Agency Agreement (Pakistan)

An Agency Agreement in Pakistan engages an independent contractor to supply services and records the scope of work, fees, timetable and ownership of any deliverables.

The Contract Act 1872 establishes the framework for agency relationships in Pakistan across four provinces — Punjab, Sindh, Khyber Pakhtunkhwa (KPK), and Balochistan — and the Islamabad Capital Territory (ICT). Key provisions include: Section 187 (agency by ostensible authority — where a principal has represented that an agent has authority to act, third parties relying on that representation are protected); Section 188 (extent of agent's authority — an agent with authority to do an act has authority to do everything lawfully necessary to do that act); Section 190 (an agent cannot delegate authority unless expressly permitted — the rule delegatus non potest delegare); Section 202 (agency coupled with interest — an agency where the agent has an interest in the subject matter cannot be revoked to the prejudice of the agent); and Sections 211-218 (duties of agents to principals, including duty of care, duty of account, and duty not to make secret profits).

For commercial agency relationships involving the sale of goods, the Sale of Goods Act 1930 supplements the Contract Act 1872 — governing aspects of the agency transaction involving the transfer of title to goods, implied conditions, and warranties. Where the agency involves international trade, the Import and Exports (Control) Act 1950 and the Trade Organisations Ordinance 1961 may apply, and the agent may be required to hold a licence from the Trade Development Authority of Pakistan (TDAP) or be registered with a relevant trade body.

Pakistan has no separate Commercial Agency Act — unlike some other jurisdictions — so the entirety of agency law is contained within the Contract Act 1872 and supplemented by common law principles as applied by the Superior Courts of Pakistan, including the Supreme Court of Pakistan and the provincial High Courts. Agency agreements in Pakistan are typically executed on non-judicial stamp paper or plain paper (stamp duty applies under the Stamp Act 1899 based on the value of the transaction), and if the agency authority extends to immovable property transactions, the agency instrument (power of attorney) must be executed in accordance with the Transfer of Property Act 1882 and the Registration Act 1908.

The Constitution of Pakistan 1973 (Article 18) guarantees freedom of trade and business, providing the constitutional foundation for commercial agency relationships. Disputes arising from agency agreements are typically resolved through arbitration under the Arbitration Act 1940 or by courts with jurisdiction over commercial disputes — the Commercial Courts established in major cities under the High Court (Commercial Courts) Rules or the ordinary civil courts having jurisdiction under the Code of Civil Procedure 1908.

An Agency Agreement in Pakistan is required whenever a business or individual wishes to appoint another person or company to act on their behalf in commercial dealings, representing their interests and entering into transactions that legally bind the principal.

Manufacturers and importers in Pakistan regularly appoint sales agents to market and sell their products across different regions of the country or in export markets. A formal Agency Agreement defines the agent's geographic territory, the products covered, the commission rate, the agent's authority to conclude sales contracts on the principal's behalf, and the reporting obligations. Without a written agency agreement, disputes over commission entitlement, exclusivity, and the scope of the agent's authority are difficult to resolve before courts applying the Contract Act 1872.

An Agency Agreement is required when a foreign company — for example, a UK, UAE, Chinese, or US manufacturer — wishes to appoint a Pakistani company or individual as its local commercial agent for marketing and distributing its products in Pakistan. The foreign principal and the Pakistani agent should document their relationship under a written agreement governed by Pakistani law (Contract Act 1872, Chapter X) to establish clarity on authority, commission, exclusivity, and termination — particularly important given that Pakistan does not have a separate Commercial Agents Directive equivalent to the European Union regime that would grant agents statutory compensation rights on termination.

Real estate transactions in Pakistan frequently involve agents who act on behalf of principals in buying, selling, or leasing property. Real estate agents (property dealers) typically operate under informal arrangements, but a formal Agency Agreement under the Contract Act 1872 — specifying the authority granted (for example, authority only to introduce buyers, or full authority to conclude sale agreements), the commission payable, and the duration — protects both principal and agent and reduces disputes in transactions before provincial Revenue Authorities.

Professional service providers — lawyers (Advocates), Chartered Accountants (members of the Institute of Chartered Accountants of Pakistan, ICAP), and Certified Public Accountants — act as agents of their clients in various capacities and should be engaged under written agency or retainer agreements that define the scope of authority, fee arrangements, and liability for the agent's acts or omissions in dealings with third parties including courts, the Federal Board of Revenue (FBR), the Securities and Exchange Commission of Pakistan (SECP), and other regulatory bodies.

Insurance agents appointed by insurance companies licensed by the Securities and Exchange Commission of Pakistan (SECP) under the Insurance Ordinance 2000 require written agency agreements defining the agent's authority to solicit insurance applications, collect premiums, and issue cover notes on the insurer's behalf. SECP regulations require licensed insurance agents to hold a written appointment from the insurer.

A legally enforceable Agency Agreement in Pakistan under the Contract Act 1872 must contain the following essential elements to create clear rights and obligations and to be effective in dispute resolution before Pakistani courts or arbitral tribunals.

Party Identification: Full legal names and addresses of the principal and the agent. Where either party is a company, the company's full registered name, registration number with the SECP under the Companies Act 2017, registered address, and the name and designation of the authorised signatory must be stated. Where either party is a partnership, the partnership's name and details under the Partnership Act 1932 apply.

Appointment and Grant of Authority: A clear clause appointing the agent as the principal's agent and specifying the scope of authority granted — whether general authority to act in all matters on the principal's behalf, or specific authority limited to defined acts (for example, soliciting orders for specified goods within a defined territory). Under Section 188 of the Contract Act 1872, an agent with authority to do an act has authority to do all things necessary to do that act — so the scope of authority must be precisely defined to avoid unintended delegation.

Territory: A precise definition of the geographic territory within which the agent is authorised to act — specifying provinces (Punjab, Sindh, KPK, Balochistan), districts, cities, or international territories as applicable. A Pakistan-wide agency should be stated as covering all four provinces and the Islamabad Capital Territory.

Exclusivity: Whether the agency is exclusive (the principal will not appoint any other agent in the territory) or non-exclusive (the principal retains the right to appoint additional agents or deal directly with customers). An exclusive agency agreement may attract competition law scrutiny under the Competition Act 2010, administered by the Competition Commission of Pakistan (CCP), if it has the effect of substantially preventing or lessening competition.

Duties of the Agent: Reflecting Sections 211-218 of the Contract Act 1872, the agreement should specify: the duty to follow the principal's lawful instructions; the duty to act with the skill and diligence of a reasonably competent agent; the duty to keep accounts and render them to the principal; the duty not to deal on the agent's own account without the principal's consent (Section 215); the duty to pay to the principal all sums received on the principal's behalf; and the prohibition on making secret profits at the principal's expense (Section 216).

Commission and Remuneration: The commission rate or fee payable to the agent — whether a percentage of the value of transactions concluded, a fixed monthly retainer, or a combination — the date on which commission becomes due (for example, upon the principal receiving payment from the third party), and the payment mechanism. The Income Tax Ordinance 2001 imposes withholding tax on commission payments under Section 153, and the agreement should address which party bears the withholding tax obligation.

Sub-Agency: Whether the agent is permitted to appoint sub-agents, reflecting the principle in Section 190 of the Contract Act 1872 that an agent may not delegate authority unless the principal has expressly or impliedly authorised sub-delegation.

Duration and Termination: The initial term of the agreement (for example, one year, two years, or indefinite subject to notice), the notice period required for termination by either party, grounds for immediate termination (breach, insolvency, fraud), and the effect of termination on pending transactions and accrued commission. Section 201 of the Contract Act 1872 provides that agency is terminated by revocation by the principal, renunciation by the agent, completion of the business, death, insanity, or insolvency of the principal or agent.

Governance and Dispute Resolution: The governing law (the laws of Pakistan, including the Contract Act 1872) and the forum for dispute resolution — arbitration under the Arbitration Act 1940, or the courts of a specified city (Lahore, Karachi, Islamabad) with subject-matter jurisdiction. The Competition Act 2010 is also relevant to exclusive agency arrangements.

Forms-legal.com provides this Agency Agreement (Pakistan) template as a practical starting point. The template reflects the requirements of the Contract Act 1872, Companies Act 2017, Competition Act 2010, Income Tax Ordinance 2001, and Stamp Act 1899. Parties entering into agency arrangements with significant financial value or involving regulated industries should obtain advice from an Advocate enrolled at the Lahore, Sindh, Peshawar, Quetta, or Islamabad Bar.