Contract- I

Submitted By:
2nd Year 4th Semester



Page No.

Table of Cases ............................................................................................................................ ii
Table of Statutes ........................................................................................................................ ii
Table of Abbreviations ............................................................................................................... ii
Introduction ................................................................................................................................ 4
Aim(s)......................................................................................................................................... 5
Objective(s) ................................................................................................................................ 6
Scope and Limitations ................................................................................................................. 7
Review of Literature ................................................................................................................... 8

Research Questions ..................................................................................................................... 9
Research Methodology.............................................................................................................. 10
Agent........................................................................................................................................ 11

Scope of Agent’s Authority ........................................................................................... 12
Liability and Duties of the Agent towards the Principle .............................................. 12

Duties not to delegate .................................................................................................... 13
Sub Agent ................................................................................................................................ 13

Sub Agency ................................................................................................................... 18
Relationship between Agent and Sub Agent ................................................................ 19
Sub Agent’s Responsibility........................................................................................... 20
Liability of Agent towards the Principle for acts of Sub Agent .................................. 21

Authority to appoint Sub Agent ................................................................................... 21
Substituted Agent ................................................................................................................... 22
Difference between Sub agent and Substituted Agent .............................................. 23

Conclusion ................................................................................................................................ 19
Bibliography ............................................................................................................................. iii

Table of Cases:

1. Foreman v Great Western Rly Co

2. McCarty v King County Medical Service Corporation

3. Banaras Bank v. Ram Prasad

4. Bonsor v Musicians’ Union

5. New Zealand Farmers Cooperative Ltd v National Mortgage & Agency of NZ

6. Chaudhry v Prabhakar

7. Yasuda v Fire & Marine Ltd v Orion Marine Insurance Ltd

8. Kelly v Cooper

9. Bryant, Powis and Bryant Ltd v La Banque du Peuple Cunnigham & Co. Ltd

10. Ferguson v. Um Chand Boid

11. Mulukchand bin Gyanmal v. Shan Mohan Vardraj

12. Wheeler v. Reed

13. Casco Nat. Bk. v. Clark

14. De Busche v. Alt

15. John McCain & Co. v. Pow

16. Warren v. Martin

17. Smith v. Jefferson Bank

18. Morris v. Warlick

19. Barnard v. Coffin

20. Bank of Ky. V. Adams Express Co.

21. Whitlock v. Hichs

Seva Ram Tikam Das 44. Co. Henry 33. National City Bank of New York 39. 41. v. Eagle Motor Lines v. Consolidated Underwriters Ins. S Summan Singh v. Amruth Ghee Co Ltd 40. Stephens v. Hugh Francis Hoole v. Franklin Fire Ins. Union of India v. Co. Landers 35. Shaw v. O’Byrne 27. Bradford v. United American Insurance Co. Standard Life Ins. Bradford 43. Baker-Riedt Motor Co. . Sanoma. Challis 26. Wells 25. Rughunath Prasad v. McKnight v. Co. Rogers v. Hood 36. Baisley v. Union Casualty & Surety Co. Moore 30. Royal Trust Co. Interested Underwriters Concerned Via Ewing Int’l Marine Corp 31. of the South 37. Hanover Ins. Booker v. De Bussche v. Mason 23. Consolidated Underwriters Ins. Alt 24. Mccants v. Cf. Butler v. Blackburn v. Co. Gray 32. v. v. Landers 28. Badcock 42. 34. v. Co. v. v. Purushotham Haridas v. Inc. Peoples-Pittsburgh Trust Co 29. Mohd Nazim 38.22.

Meeker 46. Central Bank Of India Ltd. Anr Another 3. Article . Co. v. Breck v. 1872 Table of Abbreviations: 1. 1950 The Indian Contract Act. Nat'l Bank v. Ors Others 7. Company 5. Connor v. v. American Fire Ins. AIR All India Reporter 2. Art. Ltd. Ruthven v. Wilmington First Nal'l Bank 50. 47. Chetumal Bulchand Table of Statues: The Constitution of India.45. Appleton Bank v. Parker 48. Mercantile Bank of India Ltd. Limited 6. Ch Chapter 4. McGilvray 49. Firm Rur Chand Kurra Mal 51. Planters' etc.

Himachal Pradesh . & And 10. UOI Union of India 9. e. Rupees 15. Example 13. A. SC Supreme Court 11. Station House Officer 16. Andhra Pradesh 17. v. Rs.8. UT Union Territory 14.H.g. S. Versus 12.P.P. H.O.

one of the prime example of such adoption in the present scenario is the relation of agent and the principle under the Indian Contract Act. The act contractualize the relationship between the agent and his principle. the scenario becomes much more complicated in cases wherein the principle is not directly aware of the existence of such sub agents or substituted agents on behalf of the agent. but the interpretation of those provisions has largely been ignored. The particular instance of an agent delegating his or her duties further to a third person. Who owes the responsibility in cases of mistake on part of agent. This has been a highly worrisome trend in the recent times. Whereas the regulations for the delegation of authority as an agent to the sub agents as well as the substituted agents has been provided under the statutes of the Indian Contract Act. 1872. But at the same time the act also talks about the agent himself delegating his duties to either of the sub agent or the substituted agent. . 1872. though the provisions provide for the responsibility of the agent in case of any default to the principle but the statutes lack the implementation of those provisions. sub agent or substituted agents.Abstract: India has seen a growing trend of incorporating western laws into the ambit of domesticated laws that have been developed over a course of time.

and therefore it is governed by the terms and conditions of the contract between them. the agent and principle share a relationship that is contractual in nature. Now who can become an agent? Section 184 answers this question. or who is so represented. and the person from whom the agent derives authority to act is called the principal. a minor can also act as an agent. del credere agents. According to the section “an agent is a person employed to do any act for another or to represent another in dealings with third persons. The law of agency is based on the Latin maxim “qui facit per alium. there is no need to have a contractual capacity to become an agent. According to this section any person can become an agent i. The person acting on behalf of the other is called an agent. Therefore.Introduction: In India.e. . But the minor will not be responsible to his principal. “he who acts through another is deemed in law to do it himself “ Agent and principal are defined under Section 182 of the Indian Contract Act. auctioneers. persons entrusted with money for obtaining sales and insurance agents. is called the principal”. 1872 2 Foreman v Great Western Rly Co. 2 Different types of commercial agents have been identified under Indian law like brokers. Chapter X of the Indian Contract Act. facit per se. Indian Contract Act. 1872. 1872 provides the basic structure of rules and regulations that basically govern the performance and formation of any type of contract including the agency contract. 1 Section 182. In agency contracts. (1878) 38 LT 851. 1 The competent agent is legally capable of acting for the principal vis-à-vis the third party.” which means. The person for whom such act is done. there exists a legal relationship between two people whereby one person acts on behalf of the other.

It gives the researcher an immense knowledge to attribute the of each of the agents. 1872. This book has also provided with the responsibilities of a principle under a valid contract. To understand the need and legality of appointing a substituted agent as well as a sub agent even in the presence of an Agent.Aim(s): The research paper aims to analyze the extent of duties and responsibilities assigned to each of the agent. Review of Literature: Avtar Singh. To analyze the extent of duties of the agent toward the sub agent and the substituted agent. 1872. 2013. sub agent and substituted agent. To understand the functional difference between a sub agent and a substituted agent. . 4. This book has helped the researcher in understanding the concept of substituted agent in a deeper sense. Scope and Limitations: The scope of this research paper is limited to the study of the responsibilities and duties of the agent. 11th ed. 2. sub agent and substituted agent within the ambit of the Indian Contract Act. 3. sub agent and the substituted agent as has been provided under the Indian Contract Act. Objectives(s): The objectives being tried to be achieved are: 1. To understand the duties and responsibilities of an agent. Eastern Book Company. sub agents and substituted agent under the Indian Contract Act . CONTRACT AND SPECIFIC RELIEF.

The types and validity of various forms of agents and sub agents and its significance in the present scenario is dealt with in this book.Beale. It discusses the conditions under which offer and acceptance of contracts being under the agency can be accepted and revoked. Alazemi Essa.H. Passing of Risk in International Contracts of Sale of Goods: A comparative study between the United Nations Convention on Contracts for Sale of Goods 1980 and English Sale of Goods Act 1979 This article deals with the provisions of CISG. Nagpur The author covers all the necessary aspects of agency under this masterpiece. sub agent and substituted agent as well as the principle. THE INDIAN CONTRACT AND SPECIFIC RELIEF ACT.. which can be denoted as essential for having a crisp grip over the concept of agency. VOLUME II. 25th ed. It also discusses the roles of agents and sub agents in a contract. sub agent and substituted agent in a contract have also been discussed exhaustively in this book.) Pollock & Mulla. It deals with the responsibility of a principle of contract and its nature. .G. sub agent and substituted agent under the ambit of Indian Contract Act as well as the historical development that preceded the same. 2013. CHITTY ON CONTRACTS. It gives the researcher an insight into the process under which the agents and the system of sub agents as well as substituted agents operate under the British Law as well as the accepted conventions at the international level. It also discusses the provisions and the considerations under the CISG for the proper disposal of justice in case of default of any of the agent. London This book deals in details in great details with the fundamentals of Contract law. Sweet and Maxwell. agent. However for the current work of contract the researcher has covered the entire section of agency. followed by an ambient amount of case laws both Indian as well as from other parts of Common law legal system. The essentials for being an agent. SPECIFIC CONTRACTS. 14th ed. Lexis Nexis. Nilima Bhadbhade (ed. wherein the author has beautifully described the role of principle.

etc. Books. Sources of Data Collection Secondary source of data collection was used which involves in collection of data from books. archives. articles. etc. What is the extent of duties that have been assigned to an agent under Indian Contract Act? 2. articles were used while making this project.Research Questions: 1. Type of Research Explanatory type of research is used in this project. What is the extent of responsibility of an agent towards the principle in case of appointment of sub agents and substituted agents? Research Methodology: Approach of Research: In this project doctrinal research is used. . No surveys or case studies were conducted. websites. What is the role of a sub agent and a substituted agent in a contract? 3. because the project topic was relatively new and unheard of and also because various concepts were needed to be explained. Doctrinal Research is a research in which secondary sources are used and materials are collected from libraries. What are the major and substantial differences between a sub agent and a substituted agent? 4. journals.

As between Principal and third person a person may become an Agent. The law of agency derives its statutory base from Chapter X of the Indian Contract Act. Several types of commercial agents have been recognized under Indian law. auctioneers. who is of the age of majority according to the law to which he is subject. and who is of sound mind. in his own case under similar circumstance10. persons entrusted with money for obtaining sales and insurance agents. 3 Section 183 4 Section 184 5 Section 185 6 Section 186 7 Section 187 8 Section 187 9 Section 188 10 Section 189 . Any person. The Agent in doing that act must neither do anything that is illegal. An Agent has authority in an emergency to do all such acts for the purpose of protecting his Principal from loss as would be done by a person of ordinary prudence. which includes inter alia brokers. nor beyond the powers of his Principal. not beyond the limits of his own authority. del credere agents. The authority of an Agent may be express or implied6. spoken or written7. An Agent having an authority to do an act has authority to do every lawful thing.Agent In India. Section 182 of the Act defines ‘Agent’ as ‘person employed to do any act for another or to represent another in dealings with third person’. the relationship between Agent and Principal is primarily contractual in nature and is governed by the terms of contract entered into between them ("Agency Contract"). which is necessary in order to do such act 9. No consideration is necessary to create an agency5. An authority is said to be implied when it is to be inferred from the circumstances of the case and things spoken or written or in the ordinary course of dealing may account for the circumstances of the case8. 1872 ("Act"). so as to be responsible to his Principal according to the provisions contained in the Act4. which provides the framework of rules and regulations that govern formation and performance of any contract including the Agency Contract. An authority is said to be express when it is given by words. can employ an Agent3.

Test of determining existence of agency of relationship “Agency depends on the true nature of relationship.  Implied: An agent's authority can be implied by custom. as disclosed by the evidence does not justify a finding of a agency. It is implied that the agent has authority to help third parties buy and sell homes since it is the custom among real estate agents. Ram Prasad. For example. 175 13 Banaras Bank v. When a principal (accidentally or purposefully) causes a third party to believe that someone is an agent. if the incidence of this relationship. Are There Other Ways to Determine an Agent's Authority? There are situations where an agent's authority is created even if the person is not an agent. In general. AIR 1930 All 573 . p 146 12 McCarty v King County Medical Service Corporation. It has been held in several decisions that the fact that the parties have called their relationship an agency is not conclusive. and that the court must examine the true nature of relationship and the functions and responsibilities of the alleged agent.13 Scope of Agent’s Authority Ultimately. a realty company hires a real estate agent. 11 Halsbury’s Law of England. 3rd edn. Custom is determined by the express duties of other agents in the same position. Here are examples of these different situations:  Apparent Authority: A principal has a duty not to misrepresent another as his/her agent. 12The law in India is same. there are two ways to determine the scope of an agent's authority:  Express: An agent's authority can be expressly determined. this depends on the agreement made between the principal and the agent. If an agreement specifies an agent's duties.”11 The American jurisprudence refers to the case in which it was held the use of words ‘agency agreement’ and ‘agent’ by the parties in a contract does not necessarily establish a relationship of agency in legal sense. 26 Wash 2d 660. Vol I. an agent does not have authority to represent the principal beyond those duties.

act in good faith in the discharge of the agency responsibilities. It is therefore a cardinal requirement of law that agents must exercise a reasonable degree of skill and care in executing the principal’s instructions. the agent has authority to act. an agent should only execute lawful instructions. the principal is bound by the agent's actions even if the person was not an agent. 15 (c) Act in good faith An agent must in all respects. Where there is apparent lapses in executing the agent’s responsibilities.  Emergency Powers: In an emergency situation. the agent is considered to have breached the terms of the agency.  Ratification: There are times when a principal will authorize the agent to act beyond his/her authority. 14 (b) Exercise of skill and care Skill and care are prerequisites to the efficient exercise of duties by agents. This duty is the basis of any agency. Duties Of Agent In Contract a) Execution of Instructions One of the primary duties of an agent is to execute the instructions of the principal. This means. the interest of the principal is of paramount consideration. an agent might use company funds to provide medical attention to an injured employee. in the performance of the obligations. The scope of the instructions to be executed would however depend on the terms of the agency agreement. but the emergency situation would excuse the agent's actions. and within the bounds of reasonableness. The agent should therefore avoid conflict 14 Bonsor v Musicians’ Union [1956] AC 104 15 New Zealand Farmers Cooperative Ltd v National Mortgage & Agency of NZ [1961] NZLR 969 . The agent may not have authority to do so. Importantly though. an agent may act beyond his/her authority even if the principal did not give the agent permission. As long as the principal ratifies the action ahead of time. For example. The third party must be reasonable in believing that the person was an agent.

C was in possession of all the facts. could not hold the principal. he warrants his authority but if the third person knows the facts as well as the agent. apparent or real." and C. He can hold A upon his statement that he has authority. with A as a mere representative of P. he could not be held. misconstrued them.C. and I think from it that I have authority to buy cattle. to deliver to P.A. yet the legal effect of the letter was not to give A authority to buy cattle. however. upon reading the letter. He may do this because he thinks he has authority or because he intends to deceive. 16 But. here there would be no warranty by A of his authority. An agent may expressly state that he has authority. in respect to the purchase of cattle. say. 1872 19 Kelly v Cooper [1993] AC 205 . and in common with A. In either case he is liable to the person who thus deals with him and who on account of lack of authority. to purchase C's cattle. to make inquiries concerning their purchase. on the strength of which he parted with the cattle19. C thereupon delivers his cattle to A. but merely. 18 Thus suppose that A states to C that he has been sent by P. as the contract would be between C and P. But if A lacks authority C is not without remedy. 17 Liability and Duties of an Agent To The Principal By An Agent: If an agent expressly claims to have authority or by his acts indicates that he has authority. had assented to that view. this duty also extends to the production of the agency accounts when asked to do so by the principal. there is no warranty. he could not hold A. and therefore suffers damages. 16 Chaudhry v Prabhakar [1989] 1 WLR 29 17 Yasuda v Fire & Marine Ltd v Orion Marine Insurance Ltd [1995] 2 WLR 49. Thus if A had said: "I have here a letter which P has sent me. In this case if A had had actual or apparent authority. The cattle die on the way through no fault of A. for there would be no reliance upon A's assertions that he had authority. P would be responsible as delivery to his agent would be delivery to him. in this case.of interests between his/her personal business with that of the principal. 18 Section 237 and Section 186 of I. If.

not being proper banking business. there was no warranty of authority. if the agent does not disclose his principal. Shan Mohan Vardraj (1890) ILR 14 Bom 590 . As per Sec. hold the agent for it is with the agent that he has dealt as principal. On the deal W 20 Bryant. be the more usual case. The court sustained the defence. He may not disclose the principal. preferring for some reason to let only his own identity appear. So. Iowa Paper Bag Co. In some such cases the third person upon discovering the principal may elect to hold him.20 The P bank by A. and this would. There is nothing to prevent an agent from binding himself upon a contract made by him. The plaintiff then sued the Vice President upon the ground that he warranted his authority. the agent is liable. holds himself out as having the authority to so act and thereby warrants himself to have authority.It is not necessary that the agent expressly state that he has authority. Powis and Bryant Ltd v La Banque du Peuple Cunnigham & Co. He may do this for a variety of reasons.21 When Agent having authority to bind principal may instead bind himself? One who is an agent and has full power to bind his principal may nevertheless binds himself. In the case of Thilmany v. An implication to that effect may arise from the facts. & William Daggett. in all cases. But the court held that inasmuch as the third person was chargeable as a matter of law with the power of a bank and therefore must be taken to have known that the Vice President had no powers to bind the bank upon this guaranty. guaranteed a commercial account. perhaps. as vice president. W defends that he was an agent. as we note in another connection. 73(Principal Undisclosed) If the principal is undisclosed by the agent the agent is liable. He may be careless in the execution of his authority22. R sues for breach of warranty of merchantability of the flour. Ltd (1891-92) All ER Rep 1253 (PC) 21 Ferguson v. if he chooses. the agent by acting as agent and by purporting to bind another person as principal. W sold flour to R. Um Chand Boid (1906) ILR 33 Cal 343 22 Mulukchand bin Gyanmal v. because he is the real party in interest. Indeed. The bank being sued on the guaranty defended that it had no power as a bank to make such an engagement. Or it may be that his principal has not sufficient credit with the person dealt with and therefore the agent binds himself. but he may.

Clark (1808) All ER Rep 227 . it will be presumed. bind himself when he intended only to bind his principal. that the representative was given the credit. v. although he was known to be a broker.. Bk.. by careless execution of a sealed instrument. It is therefore common and the better usage for the agent to set forth that the execution is by him as agent. Even in those states where statutes have abolished the seal. unless the contrary appears. Agent. Trustee. First. 24 And it is also everywhere agreed that if one go further and say "John Brown. So." etc. an unincorporated club. Agent of Thomas Anderson. But there are well established forms of execution which everyone should have in mind when he executes such paper. President. So. Yet it is highly desirable.did not disclose the name of his principal. If the agent signs his own name only. It is not absolutely essential that the agent's name should appear. Reed (1885) 29 Ch D 500 24 Casco Nat. Lastly.23 Thus if he signs "John Brown. if a person represents a large. Held. in order that the evidence may be the more surely preserved and other reasons of convenience. one can go into a multitude of form. only those can be sued thereon. agent is bound where no definite or responsible principal. when agent bound on sealed instruments by the form of his execution. it must be noted that it is everywhere agreed that if one merely describes himself as agent." or "Harry Jones." or "William Smith. though he describe himself as agent. these descriptive words are merely words of description and in no way qualify the liability of the party signing." the deed is the deed of John Brown. If a committee representing a large public gathering as a political party. It is a long established rule that only those who are named or described in and sign a sealed instrument are bound thereon. The transaction was oral. We may indicate here the proper form one should use and that will be about the extent to which in this discussion we can go. the above form of signature is the only safe one to use. that in itself is not sufficient to bind his principal. By the law of sealed instruments. deals with others for supplies. it is reasonable under 23 Wheeler v. he will be bound and the principal will not be bound. etc. who are parties thereto? An agent may. Furthermore. The books are full of discussions of particular sets of facts and courts are at some variance upon similar cases. that W was liable. unorganized or irresponsible body.

He may. Moreover. v. Coffin (1886) 141 Mass. Martin (1850) 52 U. 460. E. 6 N. this would seem to be the 25 De Busche v. however. Ordinarily. Jefferson Bank (1906) 120 Mo. V.The agent may.agent and delegate to him his powers which require special skill and care. 527. S. have only procured the consent of the principal to his hiring another to perform. Alt (1878) 8 Ch 286. (N. 209 28 Morris v. but. 45 S. and such committee will usually be personally responsible. 32 Roughly. Pow26that unless so authorised by the principal. T. R. 310 26 (1975) 1 All ER 129 27 Warren v. Duty Not To Delegate: Delegatus non potest delegare is a well known maxim of the law of agency. 25 It was laid down in John McCain & Co. 27. as his agent. he will be responsible. Mason (1893) 68 L. the principal may be in the position of an undisclosed principal to the additional agent. in the absence of a contrary understanding. (1876) 93 U. 174 32 Whitlock v. Although the additional agent is hired in the original agent's name. if the employment is in his behalf. 421. The principal chooses a particular agent because he has trust and confidence in his integrity and competence. In this case he is liable to the principal for any default by his own agent 30. App. E. The law on this subject is fairly well settled. the agent cannot further delegate the work which has been delegated to him by principal. S. Warlick (1903) 118 Ga. 30 Barnard v. a factor or other agent employed because of his skill and discretion must perform all acts involving these qualities personally. as the parties seldom define clearly the relations which they intend to create. on the other hand. therefore. Wherever there are situations of that sort in which the credit appears to be given the agent and he must have known it was so given. 364 31 Bank of Ky. the acts which he otherwise would have had to perform personally29. Adams Express Co.) 510 . 407 29 Smith v. a difficult question of fact is often presented31. S. 37.the circumstances to presume that it is the committee to whom the credit is given. be given authority to hire another agent for the principal to co-operate with him in the performance of delegated acts. in which case he is under no liability for the acts of the additional agent28 . an estate agent has no right to appoint s sub. Hichs (1874) 75 Ill. see Blackburn v. 97 S.

Penn Mutual Life Ins. In the principal case the plaintiff was. 2nd Dept. 33 Cf. where a life insurance policy was issued which contained the pro-vision that the insurer would lend money thereon to the "insured or owner of the policy".33 The court thought otherwise. however. the contract was for his benefit. The reason for its refusal lies in the fact that the remedy at law is adequate. 175 . plus the expenses incurred in procuring a new loan. furnish the consideration. C. and. specific performance will not be decreed of an agreement to borrow35. It was held. 1987 35 Rogers v. Div. since the damages arising from breach of a contract to borrow or to lend are easily assessable. or to lend money. Challis (1859) 27 Beav. Alt (1873) 8 Ch. Co34. Mccants v. and properly applied the law to its interpretation of the facts. In the case of Caplin v. L. that specific performance of the contract to lend would be granted. to furnish the consideration. D. Wells (1873) 4 S. Ordinarily. in the absence of special damages. 381 34 (App. J. The plaintiff was an assignee who sought to borrow on it. and have the if he is to receive the benefits. the difference between the contract rate and the market rate of interest. 286. being. Y. 1918) 58 N. De Bussche v. It is true that the defendant was to have the immediate control but it would seem that the plaintiff was the real principal of the additional agent. ultimately. as the defendant was under no obligation to perform the services of the principal.

where by the general usage of trade or the agreement of the parties. Where by an express or implied agreement of the parties. however. is the principal of the sub-agent. an agent is the principal of the sub-agent. He really acts in the double capacity. unless such exclusive credit has been given. either express or implied. there.SUB-AGENT A person appointed by an agent to perform some duty. In this case the superior or real principal is not responsible to the sub-agent. He is an agent of the principal and at the same time. the intermediate agent may be entirely exempted from all liability to the sub-agent. if the agency is avowed. or by the usages of trade. 1. . and. a sub-agent is to be employed. a privity exists between the principal and the sub-agent. To this general rule there are some exceptions for example. will be liable to the sub-agent.Sub-agents may be considered in two points of view. unless exclusive credit is given to one of them. When the agent employs a sub-agent to do the whole. to accomplish the ends of the agency. or any part of the business of the agency. Who is a Sub-agent? A sub-agent is a person employed by and acting under the control of the original agent in the business of the agency (Sec. towards their immediate employers. 2. in that case. and the latter may justly maintain his claim for compensation. With regard to their rights and duties or obligations. the latter will only be entitled to recover from his immediate employer. both against the principal and his immediate employer. because there is no privity between them. The agent. although the real principal or superior may also be liable. Thus. In simple words. and the credit is exclusively given to the principal. or the whole of the business relating to his agency. his remedy is limited to that party. without the knowledge or consent of his principal. as if he were the sole and real principal. A sub-agent is generally invested with the same rights. a sub-agent is the agent of the agent. As to their rights and obligations towards their superior or real principals. sub-agents are ordinarily or necessarily employed. and his sole responsibility is also to him. 190). and incurs the same liabilities in regard to his immediate employers.

Appointment of sub agent As a general rule. v. then the agent has an implied authority to make such appointments36. Co. etc. A subagent is a person to whom the agent delegates as his/her agent. However. Where the principal is aware that the agent will delegate his authority. a sub-agent may be appointed where the nature of the work is such that a sub-agent is necessary. 6. 2. of the agent. If an agent feels that the appointment of subagents are necessary to the proper transaction and carrying on of the business committed to the agent. 5. an agent cannot appoint a sub-agent. in the following cases. Again. Through a subagent. A sub-agent may be appointed if there is a custom of the trade to appoint a sub-agent. Where the principal expressly or impliedly allows the appointment of a sub-agent. Sub-Agency An agency is a consensual relationship created by contract or by law where the principal grants authority to an agent to act on behalf of the principal to deal with a third party. Generally. Where the work to be done is purely ministerial and does not depend upon personal skill. an agent can appoint a sub-agent: 1. 677 (Ala. An agency relationship is fiduciary in nature and the actions and words of an agent exchanged with a third party bind the principal. 4. the agent can perform an act for the principal. 285 Ala. Where an emergency makes it necessary to appoint a sub-agent. if an agent employs a 36 Consolidated Underwriters Ins. experience. 3. Landers. 1970) .

” Booker v. 114 F. 422 (3d Cir. and by his/her authority. v. 93 Okla. However. Henry.40 It was observed in Shaw v. then the subagent is the agent of the principal and is directly responsible to the principal for his/her conduct. a subagent is only responsible to the agent.. United American Insurance Co. 1948) 38 Baker-Riedt Motor Co. 1921) 44 700 So. if the agent employs a subagent on his/her own account to assist him/her in the work at his/her own risk. Interested Underwriters Concerned Via Ewing Int’l Marine Corp. App. v.38 Whereas.39 An agent is responsible to the principle for the conduct of a subagent with reference to the affairs of the principal entrusted to the subagent. 55 Cal. v. 760 (Cal. Pa. . Inc. O’Byrne41. 37 If an agent employs a subagent for his/her principal. that if an agent is authorized by owners to sell certain land. a subagency cannot rise higher than the general agency and when that general agency ceases to exist. the agent is only responsible in case s/he has not exercised due care in the selection of the subagent. 1902) 43 Baisley v. and if damage results from the conduct of such subagent. 1997). 360 Pa. 153 (Okla. it will automatically dissolve the subagency42. Gray.2d 1333.43 “The law regarding the responsibility of a principal for persons allegedly appointed as subagents is well settled. Under this circumstance. 2001 41 64 Utah 139 (Utah 1924) 42 Union Casualty & Surety Co. and if s/he authorizes a subagent to perform the same. Moore..44 “’When one employs an agent who 37 McKnight v. unless s/he is guilty of negligence in the appointment of such subagent or improperly co operates in the acts or omissions of the subagent.subagent. 1335 (Ala. then the agent is the employing person and the principal is not a party to the contract of employment. However. 1923) 39 ibid 40 Sanoma. App. a principal can be a party if s/he becomes a surety. Peoples-Pittsburgh Trust Co. 290 (Pa. while the agent is responsible to the principal for the actions done by him/her and the actions by the subagent. then there is no privity between such subagent and the principal. An agent is not liable to third persons for the misfeasance or malfeasance of a subagent employed by him/her in the service of his/her principal. then the sale made by such subagent will be binding upon the owners.

398. 46 395. the subagent will also be the agent of the principal. a sub-agent will not be liable to render an account to the principal.In other words. Through a subagent.45 Eagle Motor Lines v. 681.2d 818. Amruth Ghee Co Ltd AIR 1961 AP 143. the latter are clothed with precisely the same rights. ‘It may be generally stated that. then the agent is the employing person and the principal is not a party to the contract of employment. A subagent is a person to whom the agent delegates as his/her agent. in regard to their immediate employers. and is not under any contract with the principal. Relationship between Agent and Sub-Agent. Thus. If an agent feels that the appointment of subagents are necessary to the proper transaction and carrying on of the business committed to the agent.has either express or implied authority to employ a subagent. where agents employ sub-agents in the business of the agency. 235 So. Royal Trust Co. 49 Purushotham Haridas v. 1951). Generally. Co. or (3) the principal ratified the appointment. he must look to the agent for his remuneration and indemnity. 822 (Ala. and incur precisely the same obligations. as if they were the sole and real principals. 677. 49 45 285 Ala. and are bound to the same duties. Hood. 129 (Ala. if an agent employs a subagent.’48 The sub-agents loook to. 386.2d 126. t]he act of a subagent will not bind the original principal where the appointment of such subagent was not by authority. then the agent has an implied authority to make such appointments[i]. (2) the agent had implied authority to appoint the subagent. 47 232 Ala. “a principal will be bound by the acts of a purported subagent only if: (1) the agent had express authority to appoint the subagent. at 1335-1336(Consolidated Underwriters Ins. 238. v. 1970). 309-310 (Ala.46 Butler v. … [However. the agent can perform an act for the principal. express or implied. of the South47).” Id. 55 So. relying on Hugh Francis Hoole v. or was not subsequently ratified by the principal…’” Id. AIR 1930 PC 274 . Landers. 167 So. 1936) 48 Story of Agency. 307. Co. Standard Life Ins. and is controlled by the agent who appointed him.

iii. iv. It was held that the arrangement entered into for exchange of Vp article under agreement between the two countries did not make the Government of Pakistan the sub-agent of the Gavernment of India. P is accountable only to Z. It was held that the terms on which the business was done. and did not render the latter liable to pay the price of the article to the sender. 51 If money due to A is paid to P. and A cannot recover the money directly from P. 52 Stephens v. B appointed C as commission agent to enter unto transactions of purchase and sale of bullion in the following terms: i. National City Bank of New York.52 In S Summan Singh v. To charge certain commission on the transactions. The bank issued instructions to the Jullundur bank to pay the money to X. Z having authority from A to collect it.194. who is Z’s servant. but did not hand over the amount to the Government of India.However. Sub-Agent’s Responsibility The sub-agent looks to and is controlled by the agent who apoointed him. 53 A has instructed the American Bank to remit money to X in Jullundur. in Union of India v. as there was no privity of contract between them. These were. and Jullundur bank paid the money to the wrong person. Mohd Nazim. To act on instructions of B on behalf of B. in Jullundur. showed that the rehip between B and C was one of the pricipal and agent and not of principal and principal and. To be responsible for the solvency of persons and whom he did business. It was held that A could not recover money from the Jullundur bank. as it suspended the VP service betwenn the two countries. in Jullundur. and is not under any contract with the pincipal. The government of Pakistan realized the value of the article. Badcock (1832) 3 B&Ad 354 53 AIR 1952 Punj 172 . ii. therefore. To render accounts to B of all transactions and sale. C was a sub- 50 AIR 1980 SC 431 51 Except in cases of substituted agent appointed bt the agents: S.50 a resident of India sent a valur payable article to an addressee in Pakistan. two persons of the name of X. A authorised B to carry on business on his behalf in any manner that he liked.

which the company paid. Bradford55. under the circumstances. and issue policies for it in a certain territory. v. Franklin Fire Ins. 408. and the case fell under S. even though he may have been ignorant of the particular act. in a similar suit by another insurance company. there was no forgery committed when the sub-agent signed the agent's name to the policy. a 735 .agent. A loss occurred. and re-ceived payment (which was turned into the agent's account). covering a risk which the plaintiff company had instructed the agent not to take. C was not answerable to A. is no defense.1 56 MECHEM ON AGENCY. and the fact that he had no knowledge that the policy was issued. is in accord with the general rule that an agent who employs a sub-agent on his own account is responsible to his principal for the manner in which the business has been done. As such. 192. 197 57 Id. that the countersigning of the policy was 54 Rughunath Prasad v. and that the act was within the scope of the authority conferred by the agent upon the sub-agent. growing out of the same transaction and involving the same agent and sub-agent. or may have expressly forbidden it. appointed a sub-agent and confided to him the general charge of his business. or the pre-mium received. the court of ap- peals for the third circuit. however. R. Held. 286. In another case. if we assume that the facts are correctly interpreted. Rep. Defendant. whether by himself or his agent. This holding. A. that the agent is liable for this act of his sub-agent. without authority from the plaintiff. 54 Liability of agent to principal for acts of sub-agent. 226. and suit for accounts by A against C was not sustainable. 50 Atl. 32.57 The court held that. the latter is responsible for his acts within the scope of the authority conferred. 55 I. and not under S. an in-surance company. Without the agent's knowl-edge the sub-agent delivered a policy (countersigned by him in the agent's name). appointed defendant its agent to effect insurance. held that the act of the sub-agent was not within the scope of the authority. and it now sues the agent for indemnity.56 If the sub-agent is really the agent of the original agent. 55 (1901) 201 Pa.- Plaintiff. Seva Ram Tikam Das AIR 1980 All 15. Co.

legally a forgery. F had negotiated the original loan through one B of Lincoln. 92 Ia. Planters' etc. American Fire Ins.) authority so to act may be implied from necessity arising out of the cir-cumstances of the parties. Breck v. Held. Nebraska. if the facts are rightly interpreted. and had received several payments through him after the assignment. transferred the note and mortgage after maturity to the plaintiff. B finally collected the last installment of the note and failed to turn over the proceeds. Co. R. 48. (1894). 316. 43 C. W. 64 Am. the holder. 534. A.63 58 (1900) 102 Fed.60. the mortgagor in Nebraska. 49 L. W. 92 63 75 N. F resided in New Hampshire.Neb. Authority to appoint sub-agents J purchased a note and mortgage of F and left the same in his hands for collection. 530 59 (1903). Connor v. is sound in law. C. from necessity. Meeker. and therefore that the agent was not responsible. Nat'l Bank v. . Rep. Appleton Bank v.) 518. 60 Co. Parker61. like the other. that the plaintiff must fail because F. -. Bradford v. Hanover Ins. who brings suit to foreclose. 331 62 4 Gray (Mass. 93 N.58 This holding. 60 N. 993.59 The rule is too well settled for dispute that. Dec. J. A. McGilvray62. Wilmington First Nal'l Bank. Rep. . had implied authority to appoint B as a sub- agent to receive payment. (Ruthven v. 310. C. 663 61 114 Mass. as an exception to the general rule that agents have no power tolappoint sub-agents.

a solicitor to take proceedings against C & Co. (2) A authorises B. Section 194 enacts.. for the recoveryof the money. such person is not a sub-agent. to sell his estate by auction..64 the Court laid down that. such other person who has been named is called a “substituted agent”. vs Firm Rur Chand Kurra Mal. namely. but is an agent of the principal himself. but is A ’s agent for the conduct of the sale. In the words of (Section 194).” Examples (1) A directs B. he is not a sub-agent. C is not a sub-agent. In the case of Central Bank Of India Ltd. names another person accordingly. holding an express or implied authority to name another person accordingly. For the sake of brevity. to recover the money due to A from C &Co. his solicitor. such person is not a sub-agent but an agent of the principal for such part of the business of theagency as is entrusted to him. "where an agent holding an express or implied authority to name another person to act for the principal. “where anagent. B names C. A "Co-agent" or a "substituted Agent" is a person who is appointed by the agent to act for the principal in the business of agency with the consent of the principal.. such person is called a substituted agent. it becomes unnecessary to 64 AIR 1958 P H 159 . a merchant in Kolkata. holding an express or implied authority to name another person to act for the principal.. B instructs D . ‘In view of the conclusion at which we have arrived. and to employ an auctioneer for the purpose. D is not a sub-agent but is solicitor for A (Section 194). that the relationship between the plaintiff-firm and the Oriental Bank was one of substituted agent. to conduct the sale. but a substituted agent for the principal" Where an agent appoints or names other person for being appointed as an agent in his place.Substituted agent Section 194 provides that where an agent. . an auctioneer. has named another person.

According to Section 195.go into other matters which have been considered by the trial Court and which have been argued before us. 2. such person is not a sub-agent. A sub-agent cannot ask for his remuneration from the principal. in selecting substituted agent for his principal an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own case. and if he does so. 3. A sub-agent is appointed by the agent and as such he is under the control of the agent. The principal cannot hold the sub-agent liable.’ Where an agent holding an express or implied authority to name another person to act for the principal in the business of the agency has named another person accordingly. . but an agent of the principal for such part of the business of agency as is entrusted to him. It was admitted by Mr. What is the difference between Sub-agent and Substituted agent? It is important to understand the distinction between the two as their liability is different: Sub-agent 1. (Section194). 4. Where the agent has authority to appoint an agent and the person so appointed is in the nature of a substitute for the original agent. the contract arises between the principal and the substitute and the substituted agent becomes responsible to the principal for the due discharge of the duties as if he is appointed by the principal himself. except in case of fraud. There is no privity of contract between the subagent and the principal. Dalip Chand Gupta that the question of negligence would only arise if the defendant bank was the agent and not if the Oriental Bank became the substituted agent. A sub-agent acts under the agent. It is equally unnecessary to decide whether there was any negligence on the part of the defendant-bank in the matter of entrusting the work to the Oriental Bank or in the delay in informing the plaintiff firm about non-realisation of the amount of the hundi. 5. he is not responsible to the principal for acts or negligence of the substituted agent so selected.

Substituted Agent 1. There is contractual relationship between the substituted agent and the principal. Volume I. accordingly.405 66 Mercantile Bank of India Ltd. of the principal. established. in the third case the substituted agent has the rights and liabilities of an agent vis-a-vis the principal. wherein it is stated- "There is as a general rule no privity of contract between the principal and a sub-agent. the agent. 5. (3) those employed with the principal's authority. An agent is not liable for the acts of the substituted agent. 6. 66 Halsbury's Laws of England. (2) those employed with the express or implied authority of the principal but between whom & the principal there is no privity of contract. and a direct relationship of principal and agent is. A substituted agent is only named by the agent but is under the control of the principal. the sub- agent being liable only to his employer. A substituted agent can ask for his remuneration from the principal. by whose acts the principal is not bound. in Halsbury's Laws of England65 it is stated that there may be three classes of sub- agents: (1) those employed without the authority. 2. The principal can hold the substituted agent liable. The exception is where the principal was a party 65 (Volume I) Simonds edition para. 4. A substituted agent acts independently for his principal. express or implied. An agent is liable for the agent acts of the sub-agent. between whom & the principal there is privity of contract.6. 3. Furthermore. Chetumal Bulchand AIR 1930 Sind 247 . For the acts and defaults of the first two classes the agent is responsible to the principal. v.

The naming should. that the whole distinction in our law appears to turn on the original agent naming the person he appoints to represent the principal for the whole or part of the business first entrusted to him. Whether this naming is put to the agent or principal is by no means apparent. and it was the intention of the parties that privity of contract should be established between them. In case of a sub-agent no such naming is required and consequently no such privity in law is established." It can be inferred that. . be to the principal himself so as to bring about privity of the appointment of the sub-agent or has subsequently adopted his acts. however.

1.Conclusion and Suggestion As a general rule. the person so appointed is the nominee of 67 13th law commission report .A.agent 3. to constitute. and for the sake of brevity). the maxim 'delegatus non potest delegare' applies so as to prevent an agent from establishing the relationship of principal and agent between his own principal and a third person. we adopt for want of a better. and that. on the one hand. devolve upon another obligations to the principal which he has himself undertaken to personally fulfil. without authority from his principal. but this maxim when analyzed merely imports that an agent cannot. although it does not exactly denote the legal relationship of the parties."67 Furthermore. such authority cannot be implied as an ordinary incident in the contract. inasmuch as confidence in the particular person employed is at the root of the contract of agency. Where the authority conferred is of such a nature as to necessitate its execution wholly or in part by means of sub. and where that is the case. a direct privity of contract between him and such substitute. the reason of the thing requires that the rule should be relaxed. so as.agent of the agent.C. But the exigencies of business do from time to time render necessary the carrying out of the instructions of a principal by a person other than the agent originally instructed for the purpose. In my opinion. as in the present case. to enable the agent to appoint what has been termed a sub-agent or 'substitute' (the latter of which designations. Where the employment of a sub agent is justified by usage of the particular trade or business in which the agent employed. nor inconsistent with express term’s of agent’s authority 2. provided such a usage is neither unreasonable. and the test to be applied is the same whether the case falls within Section 194 or whether. and on the other hand. as per 13th law commission report in section 190 the following changes must be incorporated in the present act of I. in the interests and for the protection of the principal. that is the true test to determine whether the person appointed by an agent authorised in that behalf to perform part of the business of the agency is a substituted agent of the principal or the sub. no doubt. Where the act done is purely ministerial and does not involve confidence or discretion. 1872 and the paper affirms it too.

for Section 195 applies to a case falling within Section194. and his obligation quo to the part of the business of the agency entrusted to the substituted agent ceases if and so soon as privity of contract has been created between the substituted agent and the principal. and the test to be applied is the same whether the case falls within Section 194 or whether the person so appointed is nominee of the principal.the principal although there is a difference in the obligation undertaken by the agent. the agent is not concerned with the character or efficiency of the person so appointed. although there is difference in the obligation undertaken by the agent. The true test to determine whether the person appointed by the agent authorised in that behalf to perform part of the business of agency is a substitute agent of the principal or the sub-agent of the agent is to see if there is a privity of contract between the principal and the person so appointed. while in cases where the substituted agent is the nominee of the principal. .

Contract & Specific Relief Act (10th between-sub-agent-and-substituted- agent. vol 2 (13th References  Books  13th Law Commission Report (Universal publishing and Co.sources   http%3A%2F%2Fwiki.)  Pollock & Mulla.facebook. 1. Lexis Nexis Butterworths Wadhwa 2009)  Avtar Singh. Indian Contract Act& Specific Relief Acts. Wadhwa Publications)  _agent_and_substituted_agent&h=4AQG0e4nb  %3DPA245%26lpg%3DPA245%26dq%3Dsubstituted%2Bagent%26source%3Dbl% 26ots%3DJ2VwiPq19K%26sig%3DpzYm5sME_A781xPrjZY7z3o6xYk%26hl%3De n%26sa%3DX%26ei%3D0n6fUMDSI8PPrQfXzYDwDg%26ved%3D0CE0Q6AEw Bw%23v%3Donepage%26q%3Dsubstituted%2520agent%26f%3Dfalse&h=4AQG0e 4nbw.html&h=4AQG0e4nbwww.lawandotherthings.preservearticles.php? F15688659%2FAgency-contract&h=4AQG0e4nb  EBC)  P C Markanda. Vol. The Law of Contracts (2nd .