SUB-AGENCY
SUB-AGENTS
Delegatus non potest delegare – no delegated powers can be
further delegated.
Since the principal choses a particular agent because he has
trust and confidence in his integrity and competence.
Therefore, the agent cannot further delegate the work which
has been delegated to him by his principal.
S.190: WHEN AGENT CANNOT DELEGATE.
As a general rule, an agent cannot delegate his authority.
However, he may do so when:
i. Ordinary custom of trade in a particular business allows it.
ii. The nature of Agency demands or permits it.
iii. The acts are purely ministerial in nature, e.g. authority to sign
iv. The principal expressly allows the agent to appoint a sub-agent.
• In case of personal qualification, authority cannot be delegated at all – no other
person can perform – no exceptions would apply.
ORDINARY CUSTOM OF TRADE
e.g.
‘A’ deals in electronics and is the agent of importer
Electronic items come from China to Mumbai to Delhi
A’s business demands to appoint such agent for the purposes of:
i. Collection
ii. Sale
iii. Delivery, etc.
This all together pertains to “ordinary custom of trade”.
NATURE OF AGENCY
e.g.
A’s car damaged.
Insurance Company to pay for damages
Therefore, the Co. has surveyors who further go and inspect the damage
Here, surveyors appointed for a specific purpose.
Since, an insurance company cannot go itself and survey it, hence hires further agent.
Here, it is in the “nature of agency”.
S.191: “SUB-AGENT” DEFINED.
• When a sub-agent is appointed, what relationship is constituted between the
principal and the sub-agent and the agent, depends upon whether the sub-agent
has been properly or improperly appointed.
i. Proper Delegation (s.192)
ii. Improper Delegation (s.193)
S.192: REPRESENTATION OF PRINCIPAL BY
SUB-AGENT PROPERLY APPOINTED.
• The principal is represented by the sub-agent.
• He is bound by and responsible for his acts as if he were an agent originally appointed by the
Principal.
• The agent is responsible to the principal for the acts of the sub-agent.
• The sub-agent is responsible for his acts to the agent, but not to the principal, except in case
of fraud or wilful wrong.
The general rule is that there is no privity between the principal and the sub-agent. That is why,
for the acts of sub-agent, the agent is responsible to the principal. The sub-agent is not
responsible to the principal. But the principal is given an additional option to bring an action
against the sub-agent in case the sub-agent commits fraud or wilful wrong. This is an additional
option to the principal and it does not exclude the principal’s normal right of recourse against the
agent.
S.193: AGENT’S RESPONSIBILITY FOR
SUB-AGENT APPOINTED WITHOUT
AUTHORITY.
• Delegation is improper when it is not authorised, i.e., when it is not within any of the
recognised exceptions.
• The effect is that the principal is not bound by the appointment.
• Relation between Principal, Agent and Sub-agent, when the sub-agent is not properly
appointed:
a. Agent stands as Principal towards the sub-agent. (Both under properly and not
properly appointed)
b. The agent is responsible to the Principal for the acts of Sub-agent. (Both under
properly and not properly appointed)
c. The sub-agent does not represent the Principal.
d. The Principal is not liable to third parties for the acts of sub-agent.
e. The Agent will be liable to third parties for the acts of sub-agent.
SUBSTITUTED AGENT
e.g.
‘B’ – advocate (specialises only in property matters) – handling all property
matters of ‘A’.
there is a Criminal case against ‘A’. A goes to B.
B informs A that he does not deal/ handle criminal matters.
A asks B to suggest some criminal lawyer.
B suggests ‘X’, who is a criminal lawyer.
B will be out and then there will be a direct dealing between ‘X’ and ‘A’.
SUBSTITUTED AGENT
s.194: Relation between principal and person duly appointed by agent to act in
business of agency.
• There must be express or implied authority
• Not a sub-agent, but an agent of principal, i.e., substituted agent.
s.195: Agent’s duty in naming such person.
• Test – ‘man of ordinary prudence’, and not of extra ordinary prudence
• Agent’s duty only limited to ordinary prudence – once done, then such agent not
responsible for the acts/ negligence of substituted agent.
CONSEQUENCES
• s.194 and s.195 apply only where the agent has the power of selection for a
substituted agent.
• s.194 envisages that an agent nominating another person to act for the principal in the
business of agency is doing so with the knowledge and consent of the principal.
• Direct relations are established between the principal and the person nominated, and
the person so nominated becomes an agent substituted for the person who was
authorised to nominate him.
• Therefore, the substitute becomes the agent of the principal himself.
- Direct privity of contract between principal and the substituted agent.
- The principal becomes bound by the acts of the substituted agent towards the third
person, and the substituted agent is directly responsible towards the principal.
SUB-AGENT AND
SUBSTITUTED-AGENT
Similarity: the appointment is made by the agent and not by the principal.
Distinction:
a. A sub-agent is the agent’s agent, whereas a substituted agent is the principal’s agent, in conducting
the agency work.
b. A sub-agent is not responsible to the principal, except in case of fraud or wilful wrong. A substituted
agent is directly responsible to the principal for his acts.
c. The agent continues to be responsible for the acts of sub-agent towards the principal. An agent’s
responsibility is over when he names a substituted agent.
d. There is a privity of contract between the principal and the substituted agent. whereas, there is no
privity between principal and the sub-agent.
- In case of Sub-agency, there may be proper and improper appointment. However, in case of Substituted
agency there has to be a proper appointment subject to the test of reasonable and prudent person.
