.6 Capacity of Juridical/Legal Persons to Enter into Contracts

Article 54 (chapeau) CC sets forth the principle that juridical persons enjoy juridical (otherwise known as legal) personality.³² This means that, inter alia, they can contract in their own name and incur liability solely in their own person. Paragraph 2 of article 54 CC specifies that the will of the juridical person shall be expressed by its representative, which shall be a natural person.³³ The provisions on agency in the CC apply as residual rules to the authority of the juridical person’s representative. More specialised laws may, and usually do, set more specific agency requirements.³⁴ Articles 295 and 296 of the Commercial Companies Law, for example, stipulate that the authority of the managers or the board of directors ends with the dissolution of the company.³⁵ In equal measure, a limited partnership company is managed by the general partners in tandem, one of them, or a non-partner manager. It is not permissible for silent partners to take over the management, even on the basis of a power of attorney.³⁶

The authority to act as a representative of a juridical person may be express or implied. Express authority is typically conferred by an entity’s articles of association (by-laws) or other corporate resolutions. In some instances default authority may be conferred by the law, as is the case with article 242 of the Commercial Companies Law No 11 of 2015, whereby, unless otherwise stated in the by-laws, managers of limited liability companies possess full managerial authority and their acts, including contracts signed by them on behalf of the company, bind the company.³⁷ Implied authority may arise either because a particular action is necessary to carry out one’s express authority, or because it has otherwise been granted outside the framework of a company’s by-laws, for example by tacit approval or orally. A representative or employee of a legal person, while transacting in a personal capacity, does not bind the legal person.³⁸

Legal persons, chiefly corporate entities, may also engage with agents that are external to the legal person. The Court of Cassation has held that where a power of attorney is issued by the representative of the legal person, the agent (e.g. a lawyer) submitting an appeal in the courts must deposit with its proxy document proof of the capacity of the legal representative of the legal person who authorised it to file the appeal until the court ascertains that capacity.³⁹

The Court of Cassation, relying on Article 3 of the Commercial Registration Law, emphasised that a company branch does not, by registration in the Commercial Registry, acquire a legal personality that is independent from that of the parent company.⁴⁰ All rights and duties acquired by a branch equally encumber the parent company and form part of its own rights and duties and all liability is borne by the parent; so, it alone has the capacity to sue and be sued.⁴¹

From the lens of Qatari private international law, article 12(1) CC stipulates that the legal personality of foreign legal persons shall be subject to the law of the state ‘where they have established their respective headquarters’. However, in accordance with paragraph 2 of article 12 CC, where a foreign legal person conducts its main activity in Qatar, even if its headquarters are abroad, it shall be subject to Qatari law.

4.7 Agency

Agency is a common feature of the law of contract, which serves to facilitate business and transactions by substituting the principal with another entity to act on its behalf. While agency is recognised in all legal systems as a contractual relationship between principal and agent, as indeed in Qatar,⁴² there is some divergence as to the boundaries of authority conferred on the agent by contract or the operation of law. The legal consequence arising from the agreement of agency is that the principal is bound by contracts entered by the agent acting within the scope of authority conferred upon him or her.⁴³

4.7.1 Agency as a Contract and Power of Attorney

The establishment of an agency relationship is not a unilateral act and hence must be predicated on the same criteria underlying contracts, namely, offer, acceptance and an intention to be bound.⁴⁴ Moreover, the agent must possess sufficient capacity to act on behalf of the principal.⁴⁵ The agreement establishing an agency relationship requires some degree of formality under Qatari law.⁴⁶ It must be made in writing, signed by the principal, the agent and a witness, as well as be duly authenticated by the authentication department of the Ministry of Justice.⁴⁷ The authority conferred by the principal on the agent is known as a power of attorney (POE),⁴⁸ which itself may be of a general nature, or otherwise concern well-specified actions. The formality of the POE does not serve to invalidate the bona fide actions of the agent undertaken without an authenticated POE. Rather, it is meant to ensure that third parties transacting with the agent are aware of its authority, as well as that the agent does not arbitrarily exceed the authority conferred by the principal. As a result, where the principal commits a mistake that leads a bona fide third party to believe that the agency upon which the agent contracted with this third party is still valid, the agent’s actions are binding on the principal.⁴⁹ This is in line mutatis mutandis with article 209 CC, whereby an employer is liable for the acts of its employees during the ordinary course of their employment.⁵⁰

Article 82(2) CC makes it clear that if the principal announces its agent’s authority to third parties and such announcement departs (exceeds) from the authority granted under the agency agreement, the authority under the principal’s announcement supersedes the authority in the formal agency agreement.⁵¹ The formality of the instrument/deed containing the POE is confirmed by article 90 CC, which compels the agent to surrender the deed immediately upon its expiration.

4.7.2 The Authority of the Agent

As a general rule, the agent is limited by the powers conferred upon him or her by the POE.⁵² The authority of the agent, where this is unclear, will be assessed on the ‘texts and the circumstances in which the power of attorney was issued and the circumstances of the mandate’.⁵³ According to article 719 CC, the mere designation of agency in an agreement without any further specification of the powers conferred on the agent shall not grant the latter any capacity other than in respect of ‘administrative acts’.⁵⁴ Anything other than mere administrative acts requires a special agency, particularly for gifts, sale, reconciliation, mortgage, acknowledgement, arbitration, oaths and pleadings before the courts.⁵⁵ The agent does not possess authority to exceed the powers stipulated in the agency agreement, save if the principal so announces, or subsequently so concedes, in accordance with the discussion in the previous section.⁵⁶ The agent may, however, exercise implied powers in accordance with the nature of the task for which the agency is conferred and in accordance with applicable practice.⁵⁷ As a result, where a contract is entered into by an agent without the necessary authority, it is the agent and not the principal that is liable for all acts relating to defects of consent.⁵⁸ Article 83(2) CC does make the point that where the agent acted in accordance with the principal’s authority and precise instructions,⁵⁹ the principal may not plead the ignorance of the agent in respect of facts and circumstances which the principal knew or should have known.

4.7.3 Disclosure of the Agency

In most cases the agent will be authorised to disclose its relationship with the principal and correspondingly the third party may well require the disclosure of agency. Even so, one should not be oblivious to the fact that a principal may have a serious business interest in not disclosing to potential competitors its commercial intentions. Equally, politically exposed persons may be unwilling to make their assets or acquisitions known to the general public. Undisclosed agency makes sense in all these situations. Such undisclosed agency is generally permitted under Qatari law, but it is not free from consequences. Article 85 CC stipulates that where an agency is undisclosed the contract shall be deemed to have been concluded between the agent in its personal capacity and not on behalf of the principal. This presumption is inapplicable where the third party knew or should have known of the agent’s authority, or it makes no difference to the third party whether the contract is concluded between the agent or the principal. This is generally known as ostensible or apparent authority.⁶⁰ Good faith is an integral aspect of the relationship between agents and third parties. This is clear in article 86 CC where agency is deemed to remain valid even where it had terminated, assuming both the agent and the third party were unaware that the agent’s authority had terminated, or they could not have known even if they had exercised suitable due diligence.⁶¹

It is evident from this discussion that where an entity has not been granted agency authority by a principal, or if an agency exists but the agent exceeds its authority, then the effects of the contract entered between the ‘agent’ and the third party do not bind the principal.⁶² It is, therefore, in the interest of the principal to avoid contracting on its own behalf if such an outcome was not intended. Article 88 CC recognises that agents may under certain (presumably narrow) circumstances be asked by the principal to conclude a contract with their own person (i.e. agent to agent). If these are approved by the principal or are standard practice under the terms of a business custom, they bind the principal. Article 139 CL sets out a mandatory rule against the possibility of a self-contract – absent consent of the principal – by the agent as follows:

Whoever acts on behalf of third party under any agreement or provision may not buy for himself, directly or under a pseudonym, even at auction, an item that he has been entrusted with selling under such representation, except by permission of the judge, and without prejudice to what has been provided for in the law to the contrary.

The same is true in respect of brokers or other experts purchasing property in respect of which the principal authorised them to sell or provide an estimate.⁶³ Even so, self-contracts under articles 139 and 140 CL are valid if consented to by the principal.

4.7.4 Standard of Care

Agency involves a recognizable task undertaken by the agent on behalf of the principal. The appropriate exercise of this agency function is crucial to the interests of the principal. As a result, a certain duty of care must be imputed in the contract or the law. Article 723(1) CC distinguishes between agency with consideration and without. Unless otherwise specified, article 729(1) CC stipulates an agency shall be without consideration, save if the contrary was implicitly understood by the agent. In the event that the agency is deemed to be without consideration, the agent shall use ‘the same standard of care as for its own acts, but not beyond that of a reasonable person’. Where the agent is acting with consideration its duty of care is that of ‘a reasonable person at all times’.⁶⁴ This is an important distinction that is not always expressly made by civil codes. As part of the duty of care, the agent is responsible, unless the agreement or the nature of the transaction otherwise demand, for providing appropriate information about the exercise of the agency to the principal.⁶⁵ The Court of Cassation has emphasised that lawyers must refrain from accepting a power of attorney, providing assistance or expressing an opinion to the opponent of their client throughout the period of consideration of the original dispute. This is considered a professional misconduct that exposes lawyers to disciplinary accountability⁶⁶ without, however, causing nullity or affecting the validity of the work undertaken or terminating the agency.⁶⁷

The agent, unless otherwise agreed, is not permitted to use the assets of the principal for its own account. If so, the agent is liable to damages against the principal.⁶⁸ Such unlawful misuse of the assets of the principal may also amount to a tort.

4.7.5 Obligations of the Principal to the Agent

Clearly, in the event of an agency with consideration the principal must pay the agent’s fee, or a share in the profits, as explained below in the sections dealing with the various forms of commercial agency. Moreover, given that the exercise of an agency typically involves a series of expenses incurred by the agent, the principal is under an obligation to reimburse the agent for such expenses, ‘irrespective of how successful the agent [was] in such performance’.⁶⁹ In equal measure the principal must, at the request of the agent, provide him or her with all the necessary amounts for the performance of the agency.⁷⁰ Hence, the agent is justified in not performing the agency where pre-payment of expenses was not made by the principal, in which case the principal may also be in breach of the agency contract.

Article 731 CC makes the point that the principal shall be liable for any damage suffered by the agent in the normal performance of the agency, save for any damage incurred as a result of the agent’s mistakes. It is, of course, taken for granted that the agent performs its duties in accordance with the appropriate standard of care, as explained in the previous sub-section. Where more than one principal appoints a single agent to perform a common act, all such principals shall be jointly liable against the agent for the performance of the agency, unless agreed otherwise.⁷¹

4.7.6 Delegation by an Agent to a Sub-agent

Article 89 CC, following well-established international practice, permits further delegation by the agent to another person, as long as pertinent authority was granted in the POE.⁷² Where such authority was not granted, the agent shall be liable for the acts of the sub-agent as if such act is the act of the agent itself. In such event, the agent and is delegate shall be jointly liable.⁷³ Where the agent is authorised to delegate performance of the agency but no delegate is designated, the agent shall be liable only for its mistake in nominating or giving instructions to the delegate.⁷⁴

4.7.7 Multiple Agents

Where multiple (joint) agents have been contracted by the principal in respect of the same act, but under a distinct contract, each of them may individually perform the required acts unless the principal authorises the agents to act jointly.⁷⁵ Where, however, multiple agents are assigned under a single contract without any authority to act individually, they shall act jointly, unless the exchange of opinion is not required for a specific act.⁷⁶

In accordance with article 727(1) CC, multiple agents shall be jointly liable where the agency is indivisible or where the damage suffered by the principal arises from a common mistake of the agents. Paragraph 2 of article 727 CC limits joint liability where the impugned act of the agent in question exceeds the limits of or abuses the agency.

4.7.8 Termination of the Agency

Readers should consult the discussion in Chapter 11. The agency shall terminate upon the completion of the acts described in the agency agreement or upon the expiry of its term. The agency shall also terminate on the death of the agent or the principal unless it is granted in favour of the agent or a third party, or unless it is intended to be completed upon the death of the principal.⁷⁷ Article 736(1) CC allows the principal to terminate or limit the agency at any time, even if there is an agreement to the contrary. However, where the agency is issued in favour of the agent or a third party, the principal may not terminate or limit such agency without the consent of such agent or third party.⁷⁸ Of course, where the agency is terminated without good cause and in a manner that causes harm to the agent, the latter is entitled to indemnification.⁷⁹

Just like the power of the principal to terminate the agency, so too the agent may at any time withdraw, even if there is an agreement to the contrary, by giving notice to the principal. In this case, the agent shall indemnify the principal where the withdrawal is not without good cause and which moreover causes harm to the principal.⁸⁰ Unless the agent has compelling reasons, it may not withdraw from the agency if a third party has an interest therein, provided that such third party shall be notified of such withdrawal in order to offer adequate time to decide what is in its best interest.⁸¹ Where the principal dismisses the agent without good cause or does not renew the agency absent a fault by the principal, the agent is entitled to compensation.⁸²

Irrespective of the manner of termination of the agency, the agent shall complete the acts commenced to such stage where no damage may be suffered by the principal.⁸³

4.8 Commercial Agency

Commercial agency is regulated by three distinct pieces of legislation, namely, the general provisions of the CC; Law No 8 on the Organization of Business of Commercial Agents 2002 (Agency Law); and articles 272–317 of the Commercial Law. The interpretation of these statutes has been aided by a small amount of case law by the Court of Cassation and in addition the legal profession has made efforts to clarify agency-type arrangements. There is some overlap between the provisions of these three instruments and several rules are thus repeated.

Commercial agency is an important feature of the Qatari economy. This is because the import, distribution and sale of foreign goods and services can only be effectuated through a Qatari entity⁸⁴ in the form of a commercial agent. As a result, all foreign companies intending to do business in Qatar must appoint a Qatari commercial agent. Article 2 of the Agency Law stipulates that the key elements of commercial agency are as follows: a) exclusivity; b) scope of the agency on behalf of the principal; and c) consideration.⁸⁵ Exclusivity is fundamental despite narrow exceptions set out in the Commercial Law.⁸⁶ The benefits and privileges of commercial agency,⁸⁷ predominantly for the agent, arise only if the agency is registered on the Commercial Agents Register⁸⁸ held by the Ministry of Commerce and Industry (MoCI).⁸⁹ Failure to do so will render the agency void ab initio, as well as give rise to criminal sanctions on the part of the fraudulent agent.⁹⁰ The tighter regulation of commercial agency was meant to put an end to the practice of non-Qataris trading under a license or registration held by a Qatari entity.⁹¹

There are several differences between a commercial agency and general agency under the CC. Firstly, commercial agency confers authority on the agent only in respect of business actions.⁹² While such POE may be absolute, it does not affect the personal relations of the principal. Secondly, a commercial agency should involve some consideration (unless otherwise agreed), typically through the payment of a fee or a commission⁹³ that may, or may not, be stipulated in the agency agreement.⁹⁴ As a result, commercial agents owe a duty of care to the principal and the latter is liable for the agent’s fees and expenses.⁹⁵ Thirdly, because the commercial agent is typically engaged under a fee and owes a duty of care to the principal, he or she is obliged to adhere to the principal’s instructions and is liable for any damage arising from failure to adhere to ordinary standards of care.⁹⁶ This duty of care is quintessential in the relationship between commercial agents and principals.⁹⁷ Commercial agents owe extensive duties of care and best interests obligations to their principals,⁹⁸ irrespective of the fact that article 275 CL specifies that commercial agents possess ‘freedom of action’ in carrying out their mandates. As a result, blind adherence to the principal’s instructions despite overwhelming evidence that damage to the principal’s interests will follow is inexcusable. In such circumstances the agent must defer to the principal for further review.⁹⁹

Commercial agents are vested with powers similar to those conferred on ordinary agents under the CC. Such powers must under all circumstances arise expressly or implicitly from the agency agreement. Article 278 CL provides for three types of circumstances under which the agent can contract in its own name (second party) with a third party, in which case, however, the agent is not entitled to a fee for representing the principal.

The duration of commercial agency is inextricably linked to the rights and duties of the parties. The Agency Law recognises two types of commercial agencies in terms of their duration: a) limited duration, whose fixed term nature is clearly expressed in the contract; and b) unlimited duration, requiring the parties’ common consent for termination.¹⁰⁰ As regards the former, commercial agency comes to an end where the agreement expires or the work is completed.¹⁰¹ Even so, the privileged position of the agent is emphasised by the fact that successful agents are entitled to compensation when a fixed term agency agreement is terminated by the principal.¹⁰² Moreover, the same is true where the agent becomes bankrupt or incapacitated.¹⁰³

4.8.1 Contract Agency

Articles 290–303 CL set out a particular species of commercial agency, namely contract agency. Article 290 CL defines this as ‘a contract under which the agent continuously seeks and negotiates the conclusion of transactions in a specific field of activity for the benefit of the client against consideration’. Typically, the contract agent’s task will be to conclude and implement transactions on behalf of the principal. Just like general forms of commercial agency, the contract agency agreement must be recorded in writing and spell out in detail the parties’ mutual obligations, the agent’s authority and fee,¹⁰⁴ as well as its duration.¹⁰⁵ An important dimension of contract agency is that the agent is to manage the commercial activity independently, through its own business or trade, while bearing all pertinent expenses.¹⁰⁶ Given that the contract agent effectively represents the principal’s services, brands and products in the area managed by the agent, the latter may receive requests for the execution of contracts that are concluded by him as well as complaints about non-implementation of these contracts.¹⁰⁷ It is clear therefore that the contract agent does not assume the financial rights of the principal, absent the latter’s express consent.¹⁰⁸

Article 292 CL makes it clear that the contract agent assumes a significant financial commitment and is in turn dependent on the principal’s services, brands, or products, as well as the principal’s continued cooperation. As a result, the Qatari legislator is adamant that the contract agent should not be exposed to arbitrary competition by the principal. This is expressly stipulated in article 293 CL. Accordingly and in the same vein, article 294 CL states that where the implementation of the contract requires a significant amount of expense on the part of the agent, the duration of the agency cannot be less than five years. Because agency contracts are presumed by the law to be in the joint interest of both parties, article 300 CL stipulates in emphatic terms that the principal may not terminate the contract where the agent was not at fault but shall compensate the agent for damages resulting therefrom. Any agreement contrary to this shall be invalid. Equally, the agent shall also be obliged to compensate the principal for damages arising from the agent’s resignation ‘at an inappropriate time and without an acceptable excuse’. While the parties may agree a fixed term, if this is not renewed by the principal the latter shall pay a fair amount of compensation to the agent that was diligent and whose work led to a successful promotion of the business interests of the principal.¹⁰⁹ Compensation is also due where the agent is replaced as a result of collusion between the principal and the new agent.¹¹⁰

4.8.2 Commission Agency

According to article 305 CL, ‘a commission agency is a contract under which an agent legally conducts business under its own name on behalf of the client for a consideration’.¹¹¹ Unlike other agency arrangements, articles 306–309 CL consider the principal’s instructions as providing general guidelines to the agent; the latter may well deviate from these according to its business judgment and if the price received as a result is higher he or she may retain the difference. If this turns out to be lower, then the difference to the principal should in principle be compensated. In any event, the general principles of commercial agency apply mutatis mutandis to commission agency. A particularity of the commission agency model is that unless otherwise agreed the agent must not disclose the identity of the principal and in equal manner the agent must not disclose the identity of the third party to the principal.¹¹² Moreover, the commission agent contracts in its own name and is bound in its own name, with the third party, and subsequently, the principal is not bound to the third party and neither can have recourse against the other.¹¹³

The agent is entitled to reimbursement of expenses related to its mandate, save if they arose from the agent’s mistake.¹¹⁴ The same rule applies where the agent incurred harm or damage arising from the mandate.¹¹⁵

4.8.3 Distributorship

Article 304 CL is the only provision in the CL specifically discussing distributorship arrangements. Since it is situated in the part of the CL dealing with commercial agency, it too is regulated by the agency provisions of the CL and the CC.¹¹⁶ Some commentators note that where a distributor does not fall within the definition of a commercial agent under the Commercial Law and/or the agency is not registered (as discussed above), article 304 CL still allows the distributorship agreement¹¹⁷ where

a trader undertakes to market and distribute products of an industrial or commercial establishment in a particular territory shall be considered to be a commercial agency provided that he is the sole distributor of such products.

The Court of Cassation has held that in order for the distribution contract to be considered a commercial agency contract, it must meet two conditions combined: a) the first is that the contract is accompanied by a condition whereby the producer or the wholesaler assigns to a local distributor the right to limit the sale of its products only to others in a specific area, and b) that the distributor does so within the scope of the agency and on behalf of its client, in return for a consideration, whether profit, commission, or wages. If both conditions are fulfilled in the contract, the contract is considered a commercial agency and falls within the scope of the Commercial Agents Regulation Law No 8 of 2002.¹¹⁸ A contract for distributing the products of an industrial or commercial establishment in a specific area is considered a commercial agency if the distribution is exclusive to the product.¹¹⁹

4.8.4 Trade Representative

Unlike the preceding forms of agency, a trade representative is engaged in a contract of employment with the trader to carry on trading activities on behalf of and in the name of the trader.¹²⁰ As an employee, the trade representative cannot contract in its own name¹²¹ and the trader or traders so employing the representative are liable for all contracts entered into by him or her.¹²² It is therefore imperative that the trade representative disclose at the time of contracting the full identity of the trader.¹²³ Where the authority of the representative is not expressly stipulated in the agreement, this ‘shall be deemed to include all transactions relating to the type of trade that he has been authorized to conduct’.¹²⁴

4.8.5 Brokerage

The contract of brokerage involves authorisation, for a fee,¹²⁵ to a broker by a client to find and negotiate with a second party a specific contract under conditions laid down by the client.¹²⁶ The existence of a brokerage agreement is a question of fact that may be deduced on the basis of available documentation, witnesses and the circumstances.¹²⁷ Unless otherwise agreed, the broker may not be a party to the contract it is authorised to negotiate and conclude. If it does become a party he or she is not entitled to a fee.¹²⁸ In accordance with article 340 CL, ‘where a number of brokers are authorized in a single contract, they shall be jointly responsible for the work assigned to them, unless each is licensed to work individually, or specific duties are assigned to a particular broker’.