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Wednesday, November 16, 2016

DELEGATUS NON POTEST DELEGARE – AS APPLICABLE TO AGENCY

Sasi K.G.

01. INTRODUCTION

The Latin Legal maxim delegatus non potest delegare is one of the important legal maxims in the
application of the contract of agency. The present study do not intend to deal with all the characteristics
of agency, but only the area of application of the above maxim in agency is considered now. The general
application and the exceptions of delegatus non potest delegare as applicable to agency is described.

02. DELEGATUS NON POTEST DELEGARE

01. Etymology of delegatus non potest delegare

Delegatus non potest delegare is a Latin Maxim. The English meanings of the words are given below.

delegatus = delegated

non = not

potest = can

delegare = delegate

Thus delegatus non potest delegare means “the delegated (person) cannot delegate (further).

Another usage of this maxing is delegata potestas non potest delegari. The English meanings of the
words are given below.

delegata = delegate

potestas = power

non = not

potest = can

delegari = delegated
Thus delegata potestas non potest delegari means delegated authority cannot be delegated.

02. Meaning of delegatus non potest delegare

This maxim means that a person to whom an authority or decision-making power has been delegated to
from a higher source, cannot, in turn, delegate again to another, unless the original delegation explicitly
authorized it.

03. History of usage of delegata potestas non potest delegari and delegatus non potest delegare in
English legal literature.

Even though these similar maxims may have appeared earlier, the most noticeable writing with the
present meaning of the maxim is seen in Sugden’s work Treatise on Powers. i[i] Sugden had said,

“Wherever a power is given, whether over real or personal estate, and whether the execution of it will
confer the legal or only equitable right on the appointee, if the power repose a personal trust and
confidence in the donee of it, to exercise his own judgment and discretion, he cannot refer the power to
the execution of another, for delega-us non potest delegare.”

This refers only to powers of appointment, not to agency; but here again, as in Story, the wider Latin
maxim is merely an after-thought, and delegation is only denied where the testator relied on the
donee's "judgment and discretion." In “Commentaries on the Law of Agency” ii[ii] written by Story. he
remarks, “One, who has a bare power or authority from another to do an act, must execute it himself,
and cannot delegate his authority to another; for this being a trust or confidence reposed in him
personally, it cannot be assigned to a stranger, whose ability and integrity might not be known to the
principal, or, if known, might not be selected by him for such a purpose... iii[iii] The reason is plain; for, in
each of these cases, there is an exclusive personal trust and confidence reposed& in the particular party.
And hence is derived the maxim of the common law; Delegata potestas non potest delegari. And the like
rule prevailed, to some extent, in the civil law; Procuratorem alium procuratorem facere non posse... iv
[iv]”

Kent in Kent’s Commentariesv[v] gives us the rule with somewhat less qualification than Story.

“An agent ordinarily, and without express authority vi[vi], has not power to employ a sub-agent to do the
business, without the knowledge or consent of his principal. The maxim is, that delegatus non potest
dlegare, and the agency is generally a personal trust and confidence which cannot be delegated; for the
principal employs the agent from the opinion which he has of his personal skill and integrity, and the
latter has no right to turn his principal over to another, of whom he knows nothing.”

The maxim itself is found in the three early cases cited. In Alexander v. Alexander, vii[vii] Sir Thomas
Clarke, M.R., said:

"If there is a power to A, of personal trust or confidence, to exercise his judgment and discretion, A
cannot say this money shall be appointed by the discretion of B for delegatus non potest
delegare."viii[viii]
In Bristow v. Ward,ix[ix] counsel for the plaintiffs urged that delegatus non potest delegare, and opposing
counsel did not dispute the maxim, but said it did not apply. And in Blore v. Sutton x[x] counsel said,
arguendo, "Admitting the principle that delegatus non potest delegare, this is a case to be determined
by the usual course of management," which would take it out of the rule. xi[xi] It also appears from a
remarkxii[xii] in Doe dem. Duke of Devonshire v. Lord George Cavendish xiii[xiii] that Lord Mansfield knew
the maxim. But none of these four cases gives any hint of its origin; and none of the judgments rely on
its authority.

On this state of the cases, it seems likely that a principal source of the citations is Branch's Maxims, a
book published in 1753 which soon came into very general use. He gives the fomn "delegata potestas
non potest delegari," and refers to Coke, 2 Inst. 597. In this passage Coke is discussing Distraint of
Knighthood, the writ by which holders of knight's fees were compelled to accept knighthood or pay a
fine. Attempts were made to have such cases tried by roving commissioners; on which Coke says:

This writ and the returne thereof is by writ of miittimus transmitted into the court of exchequer, who
cannot make a commission to others concerning this matter, but ought to proceed legally themselves,
because they have but delegatam potestatein, quac non potest delegari, and they are learned, and
sworne judges, and able to allow the parties their just exceptions.

This naturally means to us: "they have only a delegated power, and delegated power cannot be
delegated;" but it may well have meant to Coke: "they have only a delegated power, and moreover one
that cannot be delegated. In any case delegation of delegated jurisdiction is generally undesirable, and
condemned by the Digest:xiv[xiv] mandatam sibi .jurisdictionem mandare alteri non posse manifestum
est. But Coke's latin tag certainly looks like a quotation from some authoritative source.

There was in fact more than one place where he could have found the words "delegatus non potest
delegare" or something very like them. There is indeed nothing of the kind in the Corpus Juris Civilis,
where delegare and delegatus are very seldom used in the sense of "delegate"; or among the maxims in
the Decretalsxv[xv] or the Sext; or in the collection of maxims of Bartholomew of Brescia. xvi[xvi] But the
identical phrase occurs in the gloss on texts restricting subdelegation of delegated jurisdiction;xvii[xvii]
and in Tellez' commentary on the Decretals we find similar expressions in the same connection. xviii[xviii]
Moreover, the maxim appears (as "Delegatus delegare non potest") in Flores Legum, published at Paris
in 1566,xix[xix] where it is supported by reference to D. 2.1.5. and C. 3.1.5.

In Coke's day Bracton was the highest, as he is still the most venerable, authority on the common law,
and in the printed text of his De Legibus, from the first editionxx[xx] to the last but onexxi[xxi] there
appeared the following words:--

Est enim corona regis facere iustitiam et iudicium, et tenere pacem, et sine quibus, corona consistere non
potest, nec tenere. Huius modi autem iura sive iurisdictidnes ad personas vel tenementa transferri non
poterunt, nec a privata persona possideri, nec usus nec execution iuris, nisi hoc datum fuerit ei de super,
sicut jurisdictio delegate non delegari poterit, quin ordinaria remane at cum ipso rege.

This Sir Travers Twiss translates,

“For the crown of the king is to do justice and judgment, and to maintain peace, and without which the
crown' cannot consist nor hold. But rights and jurisdictions of this kind cannot be transferred to persons
or to tenements, nor be possessed by a private person, nor can the use nor the execution of right, unless
it be given from above, as delegated jurisdiction cannot be delegated, but ordinary jurisdiction remains
with the crown.”

04. Examples of delegatus non potest delegare

An example of the operation of the maxim are given below.

An attorney given legal authority in a power of attorney cannot, of their own volition, delegate the
exercise of that authority without the consent of the person who granted the power of attorney. This
maxim has numerous applications in Constitutional Law, Administrative Law, Contract Law etc.

By the power-of-attorney-holder of the complainant giving instructions to the advocate for sending the
statutory notice or for the conduct of the case he is not offending the principle of delegatus non potest
delegare. In Pandalai v. Jacob C. Alexander - 2000 (2) KLT 59 it was held by this Court that as long as the
power-of-attorney of the payee of a cheque in a prosecution under Section 138 of the N.I. Act does not
act or plead for the principal, there is no legal impediment in his giving instructions to the Advocate. In
Anirudhan v. Philip Jacob - 2006 (3) KLT 554 this Court had held that the power- of-attorney of the
complainant in a prosecution under Section 138 of the N.I. Act will be a competent witness if he were to
speak of facts which are within his knowledge. xxii[xxii]

03. AGENCY

In India, the agent and principle share a relationship that is contractual in nature, and therefore it is
governed by the terms and conditions of the contract between them. Chapter X of the Indian Contract
Act, 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. In agency contracts, there exists a
legal relationship between two people whereby one person acts on behalf of the other. The person acting
on behalf of the other is called an agent, and the person from whom the agent derives authority to act is
called the principal. The law of agency is based on the Latin maxim “qui facit per alium, facit per se,”
which means, “he who acts through another is deemed in law to do it himself“xxiii[xxiii].

01. Definition of Agency

Agent and principal are defined under Section 182 of the Indian Contract Act, 1872. Section 182 defines
“an agent” as a person employed to do any act for another or to represent another in dealings with third
persons. The person for whom such act is done or who is so represented is called “the Principal”. But
every person, who does something for the other is not necessarily an agent, for example, a contractor
employed to carry on some construction work is not necessarily the agent of the principal. A servant
may be technically an agent of the master but he is not strictly an agent in as much as he has to act
entirely under the orders of the master as to how anything needs to be done. An agent has more
authority and independence to function in comparison to that of a servant.
An agent is a person, who acts for and on behalf of the principal and under the latter’s express or
implied authority and his acts done within such authority are binding on his principal and for his such
acts, the principal is liable to the party with whom the agent has dealings as such agent.

Section 226 of The Indian Contract Act stipulates that “Contracts entered into through an agent, and
obligations arising from acts done by an agent, may be enforced in the same manner, and will have the
same legal consequences, as if the contracts had been entered into and the acts done by the principal in
person.”

02. Parties to an Agency

There are three parties to an agency namely, the principal, the agent and the third party.

According to Section 184 of Indian Contract Act, 1872, any person can become an agent i.e. there is no
need to have a contractual capacity to become an agent. Therefore, a minor can also act as an agent.
But the minor will not be responsible to his principal. xxiv[xxiv] Different types of commercial agents have
been identified under Indian law like brokers, auctioneers, del credere agents, persons entrusted with
money for obtaining sales and insurance agents.

According to Section 182 of the Indian contracts act 1872, an agent is a person employed to do any act
for another, or to represent another in dealings with the third parties. The person for whom such act is
done, or who is represented, is called the principal. Agency is the relationship that subsists between the
principal and the agent, who has been authorized to act for him or represent him in dealing with others.
Thus, in an agency, there is in effect two contracts i.e.

a) Made between the principal and the agent from which the agent derives his authority to act for and
on behalf of the principal; and

b) Made between the principal and the third party through the work of the agent.

Any person, who is of the age of majority according to the law to which he is subject, and who is of
sound mind, can employ an Agent1. As between Principal and third person a person may become an
Agent, so as to be responsible to his Principal according to the provisions contained in the Act. No
consideration is necessary to create an agency xxv[xxv].

01. Agent and Principal

What distinguishes an agent from a person appointed to do any act is the agent’s representative
capacity coupled with a power to affect the legal relationship of the principal with the third person. It is
only when he acts as a representative of the other in business negotiations, that is to say, in the
creation, modification or termination of contractual obligations, between that other and third persons,
that he is an agent. Representative character and derivative authority may briefly be said to be the
distinguishing feature.
To know whether a person occupies the position of an agent or not, the law has to go by his functions.
The law has to see the substance of the transaction and not the parties terminology. The relevance of
the expression used is an agreement has often been in connection with the hire purchase
transactions.xxvi[xxvi]

02. Who may Employ an Agent?

Any person who is of the age of majority according to the law to which he is subject, and who is of
sound mind, may employ an agent. In shepherd v. Cartwrightxxvii[xxvii] it was observed:

“An infant cannot appoint an agent to act for him neither by means of a power of attorney, nor by any
other means. If he purports to appoint an agent, not only is the appointment itself void, but everything
done by the agent on behalf of the infant is also void and incapable of ratification.”

Further “there is nothing in the act which prohibits the guardian of a minor from appointing the agent
for him”.

03. Who may be an Agent?

Sec.184 lays down the concept of who may be an agent. The agent may not be competent to contract.
As between the principal and the third person any person may become an agent, but no person who is
not of sound mind can become an agent, so as to be responsible to his principal according to the
provisions in that behalf therein.

Ordinarily, an agent occupies no personal liability while contracting for his principal and therefore, it is
not necessary, that he should be competent to contract.

Thus, a person can contract with a minor agent but the minor agent will not be responsible to the
principal.

According to Section 185 of Indian Contract Act, generally an agent is remunerated by a way of 
commission for services rendered, but no consideration is immediately necessary at the time of
appointment.xxviii[xxviii]

04. Kinds of Agents

Following are kinds of agents.

1. Del-credere agent

A del-credere agent is an agent, who guarantees to his principal that person to whom he sells will pay
for that, if he will not pay, he will be liable. It is a type of mercantile agent.

2. Factor

A factor is an agent to whom goods are entrusted for sale.

3. Mercantile agent

A mercantile agent is the person who has authority to sell the goods or to buy goods or to raise money
on the security of goods.

4. Banker

The relationship between banker and his customer is that of debtor and creditor.

5. Auctioneer

An auctioneer is an agent who is authorized to sell goods to the highest bidder at a public sale for
commission.

6. Sub-agent

A sub-agent is a person employed by and acting under the control of the original agent in the business of
agency.

7. Broker

A broker is an agent employed for buying or selling the goods or other property. He simply acts between
the two parties.

8. Indenter

He is an agent who, buys or sells on behalf of his principal.

9. Advocate

An advocate also acts an agent. He appears on behalf of principal in the court.

10. Co-agent

Who acts jointly is called co-agent.xxix[xxix]

03. Rights of the Principal

A Principal has the following Rights

01. To repudiate contract: (Sec 215)

If an agent deals on his own account in the business of the agency, without first obtaining the consent of
his principal and acquainting him with all material circumstances which have come to his own
knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any
material fact has been dishonestly concealed from him by the agent or that the dealings of the agent
have been disadvantageous to him.
As a rule, an agent cannot deal on his account. Only after obtaining the consent of the principal and full
disclosure of all material facts, agent may act on his own account. However, where agent’s personal
interest is to conflict with principal’s interest, he cannot act on his own account. Where the agent acts
on his own account, principal has following rights:

1) he may repudiate the transaction

2) he may affirm the transaction and claim the benefits

3) he may claim damages for loss caused to him.

02. To claim benefit (Sec 216)

If an agent without the knowledge of the principal, deals in the business of the agency on his own
account instead of on account of his principal, the principal is entitled to claim from the agent any
benefit which may have resulted to him from the transaction.

The principal must show that a material fact has been dishonestly concealed or the dealing of an agent
has been disadvantageous to him. All profits and advantages made by the agent in the business
conducted by him for his principal must be paid over to the principal. Agent cannot make any secret
profits or receive bribes. Principal is entitled to receive all such sums and also interest on them. The
position of an agent being fiduciary in character, he cannot conflict his personal interest with his duty to
the principal.

03. To ratify or disown agent’s acts: (Sec 196)

Where acts are done by one person on behalf of another but without his knowledge or authority, he
may elect to ratify or disown such acts.

04. To revoke agent’s authority: (Sec 203)

The principal may revoke the authority given to his agent by giving a reasonable notice of revocation at
any time before the authority has been exercised so an to bind the principal.

05. To claim loss or profit: (Secs 211 & 212)

The principal is entitled to compensation for any loss sustained by him or to any profits accrued

1) where the agent acts contrary to the directions given by the principal; or
2) where loss is caused due to agent’s neglect, want of skill, or misconduct.

06. To demand accounts: (Sec 213)

Principal is entitled to demand proper accounts from the agent.

07. To refuse remuneration when agent is guilty of misconduct: (Sec 220)

The principal has a right to refuse remuneration to the agent who is guilty of misconduct in the business
of the agency.

Agent when personally liable? (Sec 230)

In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into
by him on behalf on his principal, nor is he personally bound by them (Sec 230). As a general rule, an
agent who enters into a contract on behalf of his principal is not entitled to sue personally nor is he
personally liable on the contract. An agent enjoys immunity from being personally sued. It is the
principal who can enforce and can be held liable on a contract entered into by his agent.

However, an agent can personally enforce contracts or be personally liable in the following cases.

08. Where the principal is a foreigner: (Sec 230 (1))

Where the contract is made by an agent for sale or purchase of goods for a merchant resident abroad,
the agent is personally liable. Contract to this effect shall be presumed to exist. In the case of foreign
principals, this rule is adopted as the third party does not know the standing and credit of foreign
principal. The credit is given to the agent. Foreign party is not a party to the contract at all. He can
therefore neither sue nor be sued.

09. Where principal is undisclosed: (Sec 230 (2))

Where the agent does not disclose the name or existence of the principal, he is personally liable.
Contract to this effect shall be presumed to exist. Where the agent has no authority to disclose, the
name of the principal or existence of the principal, the principal is called an undisclosed principal. The
agent also conceals the fact that he is acting as an agent. The third person should not know that the
person is acting as an agent. Where the third person knows of the existence of the principal, disclosure
of name is not essential and the agent cannot be made personally liable since the knowledge in such
case is equivalent to disclosure. It must be noted that agent may either –

1) disclose the existence of the principal but not his name; or

2) he may neither disclose the existence nor the name of the principal .

04. Duties of the Principal

The main duties of the Principal include

1. The principal is bound to indemnify the agent against any consequences of lawful acts done by
such agent in exercise of the authority conferred on him;

2. The principal is bound to indemnify the agent against consequences of the acts done by the
agent in good faith though it may cause injury to the third persons;

3. The principal is bound to make compensation to the agent in respect of any injury caused to
such agent by the principal's neglect or want of skill;
 4. These duties are not subject to a contract to the contrary and, therefore, they cannot be
avoided by an agreement.

Contracts lawfully entered by an agent on behalf of the principal are binding on the principal;

1. What is done by the agent within authority is binding but what is done beyond authority is not
binding on the principal but if both the acts cannot be separated, then both the acts are not
binding on the principal;

2. Notice to or information obtained by an agent in course of business is a notice or information to

the principal;

3. A contract entered into by an agent cannot be specifically enforced by him nor is he personally
bound by it unless where the contract is for sale or purchase of goods or from a merchant
abroad or unless the principal is not disclosed by the agent or unless the principal cannot be
sued;

4. In case of an undisclosed principal, the third party has the same right against the agent as he
would have if the principal was disclosed. Similarly, in such a case a third party would not be
bound by the contract if he could show that he would not have entered into the contract if he
had known the principal;

5. In the event of personal liability, both the agent and the principal would be liable.

6. Even an act of fraud or misrepresentation done by an agent in the course of his agency business
is binding on the principal;

7. These provisions are not subject to any contract to the contrary between the principal and the
agent.

05. Rights of the Agent

The main Rights of the Agent include

01. Right to remuneration

An agent is entitled to get an agreed remuneration as per the contract. If nothing is mentioned in the
contract about remuneration, then he is entitled to a reasonable remuneration. But an agent is not
entitled for any remuneration if he is guilty of misconduct in the business of agency.

02. Right of retainer

An agent has the right to hold his principal’s money till the time his claims, if any, of remuneration or
advances are made or expenses occurred during his ordinary course of business as agency are paid.

03. Right of lien

An agent has the right to hold back or retain goods or other property of the principal received by him, till
the time his dues or other payments are made.

04. Right to indemnity

An agent has the right to indemnity extending to all expenses and losses incurred while conducting his
course of business as agency.

05. Right to compensation

An agent has the right to be compensated for any injury suffered by him due to the negligence of the
principal or lack of skill.

All these rights are, however, subject to a contract to the contrary and therefore different provisions can
be made in the agreement of agency.

General

In the absence of any special contract payment for the performance of any act is not due to the agent
until the completion of such act; but an agent may detain moneys received by him on account of goods
sold, although the whole of the goods consigned to him for sale may not have been sold, or although the
sale may not be actually complete.

Every agent is clearly entitled to his agreed remuneration, or if there is no agreement, to a reasonable
remuneration. The difficult question is as to when remuneration becomes due. Section 219 says that "in
the absence of any special contract, payment for the performance of any act is not due until the
completion of such act ..."

The provision raises two questions. When is the act complete and secondly, is the act a result of the
agent's services? Both questions depend "first and last on particular terms of the particular contract". xxx
[xxx] Thus, where an agent was appointed to secure orders for advertisements in a newspaper, the
commission in respect of an advertisement being payable when it was published, the agent was held
entitled to commission on orders actually obtained by him although the advertisements to which the
orders related were not published until after the termination of employment. As against it, where an
agent was engaged to negotiate for the purchase of a house at a commission of 2 per cent on the
purchase price, he was held not entitled to any commission till the completion of the purchase of the
house.xxxi[xxxi]

Secondly, the transaction that results must be due to the agent's services. The bargain must be the
direct result of his service. In Green v Bartlettxxxii[xxxii] an agent was appointed to sell a house. He held
an auction but failed to find a purchaser. One of the persons attending the auction obtained from him
the address of the principal and purchased the house from him without intervention of the agent. Even
so the transaction was held to be a result of the agent's effort entitling him to his commission.

Powers of an Agent
An agent has authority to do all acts and things, which are expressly given to him but he has also implied
authority to do all acts which are incidental to the main powers. S. 189 of the Indian Contract Act, 1872
provides that an agent also has powers to do all acts for the purpose of protecting the principal in
emergency as would be done by a man of prudence in his own case. An agency can be granted orally or
through writing and it can also be created through subsequent ratification of the acts done by one
person for the other.

06. Duties of the Agent

An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the
agency relationship. This duty supplements the duties created by an agency contract. A fiduciary duty
exists because agency is a relationship of trust and confidence. The principal’s many remedies for an
agent’s breach of her fiduciary duty include termination of the agency and recovery of damages from
the agent.

01. Duties to execute mandate

The first and the foremost duty of every agent is to carry out the mandate of this principal. He should
perform the work which he has been appointed to do. Any failure in this respect would make the agent
absolutely liable for the principal’s loss. Thus it had been held in number of cases that:

“The rule of equity is that if an order is sent by a principal to a factor to make an insurance, and he
charges his principal, as if it was made, if he never in fact made that insurance, he is considered as the
insurer himself.”

In such cases the agent is held liable to the principal for the amount which would have been recovered if
the goods had been insured. Thus, for example, in Pannalal Jankidas v. Mohanlal:xxxiii[xxxiii]

A commission agent purchased goods for his principal and stored them in a godown pending their
dispatch. The agent was under instruction to insure them. He actually charged the premium for
insurance, but failed to insure the goods. The goods were lost in an explosion in the Bombay harbor.

The agent was held liable to compensate the principal for his loss inus the amount received under the
Bombay Explosion Ordinance,1944, under which the Government paid compensation up to fifty per cent
in respect of the uninsured merchandise lost in the explosion.

02. Duties to follow Instructions or Customs

1.            When an agent is appointed to facilitate or negotiate a transaction on behalf of the principal,
the agent owes a duty to the principal to act in the principal’s best interests within the authority of the
agent.

1.            In practice, the duty to act in the best interests of the principal requires the agent to use his due
diligence and skill to negotiate terms of a transaction on behalf of his principal with a third party to the
greatest advantage of his principal in the circumstances.
According to Section 211 an agent that an agent is bound to conduct the business of his principal
according to the directions given by the principal and to keep himself within the confines of his
authority. In the absence of directions, the agent has to follow the custom which prevails in businesses
of the same kind and at the place where the agent conducts such businesses. When the agent acts
otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he
must account for it. Thus in Liley v.Doubleday:xxxiv[xxxiv]

An agent was instructed to warehouse his principal’s goods at a particular place. He placed a part of
them at a different warehouse which was equally safe. But the goods were destroyed without
negligence.

The agent was held liable for the loss. Any disobedience, or departure from, the instructions make the
agent absolutely liable for the loss.

Where a principal had given instructions of ambiguous nature which were capable of two meaning, he
was not permitted to argue as against the agent that he should have read the instruction in the other
sense than what he actually did.

In the absence of instructions, business customs must be followed. Where, for example, the customs of
a trade require that goods should not be sold on credit or in return for a negotiable instrument; the
agent should not do so. If he does so, he would be liable to the principal for any loss resulting from the
transaction.

Because an agent acts under the principal’s control and for the principal’s benefit, she has a duty to act
within her actual authority and to obey the principal’s reasonable instructions for carrying out the
agency business.

There are exceptions to the duty to obey instructions. A gratuitous agent need not obey his principal’s
order to continue to act as an agent. Also, agents generally have no duty to obey orders to behave
illegally or unethically. Thus, a sales agent need not follow directions to misrepresent the quality of the
principal’s goods, and professionals such as attorneys and accountants are not obligated to obey
directions that conflict with the ethical rules of their professions.

Usually a principal’s instructions are clear and can be easily followed. Sometimes, however, the
instructions are ambiguous. For example, an instruction may have terms an agent does not understand.
Or perhaps a cell phone conversation may be garbled due to poor signal strength. When a principal’s
instructions are unclear, the agent has a duty to communicate with the principal to clarify the
instructions.xxxv[xxxv]

03. Duty of reasonable care and skill

Section 212 lays down the standard of care and skill required by an agent.

a. Common law requires an agent to act with due care and skill in performing his duties. Agents who fail
to meet this standard are prima facie negligent.
b. Generally speaking, an agent in a certain profession, trade or calling who performs his duty with the
degree of care and skill expected of a reasonable, average member of the relevant profession, trade or
calling meets the requisite standard.

The Agent is bound to act with reasonable diligence, and to use such skill as he possesses; and to make
compensation to his principal in respect of the direct consequences of his neglect, want of skill or
misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such
neglect, want of skill, or misconduct.

If the principal suffers any loss owing to the agent’s want of care or skill, the agent must compensate the
principal for such loss .An agent is liable to his principal for the direct consequences. If, for example, an
agent fails to send the principal’s money in time, he may be liable for the money and the loss of interest,
but not if the principal becomes insolvent by that reason. In Keppel v.Wheeler xxxvi[xxxvi], an agent was
appointed to sell a house. He received as offer which he promptly communicated to his principal. The
latter accepted it provisionally “subject to contract”. Subsequently the agent received a higher offer
which he failed to pass on to the principal. This resulted in final acceptance of the first offer in ignorance
of the second. The agent was held liable to make good the principal’s loss in terms of the difference in
the two prices.xxxvii[xxxvii]

The meaning “direct consequences” has been explained by Pannalal Jankidas v. Mohanlalxxxviii[xxxviii]

An agent, having been instructed to insure certain goods, failed to do so. The goods were lost in an
explosion at the docks. Even if the agent had taken out a fire insurance policy in the usual form it would
not have covered a loss of this kind, as fire due to explosion would have been an expected peril. But the
Bombay Government passé an ordinance under which it overtook to pay half loss in cases of uninsured
goods. Thus the principal got only half of what he would have got if the goods had been insured.

The agent contended that as the passing of the ordinance could not have been anticipated, the loss was
too remote. But, it was held by a majority, that the loss was the direct result of the agent’s negligence.

 A paid agent must act with the care, competence, and diligence normally exercised by agents in similar
circumstances. Paid agents who represent that they possess a higher than customary level of skill may
be held to a correspondingly higher standard of performance. Similarly, an agent’s duty may change if
the principal and the agent agree that the agent must possess and exercise greater or lesser than
customary care and skill.

Agent is also under the duty to communicate with the principal. It is the duty of an agent, in cases of
difficulty, to use all reasonable diligence of communicating with his principal, and in seeking to obtain
his instructions. Unless otherwise agreed, an agent may not use or communicate confidential
information of the principal for the agent’s own purpose or that of a third party. Confidential
information is the principal’s information entrusted by the principal to the agent for purposes of the
agent carrying out her duties. Confidential information includes facts that are valuable to the principal
because they are not widely known or that would harm the principal’s business if they became widely
known. Examples include the principal’s business plans, financial condition, contract bids, technological
discoveries, manufacturing methods, customer files, and other trade secrets. xxxix[xxxix]

In the absence of an agreement to the contrary, after the agency ends almost all fiduciary duties
terminate. For example, an agent may compete with her principal after termination of the agency. As
the following ABKCO case illustrates, however, the duty not to use or disclose confidential information
continues after the agency ends. The former agent may, however, utilize general knowledge and skills
acquired during the agency.

04. Duty to avoid Conflict of Interest

An agent whose interest’s conflict with the principal’s interests may be unable to represent his principal
effectively. Therefore, an agent may not acquire a material benefit from a third party in connection with
an agency transaction. When conducting the principal’s business, an agent may not deal with himself.
For example, an agent authorized to sell property cannot sell that property to himself. Many courts
extend the rule to include transactions with the agent’s relatives or business associates or with business
organizations in which the agent has an interest. However, an agent may engage in self-dealing
transactions if the principal consents. For this consent to be effective, the agent must disclose all
relevant facts to the principal before dealing with the principal on his own behalf.

Unless the principal agrees otherwise, an agent also may not compete with the principal regarding the
agency business and not assist the principal’s competitors, so long as he remains an agent. Thus, an
agent employed to purchase specific property may not buy it himself if the principal desires it.
Furthermore, an agent ordinarily may not solicit customers for a planned competing business while still
employed by the principal.

Finally, an agent who is authorized to make a certain transaction may not act on behalf of the other
party to the transaction unless the principal knowingly consents. Thus, one ordinarily may not act as
agent for both parties to a transaction without first disclosing the double role to, and obtaining the
consent of, both principals. Here, the agent must disclose to each principal all the factors reasonably
affecting that principal’s decision. Occasionally, though, an agent who acts merely as a middleman may
serve both parties to a transaction without notifying either. For instance, an agent may simultaneously
be employed as a “finder” by a firm seeking suitable businesses to acquire and a firm looking for
prospective buyers, so long as neither principal expects the agent to advise it or negotiate for it.

An agent will not breach her duty of loyalty, however, if she acts in good faith, discloses to the principal
all material facts regarding her conflict of interest, and deals fairly with the principal.

An agent who has accepted an appointment to act for a principal (“A”) should not thereafter accept
appointment to act for another principal (“B”) if the interests of principal B conflict with the interests of
principal A. However, if the agent fully discloses to each principal the agent’s interests under the two
appointments and the fact that he acts for both principals at the same time and obtains the consent of
each principal to the dual agency, he may still act for the two principals. Accordingly, an estate agent
who acts for both the vendor and purchaser in a sale and purchase property transaction must disclose
the fact to both the vendor and the purchaser and obtain their consent for so acting.

The agent’s duty to avoid conflict of interest applies equally to cases where the interest of the agent
himself or that of his close relatives conflicts or potentially conflicts with his duties to the principal.
However, if the agent fully discloses such interests to the principal and obtains the principal’s consent,
the agent may still act for the principal. Failure to make full disclosure to the principal is a breach of the
agent’s fiduciary duty and the agent is liable to account for any profit that the agent has made from such
transaction in addition to other remedies available to the principal for the agent’s breach of duty. The
following situations require more discussion:

Purchase or rent from principal – the general rule is that an agent cannot purchase or rent property
from his principal without full disclosure of all the facts to the principal. The agent has to show:

1. How the terms and conditions of the sale or tenancy to the agent compare to a sale or tenancy to a
third party in the market;

2. He has disclosed all the relevant facts to the principal before entering into any agreement with the
principal; and

3. The principal has given his informed consent to such a transaction.

Sale or rent to principal – similarly, an agent may not sell or let his own property to his principal without
full and frank disclosure and the obtaining of his principal’s informed consent. The agent has also to
show how the terms of the relevant transaction compare to similar transactions in the market. xl[xl]

05. Duty not to make secret profit

Common law requires that an agent should not make any profit or acquire any benefit in the course and
in the matter of his agency without the knowledge and consent of his principal. Such profit, generally
known as secret profit, is not restricted to money but may include anything of value, for example, an
interest-free loan, a club membership, etc. An agent who has made secret profit is liable to account to
the principal for such profit in addition to any other remedies available to the principal for the agent’s
breach of duty. The following situations are some examples of secret profit:

Use of property

An agent who uses property entrusted to him by the principal to make a profit for himself and without
the principal’s consent is in breach of his duty not to make secret profit. For example, if an estate agent
is entrusted with the keys to a property by its owner for the purpose of listing while the owner is
abroad, and the estate agent lets the property to a third party and receives and keeps the rent for
himself without the consent of the owner, the estate agent will be, among other things, in breach of his
duty not to make secret profit.[xi]

Use of position
In some circumstances, an agent may obtain a benefit simply through his position as agent of the
principal. For example, an agent appointed to purchase goods for his principal from a supplier obtains
secret monetary benefit from the supplier for placing purchase orders with the supplier. Such an act by
the agent will amount to making secret profit. Likewise, if a company director is entrusted with the task
of negotiating a contract with a third party on behalf of the company (that is, as the company’s agent),
the director cannot subsequently enter into that contract personally with that third party, even if the
latter is willing to do so without the company’s consent. An agent who, without lawful authority or
reasonable excuse, solicits or accepts any advantage in relation to his principal’s affairs or business in
the course of his agency shall be guilty of an offence.

Use of information or knowledge

An agent who acquires information or knowledge which he has been employed by the principal to
collect or discover, or which he has otherwise acquired for the use of his principal should not make use
of the same for his personal gain. For example, in the course of acting for a purchaser, an estate agent
looks for a property for investment in a particular building specified by the principal and becomes aware
of a property in that building which is being offered for sale at below the market price. If the estate
agent makes use of this information, which he is appointed to obtain on behalf of the purchaser, and
acquires that property himself without disclosing the same to the purchaser and makes a profit by
reselling it, the estate agent will, among other things, be in breach of his fiduciary duty not to make
secret profit.

However, the duty not to make secret profit may be discharged if the agent makes full disclosure of all
the relevant facts to the principal and the principal consents to the making and retention of such profit
by the agent.

Can agent’s duty to account to his principal secret profits he has made in the course of the agency
continue even after the agency relationship terminates.

06. Duty to remit sums

According to Section 218 of Indian Contract Act, agent is under the duty to remit sum repay to his
principal all sums received on his account. The agent is, however, entitled to deduce his lawful charges,
but subject only to this right, the principal’s money must be remitted to him even if it has been received
in pursuance to a void or illegal contract. The agent has to perform this duty even if his earnings for the
principal flow out of void or illegal transactions. “If an agent receives money on his principal’s behalf
under an illegal and void contract, the agent must account to the principal for the money so received
and cannot set up the illegality of contracts as a justification for withholding payment, which illegality
the other contracting party has waived by the paying the amount.”

The agent has the right to make a counter claim. The Bombay High Court did not consider it fair or in the
interest of justice to compel the agent to deposit the amount in the court as a measure of protecting his
principal, particularly where there was a claim against the claim.
07. Duty to maintain Accounts

Alan agent who receives any property for his principal or from his principal is bound to keep such
property separate from his own and he is to be treated as a trustee of such property.

For the reason stated in sub-paragraph (a), an agent has a duty to keep proper accounts of the property
received by him in the course of the agency and to render such account to the principal on request.

Even after the agency relationship has ceased, the agent’s duty to account to the principal may
continue. Hence, the agent is obliged to return to his principal all documents and property originally
given to the agent by the principal and documents prepared by the agent on the instruction and at the
expense of the principal.

Agents must keep accurate records and accounts of all transactions and disclose these to the principal
once the principal makes a reasonable demand for them. Also, an agent who obtains or holds property
for the principal usually may not commingle that property with her own property. For example, an agent
ordinarily cannot deposit the principal’s funds in her own name or in her own bank account.

In Ram All v. Asian Commrel,xli[xli] The High Court observed:

“The right to claim a statement of accounts is an unusual form of relief, only granted in certain specific
cases and is only to be claimed when the relationship between the parties is such that this is the only
relief which will enable the claimant to satisfactorily assert his legal rights”.

08. Duty not to delegate

The general rule is that an agent may not delegate his authority or duty in whole or in part except with
the authority and consent of the principal.

Owing to the fact that an agency agreement is privy to the principal and the agent and that authority is
normally given to the agent personally, on account of his trustworthiness, skill or experience, the agent
is under a duty to the principal not to delegate his duties under the agency agreement to another
person, but to exercise the authority in person. Hence, an agent has normally no implied authority to
employ deputies or sub-agents to carry out his duties.

Where an agent is not authorised to delegate, the act of a “sub-agent” appointed by the agent will not
be binding on the principal. The agent who so delegates his authority is also in breach of the duty not to
delegate and is liable to compensate for any loss which the principal may suffer in consequence of the
agent’s failure to exercise his authority in person.

It was laid down in John McCain and Co. v. Powxlii[xlii] that unless so authorized by the principal, an
estate agent has no right to appoint a sub-agent and delegate to him his powers which require special
skill and care. No implied authority could be pleaded. In this case the sub-agent affected a sale on his
account. The agent had sued for his commission. The court negatived the claim as the contract of agency
did not permit appointment of sub-agent.
But there are exceptions where the agent can delegate.

07. Rights and Duties of the Third Party

If an agent acts within the scope of his/her authority, a principal is bound by the act of his/her agent. 
Moreover, a party is responsible for any action or inaction by the party or the party’s agent.  The liability
of the principal to a third person upon a transaction conducted by an agent is based upon facts such as:

·                     the agent was authorized;

·                     the agent was apparently authorized; or

·                     the agent had a power arising from the agency relation and not dependent upon authority
or apparent authority.

A principal may be liable to a third person on account of a transaction with an agent because of the
principles of estoppel, restitution, or negotiability, although he may not be subject to liability based on
principles of agency.  Unless a person has expressly or impliedly made such other his representative, no
person is liable for the acts of another who assumes to represent him.  Moreover, a person dealing with
an agent cannot hold the principal liable for any act or transaction of the agent not within the scope of
his/her actual or apparent authority.  Unless the limitations of the agency are known or can be readily
ascertained, the principal is bound by unauthorized acts of an agent through which a third party has
sustained a loss.

The principal will no longer be liable for a particular act after the third person has notice of the
principal’s repudiation of the agent’s authority to do such an act.  After the termination of an agency for
a particular purpose and notice of the revocation of the agency, the act of an agent will not bind the
principal.  A principal is liable for the tortious acts of an agent within the course and scope of the agent’s
employment.  Unless the principal commands or directs the act, a principal is not liable for the torts
committed by an agent while acting adversely to the principal or outside the scope of the agent’s
employment.

Even though the principal does not authorize, ratify, participate in, or know of the misconduct, he may
be held for an agent’s tort committed in the course and scope of the agent’s employment.  A master or
other principal who is under a duty to provide protection is subject to liability to such others for harm
caused to them by the failure of such agent to perform the duty.  A principal is not relieved from the
separable part of a contract which he authorized the agent to make by the fact that the agent
undertook.  Even where the agent’s unauthorized act constitutes a fraud on both the principal and the
third person, the partial validity rule is applicable.

Under circumstances which do not impute knowledge and without the principal’s knowledge or consent,
the principal is not liable for a usurious agreement of an agent which is entered into.  The principal is
bound where:

·                     the principal expressly or impliedly authorizes or ratifies the agent’s usurious agreement, or
·                     the circumstances are such that the agent’s conduct is presumed to be known to the
principal.

·                     the issue is whether the agent had apparent authority to enter into an usurious agreement.
Whether the principal is bound by the agent’s acts requires a case-by-case inquiry into whether the
principal’s conduct reasonably induced a third party to believe that the agent had authority to act for
the principal.

Even if an act done by an agent is directly contrary to the instructions of the principal, the principal will
be liable unless the third person with whom the agent dealt knew that the agent was exceeding his/her
authority or violating his/her instructions.  A general agent for a disclosed or partially disclosed principal
subjects his principal to liability for acts done on his account which usually accompany or are incidental
to transactions which the agent is authorized to conduct if the other party reasonably believes that the
agent is authorized to do them although they are forbidden by the principal.  A disclosed or partially
disclosed principal authorizing an agent to make a contract is subject to liability upon a contract made in
violation of such limitations with a third person who has no notice of them.

The knowledge of an agent may be imputed to the principal only where it is relevant to the agency and
to the matters entrusted to the agent.  If the knowledge acquired or notice received by an agent:

·                     does not pertain to the duties of the agent,

·                     does not relate to the subject matter of the employment, or

·                     affects matters outside the scope of the agency, it is not chargeable to the principal unless
actually communicated to him.

The rule charging the principal with an agent’s knowledge is not necessarily restricted to matters of
which the agent has actual knowledge.  The principal is not affected by knowledge which the agent
should have acquired in the performance of his duties unless the principal has a duty to others that care
will be exercised in obtaining information. Moreover, the principal is not affected by the knowledge
which an agent should have acquired in the performance of the agent’s duties to the principal or to
others, except where the principal or master has a duty to others that care shall be exercised in
obtaining information.

08. Creation of Agency

An agency can be created by one or another of the following ways.

01. By express appointment by the principal

Generally an authority is conferred by the Principal to the Agent. If the agent exceeds this authority,
then the principal will not be bound and the agent will be personally liable to the third party for breach
of warranty of authority.
However the common law may extend the scope of the agent’s authority beyond this, to protect an
innocent third party.

The principal will then be bound to the third party, but the principal can sue the agent for overstepping
his actual authority, if it’s a breach of the agency contract.

02. By implied appointment by the principal

The law can infer the creation of an agency by implication when a person by his words or conduct acts as
if he has such authority and the principal acknowledges that he was entitled to act accordingly. Implied
authority, is not specifically mentioned by contract but assumed or implied by the nature of the
relationship, are presumed to be given to an agent if that authority is necessary to perform the duties or
responsibilities otherwise assigned to the agent or representative.

03. By Apparent / Ostensible authority

While actual authority arises from an agreement, apparent authority is that which the law regards the
agent as having, although principal may not have consented to the agent having such authority.
Apparent authority can happen in two situations:

Where principal by words/ conduct, makes a third party to believe that ‘agent’ has authority to make
contract for the principal

Where the agent previously had authority to act, but that authority was terminated by the principal and
the principal did not inform third parties that he has terminated it.

04. By necessity

The origins of the doctrine of necessitous intervention by someone who is in a legal relationship with the
defendant lie in the principle of agency of necessity, where an agent went beyond his or her authority by
intervening on behalf of the principal in an emergency. Because of the circumstances of necessity,
particularly the impracticability of the agent communicating with the principal, the courts were
prepared to treat the agent as though he or she had the necessary authority to do what was reasonably
necessary to save the principal’s property xliii[xliii]. If an agency of necessity was established, the agent
would be reimbursed for the expense incurred in rescuing the principal’s property.

An agency of necessity may be created if the following three conditions are met:

a) It is impossible for the agent to get the principal’s instruction.

b) The agent’s action is necessary, in the circumstances, in order to prevent loss to the principal to
prevent them from rotting.

c) The agent must have acted in good faith.

In an urgent situation, an agent has authority to act in the best interest for the purpose of protecting his
principal from losses.
05. By Estoppel

A person cannot be bound by a contract made on his behalf without his authority. However, if he by his
words and conduct allows a third party to believe that that particular person is his agent even when he
is not, and the third party relies on it to the detriment of the third party, he (principal) will be estopped
or precluded from denying the existence of that person’s authority to act on his behalf xliv[xliv].

06. Ratification by the Principal

Agency by ratification can arise in any one of the following situations:

An agent who was duly appointed has exceeded his authority; or

A person who has no authority to act acted as if he has the authority.

When one of the above said situations arise, the principal can either reject the contract or accept the
contract so made.

When the principal accepts and confirms such a contract, the acceptance is called ratification.
Ratification may be expressed or implied.

The effect of ratification is to render the contract as binding on the principal as if the agent had been
properly authorized beforehand.

09. Types of Agents

01. Types of Agency

The most common types of agents are the following.

Sole Selling Agent:

In case of sole selling agent, the relationship between the principal and the sole selling agent is more or
less of a seller and buyer and therefore, when a sole selling agent sells the goods to his buyer the
relationship between the sole selling agent and the buyer may be of the vendor and purchaser unless
the agency is disclosed.

Mercantile Agent

A mercantile agent is one having authority in the course of business to sell goods or consign goods for
the purpose of sale or to buy goods and even to raise money on the security of goods. A mercantile
agent is also called a commissioner agent.

Factor

A factor in ordinary course of business is entrusted with possession of the goods or with possession of
documents of title to goods;
Broker

He only brings about the transaction between the principal and the buyer or seller but the possession of
the goods or document of title to goods is not given to him. He is, therefore, an agent, who in ordinary
course of business is employed to make contract for the purchase or sale of shares or goods.

Forwarding or Clearing Agent

A forwarding agent, also called shipping agent or clearing agent acts as agent of the principal, who
wants to export goods outside the country or to clear the goods imported by the principal and all the
functions for exporting or clearing and taking possession of imported goods are done by this agent.

Estate Agent

An estate agent generally deals as intermediary in the transaction of sale and purchase of immoveable
property or in management of any property.

Auctioneer

An auctioneer is in law an agent of the person whose property is to e sold by auction through him. He
also becomes the agent of the auction purchaser when the bid is struck down in his favor.

Agents under the Companies Act

There are three types of Agents under the Companies Act, 1956.

1.            Sole Selling Agent;

2.            Managing Director;

3.            Manager;

Restrictions on appointment of Agent

In respect  sole Selling agent:

1.            The term of appointment of a Sole Selling agent cannot be for more than 5 years; though
renewable.

2.            The appointment, as such, is subject to the approval of a general body of share holders of the
company prior to appointment or subject to ratification subsequent to the appointment;

3.            The terms and conditions of the appointment of a sole selling agent are subject to approval by
the Central Government, which has the power to vary the same in the event they are found to be
prejudicial to the interests of the Company;

4.            The Company can appoint more than one such agents, however, the Government has a right to
declare any of them as the sole selling agent of that area;
5.            A company cannot appoint as sole selling agent an individual, firm or body of persons if it has
any substantial interest in the company without the Government approval;

6.            A Company having a paid up capital of Rs. 50 Lakhs or more cannot appoint such agent without
Government consent;

In respect of the Managing Director:

1.            No person can act as managing director for more than two companies;

2.            No managing director can be appointed for more than five years at a time unless reappointed;

3.            a managing director will not be entitled to remuneration for loss of office in cases as are
mentioned above in the case of a sole selling agent;

4.            monthly salary or other remuneration payable to the managing director are controlled by the
Act.

In respect of Manager;

1.    The conditions that govern the appointment of a Manager are similar to the ones applicable to the
Managing Director.

Stamp duty:

An agency agreement, falling under the general item category of Article 5 of the Indian Stamp Act, 1899
would not attract any specified ad-valorem stamp duty and is treated like any other ordinary agreement.

Registration:

Registration of the Agency agreement is not mandatory.

10. Termination of Agency

01. Section 201 Termination of agency

An agency is terminated by the principal revoking his authority, or by the agent renouncing the business
of the agency; or by the business of the agency being completed; or by either the principal or agent
dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the
provisions of any Act for the time being in force for the relief of insolvent debtors.

A contract of agency is a species of the general contract. As such, an agency may terminate in the same
way as a contract is discharged except where the agency is irrevocable. The relation of principal and
agent can only be terminated by the act or agreement of the parties to the agency or by operation of
lawxlv[xlv]. “An agency, when shown to have existed, will be presumed to have continued, in the absence
of anything to show its termination, unless such a length of time has elapsed as destroys the
presumption”. The agent’s duty to act on behalf of the principal comes to an end on the termination of
agency. The timeframe for termination of an agency can be stipulated by a particular statute or
instrument. In such a case, if the instrument specifies in plain and unambiguous terms that an agency
will terminate without action on the part of the principal or agent upon the expiration of the time
specified in the instrument, the agency will in fact, terminate xlvi[xlvi]. If, after the expiration of the time
so stipulated in the contract, the parties continue their relationship as principal and agent, a rebuttable
presumption is raised that their relations are governed by the original contract and that the contract is
renewed for a similar period. For instance, if the parties entered into a contract for one year and
continued to act under the contractual terms after one year, the court will presume that the parties in
fact intended to keep the contract alive for another year.

On the other hand, if the parties did not fix any appropriate time for the termination of contract, the
contract is deemed to be terminated after a reasonable time. “What constitutes a reasonable time
during which the authority continues is determined by the nature of the act specifically authorized, the
formality of the authorization, the likelihood of changes in the purposes of the principal, and other
factors”. Moreover, the burden of proving the termination or revocation of an agency rests on the party
asserting it.

“Parol evidence cannot be admitted to add another term to an agreement even if the writing contains
nothing relating to the particular provision to which the parol evidence is directed”. Thus, courts will not
admit parol evidence while determining the duration of an agency contract where the written contract is
viewed as integrated, or unambiguous, or both. An agency continuing for a reasonable time can be
terminated by one party only after giving sufficient notice to the other party.

02. Different ways by which an agency can be terminated

·                     An agency created for a specific purpose as well as an agency created by a power of
attorney is terminated once the particular purpose for which it was created was accomplished. After the
termination of the agency, the agent is free of any fiduciary duty to the principal arising from the agency
relationship.

·                     The parties can terminate the agency by mutual agreement. An agency relationship requires
the mutual assent of the parties and both the parties have power to withdraw their assent. An agency
may not be terminated by the act of one of the parties and should be done mutually. The mutual
abandonment of an agency is a question of fact, since it is a matter of intention of both the parties. The
court will ascertain such intent from the surrounding facts and circumstances of the transaction as well
as implied from the conduct of the parties xlvii[xlvii].

·                     An agency contract may be cancelled on the basis of an express stipulation in the contract.
In such a case, the parties will have a right of cancellation at the will of either party or upon the
happening of a contingency or the nonperformance of some expressed condition. The principal cannot
cancel such an agreement at will so long as the agent fulfills his/her part of the agreement. However,
the principal can cancel the agency contract for any justifiable cause.
·                     An agency may be revoked at the will of the principal when an agency is not coupled with
an interest, and no third party’s rights are involved. The party terminating the agency must show good
cause. Thus, when A enters into a contract whereby B is to provide A for a stated period of time with
goods or services, which both parties realize are for use in a particular enterprise owned by A, in the
absence of a specific clause so providing, A cannot escape his obligations under that contract by
voluntarily selling his interest in the enterprise before the expiration of the expressed contract term.
Therefore, if the right to cancel an agency contract is dependent upon some contingency, the
cancellation must be justified by establishing the happening of such contingency.         An agency cannot
be terminated at will during certain specific instances. For example, in the matter of distributorship or
sales agency contracts of indefinite duration, an at-will termination is not feasible xlviii[xlviii]. In such a
case, the distributor might have made substantial investment in establishing or furthering the
distributorship. Hence, the agreement may be terminated only after a reasonable time has lapsed and
reasonable notice of termination is given. An agency contract to be performed to the principal’s
satisfaction can generally be canceled at will by the principal. Similarly, a power of attorney constituting
a mere agency may be revoked at any time, with or without cause.

·                     A principal may unilaterally cancel an agency without incurring liability for breach of
contract under the following instances: misconduct or habitual intoxication of the agent which interferes
with his/her employment, the refusal of the agent to obey reasonable instructions or to permit the
principal to make a proper audit of his/her accounts, serious neglect or breach of duty by the agent,
dishonesty or untrustworthiness of the agent, the agent’s failure to pay an indebtedness owing to the
principal, disloyalty of the agent like using the agency to make secret profits.

·                     Ordinarily, an agent may renounce the agency relationship by expressly notifying the
principal, either orally or in writing. An agent’s cessation of all relations with the principal, and
abandonment by the agent may be treated as a renunciation. However, mere violation of instructions by
the agent will not amount to renunciation. Although agency can be terminated at will, law stipulates
that notice must be given to the party affected by termination. However, express notice to the agent
that the agency has been revoked, or to the principal that the agency is renounced, is not always
necessary if the affected party actually knows, or has reason to know the facts resulting in such
revocation or renunciation. The principal shall provide sufficient notice to third parties as to the
revocation of agent’s authority. Otherwise, the acts of an agent after his/ her authority has been
revoked may bind a principal as against third persons who rely upon the agency’s continued existence.
This may often happen to transactions initiated by the agent before the revocation of authority, and the
rule is applied in favor of persons who have continued to deal with insurance agents, purchasing agents,
and the like.

There is no need to provide any formal written notice to third persons of the ending of an agency
relationship. Actual notice of termination is sufficient in the case of third parties and such notice may be
shown by a written or oral communication from the principal or the agent, or it may be inferred from
the circumstances. For instance, a third party is deemed to have actual notice if he/she has knowledge
of the fact that the principal has appointed another agent for the same purpose. The character of the
notice also differs with respect to third parties. Thus, actual notice must be brought home to former
customers who have dealt with the agency more directly, while notice by publication will be sufficient as
to other persons. In addition, an agency may be terminated by operation of law xlix[xlix]. The death of the
principal operates as an immediate and absolute revocation of the agent’s authority, unless the agency
is one coupled with an interest. The rule is the same even if the agency is created with more than one
principal. Where the power or authority is created by two or more principals jointly and one of them
dies, the agency will be terminated unless it is coupled with an interest. However, an agency may be
made irrevocable by statute, notwithstanding the death of the principal.

·                     Regarding the termination of agency upon the death of the principal, two views are
prevailing. According to one view, unless the agency is one coupled with an interest, it will terminate on
the death of the principal, notwithstanding the fact that the agent and third person are ignorant of the
fact. Another view is that if the third person dealing with the agent acts in good faith and in ignorance of
the principal’s death, the revocation of the agency on the death of the principal takes effect only from
the time that the agent receives notice of such death. In such a case, “the principal’s estate may be
bound where the act to be done is not required to be done in the name of the principal.” Similarly,
death of the agent will revoke an agency not coupled with an interest and this is the rule when there are
two or more agents. However, in the case where a sub agent is appointed by the agent, the authority of
a subagent is terminated by the death of the agent, unless the agent appointed the subagent at the
principal’s requestl[l]. In that event, the subagent derives his/her authority form the principal and not
from the agent.

·                     The loss of capacity of a party resulting from temporary or permanent mental incompetency
may result in the termination or suspension of the agency relationship. Thus, the termination of the
agent’s authority due to the loss of capacity of the principal may not affect the rights of third persons if
such third persons do not have notice of such fact. Also, if the agent’s authority is coupled with an
interest, it is not suspended by the principal’s insanity. Similarly, bankruptcy of the principal is a valid
reason for the termination of agency and the agent is divested of any authority to deal with any assets
or rights of property of which the principal was divested by reason of the bankruptcy, irrespective of
whether the agent receives notice of the bankruptcy. A power of attorney may be terminated by the
bankruptcy of the principal. The mere insolvency of the principal will not automatically terminate
agent’s authority.

·                     A change in value of the subject matter or a change in business conditions may terminate or
suspend the agent’s authority if the agent should reasonably infer that the principal would not consent
if aware of such facts. Similarly, a change in legal identity of, or merger by, the principal is a valid ground
for termination of an agency contract. The loss or destruction of the subject matter of the agency or the
termination of the principal’s interest is yet another ground for terminating the agent’s authority. The
agent’s authority ceases when the agent has notice of the fact. However, destruction of subject matter
will not always result in termination of agency, especially when the subject matter can be replaced
without substantial detriment to either party li[li].

In addition, a change of law making the required act illegal may terminate an agency contract. If the
authority or power of an agent is coupled with an interest, it is not revocable by the act, condition,
death, or mental incapacity of the principal before the expiration of the interest, unless there is some
agreement to the contrary. A power is coupled with an interest where the agent receives title to all or a
part of the subject matter of the agency. In order to support a claim of power coupled with an interest,
either legal title or equitable title is sufficient. A power coupled with an interest will survive to the
personal representative of the agent upon the agent’s death.

03. Some Caselaws

R. Sayani v. Bright Bros (P) Ltd, AIR1980 Mad 162

Where an agency has been created for a fixed period, compensation would have to be paid for its
premature termination, if the termination is without sufficient cause. Reasonable notice for premature
determination of agency was not given. The agent was earning Rs. 4000 per month.     The court was of
the view that at least three months’ notice should have been given. A compensation of Rs. 12,000 was
accordingly allowed.

Carter v White, (1883) 2 Ch D 666: (1881-85) All ER Rep 921

A principal owed a sum of money to his agent and gave him an accepted bill of exchange with an
authority to fill in the drawer’s name. The principal died before the agent could complete the bill.

His authority to fill in the drawer’s name was held not to be terminated.

Sukhdev v Commr of Endowments, (1998) 1 BC 403 (AP)

An agency comes to an automatic end on the expiry of its term. Where the agency was to run a petrol
pump for a specific period, it was held that the agent was bound to vacate the premises on expiry of the
period. There was no renewal clause, nor in fact there was any renewal.

Trueman v Loder (1840) 11 Ad & El 589

Here A traded as B’s agent. With the authority of B, all parties with whom A made contracts in that
business, were held to have a right to hold B liable to them until B gives notice to the world that A’s
authority is revoked and it makes no difference if in a particular case the agent intended to keep the
contract on his own accountlii[lii]. The court repelled the contention that it was very unreasonable to
expect that the principal should inform the whole world that he has cancelled the power of attorney
given to his agent and that he cannot be expected to approach everybody with whom the agent was
likely to enter into a contract and inform him of the cancellation.

04. Effect of Termination of Agent’s Authority

Sometimes former agents continue to act on their ex-principals’ behalf even though the agency has
ended. Once an agency terminates by any of the means just described, the agent’s actual authority
(expressed and implied) ends as well. Nonetheless, such “ex-agents” may retain apparent authority to
bind their former principals.
Third parties who are unaware of the termination may reasonably believe that an ex-agent still has
authority. To protect third parties who rely on such a reasonable appearance of authority, an agent’s
apparent authority often persists after termination. Thus, a former agent may be able to bind the
principal under his apparent authority even though the agency has ended.

05. How can an Agency be terminated?

Agency can be terminated by following ways:

By Agreement

On the basis that agency relationship is created by agreement between the principal and the agent, such
a relationship can also be brought to an end by mutual agreement between the parties, either in writing
or orallyliii[liii].

Termination by agreement may also occur if the agency relationship is terminated pursuant to the
provisions of the agreement itself. The following situations may arise in this context:

If the agreement provides for the appointment of the agent for a specified period of time, the agency
will come to an end automatically when that period of time expires.

If the agreement provides for the agency to terminate upon the occurrence of a specified event, the
agency will come to an end upon the happening of the specified event.

By the Act of Parties

An agency may be terminated by the acts of the either principal or the agent as illustrated below:-

Performance by the agent

If an agent is appointed to accomplish a particular task or for a specific purpose, when the task is
accomplished by the agent or the specific purpose is attained, the agency will terminate.

Revocation by the principal

The authority of an agent may be revoked at any time by the principal. However unilateral revocation
otherwise than in accordance with the provisions of the agency agreement may render the principal
liable to the agent for the breach of agency agreement.

Any word or conduct of the principal inconsistent with the continued exercise of the authority by the
agent may operate as revocation of the agency.

Revocation’s of the agent’s power by the principal may not automatically discharge the principal from
liability to a third party who is entitled to rely from liability to a third party who is entitled to rely from
liability to a third party who is entitled to rely from liability to a third party who is entitled to rely on the
apparent authority of the agent on ground’s of representation by the principal of previous course of
dealing with the agent’s before notice of revocation is given to the third party .Therefore notice of
revocation of an agent’s power should be given to the third party as soon as possible.

Renunciation by agent

An agent is entitled to renounce his power by refusing to act or by notifying the principal that he will not
act for the principalliv[liv].

Unilateral termination of the agency by the agent before he has fulfilled the obligations to the principal
under the agency agreement will render the agent liable to the principal for the breach of the agency
agreement such as payment of damages for the loss suffered by the principal.

By Notice

If the agency agreement provides that the agency may be terminated upon either party serving on the
other written notice of a specified duration.

However, if the agency agreement does not contain any termination provision, the general rule is that
reasonable notice has to be given to the other party to terminate the agency.

By Operation Of Law:-

An agency may terminate by the operation of law upon the occurrence of particular events:-

Where the party concerned is an individual:

By death

By insanity

By bankruptcy

Where the party concerned is a limited company

Winding up

Receivership

Frustration of the contract of agency.

06. When can an Agency be terminated?

An ‘agency’ is terminated when:

·                     the principal revokes the agent’s authority;

·                     the agent renounces the business of the agency;

·                     the business of the agency is completed;

·                     either the principal or the agent dies or becomes of unsound mind; or

·                     the principal is adjudicated an insolvent under any law for the time being in force for the
relief of insolvent debtors.

07. Effect of Termination of Agent’s Authority

Sometimes former agents continue to act on their ex-principals’ behalf even though the agency has
ended. Once an agency terminates by any of the means just described, the agent’s actual authority
(expressed and implied) ends as well. Nonetheless, such “ex-agents” may retain apparent authority to
bind their former principals.

Third parties who are unaware of the termination may reasonably believe that an ex-agent still has
authority. To protect third parties who rely on such a reasonable appearance of authority, an agent’s
apparent authority often persists after termination. Thus, a former agent may be able to bind the
principal under his apparent authority even though the agency has ended.

08. Notice to Third Parties

Apparent authority ends only when the third party receives appropriate notice of the termination, that
is, when it is no longer reasonable for a third party to believe that the agent has actual authority. Some
bases for termination by operation of law (such as changed circumstances) may provide such notice.

Under the Restatement (Third) of Agency, an agent’s apparent authority may continue even after the
principal’s death or loss of capacity. An agent may act with apparent authority following the principal’s
death or loss of capacity because the basis of apparent authority is a principal’s manifestation to third
parties, coupled with a third party’s reasonable belief that the agent acts with actual authority lv[lv].
When third parties do not have notice that the principal has died or lost capacity, they may reasonably
believe the agent to be authorized. The rule that the principal’s death does not automatically terminate
apparent authority is consistent with the interest of protecting third parties who act without knowledge
of the principal’s death or loss of capacity.

To protect themselves against unwanted liability, however, prudent principals will want to notify third
parties themselves. The required type of notification varies with the third party in question.

For third parties who have previously dealt with the agent or who have begun to deal with the agent,
actual notification is necessary. This can be accomplished by-

(1) a direct personal statement to the third party; or

(2) a writing delivered to the third party personally, to his place of business, or to some other place
reasonably believed to be appropriate.

For all other parties, constructive notification. Usually, these other parties are aware of the agency but
did no business with the agent. Constructive notification normally can be accomplished by advertising
the agency’s termination in a newspaper of general circulation in the place where the agency business
regularly was carried on. If no suitable publication exists, notification by other means reasonably likely
to inform third parties—for example, posting a notice in public places or at a website—may be enough.

09. Claim for damages

Apart from revocation of agency, the principal may also claim damages/losses sustained due to the
acts/non-acts of the agent by referring the matter to arbitration as stipulated in the contract of agency.
It also is well settled that the party who has breached the contract and has by his conduct exhibited the
traits of having abandoned or renounced the obligations under the contract will not be entitled to claim
damages from the other sidelvi[lvi]. In this case, the sole selling agent, having exhibited uncooperative
attitude and conduct and by virtually sabotaging the business of the principal, notwithstanding his clear
obligations both under the agreement and the Contract Act, would have no case to go before any court
and seek damages or compensation – on the contrary, the principal would be well justified in claiming
damages and expenses/costs against the sole selling agent. In view of the ‘doctrine of necessity’, the
dispensing with prior to six months’ notice would be justified and reasonable – otherwise, to wait for six
months and play into the hands of an untrustworthy agent would only witness the complete obliteration
of the principal’s business.

A contract of agency is a species of the general contract. As such, an agency may terminate in the same
way as a contract is discharged except where the agency is irrevocable. The relation of principal and
agent can only be terminated by the act or agreement of the parties to the agency or by operation of
law. “An agency, when shown to have existed, will be presumed to have continued, in the absence of
anything to show its termination, unless such a length of time has elapsed as destroys the presumption
Agency may be brought to an end either by the act of the parties, or by operation of law” lvii[lvii]. Agency
may be terminated by subsequent events. These may be physical, as where, for example, the subject
matter is destroyed, or the principal or agent dies, or becomes insane. Alternatively, they may be legal,
as where the principal or agent becomes, bankrupt, or the relationship becomes illegal (for example, if
the principal becomes an enemy alien). The effects of termination are that as far as principal and agent
are concerned, rights vested at the time of the termination will subsist, but no new rights can be
created, at least once the agent has notice of the termination. Where the agency was created by
agreement, it will be determinable in the same way. A continuing agency may also be determined by
giving such period of notice as is specified in any agreement, or failing that, reasonable notice. Finally, if
either party acts in a way which is inconsistent with the continuation of the agency then it will be
terminated though of course this may well give rise to rights of action for breach of contract. As regards
termination by operation of law, if an agency is for a particular transaction, the relationship will
terminate when that transaction is completed. If it is for a specified period, it will cease at the end of
that period.

11. Agency and Dealer

01. Difference between agency and dealership

In the law of agency, the relationship that matters is the legal relationship. A person cannot become an
agent of another merely because he gives advice to the other. Any person acting on behalf of the other
cannot be an agent for another until there is an implied or explicit agreement between them, which
leads to a legal relationship between them. Also not all those who describe themselves as agents will, in
law, be considered as agents. The dealer of a particular make of cars, e.g. Mercedes, may be called as an
agent, but the dealer in law is not an agent for the manufacturer. This is because, in practice, the dealer
purchases vehicles from the manufactures and sell them on the dealer’s own account. No privity of
contract exists between the manufacturer and the buyer. This example highlights the difference
between agency and dealership. An agent markets his principal’s products for a fixed commission, which
can be determined according to the contracts. But, a dealer buys the product of a company directly from
its manufacturer on its own name. So, rather than matching up the principal and the third party, the
dealer acts as a principal and buys or sells stock for the dealer’s own inventory. An agent acts as an
intermediary and receives a commission for its services. But, a dealer acts on behalf of the firm rather
than acting as an intermediary. As mentioned in the above car example, no contract exists between the
dealer and the manufacturer, thus, there is no legal relationship, which is the most important thing in
the law of agency.

The description of an agent looks quite similar to that of a servant or a bailee but their duties, role and
liabilities are entirely different. The Supreme Court has clearly underlined the distinctions between an
agent and a servant in the case Lakshminarayan Ram Gopal & Sons v. Hyderabad Government.lviii[lviii]

02. Difference between agency and servant

The table draws a distinction between an agent and a servant.

Agent Servant

An agent is authorized to act on behalf of his A servant does not have the authority to create
principal and create contractual obligations contractual obligations between the principal and a
between the principal and a third party. third party.

The principal has the authority to direct the agent

The master can direct a servant as to what has to
as to what he has to do but he cannot direct how it
be done and also how it should be done
is to be done.

An agent is paid in terms of commission A servant gets his salary or wages.

An agent can work for different principals at the A servant usually works under one master at a
same time given point of time.

The agent offers and accepts new proposals from

the third party on behalf of his principal and thus A servant cannot create any such legal relations
new legal relations are created in law of agency.

12. Sub agents and Substituted agents

01. Types of Sub Agents

Subagents are generally appointed by agents. Sub agents are generally of three types

a.            Those employed without the express or implied authority of the principal and by whose acts the
principal is not bound;

b.            Those employed with express or implied authority of the principal but between whom and the
principal there is no privity of contract;

c.            Those employed with the express authority of the principal and between whom and the
principal there is a privity of contract and a direct relationship of principal and agent is accordingly
established.

02. Overview of Sub Agents and their rights

A sub agent is a person employed by and acting under the control of the original agent in the agency
business. An agent cannot lawfully employ another person to perform acts which he has expressly or
impliedly undertaken to perform personally unless by ordinary custom of trade a sub agent may or from
the nature of the agency a sub agent must be employed.
A sub agent cannot be appointed ordinarily by the agent without the express or implied consent of the
principal. When a sub agent is appointed with the consent of the principal, he is, as regards the third
persons, represented by the sub agent also and is bound by and responsible for the acts of the sub agent
as if he were an agent ordinarily appointed by the principal. Otherwise it is the agent who is responsible
to the principal for the acts of the sub agent and the sub agent is responsible for his acts to the agent
and not to the principal except in case of fraud or willful wrong. The principal is not responsible for the
acts of the sub agent if the sub agent is appointed without his consent.

Section 191 of the Indian Contract Act, 1872 defines sub-agent. According to this section “a sub-agent is
a person employed by, and acting under the control of, the original agent in the business of the
agency.”lix[lix] The appointment of an agent may be done properly or improperly, which determines the
relationship between the principal and the sub-agent.

Thus there are two types of delegation–

1.            Proper delegation– This comes under section 192 of the Indian Contract Act, 1872. This is when
an agent having the authority to do so, appoints a sub-agent.

2.            Improper delegation– This comes under section193 of the Indian Contract Act, 1872. This is
when an agent without any authority appoints a sub-agent.

03. Proper delegation [S. 192]

Sn. 192. Representation of principal by sub-agent properly appointed- Where a sub-agent is properly
appointed, the principal is, so far as regards third persons, represented by the sub-agent and is bound
by and responsible for his acts, as if he were an agent originally appointed by the principal.
Agent's responsibility for sub-agent- The agent is responsible to the principal for the acts of the sub-
agent.

Sub-agent's responsibility- 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 following effects of the appointment are stated in Section 192:

Principal represented by sub-agent- In the first place, so far as regards third persons, 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.lx[lx]

Agent's responsibility for sub-agent-Secondly, the agent is responsible to the principal for the acts of
the sub-agent. If, for example, the sub-agent has misappropriated the principal's property or its sale
proceeds, the agent is responsible for the same. There is no privity of contract between the principal
and the sub-agent and, therefore, he cannot sue the sub-agent, except for fraud or wilful wrong. Even
where fraud or wilful wrong is established, the principal has the choice to sue either the agent or the
sub-agent.lxi[lxi] But the agent may exempt himself from such liability. lxii[lxii]

04. Improper delegation [Sn. 193]

Sn.193. Agent's responsibility for sub-agent appointed without authority- Where an agent, without
having authority to do so, has appointed a person to act as a sub-agent, the agent stands towards such
person in the relation of a principal to an agent, and is responsible for his acts both to the principal and
to third persons; the principal is not represented by or responsible for the acts of the person so
employed, nor is that person responsible to the principal.

Delegation is improper when it is not authorised, that is, when it is not within any of the recognised
exceptions. The effect is that the principal is not bound by the appointment. He is not represented by
that person, nor bound by his acts. That person is also not responsible to the principal. But the agent will
be responsible to the principal for any act of that person. The agent stands in the position of principal
towards the person and is as such responsible for his acts to third parties.

Sub-agent's liability to principal- The sub-agent is not directly liable to the principal, except for fraud
and wilful wrong. A well-known illustration is Calico Printers’ Assn v. Barclays Bank:lxiii[lxiii] A sub-agent
failed to insure the principal's goods, which were destroyed by fire. But the principal could not recover
against the sub-agent.

A sub-agent is, however, bound by all the duties of an ordinary agent.

05. distinction between an agent and a sub-agent

The table shows a distinction between an agent and a sub-agent.

Agent Sub-agent
 An agent is appointed by a principal and is under A sub-agent is appointed by an agent and as such is
his control. under the control of the agent.

An agent acts under the principal. A sub-agent acts under an agent.

A privity of contract exists between a principal and No privity of contract exists between a principal
an agent. and a sub-agent.

An agent can ask for remuneration from the A sub-agent cannot ask for remuneration from the
principal. principal.

06. Substututed Agents

Sections 194 and 195 talk about substituted agents. When an agent having the authority to do so, names
another person to act for the principal in the business of the agency, then such a person is called a
substituted agent and not a sub-agent. Thus a contractual relation comes in existence between the
principal and the substitute agent and therefore the substituted agent is directly liable to the principal
to perform his duties.

The distinction between a sub-agent and a substituted agent is important because an agent is liable in
relation to the acts of a sub-agent, but an agent carries no liability to the principal for the acts of the
substituted agent.

Sn 194. Relation between principal and person duly appointed by agent to act in business of agency-
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, such person is not a sub-agent but
an agent of the principal for such part of the business of the agency as is entrusted to him.

Illustrations

(a) A directs B, his solicitor, to sell estate by auction, and to employ an auctioneer for the purpose. B
names C, an auctioneer, to conduct the sale, C is not a sub-agent, but is A's agent for the conduct of the
sale.

(b) A authorises B, a merchant in Calcutta to recover the moneys due to A from C & Co. B instructs D, a
solicitor, to take legal proceedings against C & Co, for the recovery of the money. D is not a sub-agent,
but is solicitor for A.

195. Agent's duty in naming such person- In selecting such 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 this, he is not responsible to the principal for the acts or negligence of the agent so
selected.

IIIustrations
(a) A instructs B,a merchant, to buy a ship for him. B employs a ship surveyor of good reputation to
choose a ship for A. The surveyor makes the choice negligently and the ship turns out to be unseaworthy
and is lost. Bis not, but the surveyor is, responsible to A.

(b) A consigns goods to B, a merchant, for sale. B, in due course, employs an auctioneer in good credit to
sell the goods of A, and allows the auctioneer to receive the proceeds of the sale. The auctioneer
afterwards becomes insolvent without having accounted for the proceeds. B is not responsible to A for
the proceeds.

07. distinction between a sub-agent and a substituted agent

A sub-agent has to be distinguished from a substituted agent. Sections 194 and 195 contain special
provisions about substituted agents. According to Section 194 when an agent has an express or implied
authority of his principal to name a person to act for him and the agent has accordingly named a person,
such person is not a sub-agent, but he becomes an agent for the principal in respect of the business
which is entrusted to him.

One of the effects of appointing a substitute is that a direct privity of contract is established between
the principal and the "substitute". The agent is not concerned about the work of the substitute. His only
duty is to make the selection of the substitute with reasonable care. Section 195 says that "in selecting
such 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 this he is not responsible to the
principal for the acts or negligence of the agent so selected".

The table shows a distinction between a sub-agent and a substituted agent.

Sub-agent Substituted agent

An agent appoints a sub-agent and therefore a sub- A substituted agent is only named by the agent but
agent is under the control of an agent. is under the control of the principal.

A substituted agent acts independently for his

A sub-agent acts under the agent.
principal.

A sub-agent cannot be held liable by the principal, A substituted agent can be held liable by his
except in case of fraud. principal.

A sub-agent is not entitled to any remuneration A substituted agent can ask for his remuneration
from the principal. from his principal.

No contract exists between a sub-agent and the A contractual relationship exists between the
principal. substituted agent and the principal.

An agent is not liable for the acts of substituted

An agent is liable for the acts of the sub-agent.
agent.

08. Principal's Remedies Against Agent's Breach of Duty

The rights of the principal on agent committing breach of duty were briefly stated by Lord SUMNER in
Christoforides v Terrylxiv[lxiv]: Principals have three rights as against agents who fail in their duty- they
can recover damages for want of skill and care, and for disregard of the terms of the mandate: they can
obtain an account and payment of secret and illicit profits, which have come to the hands their agents as
agents; and they can resist an agent's claim for commission and for indemnity against liability incurred
as mandatory by showing that the agent has acted as a principal himself and not merely as an agent.
Each remedy is distinct and is directed to a specific irregularity. A defaulting agent can also be dismissed
instantly and summarily.

04. DELEGATION

01. Definition of Delegation

Black’s Law Dictionary defines ‘Delegation’ as ‘the act of entrusting another with authority or
empowering another to act as an agent or representative’. E.g. Delegation of Contractual Duties. The
Dictionary further defines ‘Doctrine of Delegation’ as: “The Principle (based on the Separation of Powers
Concept) limiting Legislature’s ability to transfer its legislative power to another Governmental Branch,
especially the Executive Branch.”

02. Principles of Delegation

The following are the principles of delegation.

1. Principle of Functional Definition

The related or similar activities should be grouped together according to enterprise function. When the
definition of a position is clear then delegation of authority becomes simple. In the words of Koontz and
O’Donnell “the more a position or a department has clear definitions or results expected, activities to be
undertaken, organization authority delegated and authority and informational relationships with other
positions understood, the more adequately the individuals responsible can contribute toward
accomplishing enterprise objectives.”

It is very difficult to define a job and the authority required to accomplish it. If the superior is not clear
about the results expected then it becomes all the more difficult. It should be clear who should do what
so that right amount of authority is delegated. Dual subordination results in conflicts, division of loyalty
and lack of personal responsibility for results.

2. Principle of Unity of Command

The basic management principle is that of unity of command. This principle states that a subordinate
should report only to single superior. This will give a sense of personal responsibility. Although it is
possible for a subordinate to receive orders from more superiors and report to them but it creates more
problems and difficulties. An obligation is essentially personal and authority delegation by more than
one person to an individual is likely to result in conflicts in both authority and responsibility. This
principle is also useful in the classification of authority-responsibility relationships.
3. Principle of Delegation by Results Expected

The delegation of authority should be based on the basis of results expected. The authority should be
sufficient to achieve the desired results. If the authority is insufficient then results will not be achieved.
So there should be a balance between the results expected and the authority required.

4. Principle of Absoluteness of Responsibility

The responsibility of a subordinate, once he has accepted the work, is absolute to his superior. The
responsibility of the superior does not decrease once he has delegated authority. A person can delegate
authority and not responsibility. He will remain accountable for the work even if it is delegated to the
subordinate. So the responsibility of superior and subordinate remains absolute.

5. Principle of Parity of Authority and Responsibility

Since authority is the right to carry out assignments and responsibility is the obligation to accomplish it,
there should be a balance between the both. The responsibility should bear logical relationship with
authority delegated. The subordinate should not be burdened with high performance responsibility with
delegating enough authority. Sometimes the authority is delegated but the concerned person is not
made accountable for its proper use. This will be a case of poor management. The parity between
authority and responsibility will be essential for achieving efficiency.

6. Authority Level Principle

The principle that decision-making should remain at the level at which authority is delegated. The
managers delegate authority to subordinates but have the temptation to make decisions for them. They
should allow the subordinates to take their own decisions as per the authority delegated to them. The
delegation of authority will be effective only when it is clear and understandable to subordinates. The
subordinates should know the area of their decision-making and should avoid the temptation of
referring things to higher ups. In the words of Koontz and O’Donnell, the authority level principle would
be “maintenance of intended delegation requires that decisions within the authority competence of
individuals be made by them and not be referred upward in the organization structure.”

7. The Scalar Principle

The scalar principle refers to the chain of direct authority relationships from superior to subordinates
throughout the organization. The ultimate authority must rest somewhere. Subordinates must know to
whom they should refer the matter if it is beyond their authority. The more clear the line of authority
from top manager to every subordinate the more effective will be responsible decision-making. lxv[lxv]

Following guidelines can also be followed by the managers to practice an efficient delegation.

8. Principle of Unity of Command

According to this principle, every subordinate should have a single supervisor from whom he gets the
authority and to whom he is solely accountable. This means the subordinate should get the instructions
from a single superior and perform those responsibilities as assigned by him. In case, if the subordinate
is required to report to more than one boss, then there may be a conflict and delay in the managerial
operations.

09. Principle of Exception

According to this principle, the subordinate shall be given complete freedom to perform his
responsibilities under the purview of his authority. The manager should not interfere in between his
work and must allow him to do even if he commits mistakes. But in some exceptional cases, the
managers can interfere and even withdraw the authority delegated to the subordinate.

10. Selection of apt person for an effective delegation process

For the selection of apt person for delegation the following guidelines shall be beneficial.

1. Determine what you will delegate.

Effective delegation begins with defining your responsibilities. Write down all of your activities and
responsibilities. Review your master list and categorize all of the items into two secondary lists: things
you alone must do and things that others could do or help you complete. Anything that falls into the
second list presents an opportunity for delegation.

2. Choose the right person to delegate the task to.

Andrew Carnegie said, "The secret to success lies not in doing your own work, but in recognizing the
right person to do it." The key to finding the right person to delegate an assignment to is matching skills
and attitude to the task at hand.

3. Clarify the desired results.

When the results are clear, it allows the employee to use his or her own creativity and resources to
accomplish the task. An added benefit of effective delegation is the individual may find a better and
more effective way to accomplish the task or achieve the desired results.

4. Clearly define the employee's responsibility and authority as it relates to the delegated task.

Clearly communicate the expectation, responsibilities, and timeline. Be sure to ask the employee to
share his or her understanding.

5. Establish a follow up meeting or touch points.

The follow up meetings should be focused on two things-monitoring progress and determining the need
for assistance. The number of follow up meetings will vary based on the scope of the task or project and
whether the employee is new or a long term member of the department.

Once you have created a solid process for delegation, stick to it, and avoid reverse delegation. At times,
a team member may try to dump the delegated task back to you, and you may feel tempted to take it
back especially if he or she seems to be struggling. Helping him or her stretch outside his or her comfort
zone is all part of a positive growth and development. Use the scheduled follow up meetings to manage
the delegation process, provide encouragement, and monitor the results. lxvi[lxvi]

03. Sub-Delegation

It has been consistently held by the courts that the delegate on whom the power to make subordinate
legislation is conferred cannot further delegate that power. This principles finds its origin in the Latin
maxim ‘delegatus non potest delegare’ meaning a delegate cannot himself delegate.

Thus when an Act prescribes a particular body to exercise a power, it must be exercised by that body
and none else unless the Act by express words or necessary implication permits such delegation. When a
sub-delegation is made, it does not divest the authority making sub-delegation of his statutory
authority.

04. Effects of Delegation

A person who is appointed by the agent and to whom the principal's work is delegated is known as "sub-
agent". Section 191 defines "sub-agent" as "a person appointed by and acting under the control of the
original agent in the business of the agency". The significance of the words "acting under the control of
the original agent," appears from a judgment of the Supreme Court. The plaintiff had sent an article by
VPP (value payable post) to Pakistan. The Pakistani authorities received the dispatch, delivered it to the
addressee and received the value from him. Commencement of hostilities at this stage resulted in
suspension of the postal services agreement between the two countries. The amount was not received
by the Government of India. Even so the plaintiff sued the Government contending that the failure of
the Government was a failure of a sub-agent for which the original agent is liable. The Supreme Court
did not consider it possible for anybody to say that by virtue of the postal treaty a foreign Government
had become the sub-agent of the Union of India. The court said that when two sovereign powers enter
into an agreement, neither of them can be described as an agent of the other. lxvii[lxvii]

Now, when a sub-agent is appointed, what relationship is constituted between the principal and the
sub-agent and the agent? The answer depends upon whether the sub-agent has been properly or
improperly appointed.

05. APPLICATION OF DELEGATUS NON POTEST DELEGARE IN AGENCY

01. Duty not to delegate [Sn. 190]

Delegatus non potest delegare is a well-known maxim of the law of agency. The Principal chooses a
particular agent because he has trust and confidence in his integrity and competence. Ordinarily,
therefore, the agent cannot further delegate the work which has been delegated to him by his
principal.lxviii[lxviii] But there are exceptions.

It was laid down in John McCain and Co v. Powlxix[lxix] that unless so authorized by the principal, an
estate agent has no right to appoint a sub-agent and delegate to him his powers which require special
skill and care. No implied authority could be pleaded. In this case the sub-agent effected a sale on his
own account. The agent (plaintiff) had sued for his commission. The court negatived the claim as the
contract of agency did not permit appointment of sub-agent. This principle and its exceptions are stated
in Section 190:

Section 190. When agent cannot delegate

An agent cannot lawfully employ another to perform acts which he has expressly or impliedly
undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may, or, from the
nature of the agency, a sub-agent must, be employed. But there are exceptions. In the following cases
the agent may delegate the work to another:

1. Nature of Work

Sometimes the very nature of work makes it necessary for the agent to appoint a sub-agent. For
example, an agent appointed to sell an estate may retain the services of an auctioneer and the one
authorized to file a suit may engage a lawyer. A banker instructed to make payment to a particular
person at the particular place may appoint a banker who has an office at that place. lxx[lxx] A banker
authorized to let out a house and collect rents may entrust the work to an estate agent. lxxi[lxxi]

2. Trade Custom

Secondly, a sub-agent may be appointed and the work delegated to him if there is ordinary custom of
trade to that effect. Thus architects generally appoint surveyors. lxxii[lxxii]

3. Ministerial Action

An agent cannot, of course, delegate acts which he has expressly or impliedly undertaken to perform
personally, e.g. acts requiring personal or professional skill. But the agent may delegate acts which are
purely ministerial in nature. e.g., authority to sign. lxxiii[lxxiii]

4. Principal's Consent

The principal may expressly allow his agent to appoint a sub-agent. His consent may also be implied
from the conduct of the parties. The principal may ratify his agent’s unauthorized delegation.

02. Sub agent

A person who is appointed by the agent and to whom the principal's work is delegated is known as "sub-
agent". Section 191 defines "sub-agent" as "a "sub-agent" is a person employed by, and acting under the
control of, the original agent in the business of the agency.

In a case before the Supreme Courtlxxiv[lxxiv], a person had sent certain parcels by VPP to a destination in
Pakistan. The articles reached Pakistan. They were delivered to the addressee and their value was
collected. The Government of Pakistan, having snapped the postal treaty with the Government of India,
did not forward the amount. The Indian Post Office could not pay to the sender. The sender sued the
Government. Holding the Government not liable. the court said that when two sovereign powers enter
into a postal treaty, neither of them can be described as an agent of the other. Neither can be said to be
employed or acting under the control of the other as required of a sub-agent under Section 191.

When a sub-agent is appointed, what relationship is constituted between the principal and the sub-
agent and the agent? The answer depends upon whether the sub-agent has been properly or improperly
appointed.

01. Agent's responsibility for sub-agent

The agent is responsible to the principal for the acts of the sub-agent.

02. Sub-agent's responsibility

The sub-agent is responsible for his acts to the agent, but not to the principal, except in case of fraud or
wilful wrong.

In Calico Printers' Association v Barclays Banklxxv[lxxv] WRIGHT J explained the effect of proper
delegation, "Even where the sub-agent is properly employed, there is no privity between him and the
principal; the latter is .entitled to hold the agent liable for breach of the mandate, which he has
accepted, and cannot, in general claim against the sub-agent for negligence or breach of duty."

The following effects of the appointment are stated in Section 192:

1. Principal Represented by Sub-Agent

In the first place, so far as regards third persons, 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. lxxvi
[lxxvi]

2. Agent's Responsibility for Sub-Agent

Secondly, the agent is responsible to the principal for the acts of the sub-agent. If, for example, the sub-
agent has misappropriated the principal's property or its sale-proceeds, the agent is responsible for the
same. There is no privity of contract between the principal and the sub-agent and, therefore, he cannot
sue the sub-agent, except for fraud or wilful wrong. Even where fraud or wilful wrong is established the
principal has the choice to sue either the agent or the sub-agent. lxxvii[lxxvii] But the agent may exempt
himself from such liability.lxxviii[lxxviii]

3. Sub-agent's Liability to Principal

The sub-agent is not directly liable to the principal, except for fraud and wilful wrong. A well-known
illustration is Calico Printers' Association v Barclays Bank.lxxix[lxxix]

A subagent failed to insure the principal's goods, which were destroyed by fire. But the principal could
not recover against the sub-agent.
Similarly, in Summon Singh v. N.C. Bank of New York,lxxx[lxxx] the plaintiff in a foreign country appointed
the N.C. Bank to deliver a sum of money to one Pritam Singh of Jullundur, whose address was given. The
bank instructed its Bombay branch accordingly. The Bombay branch appointed the Punjab National Bank
which delivered the money to a wrong person.

The plaintiff’s action against either bank failed. The Punjab National Bank was held not liable on the
principle that a sub-agent is not liable to the principal except when he is guilty of fraud or wilful wrong.
The wrong delivery was due only to negligence. The N.C. Bank had exempted itself from the
consequences of wrong delivery.lxxxi[lxxxi]

A sub-agent is, however, bound by all the duties of an ordinary agent. His rights cannot go beyond those
of the main agent and they have to be exercised through the agent except where direct action would be
necessary to give business efficacy to the appointment of a sub-agent. Where a sub-agent (fire
protection coating specialist) was appointed on agreed basis for the purpose of coating the 52-storey
building undertaken by the contractor, it was held to be an implied term that his work would not be
rejected except on reasonable basis.lxxxii[lxxxii]

03. Substituted agent [Ss. 194 and 195]

194. Relation between principal and person duly appointed by agent to act in business of agency:-
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, such person is not a sub-agent but
an agent of the principal for such part of the business of the agency as is entrusted to him.

Illustrations

(a) A directs B, his solicitor, to sell estate by auction, and to employ an auctioneer for the purpose. B
names C, an auctioneer, to conduct the sale. C is not a sub-agent, but is A's agent for the conduct of the
sale.

(b) A authorises B, a merchant in Calcutta to recover the moneys due to A from C & Co B instructs D, a
solicitor, to take legal proceedings against C & Co, for the recovery of the money. D is not a sub-agent,
but is solicitor for A.

195. Agent's duty in naming such person:- In selecting such 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 this, he is not responsible to the principal for the acts or negligence of the agent so
selected.

Illustrations

(a) A instructs B, a merchant, to buy a ship for him. B employs a ship surveyor of good reputation to
choose a ship for A. The surveyor makes the choice negligently and the ship turns out to be unseaworthy
and is lost. B is not, but the surveyor is, responsible to A.
(b) A consigns goods to B, a merchant, for sale. B, in due course, employs an auctioneer in good credit to
sell the goods of A, and allows the auctioneer to receive the proceeds of the sale. The auctioneer
afterwards becomes insolvent without having accounted for the proceeds. B is responsible to A for the
proceeds.

A sub-agent has to be distinguished from a substituted agent. Sections 194 and 195 contain special
provisions about substituted agents. According to Section 194 when an agent has an express or implied
authority of his principal to name a person to act for him and the agent has accordingly named a person,
such person is not a sub-agent, but he becomes an agent for the principal in respect of the business
which is entrusted to him. The two illustrations to the section further explain the position of a
substituted agent. A solicitor is appointed to sell an estate by auction and to employ an auctioneer for
the purpose. The auctioneer thus appointed is not a sub-agent but an agent of the employer himself for
the purpose of the sale. Similarly, when an agent is authorized to recover debts and he appoints a
solicitor for the purpose, the latter is not a sub-agent, but a full-fledged agent for the purpose. lxxxiii[lxxxiii]

One of the effects of appointing a substitute is that a direct privity of contract is established between
the principal and the "substitute". The agent is not concerned about the work of the substitute. His only
duty is to make the selection of the substitute with reasonable care. Section 195 says that "in selecting
such 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 this he is not responsible to the
principal for the acts or negligence of the agent so selected". The two illustrations appended to the
section explain the point. A merchant is instructed to buy a ship for his principal. The merchant employs
a ship surveyor of good reputation to choose a ship for the principal. The surveyor makes the choice
negligently, the ship turns out to be unseaworthy, and is lost. The surveyor, but not the agent, is liable
to the principal. In the second illustration, goods are consigned to a merchant for sale. The merchant
employs an auctioneer in good credit to sell the goods and allows him to receive the proceeds. The
auctioneer becomes bankrupt without having accounted for the proceeds to the principal. The agent is
not liable.

04. Delegation

Standing by without objection to the deputy acting will in general be taken as an assent to the
delegation of authority.lxxxiv[lxxxiv]

An agent may not delegate even the mere act of signing, unless such special circumstances exist as to
lead to the inference that the principal intended that the agent was to have that power. lxxxv[lxxxv]

It is a general rule that an agent cannot delegate his authority to another without a special authority to
do so, as expressed in the maxim " delegata potestas non potest delegari "; and this rule applies strictly
wherever the agency involves a trust or discretion in the agent, for the exercise of which he is personally
selectedlxxxvi[lxxxvi]. A factor or broker employed to sell goods for his principal cannot delegate his
commission to another; and a sale by a sub-agent would be wrongful and void against the principal, who
might recover the goods or their value, without regard to any dealings between him and the original
agentlxxxvii[lxxxvii]; or he might affirm the transaction and claim any profit made by the sub-agent, beyond
his proper remuneration and chargeslxxxviii[lxxxviii]. A partner requires a special authority to appoint an
agent so as to bind his co-partners if the contract be one falling within the Statute of Frauds lxxxix[lxxxix].

But if the agency involves no exercise of discretion and it is immaterial whether it be done by one
person or another, or if the discretionary part of the agency is exercised by the party to whom it is
entrusted, a mere act, as the signing of a name, may in general be delegated to and performed by the
hand of another; as where a creditor under a composition deed telegraphed to his agent to sign the
deed, who in turn required his clerk to sign it, the signature was held to be that of the principal xc[xc].
And an agent having authority to draw bills or notes may direct another person to sign the name of the
principal upon a particular instrument of that kind xci[xci].—

A statute may require a personal signature by the hand of the party himself; as the Statute of Frauds
Amendment Act, 1828, s. 6, which requires that any representation made concerning the character of
another shall be " made in writing signed by the party to be charged therewith xcii[xcii]". But unless
restricted by statute a party may sign by an agent by the general rule of common law xciii[xciii].

An agent employed for a particular business is impliedly authorized to employ such qualified sub-agents
as are generally required in that business; as in the case of contractors employed to build a railway in a
foreign country who may of necessity employ a local representative invested with all their
powersxciv[xciv]. And in such case "the sub-agent becomes as responsible to the principal for the due
discharge of the duties of his employment as if he had been appointed agent by the principal
himself"xcv[xcv]. But the principal cannot charge a sub-agent with money received to his use merely by
reason of his having received it to the use of his employer, whose duty it was to account for it as agent
of the principalxcvi[xcvi] . The sub-agent, after notice of the principal, can acquire no rights against the
agent in derogation of the rights of the real principal; as a right of set-off against his own
principalxcvii[xcvii]. But the sub-agent retains the rights incident to his employment as against the real
principal notwithstanding the dealings between the latter and his agent; as the lien of an insurance
broker for premiums and commissions upon policies effected by him, which cannot be defeated by
payment of the principal to his agent xcviii[xcviii]. Upon the above principle trustees, executors, and
persons filling similar offices may employ professional or skilled agents to do all such business as
requires such agency; they are allowed to charge payment of such agents in account, and are not
responsible for their defaults if properly employed xcix[xcix].The same principle applies to directors of
companies. They may execute the ordinary business of the company by properly qualified sub-agents;
but they cannot delegate matters entrusted to their own discretion, as the allotment of shares c[c]; or
the buying of shares in the Companyci[ci]; or the making of calls and enforcing forfeiture for
nonpaymentcii[cii].

But an agreement made between a Mahomedan wife and husband, entered into before marriage, by
which it was provided that the wife shall be at liberty to divorce herself from her husband under certain
specified conditions was valid, if the conditions were of reasonable and not opposed to the policy of
Mahomedan law. When such an agreement is made, the wife may, at any time after the happening of
the contingencies, repudiate the marriage herself, in the exercise of the power; and such a divorce will
take effect as if the talaq (divorce by the husband) was by tafwiz (delegation), the wife being as it were,
the delegate of the husband to pronounce the talaq .ciii[ciii]

Even where a contract involves personal skill, it may not be necessary that he personally perform each
and every act in the promise. A sculptor, painter or architect may design and supervise the work, and its
manual execution may be done subject to the promisor's final touches by other skilled persons. Less
important parts of the work may at times be executed by pupils and assistants under the direction of the
promisor; the promisor is bound to perform his promise personally in that he cannot delegate the
design or general supervision to a junior.

The presumption is that the parties intend to contract with reference to the law as existing at the time
when the contract is made. The same principle applies where performance is rendered legally
impossible by delegated legislation or by the exercise of powers under an Act or delegated legislation. civ
[civ] The impossibility may arise because the law prohibits the doing of the act undertaken under the
contract, or restricts it. But the change in law must be such as to strike at the basis of the contract, and
not merely to suspend performance under it.

05. Relationship between Agent and Sub-Agent

The relation of the sub-agent to the original agent is, as between themselves, that of agent to principal.
'It may be generally stated that, where agents employ sub-agents in the business of the agency, the
latter are clothed with precisely the same rights, and incur precisely the same obligations, and are
bound to the same duties, in regard to their immediate employers, as if they were the sole and real
principals.cv[cv]

The sub-agent looks to, and is controlled by the agent who appointed him, and is not under any contract
with the principal. He must look to the agent for his remuneration and indemnity. Thus, a sub-agent will
not be liable to render an account to the principal, cvi[cvi] and even if the sub-agent is negligent, he
cannot be sued directly by the principal. cvii[cvii]

Goods sent to the sub-agent under instruction of the agent are deemed to be in the custody of agent, ie,
in his constructive custody, and the custody will be deemed to be custody of the principal. cviii[cviii]
However, in Union of India v Mohd Nazim,cix[cix] a resident of India sent a value payable article to an
addressee in Pakistan. The government in Pakistan realized the value of the article, but did not hand
over the amount to the Government of India, as it suspended the VP service between the two countries.
It was held that the arrangement entered into for exchange of VP articles under agreement between the
two countries did not make the Government of Pakistan the sub-agent of the Government of India, and
did not render the latter liable to pay the price of the article to the sender.

In the three next following sections, the Contract Act states the relations of the ultimate principal to the
sub-agent in different cases.

Section 192.

Section 192 provides that where the sub-agent is properly appointed:

(i)                      the principal is liable to the third parties for the acts of the sub-agent;

(ii)                      the agent is liable to the principal for the acts of the sub-agent; and

(iii)                     except in cases of fraud or willful wrong, the sub-agent is not liable to the principal, but
he is liable to the agent.

The words 'properly appointed' connote appointment according to the provisions of s 190. As a general
rule, there is no privity of contract between the principal and a sub-agent;cx[cx] the sub-agent is liable
only to his own principal, ie, the agent who has employed him. cxi[cxi] The sub-agent is not liable to the
principal, unless he commits fraud or willful wrong. cxii[cxii] The principal cannot sue the sub-agent for
money received by the sub-agent in the course of his agency. cxiii[cxiii]

However, if the principal is a party to the appointment of the sub-agent, or has subsequently adopted
his acts, indicating that it was the intention of the parties that privity of contract should be established
between them, or where the agent has clear authority to create such privity, cxiv[cxiv] this rule will not
apply, and the sub-agent has both the rights and the liabilities of an agent vis-a-vis the principal.

06. Ratification

If the sub-agent purports to act in the name of the ultimate principal, that principal may adopt his acts
by ratification, as he might adopt acts purporting to be done on his behalf by any other person. cxv[cxv]
But it is conceived that, if a sub-agent acts in his own name or in that of the agent who has taken on
himself without authority to delegate to him business which is in fact the principal's, the acts so done
cannot be ratified by the principal.

07. Agent's Responsibility for the Sub-Agent

Where there is no averment of fraud or willful wrong, the agent is responsible to the principal, and not
the sub-agent.cxvi[cxvi] The agent is responsible for the acts of the sub-agent, cxvii[cxvii] his negligence,
fraud,cxviii[cxviii] and other breaches of duty.cxix[cxix] Thus, the agent will be liable to the principal for the
money received by the sub-agent, to the use of the principal, cxx[cxx] or for the sub-agent's breach of
duty.

Where contract for carriage of goods from Delhi to New York was entered into by the plaintiff with Air
India and Air India availed of services of Trans World Airlines for carriage of consignment from Paris to
New York, it was held that the liability of Air India, to account for the consignment to the plaintiff
subsisted, and it was liable to pay the value of the consignment as the same was negligently, and
without authority, delivered by Trans World Airlines. cxxi[cxxi]

Even where the sub-agent conducts the business of agency fraudulently, or commits a willful wrong, the
agent is liable to the principal for the sub-agent's fraud or willful wrong within the course of his
employment. The last clause of this section, giving a principal, in cases of fraud or willful wrong, the right
of recourse to the sub-agent, does not exclude the principal's normal right of recourse to his agent. cxxii
[cxxii] In fact, the total effect of the section is to give an option to the principal where a fraud or willful
wrong is committed by the sub-agent.cxxiii[cxxiii] Nor is the position of the agent divested by the mere
circumstances of direct communications between the principal and the sub-agent. cxxiv[cxxiv]

Criticism of the Rule

The rule that where a sub-agent is validly appointed, the principal has no right of action against the sub-
agent, is justified on the grounds of lack of privity between the two, and of duplication of remedies, ie,
the principal should have only one right of action. However, the rule is criticized, and an opinion now
favours the view that the principal must have a direct right of action against the sub-agent, on the
ground where the sub-agent has acted for the principal, the principal has a far more convincing claim in
respect of the contract so entered, viz to recover moneys collected by the sub-agent, than the agent,
who is no more than a middleman; when the sub-agent purports to act for his ultimate principal, and
has the power to change the latter's position, he should equally be under a duty to account to him, as is
every other agent.cxxv[cxxv]

08. Contracting Out of Liability

It has, however, been held that an agent may exempt himself from liability for the negligence of a sub-
agent by a special term in the contract. Thus, where a customer instructed his bank to remit money to a
person in another place, and his bank instructed another bank at that place to make the payment, and
the liability of the customer's bank was exempted under an exemption clause, it was not liable to the
customer when the bank, at the other place, paid the amount to another person. It was held that it was
possible to contract out of s 192,cxxvi[cxxvi] just as it was possible to contract out of s 151.cxxvii[cxxvii]

09. Sub-Agent's Responsibility

The sub-agent looks to and is controlled by the agent who appointed him, and is not under any contract
with the principal.cxxviii[cxxviii] If money due to A is paid to P, who is Z's servant, Z having authority from
A to collect it, P is accountable only to Z, and A cannot recover the money directly from P.cxxix[cxxix]

In S Summan Singh v National City Bank of New York,cxxx[cxxx] A had instructed the American bank to
remit money to X in Jullundur. The bank issued instructions to a Jullundur bank to pay the money to X, in
Jullundur. There were, in Jullundur, two persons of the name of X, and Jullundur bank paid the money to
the wrong person. It was held that A could not recover the money from the Jullundur bank, as there was
no privity of contract between them.

A authorised B to carry on business on his behalf in any manner that he liked. B appointed C as
commission agent to enter into transactions of purchase and sale of bullion on the following terms:

(i)                      to render accounts to B of all transactions and sale;

(ii)                      to be responsible for the solvency of persons with whom he did business;

(iii)                     to act on instructions of B on behalf of B;

(1)                    to charge certain commission on the transactions.

It was held that the terms on which the business was done, showed that the relationship between B and
C was one of principal and agent and not of principal and principal and, therefore, of katcha arhatia and
not pucca arhatia, and, therefore, C was a sub-agent, and the case fell under s 192, and not under s 226.
As such, C was not answerable to A, and suit for accounts by A against C was not sustainable.cxxxi[cxxxi]

Sub-Agent Liable

In effect, the last paragraph of the section gives an additional option to the principal to hold the sub-
agent also liable, for any fraud or willful wrong is committed by him. cxxxii[cxxxii]

However, a sub-agent is accountable to the principal for a secret commission improperly received by
him.cxxxiii[cxxxiii] He may also be liable to the principal in tort. cxxxiv[cxxxiv]

Principal Undisclosed

A sub-agent, who does not know that his employer is an agent, is entitled to the same rights as any
other contracting party dealing with an undisclosed principal. cxxxv[cxxxv] If A employs B as his agent to
make any contract for him, or to receive money for him, and B makes a contract with C, or employs C as
his agent, if B is a person who would be reasonably supposed to be acting as a principal, and is not
known or suspected by C to be acting as an agent for anyone, A cannot make a demand against C
without the latter being entitled to stand in the same position as if B had in fact been a principal. If A has
allowed his agent B to appear in the character of a principal he must take the consequences. cxxxvi[cxxxvi]

Thus, where goods consigned were sold in good faith by a sub-agent appointed by the consignee, and
the proceeds were brought into account between the consignee and the sub-agent, the latter was not
liable to account to the consignor. His account with the consignee could not be interfered with by the
consignee's principal except on the ground of bad faith. cxxxvii[cxxxvii]

10. Delegatus non protest delegare

This section embodies a very important principle viz. one who has a bare power or authority from
another to do an act must execute it himself and cannot delegate his authority to another. The reason
that no such power can be implied as an ordinary incident in the contract of agency is that confidence in
the particular person employed is at the root of the contract. Accordingly, auctioneers, factors, directors
of companies, brokers, and other agents in whom confidence is reposed have, generally Speaking, no
power to delegate their authority. "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, and where that is the case, the reason of the thing requires that the rule
should be relaxed." And "an authority to the effect referred to may and should be implied where, from
the conduct of the parties to the original contract of agency, the usage of trade, or the nature of the
particular business which is the subject of the agency, it may reasonably be presumed that the parties to
the contract of agency originally intended that such authority should exist, or where, in the course of the
employment, unforeseen emergencies arise which impose upon the agent the necessity of employing a
substitute."cxxxviii[cxxxviii] Authority to delegate is implied whenever the act to be done by the sub-agent
is purely ministerial, and does not involve the exercise of any discretion. cxxxix[cxxxix]

In some cases the custom of trade justifies the delegation of special branches of work. Thus it has been
found to be a usage of trade for architects and builders to have the quantities taken out from their
designs by surveyors, who are more expert in that work, for the purpose of enabling a proper estimate
to be made; and the surveyor can sue the architect's employer for his charges. cxl[cxl]

01. Principal, Agent, Sub-agent, third party

The last para of the section is based on the principle that there is no privity of contract between the
principal and sub-agent. That is the reason why a sub-agent is responsible to the agent and not to the
principal. A subagent is not accountable to the principal; he is liable to account to the agent. The
principal cannot proceed against the sub-agent except in case of fraud or wilful wrong. cxli[cxli]

The second para emphasizes that the privity of contract exists between the agent and principal and
therefore the agent is responsible for the acts of the sub-agent to the principal.

Despite this position inter se amongst the principal, agent and sub-agent, a third party cannot be made
to suffer and hence vis-a-vis a third party, the principal is bound by the acts of the sub-agent provided
the sub-agent is properly appointed. If the sub-agent is not properly appointed, sec. next section. This
principle is laid down in the first para of the section. Where authority to appoint a sub-agent in the
nature of a substitute for the first agent "exists" either by agreement or as implied in the nature of the
business "and is duly exercised, privily of contract arises between the principal and the substitute, and
the latter becomes as responsible to the former for the due discharge of the duties which is employment
casts upon him, as if he had been appointed agent by the principal himself. cxlii[cxlii] This is the class of
cases contemplated in sec. 194. Otherwise the sub-agent looks to and is controlled by the agent who
appointed him, and is not under any contract with the principal. If money due to A is paid to P, who is Z's
servant, Z having authority from A to collect it, P is accountable only to Z and A cannot recover the
money direct from P.cxliii[cxliii]

A sub-agent who does not know that his employer is an agent is entitled to the same rights as any other
contracting party dealing with an undisclosed principal (see Ss. 231,232 below).

02. Agent's responsibility for sub-agent

A commission agent for the sale of goods, who properly employs a sub-agent for selling his principal's
goods, is liable to the principal for the sub-agent's fraudulent disposition of the goods within the course
of his employment. The last clause of this section, giving a principal in case of fraud or wilful wrong the
right of recourse to the sub-agent, does not exclude the principal's normal right of recourse to his agent.
In fact, the total effect of the section is to give an option to the principal where a fraud or wilful wrong is
committed by the sub-agent.cxliv[cxliv]

Unauthorized sub-agent:- Preceding section dealt with the position when a sub-agent is duly appointed.
This section deals with a situation arising in case a sub-agent is appointed without authority. In such an
event, the principal is not bound by the acts of the sub-agent nor is the latter liable to the principal. In
such an event, the agent is the principal of the sub-agent and the agent is responsible both to the
principal and the third party.

Section 193.

03. Agent's responsibility for sub-agent appointed without authority

--Where an agent, without having authority to do so, has appointed a person to act as a sub-agent, the
agent stands towards such person in the relation of a principal to an agent, and is responsible for his
acts both to the principal and to third persons; the principal is not represented, by or responsible for the
acts of the person so employed, nor is that person responsible to the principal.

Introduction

Where the sub-agent is not properly appointed, Sn. 193 provides that:

(i)                      the agent stands as a principal towards such a sub-agent;

(ii)                      the agent is responsible to his principal for the acts of the sub-agent;

(iii)                     the sub-agent does not represent the principal;

(1)                    the principal is not liable to third parties for the acts of the sub-agent;

(v)                      the sub-agent is not responsible to the principal, but only to the agent;

(vi)                     the agent will also be liable to the third parties for the acts of the sub-agent.

Substituted Agent

An agent may appoint a substituted agent when:

(i)                      he holds an express or implied authority to do so;

(ii)                      he has named such person to act for the principal in the business of an agency.

Such named person will be an agent of the principal for such part of the business of agency as is
entrusted to him.

This section envisages that an agent nominating another person to act for the principal in the business
of the agency with the knowledge and consent of the principal. The naming of such person does not
amount to delegation of the duties of the principal; but 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 authorized to nominate him. The substitute becomes the agent of the principal himself.
Such substitute becomes directly responsible to the principal for the due discharge of his duties. The
appointing agent is not, after naming such a person, concerned with the character or efficiency of the
substituted agent.cxlv[cxlv] Privity of contract is established between the principal and the substituted
agent.cxlvi[cxlvi]

This section draws a clearly marked line between the ordinary sub-agent and a person who is put in
relation with the principal, a 'substitute'. cxlvii[cxlvii] The agent appointing such other person, is merely the
messenger of the principal's direct authority. In Nensukhdas v Birdichand ,cxlviii[cxlviii] it has been stated:

The whole distinction in our law appears to turn upon 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 the
naming of this naming is to be to the agent or the principal is by no means apparent. I gather, however,
that the naming should be to the principal himself so as to bring privity of contract between them. In
the case of a sub-agent, no such naming is required and consequently no such privity of contract is in
law held to be established...Whereas in cases of daily occurrence the sub-agent is perfectly well-known;
and the principal has assented thereto, if not expressly, tacitly by agreeing throughout. Nevertheless
observe what a serious difference there is between the legal consequences attendant upon the
appointment of a sub-agent and a substituted agent. In the case of a sub-agent the principal has no right
to obtain any remedy against him except in case of fraud or willful wrong. In the case of a substituted
agent the ordinary relations between principal and agent immediately came into being, and the
principal can, of course, recover from him any loss occasioned by his failure of duty.

Where authority to appoint a sub-agent in the nature of a substitute for the first agent 'exists' either by
agreement or as implied in the nature of the business 'and is duly exercised, privity of contract arises
between the principal and the substitute, and the latter becomes as responsible to the former for the
due discharge of the duties which his employment casts upon him, as if he had been appointed agent by
the principal himself.cxlix[cxlix] This is the class of cases contemplated in s 194.

The maxim delegatus non potest delegare merely imports that the agent cannot, without authority from
the principal, devolve upon another obligation undertaken by himself. cl[cl] In Union of India v Amar
Singh,cli[cli] it was held that the principle embodied in this section is the same as stated in De Bussche v
Alt .clii[clii] It was stated:

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, and where that is
the case, the reason of the thing requires that the rule should be relaxed, so as, on the one hand, to
enable the agent to appoint who has been termed 'a sub-agent' or 'substitute'; and, on the other hand,
to constitute, in the interest and for the protection of the principal, a direct privity of contract between
him and such substitute.cliii[cliii]

This section and s 195 apply only where the agent has the power of selection for a substituted agent. If
he has no such power of selection, and is merely compelled to appoint a nominee of the principal as the
agent of the principal, these sections do not apply. cliv[cliv]

04. Authority: Express or Implied

An authority to that effect should be implied where, from the conduct of the parties to the original
contract of agency, the usage of trade or the nature of the particular business, it may reasonably be
presumed.clv[clv]

05. Effect of Appointment of Substituted Agent

When such an authority exists and is duly exercised, privity of contract arises between the principal and
the substitute, and the latter becomes responsible to the former for the due discharge of his duties as if
he was appointed by the principal. The principal can sue such agent for account or damages, and such
agent can sue the principal for remuneration.

06. Effect of Appointment of Such Agent on Original Agency

The mere fact that the principal accepts the terms on which the sub-agent would sell goods and advance
money against goods would not ipso facto end the agency between the principal and the agent. clvi[clvi]
Where the agent names another and he is accepted, the agent has no concern with the business
transactions of the principal and the named agent. clvii[clvii] When privity is established between the
principal and the substituted agent, the agent is not concerned with the character or efficiency of the
substituted agent or his negligence.clviii[clviii]

The agency of the agent gets terminated when he is instructed to hand over all, or part of the business,
to another. Thus, the following section and this section, read together, show that they do not apply to
the case of an agent being instructed to hand over all, or part of the business, to a certain named person
and no other; in such case he is not answerable for the capacity or conduct of that person; his duty is
done when he has established relations between the substituted agent and the principal, clix[clix] and
then ss 191, 192 have no place.

Illustrative Cases

Such agency was presumed where a ship owner employed an agent to effect the sale of a ship at any
port where the ship happened to call. The appointment of substitutes at ports other than where the
agent carried on business was a necessity, and must be presumed. clx[clx] Goods in a wagon booked
before Partition from Quetta were found missing from the wagon when it arrived at Delhi Railway
Station after the Partition. Indian Railway was held to be an agent to receive the goods, and a bailee of
the consignor under s 194 of the Contract Act. clxi[clxi]

A bought mohua flowers at Sakti through merchants there, and had them sent to Jharia for sale. The
railway receipt was in his own name, the permit for export out of Sakti was also obtained by him. The
Sakti merchant wrote to Jharia merchants to sell the mohua flowers under instructions of A. The Jharia
merchants were held 'substituted agents' and accountable to A, and not sub-agents of Sakti
merchants.clxii[clxii] The trustees of the Industrial Trust Fund were appointed agents of certain mills with
authority to employ another, and to delegate powers to such other. The appellant was thus appointed,
and certain powers delegated to him. He was held to be an agent under s 194 for such part of the
business as was entrusted to him, and not a servant or a sub-agent. clxiii[clxiii]
A drew a cheque on his bank B in favour of C who had an account with D. C sent the cheque to D bank
who in turn sent it for collection to B bank, but it did not make the payment, and suspended payment. It
was held that B bank became substituted agent and not sub-agent and, therefore, the bank D would not
be liable for the amount of the cheque; that D bank must be taken to have implied authority to appoint
B bank for the purpose of collection, and the act of B bank would be binding on C. D bank in the absence
of receipt of payment from B bank would not be liable, the liability being of B bank.clxiv[clxiv] A bank was
held liable for negligence in collecting a hundi even where it had no branch at the place of collection,
and the sub-agent was another bank appointed under the authority of the defendant firm; there being
no privity between them.clxv[clxv]

'A letter of credit is in principle an undertaking by a banker to meet drafts drawn under the credit by the
beneficiary of the credit in accordance with the conditions therein laid down. clxvi[clxvi] A banker must
comply rigidly with the instructions and this applies to the paying banks as to the intermediary banker.
The latter is indemnified only if he complies strictly with the instructions. The person who requires the
bank to establish the credit can impose what conditions he likes. clxvii[clxvii]

Where a mortgagor under an English mortgage gave a power of attorney to the mortgagee to collect
rents as mortgagor's agent, and gave the power to appoint substitutes, such substitute became the
agent of the mortgagor, and not of the mortgagee. clxviii[clxviii]

This section might cover the case of an upper servant in a household who has authority to select and
dismiss under-servants, although the language is not the most appropriate. Such a servant, at any rate,
is not answerable to third persons for acts or defaults of those under him, which he has not specifically
authorized. 'It was never heard of that a servant who hires labourers for his master was answerable for
all their acts'.clxix[clxix] A receiver appointed to carry on a business by mortgagees, trustees for debenture
holders, or the like, appears to be in a similar position, clxx[clxx] though it by no means follows that those
who appoint him under the special powers conferred on them for that purpose, whether by law or by
agreement of parties, are liable as principals for his acts. clxxi[clxxi]

In Bombay, the appointment of a muccadam by a commission agent acting for an up-country

constituent is an ordinary case of the appointment of a sub-agent. The muccadam is not a substituted
agent of the up-country constituent.clxxii[clxxii]

Further, there can be no ratification unless the principal was not competent to authorise the act. Since a
ratification is, in law, equivalent to a previous authority, a person not competent to authorise an act
cannot give it validity by ratifying it. clxxiii[clxxiii] An act by an authority not competently constituted
cannot be subsequently ratified.clxxiv[clxxiv] Thus, an appointment of a tahsildar by the divisional
commissioner under delegated powers, which the government could not legally delegate, was void and
could not be ratified by government.clxxv[clxxv]

07. No Delegation

Delegation by an agent, that is the entrusted to another person by an agent of the exercise of a power
or duty entrusted to him by his principal, is in general prohibited, under the maxim delegatus non potest
delegare. A delegated authority cannot be delegated further. 'One who has a bare power or authority
from another to do an act must execute it himself and cannot delegate his authority to another'. clxxvi
[clxxvi] This maxim debars the agent from delegating his powers beyond the limit fixed by the
principal.clxxvii[clxxvii] A principal is not bound by the act of a sub-agent in absence of his express or
implied assent empowering the agent to delegate his authority. Thus, it has been stated:

This maxim is founded on the confidential nature of the contract of agency: whenever authority is
coupled with a discretion or confidence it must as a rule, be exercised by the agent in person. The
reason is fairly obvious: the risks of agency are substantial, and a person has a right not to be
represented, save at his own election and by an agent of his own choice. clxxviii[clxxviii]

However, the maxim delegatus non potest delegare is not of universal application, unless a power is
given on account of personal skill or personal confidence. clxxix[clxxix]

Where the nature of the employment is such that it has to be performed by another, the rule does not
apply. And where, by usage, such duties are to be performed by a sub-agent, the usage will be
implied.clxxx[clxxx] The maxim would, however, stringently apply where personal skill of the agent is
essential or where the principal has reposed trust and confidence in the agent.

The reason that no such power can be implied as an ordinary incident in the contract of agency is that
confidence in the particular person employed is at the root of the contract. Accordingly, auctioneers,clxxxi
[clxxxi] factors,clxxxii[clxxxii] directors of companies,clxxxiii[clxxxiii] brokers,clxxxiv[clxxxiv] estate agents,clxxxv
[clxxxv] and other agents in whom confidence is reposed have, generally speaking, no power to delegate
their authority. Thus, an auctioneer at a sale by auction is the agent of the purchaser as well as of the
seller, and has authority to sign a memorandum of the sale so as to bind both parties'; but he cannot, of
his own motion, delegate that authority to his clerk. clxxxvi[clxxxvi]

An estate agent, who claims to be a sole agent, does not have an implied authority to appoint a sub-
agent, since he held a position of discretion and trust, and the functions and duties of an estate agent
require personal skill and competence of such a nature that he had no authority to delegate his
responsibilities to a sub-agent, unless he was expressly authorized to do so. Therefore, where the owner
of property sold it and subsequently discovered that the purchaser had been introduced by a sub-agent,
the agent was not entitled to any commission. clxxxvii[clxxxvii]

08. Deputation of another person by Agent

An agent may not as a rule depute another person of authority to do that which he has undertaken to
do

The reason of this rule, and its limitations, are thus stated by Thesiger, L. J., clxxxviii[clxxxviii] "As a general
rule, no doubt, 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; but
this action when analyzed merely imports that an agent cannot, without authority from his principal,
devolve upon another obligation to the principal which he has himself undertaken personally to fulfill;
and that inasmuch as confidence in the particular person employed is at the root of the contract of
agency, such authority cannot be implied as an ordinary incident to the contract." The Lord Justice then
goes on to point out that there are occasions when such an authority must needs be implied, occasions
springing from the conduct of the parties, the usage of a trade, the nature of a business, or an
unforeseen emergency, "and that when such implied authority exists and is duly exercised, privity of
contract arises between the principal and the substitute, and the latter becomes as responsible to the
former for the due discharge of the duties which his employment casts on him, as if he had been
appointed agent by the principal himself."

The contract of agency as between agent and principal imports a liability on the part of the principal to
indemnify the agent for acts done lawfully in pursuance of his authority. clxxxix[clxxxix] It also imports a
promise on the part of the agent to act with due diligence in the matter of the agency and within the
limits of his authority.cxc[cxc] As regards the right arising from contracts made by the agent on behalf of
his principal with third parties, we will state only the most common and established rules.

(a) Where the contract is under seal, no one is regarded as a party to the contract who is not named

as a party in the deed.

(b) Where the contract is in writing no one contracting as a party can be heard to say that he is not one,
but other parties may be shown to exist. So where an agent contracts personally in the matter of his
agency, it is open to the party with whom he has contracted to fix him with the contract, or to show that
he merely represented his principal and to sue the principal. cxci[cxci]

(c) Where the agent contracts as agent for a principal whom he does not name he binds himself
personally, or his principal when disclosed, at the option of the party with whom he contracts.

But this general rule must be taken to be subject to the usage of the trade in which the agent is
employed and the character of the agency, for the contract may be of such a nature that though the
agent does not disclose his principal's name, he excludes himself from liability upon the contract. Such is
the case of a broker acting for buyer and seller, who delivers to the seller a note in terms "sold for you
to my principal " and signs it as broker. cxcii[cxcii] In such a case it has been held that the broker is by the
terms of the contract excluded from liability to the seller, though he would have been liable had the
terms run "bought of you for my principal."

(d) If the agent contracts as principal, that is to say, if there be not merely a non-disclosure of the name
of the principal, but a non-disclosure of the existence of the principal, the agent is a fortiori liable at the
option of the party with whom he contracts.

In this case and in the case above mentioned the rights of the parties appear to be these.

The agent is liable at the option of the third party with whom he has contracted, and his principal is not
bound to intervene if the third party choose to hold the agent liable when he is aware of the
circumstances of the case.
The principal is entitled to intervene and, as against his agent, take the benefit of the contract. cxciii[cxciii]

The third party, upon the disclosure of the principal, may elect whether he will adopt agent or principal
as the party with whom he has contracted. He is thenceforth bound by such election

But in each of these last cases the rights of the parties are limited by circumstances which may make it
inequitable that the principal or the third party should deal with one another as though each had been
disclosed to the other from the first.

If the principal choose to enforce the contract, he must do so subject to the right of the third party to be
put in the same position as if he had been dealing with the real principal. cxciv[cxciv] Any rights which the
third party would have had against the agent in respect of the contract he has against the principal. cxcv
[cxcv] And in like manner the third party in enforcing the contract against the principal when discovered
must do so subject to the state of accounts between the agent and principal. cxcvi[cxcvi] (e) It is possible
for an agent to enter into a contract in which he so represents himself as principal that the idea of
agency is altogether excluded. Thus, where an agent in making a charter party described himself therein
as owner of the ship, it was held that the principal could not sue upon the contract. cxcvii[cxcvii]

(f) If a man contract as agent for an existing principal, having no authority to do so, he cannot be sued
upon the contract so made, or dealt with as though he were the principal, because there is in point of
fact no relation of principal and agent, but only a false representation by one party to another that he is
acting as an agent and can bring about a contract between that other person and the supposed
principal.cxcviii[cxcviii]

But in order to find a remedy ex contractu for the person to whom such a representation has been
made, a warranty of authority, or promise that he was an agent, is feigned to have been given by the
one party to the other. Such a promise or warranty need never have been, and in the nature of things
probably never was present to the minds of parties to the contract; nevertheless it appears to have
been thought to be a reasonable implication from the conduct of the parties by the Court of Exchequer
Chamber in Collen v. Wrightcxcix[cxcix], the leading case upon the subject. The novelty as well as the
unreality of the conception formed the ground of a luminous dissenting judgment by Cockburn, C. J., cc
[cc] The point has been already alluded to in the discussion of the nature of Warranty, and in particular
of implied warranties.cci[cci]

(g) If a man contract as agent for a non-existent principal he is personally liable on the contract; he
cannot be relieved from liability by any subsequent ratification, for the reason, assigned above, that
such persons only can ratify as were ascertained or contemplated when the contract was made. A
purchased goods on behalf of a company not in existence at the time. The company was incorporated, it
collapsed, and A was sued on the contract. He was held personally liable. "Both upon principle and
authority," said Willes, J., " it seems to me that the company never could be liable upon this contract,
and construing this document ut res magis valeat quam pereat, we must assume that the parties
contemplated that the persons signing it would be personally liable." ccii[ccii]

09. Types of Acts for which Agent can be Appointed

The rule of agency is expressed in the maxim qui tacit per alium, facit per se. Generally, whatever a
person has power to do himself, he may do so by appointing an agent. Conversely, what a person cannot
do himself he cannot do by means of an agent. For instance, the right of audience before a tribunal
cannot be delegated to an agent.cciii[cciii]

The right to appoint an agent is subject to well-known exceptions, cciv[cciv] viz:

(i)                      where the act to be performed is personal in character; ccv[ccv]

(ii)                      where the transaction is required by statute to be done by or to be evidenced by the
signature of the principal himself; or

(iii)                     where the competency to do the act arises by virtue of the holding of some public office;
or

(1)                    the competency arises by virtue of some power, authority, or duty of a personal nature
and requiring skill or discretion for its exercise; or

(v)                      where a statute imposes on a person a duty which he is not free to delegate. ccvi[ccvi]

The Contract Act is silent about the acts in respect of which a principal may appoint an agent. The Law
Commission recommended that this be specified by inserting a specific provision. ccvii[ccvii]

An estate agent who claims to be a sole agent does not have an implied authority to appoint a sub-agent
since he held a position of discretion and trust, and the functions and duties of an estate agent require
personal skill and competence of such a nature that he had no authority to delegate his responsibilities
to a sub-agent, unless he was expressly authorized to do so. Therefore, where the owner of property
sold it to a purchaser by private treaty and subsequently discovered that a sub-agent had introduced the
purchaser, the agent was not entitled to any commission. ccviii[ccviii]

10. General Agency and Special Agency

The distinction between a general and special agent is of importance in determining the nature and
extent of authority conferred. A general agent has an authority to act for his principal in all matters, or in
all matters concerning a particular trade or business, or of a particular nature, or to do some act in the
ordinary course of his trade, profession or business, as agent on behalf of his principal, eg solicitor,
factor or broker. A special agent has only authority to do some particular transaction not being in the
ordinary course of his trade, profession or business as an agent. ccix[ccix] A factor, broker, auctioneer or
estate agent who is authorized to do any act in the ordinary course of his business is a general agent in
relation to that employment. Similarly, a manager of a business on an estate is a general agent. A
general agent is not the same as a universal agent, the latter being authorized to do all the acts which
the principal can lawfully do and can delegate; and being able to transact all the business of the principal
of every kind. Such universal agent may potentially exist, but it must be of rarest occurrence.
Where the very delegation of authority to the agent is ultra vires the company or where the agent of a
company purports to make a contract ultra vires the company, the company cannot be bound by it. ccx
[ccx] In other cases, within the company the agent may have apparent authority to do things which bind
the company, where the authority arises from the representation by the person in actual authority. ccxi
[ccxi]

A broker has no implied power to delegate his authority even if acting under a del credere
commission.ccxii[ccxii]

11. Factors

A factor to whom goods are entrusted for sale has authority to sell them in his own name, ccxiii[ccxiii] on
reasonable credit,ccxiv[ccxiv] at such times and at such prices as in his discretion he thinks best; ccxv[ccxv] to
receive payment of the price where he sells them in his own name, ccxvi[ccxvi] and to warrant the goods
sold, if in the ordinary course of business it is usual to warrant that particular kind of goods. ccxvii[ccxvii]
However, he has no implied authority to barter the goods, ccxviii[ccxviii] nor to delegate his authority, even
if acting under a del credere commission.ccxix[ccxix]

12. Implied Authority to Delegate

An authority to delegate will, in some cases, be implied, generally on the ground that there is no
personal confidence reposed or skill required, and that the duties are capable of being equally well
discharged by any person.ccxx[ccxx] An authority to delegate may be implied from the nature of the task
of agency, custom or usage of trade, and the conduct of the parties. ccxxi[ccxxi] The Law Commission of
India recommended that the exceptions to the rule prohibiting delegation be expressly provided in the
section.ccxxii[ccxxii]

13. Delegation Valid

An authority to the effect referred to may and should be implied where, from the conduct of the parties
to the original contract of agency, the usage of trade, or the nature of the particular business which is
the subject of the agency, it may be reasonably presumed that the parties to the contract originally
intended that such authority should exist, or where, in the course of the employment, unforeseen
emergencies arise which impose upon the agent the necessity of employing a substitute. ccxxiii[ccxxiii]

14. Necessary for the Business

An agency may be of such a nature that it cannot be carried out effectively without the help of sub-
agents; in which case delegation is justified. ccxxiv[ccxxiv] '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, and where that is the case, the reason of the thing requires that
the rule should be relaxed.'ccxxv[ccxxv]

15. Nature of Business

So it is 'where a ship owner employs an agent for the purpose of effectuating a sale of a ship at any port
where the ship may, from time to time in the course of its employment under charter happen to
be'ccxxvi[ccxxvi] for it is obvious that the agent cannot himself be prepared to do the business at every
such port.

16. Usage, Custom of Trade

Delegation is also permissible if it is in accordance with reasonable custom or usage of trade. ccxxvii[ccxxvii]
In some cases, the custom of trade justifies the delegation of special branches of work. Thus, it has been
found to be a usage of trade for architects and builders to have the quantities taken out from their
designs by surveyors, who are more expert in that work, for the purpose of enabling proper estimates to
be made; and the surveyor can sue the architect's employer for his charges. ccxxviii[ccxxviii]

17. Ministerial or Subsidiary Acts

Authority to delegate may be implied whenever the act to be done by the sub-agent is purely
ministerial, and does not involve the exercise of any skill or discretion; ccxxix[ccxxix] or is an act subsidiary
to the main purpose of the transaction. ccxxx[ccxxx] For instance, an authority to sign may be
delegated.ccxxxi[ccxxxi] However, a shebait cannot delegate his power to lease trust properties since no
one can delegate a fiduciary discretion. ccxxxii[ccxxxii]

18. Acquiescence of Principal or Necessity

The rule prohibiting delegation may not apply where the principal knows of the agent's intention at the
time of his employment to delegate, or subsequently acquiesces in the delegation, or where the very
nature of the employment necessitates a partial or total delegation. ccxxxiii[ccxxxiii] An authority may also
be implied where unforeseen circumstances have arisen, and the necessity of the case compels the
agent to delegate.ccxxxiv[ccxxxiv]

06. CONCLUSION

As the appointment of a sub agent itself is a further delegation of the delegated authority of an agent,
all legal questions surrounding sub agency is a demarcated area of the operation of the legal maxim
delegatus non potest delegare. As there are as much exceptions as per the facts, circumstances,
customs and usages of a transaction, delegation and the maxim in discussion are subject to factual
analysis also as well as legal analysis. Having a history of a few centuries, this maxim has undergone
profound evolutions and is no more a maxim of absolute application. Precedents rule more in this area
than legislations.

BIBLIOGRAPHY

1.    Business Law by Avtar Singh, published by Eastern Book Company, Lucknow, 9 th Edition, 2011
2.    Law of Contract and Specific Relief by Avtar Singh, published by Eastern Book Company, Lucknow,
9th Edition, Reprint, 2006

3.    Mulla The Indian Contract Act by H.S. Pathak, , published by N.M. Tripathi Private Limited, Bombay,
11th Edition, 4th Reprint, 1996

4.    Leake’s Principles of the Law of Contracts Vol I by A.E. Randall, published by Stevens and Sons Ltd,
London, 7th Edition, 1921

5.    Leake’s Principles of the Law of Contracts Vol II by A.E. Randall, published by Stevens and Sons Ltd,
London, 4th Edition, 1902

6.    Principles of the English Law of Contract by William Reynell Anson, published by Oxford at
Clarendon Press, 1879

7.    Pollock and Mulla Indian Contract and Specific Relief Acts, published by LexisNexis, Butterworths
Wadhwa Nagpur, 13th Edition 2006

8.    Principles of Contract by Frederick Pollock, published by Stevens and Sons Ltd, London, 5 th Edition,
1889

9.     

10.  https://en.wikipedia.org/

11.  https://indiankanoon.org/

12.  http://judis.nic.in/supremecourt/chejudis.asp

13.  http://judis.nic.in/judis_kerala/content.asp

NOTES

Posted by ജീവബിന്ദു at 12:09 AM

i

ii

iii[iii] from BACON'S ABRIDGMENT, AUTHORITY, D.

iv[iv] This text (Digest 49.1.4.5) refers only to representation in litigation and before litis contestatio. Another text
(D. 17.1.8.3) seems to assert the possibility of subdelegation by procuratores ad administrandum dati, and was
certainly so understood by Cujas, the greatest 16th century authority: see CUJACII OPERA, (ed.1836) Vol. 8,
col. 409, Recitatio ad tit. de app. et rel., L. ab executore, § si procurator. (D. 49-1.4.5). Referred to

vi[vi] This follows the maxim too closely to be true; and Kent inserted here in the fourth edition "or a fair
presumption of one, growing out of the particular transaction, or of the usage of trade. Kent’s Commentaries (4 th
Ed. 1840).

vii[vii] 2 Ves. 640, 643 (Ch. 1755), power of appointment under a will

viii[viii] The maxim looks here like an addition of the reporter's (in 1771)

ix[ix] 2 Ves. Jr. 336, 344, 345 (Ch. 1794), power of appointment under marriage articles

x[x] 3 Mer. 237, 244 (Ch. 1817), power to make leases under a will

xi[xi] The court decided against him, saying "To go farther, and say, that a man shall be bound not only by his
own parol agreement, but by the uncommunicated and unknown parol agreement of another person, would be to
break in upon the statute of frauds, without the existence of any of the pretexts on which it has been already too
much infringed."

xii[xii] . “Another objection was, that the power could not be delegated. That is a good maxim, but it
does not apply to this case."

xiii[xiii] 4 T. R. 741 n, 744 fin. (K. B. 1782), power of appointment under a will

xiv[xiv] D. 1.21.5. pr. See this whole title, and also D. 2.1.5., D.5o.I7.7o, and Code 3.1.5.

xv[xv] Book 5, Title 41

xvi[xvi] BROCARDA OF DAMASUS, edited by BARTHOLOMEW OF BRESCIA; TRACTATUS

TRACTATUUM, Vol. 17, Folio 25

xvii[xvii] D. 1.21.5., D. 2.1.5., C. 3.1.5

xviii[xviii] GONZALEZ TELLEZ, COMMENTARIA PERPETUA IN SINGULOS TEXTUS QUINQUE

LIBRORUM DECRETALIUM, (ed. 1715), Vol. I, p. 614 (6 on Decr. 1.29.3). Compare chapters 3, 6, 18,
27, 29, 37 and 43 of this title (de officio et potestate iudicis subdelegati), with Tellez' comments

xix[xix] Bentham may have had it from some French source. He says, in a note first published among
the corrections at the end of the first edition (1789) of his INTRODUCTION TO THE PRINCIPLES OF
MORALS AND LEGISLATION and printed in subsequent editions under section II of chapter 2: "When
I know not what ingenious grammarian invented the proposition Delegatus non potest delegare, to
serve as a rule of law, it was not surely that he had any antipathy to delegates of the second order, or
that it was any pleasure to him to think of the ruin which, for want of a manager at home, may befall
the affairs of a traveller, whom an unforeseen accident has deprived of the object of his choice: it was,
that the incongruity of giving the same law to objects so contrasted as active and passive are, was not
to be surmounted, and that -atus chimes, as well as it contrasts, with -are."

xx[xx] 1569 (reprinted 164o), folio 55 b

xxi[xxi] 1878 (ed. Sir Travers Twiss)

xxii[xxii] Ashalatha v. State Of Kerala Crl.R.P. No. 1509 of 2007 of Kerala HC

xxiii[xxiii] Agency | LII / Legal Information Institute, http://www.law.cornell.edu/wex/agency

xxiv[xxiv] Foreman v Great Western Rly Co, (1878) 38 LT 851

xxv[xxv] https://www.inkling.com/read/business-law-jane-mallor-15th/chapter-35/termination-of-an-
agency

xxvi[xxvi] Avtar Singh, Contract & Specific Relief Act 724-727(10th ed.2008)

xxvii[xxvii] Shephard v Cartwright (1935)Ch 728,755

xxviii[xxviii] Pollock & Mulla ,Indian contract and Specific relief acts 780-785(8th ed.,2008)

xxix[xxix] R. K. Bangia, Indian Contract Act  278-280(11th ed., 2004)

xxx[xxx] Sellers v. London Counties Newspapers, (1951) 3 KB 754: (1951) 1 All ER 554

xxxi[xxxi] Ayyanath Chetty v Subramania Iyer, (1923) 45 Mad LJ 409

xxxii[xxxii] (1863) 14 CB NS 681: 8 LT 503 : 11 WR 834 : 32 LJCP 261

xxxiii[xxxiii] 1951 AIR 144, 1950 SCR 979

xxxiv[xxxiv] Liley v.Doubleday (1881) 7 QBD 510

xxxv[xxxv] R.L.Meena ,Law of Contract 401 (8th ed. 2008)

xxxvi[xxxvi] Keppel v. Wheeler (1927) 1 KB 577

xxxvii[xxxvii] Keppel v. Wheeler (1927) 1 KB 577

xxxviii[xxxviii] Pannalal Jankidas v. Mohanlal  1951 AIR 144, 1950 SCR 979

xxxix[xxxix] John Cartwright, Anson’s Law of Contract 567 (29th ed.,2010)

xl[xl] John Cartwright, Anson’s Law of Contract 567 (29th ed.,2010)

xli[xli] Ram All v. Asian Commrel AIR 1933 Lah 483

xlii[xlii] John McCain and Co. v. Pow (1975)All ER 129

xliii[xliii] www.isca.in/IJSS/Archive/v2/i11/10.ISCA-IRJSS-2013-108.pdf

xliv[xliv] http://www.studymode.com/essays/Termination-Of-Agency-1469514.html

xlv[xlv] http://www.studymode.com/essays/Termination-Of-Agency-1469514.html

xlvi[xlvi] https://www.scribd.com/doc/48004714/The-Formation-of-Agency-and-Termination

xlvii[xlvii] http://agency.uslegal.com/duration-and-termination-of-agency

xlviii[xlviii] http://www.lawteacher.net/commercial-law/essays/the-law-of-agency-commercial-law-
essay.php

xlix[xlix] http://www.studymode.com/essays/Termination-Of-Agency-1469514.html

l[l] https://www.scribd.com/doc/48004714/The-Formation-of-Agency-and-Termination

li[li] http://agency.uslegal.com/duration-and-termination-of-agency

lii[lii] www.isca.in/IJSS/Archive/v2/i11/10.ISCA-IRJSS-2013-108.pdf

liii[liii] www.isca.in/IJSS/Archive/v2/i11/10.ISCA-IRJSS-2013-108.pdf

liv[liv] http://www.studymode.com/essays/Termination-Of-Agency-1469514.html

lv[lv] http://www.studymode.com/essays/Termination-Of-Agency-1469514.html

lvi[lvi] http://www.studymode.com/essays/Termination-Of-Agency-1469514.html

lvii[lvii] www.isca.in/IJSS/Archive/v2/i11/10.ISCA-IRJSS-2013-108.pdf

lviii[lviii] Lakshminarayan Ram Gopal & Sons v. Hyderabad Government AIR 1954 SC 364

lix[lix] Section 191, Indian Contract Act, 1872

lx[lx] Raghunatn Prasad v Sewa Ram, AIR 1980 All 15

lxi[lxi] Nensukhdas v Birdichand, (1917) 19 Bom LR 948

lxii[lxii] S. Summan Singh v National City Bank of New York, AIR 1952 Punj 172 : ILR 1952 Punj 189;
Indian Airlines v Renu Gupta, AIR 2007 (DOC) 116 : (2006) 3 CPR 201, Indian Airlines sells tickets to
its customers through its agents. One of them failed to inform its buyers of change in the time of
departure with the result that the consumer had to wait for 6-7 hours. The Airline was held vicariously
liable for the deficiency in the service of its agent

lxiii[lxiii] (1931) 145 LT 51(CA)

lxiv[lxiv] Christoforides v. Terry (1924) 1 AC 566 : (1924) All ER Rep 815; Imageview Management Ltd v. Jack
2009 Bus LR 1034 : 2009 EWCA Civ 63 (CA), a foreign footballer wanted to play professional in UK, appointed
an agent to negotiate a contract with UK Club, agent made a secret side deal with the club to obtain footballer's
work, permit, in return for fee this being a breach of duty, the agent could not recover his commission, was
bound to restore any profit made by him in the side deal.
lxv[lxv] http://www.yourarticlelibrary.com/delegation/top-7-principles-of-delegation/53272/

lxvi[lxvi] http://www.jfdperfsolutions.com/modules/news/leadership-
5_principles_of_effective_delegation.html

lxvii[lxvii] Union of India v. Mohd. Nizam 1980 AIR 431, 1980 SCR (1) 968

lxviii[lxviii] See THESIGER LJ in De Busche v. Alt, (1878) 8 Ch D 286,310

lxix[lxix] (1975) 1 All ER 129; relying on (1882) 22 Ch D 194: (1871) LR 6 CP 445

lxx[lxx] Summan Singh v National City Bank of New York, AIR 1962 Punj 172: ILR 1952 Punj 189

lxxi[lxxi] Mohinder v Mohan, AIR 1939 All 188; Union of India v Amar Singh, (1960) 2 SCR 75: AIR
1960 SC 233, goods received from another railway, sub-agency not constituted; Nagpur Electric Light
and Power Co v. R.B.S.R. Pandit, AIR 1937 Nag 379, director of a company appointing an advocate;
Ramdeo v Lalumatha, AIR 1937 Nag 65, a general agent appointing an advocate for a suit.

lxxii[lxxii] Moon v Witney Union, (1837) 43 RR 802

lxxiii[lxxiii] Mason v Joseph, (1804) 1 Smith KB 406

lxxiv[lxxiv] Union of India v Mohd Nazim, (1980) 1 SCC 284: AIR 1980 SC 431

lxxv[lxxv] (1931) 145 LT 51. A similar explanation occurs in Mercantile Bank v. Chetumal, AIR 1930
Sind 247, 250

lxxvi[lxxvi] See also Raghunath Pd v. Sewa Ram, AIR 1980 All 15

lxxvii[lxxvii] Nensukhdas v. Birdichand, (1917) 19 Bom LR 948

lxxviii[lxxviii] Summan Singh v. N.C. Bank of New York, AIR 1952 Punj 172

lxxix[lxxix] (1931) 145 LT 51 CA; New Zealand and Australian Land Co v. Watson, (1881) 7 QBD 374,
privity not constituted by mere knowledge or consent to appointment; Stephens v. Badcock, (1832) 37
RR 448, money paid to sub-agent, principal could sue only the agent, not subagent.

lxxx[lxxx] AIR 1952Punj 172

lxxxi[lxxxi] See also Amritlal Raichand v Bhagwandas Fateh Chand, (1940) 186 IC 9; New Zealand &
Australian Land Co v Watson, (1881) 44 LT 675: 7 QBD 374 and Peacock v Baij Nath, (1891)
18Ca1573.

lxxxii[lxxxii] Obbayashi-Gumi Ltd v Industrial Fireproofing P Ltd, (1991) 3 Current LJ 2330 II Singapore

lxxxiii[lxxxiii] See also the decision of the Supreme Court in Qamar Shaffi Tyabji v Commr, Excess
Profits Tax, (1960) 3 SCR 546: AIR 1960 SC 1269, where a person named as an agent for the
company with the approval of the Board of Directors was held to be a substituted agent; Aggarwal
Chamber of Commerce Ltd v. Ganpat Rai Hira Lal, 1958 SCR 938: AIR 1958 SC 269, privity of
contract established. Central Bank of India v. Rur Chand, AIR 1958 Punj 159, the principal asking his
bank to collect the proceeds of their invoice through a particular bank, the matter handed over to that
bank which, therefore, became a substituted agent; Nensukhdas v Birdichand, (1917) 19 Bom LR 948,
explaining the position of the substituted agent. A.C. Rangaswami v. D.J. Renuka, (1997) AIHC 975
Kant, holder of power of attorney is equal in the right of transfer to the owner, part payment taken by
the attorney, sale failed to go through, attorney liable for refund as much as the owner

lxxxiv[lxxxiv] Bird v. Boulter (1833), 4 B. & Ad. 443; Sims v. Landray (1894), 63 L. J. C. 535; [1894] 2 Ch. 318

lxxxv[lxxxv] Bell v. Sails (1897), 66 L.J C. 397; [1897] 1 Ch. 663; Keen v. Hear (1920), 89 L. J.O. 513; [1920] 2
Oh. 574

lxxxvi[lxxxvi] Ess v. Trmcott (1837), 6 L. J. Ex. 144; 2 M. & W. 385; Bell v. Balls (1897), 66 L. J. C. 397;
[1897] 1 Ch. 663

lxxxvii[lxxxvii] Cochran v. Irlam (1813), 2 M. & S. 301, n.; Henderson v. Barnewall (1827), 1 Y. & J. 387

lxxxviii[lxxxviii] De Bussche v. Alt (1878), 47 L. J. C. 387; 8 Ch. D. 286

lxxxix[lxxxix] Grindell v. Bass (1920), 89 L. J. C. 591; [1920] 2 Oh. 487

xc[xc] Johnson v. Osenion (1869), 38 L. J. Ex. 76; L. E. 4 Ex. 107. See Brown v. Tombs (1890), 60 L.
J. Q. B. 38; [1891] 1 Q. B. 253

xci[xci] Lord v. Hall (1849), 19 L. J. C. P. 47; 8 C. B. 627

xcii[xcii] Swift v. Jewsbury (1874), 43 L. J. Q. B. 56; L. R. 9 Q. B. 301; Hirst v. W. Riding Union Bk.
(1901), 70 L. J. K. B. 828; [1901] 2 K. B. 560

xciii[xciii] Re Whitley (1886), 55 L. J. C. 540; 32 Ch. D. 337

xciv[xciv] Quebec & Richmond Ry. v. Quinn (185S), 12 Moo. P. C. 232

xcv[xcv] Per cur. De Bussche v. Alt (1878), 47 L. J. C. 387; 8 Ch. D. 310; Powell v. Evans Jones & Co.
(1904), 74 L. J. K. B. 115; [1905] 1 K. B. 11

xcvi[xcvi] Stephens v. Badcock (1832), 1 L. J. K. B. 75; 3 B. & Ad. 354. See New Zealand Land Co. v.
Watson (1881), 50 L. J. Q. B. 433; 7 Q. B. D. 374

xcvii[xcvii] Cahill v. Dawson (1857), 2i8 L. J. C. P. 253; 3 C. B. N. S. 106; Mildred v. Maspons (1883),
53 L. J. Q. B. 33; 8 Ap. Ca. 874

xcviii[xcviii] Fisher v. Smith (1879), 48 L. J. Ex. 411; 4 Ap. Ca. 1

xcix[xcix] Speight v. Gaunt (1884), 53 L. J. 0. 419; 9 Ap. Ca. 1; Re Brier (1884), 26 Ch. D. 238; Re
Blundell (1888), 57 L. J. C. 730; 40 Ch. D. 370; Re Weall (1889), 58 L. J. C. 713; 42 Ch. D. 674

c[c] Howard's ease (1866), L. R. 1 Oh. 561

ci[ci] Cartmell's case (1874), 43 L. J. 0. 588; L. R. 9 Oh. 691

cii[cii] Bottomley's case (1880), 50 L. J. 0. 167; 16 Ch. D. 681

ciii[ciii] Hamidolia v. Faizunnissa (1882) ILR 8 Cal 327; Mirjan Ali v. Maimuna Bibi AIR 1949 Assam 14
(the wife must establish clearly that the conditions entitling her to exercise the delegated power have
been full filed); Buffatan Bibi v. Sheikh Abdul Salim AIR 1950 Cal 304; Saifuddin Sekh v. Soneka Bibi
AIR 1955 Assam 153

civ[civ] FA Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co Ltd [1916-17] All ER
Rep 104

cv[cv] Story on Agency § 386

cvi[cvi] Lockwood v. Abdy (1845) 14 Sim 437; Cartwright v. Hateley (1791) 1 Ves 292

cvii[cvii] Balsamo v. Medici [1984] 2 All ER 304

cviii[cviii] Purushotham Haridas v. Amruth Ghee Co Ltd AIR 1961 AP 143; relying on Hugh Francis
Hoole v. Royal Trust Co AIR 1930 PC 274

cix[cix] AIR 1980 SC 431

cx[cx] South Indian Indls Ltd v. Mindi Ramajogi AIR 1915 Mad 509; S Summan Singh v. National City
Bank of New York AIR 1952 Punj 172

cxi[cxi] Purushotham Haridas v. Amruth Ghee Co Ltd AIR 1961 AP 143, p 153; Mohant Sri Banwari
Mukunda Das Nandi v. Promothanath Bhattacharji AIR 1938 Cal 12

cxii[cxii] Mohant Sri Banwari Mukunda Das Nandi v. Promothanath Bhattacharji AIR 1938 Cal 12;
Eastern Bunkers Ltd v. Bharat Coaking Coal Ltd AIR 1985 NOC 87 (Cal)

cxiii[cxiii] Raghunath Prasad v. Seva Ram Tikam Das AIR 1980 All 15; Shamia v. Joory but see
[1958]1 All ER 111 (sub-agent acknowledging that he held money on behalf of the principal)

cxiv[cxiv] De Bussche v. Alt [1874-80] All ER Rep 1247; Powell and Thomas v. Evan James & Co
[1905] 1 KB 11 (CA)

cxv[cxv] Sections 196-200 also

cxvi[cxvi] Shah Jugaldas Amritlal v. Shah Harilal Talakchand AIR 1986 Guj 88

cxvii[cxvii] Purushotham Haridas v. Amruth Ghee Co Ltd AIR 1961 AP 143; Peacock v. Graham 18 IA
78 (PC)

cxviii[cxviii] Hugh Francis Hoole v. Royal Trust Co AIR 1930 PC 274

cxix[cxix] Meyerstein v. Eastern Agency Co (1885) 1 TLR 595

cxx[cxx] Hugh Francis Hoole v. Royal Trust Co AIR 1930 PC 274

cxxi[cxxi] Anil & Co v. Air India AIR 1986 Del 312

cxxii[cxxii] Gambhirmull Mahabirprasad v. Indian Bank Ltd AIR 1963 Cal 163
cxxiii[cxxiii] Nensukhdas Shivnarain v. Birdichand Anraj AIR 1917 Bom 19; South Indian Indls Ltd v.
Mindi Ramajogi AIR 1915 Mad 509; Gambhirmull Mahabirprasad v. Indian Bank Ltd AIR 1963 Cal
163

cxxiv[cxxiv] Purushotham Haridas v. Amruth Ghee Co Ltd AIR 1961 AP 143

cxxv[cxxv] Tettenborn [1999] 115 LQR 655

cxxvi[cxxvi] S Summan Singh v. National City Bank of New York AIR 1952 Punj 172

cxxvii[cxxvii] Kariadan Kumber v. British India Steam Navigation Co Ltd AIR 1915 Mad 833

cxxviii[cxxviii] Except in cases of substituted agent appointed by the agent: s 194

cxxix[cxxix] Stephens v. Badcock (1832) 3 B&Ad 354

cxxx[cxxx] AIR 1952 Punj 172

cxxxi[cxxxi] Raghunath Prasad v. Seva Ram Tikam Das AIR 1980 All 15

cxxxii[cxxxii] Nensukhdas Shivnarain v. Birdichand Anraj AIR 1917 Bom 19; South Indian Indls Ltd v.
Mindi Ramajogi AIR 1915 Mad 509; Gambhirmull Mahabirprasad v. Indian Bank Ltd AIR 1963 Cal
163

cxxxiii[cxxxiii] Powell and Thomas v. Evan James & Co [1905] 1 KB 11 (CA)

cxxxiv[cxxxiv] Junior Books Ltd v. Veitchi Co Ltd [1982] 3 All ER 201 (HL); Muirhead v. Indl Tank
Specialities Ltd [1985] 3 All ER 705; D and F Estates Ltd v. Church Commrs for England [1988] 2 All
ER 992 (HL); Yuen Kun Yeu v. Attorney General of Hong Kong [1987] 2 All ER 705

cxxxv[cxxxv] Sections 231-232

cxxxvi[cxxxvi] Montagu v. Forwood [1893] 2 QB 350; New Zealand and Australian L & Co v. Watson
(1881) 7 QBD 374

cxxxvii[cxxxvii] Peacock v. Graham 18 IA 78

cxxxviii[cxxxviii] De Bussche v. Alt (1878) 8 Ch. Div. 286, 310, 311

cxxxix[cxxxix] . Ex parte Birmingham Banking Co. (1868) L.R. 3 Ch. 651; Allam &. Co. Ltd. v. Europa
Poster Services Ltd. (1968) 1 W.L.R. 639

cxl[cxl] Moon v. Witney Union (1837) 3 Bing. N.C. 814

cxli[cxli] Calico Printers' Association Ltd v. Barclay's Bank (1931) 145 L.T. 51; New Zealand and Australian Land
Co. v. Watson (1881) 7 Q.B.D. 374; Nansukhdas v. Birelichand 19 Bom L.R. 948

cxlii[cxlii] De Bussche v. Alt (1878) 8 Ch. Div. 286, 311

cxliii[cxliii] Stephens v. Badcock (1832) 3 B. & Ad. 354; Summan Singh v, National City Bank of New
York (‘52) A Punj. 172
cxliv[cxliv] Calico Printers' Association Ltd v. Barclay's Bank (1931) 145 L.T. 51; New Zealand and
Australian Land Co. v. Watson (1881) 7 Q.B.D. 374; Nansukhdas v. Birelichand 19 Bom L.R. 948

cxlv[cxlv] Central Bank of India Ltd v. Firm Rurchand Kurramal AIR 1958 Punj 159; Chowdhury TC v.
Girindra Mohan Neogi AIR 1930 Cal 10

cxlvi[cxlvi] Thomas Cheshire & Co v. Vaughan Bros & Co [1920] 3 KB 240

cxlvii[cxlvii] De Bussche v Alt [1874-80] All ER Rep 1247; Union of India v. Amar Singh [1960] 2 SCR
75, AIR 1960 SC 233

cxlviii[cxlviii] AIR 1917 Bom 19

cxlix[cxlix] De Bussche v. Alt [1874-80] All ER Rep 1247; [1874-80] All ER Rep 1247; Aggarwal
Chamber of Commerce Ltd v. Ganpat Rai Hira Lal [1958] SCR 269, AIR 1958 SC 269

cl[cl] De Bussche v Alt [1874-80] All ER Rep 1247; Union of India v. Amar Singh [1960] 2 SCR 75, AIR
1960 SC 233

cli[cli] Union of India v. Amar Singh AIR 1960 SC 233; Purushotham Haridas v. Amruth Ghee Co Ltd
AIR 1961 AP 143; Central Bank of India Ltd v. Firm Rurchand Kurramal AIR 1958 Punj 159

clii[clii] [1874-80] All ER Rep 1247

cliii[cliii] Union of India v. Amar Singh [1960] 2 SCR 75, AIR 1960 SC 233

cliv[cliv] TC Chowdhury v. Girindra Mohan Neogi AIR 1930 Cal 10

clv[clv] De Bussche v. Alt [1874-80] All ER Rep 1247

clvi[clvi] Purushotham Haridas v. Amruth Ghee Co Ltd AIR 1961 AP 143

clvii[clvii] Ibid; Central Bank of India Ltd v. Firm Rurchand Kurramal AIR 1958 Punj 159

clviii[clviii] Gambhirmull Mahabirprasad v. Indian Bank Ltd AIR 1963 Cal 163 (agent appointed for
handing over documents and reshipment of goods)

clix[clix] Chowdhury TC v. Girindra Mohan Neogi AIR 1930 Cal 10

clx[clx] De Bussche v. Alt [1874-80] All ER Rep 1247

clxi[clxi] Union of India v. Amar Singh AIR 1960 SC 233

clxii[clxii] Saligram Marwari v. Ayodhya Parsad Musaddilal AIR 1966 Pat 61

clxiii[clxiii] Qamar Shaffi Tyabji v. Commissioner, Excess Profits Tax [1960] 3 SCR 546, AIR 1960 SC
1269

clxiv[clxiv] Punjab National Bank v. Firm Ishwarbhai Bhai Lalbhai Patel & Co AIR 1971 Bom 348;
Bengal Bank Ltd v. Satyendra Nath Das AIR 1952 Cal 1385
clxv[clxv] Punjab National Bank Ltd v. RBL Benarsi Das & Co AIR 1960 Punj 590; Dadi Bhogalingam v.
Indo Commercial Bank Ltd AIR 1961 AP 346

clxvi[clxvi] Eastern Traders (I) Ltd v. Punjab National Bank Ltd AIR 1966 Punj 303

clxvii[clxvii] Ibid; Rayner & Co Ltd v. Hambros Bank Ltd [1942] 2 All ER 694; English Scottish and
Australian Bank Ltd v. Bank of South Africa 13 Lloyd LR 21

clxviii[clxviii] Janaki Nath Ray v. Asad Reza AIR 1936 Pat 211

clxix[clxix] Stone v. Cartwright (1795) 6 TR 411

clxx[clxx] Owen & Co v. Cronk [1895] 1 QB 265

clxxi[clxxi] Gosling v. Gaskell [1895-97] All ER Rep 300

clxxii[clxxii] Nensukhdas Shivnarain v. Birdichand Anraj AIR 1917 Bom 19; South Indian Indls Ltd v.
Mindi Ramajogi AIR 1915 Mad 509

clxxiii[clxxiii] William lrvine v. Union Bank of Australia 4 IA 86, [1877] 2 AC 366

clxxiv[clxxiv] Mohd Dilawar Ali v. Andhra Pradesh Muslim Wakf Board AIR 1967 AP 291

clxxv[clxxv] K Panduranga v. State of Mysore AIR 1965 Mys 244

clxxvi[clxxvi] Story on Agency§ 13

clxxvii[clxxvii] B Mohinder Das v. P Mohan Lal AIR 1939 All 188

clxxviii[clxxviii] Bowstead on Agency, fourteenth edn, pp 101-02; quoting Mechem, Outlines of Agency,
fourth edn, p 50

clxxix[clxxix] County Palatine Loan and Discount Co, Cartmell's Case IN RE. [1874] 9 Ch App 691;
Tarry v. Ashton (1875) 1 QBD 314

clxxx[clxxx] Sardar Bir Singh v. Noor Ahmed AIR 1972 Gau 122

clxxxi[clxxxi] Coles v. Trecothick [1803-13] All ER Rep 14

clxxxii[clxxxii] Cockran v. Irlam (1813) 2 M&S 301

clxxxiii[clxxxiii] Leeds Banking Co IN RE. (1886) LR 1 Ch 561

clxxxiv[clxxxiv] Henderson v. Barnewall (1827) 1 Y&J 387

clxxxv[clxxxv] John McCann & Co v. Pow [1975] 1 All ER 129 (CA)

clxxxvi[clxxxvi] Bell v. Balls [1895-99] All ER Rep 733 (unless the purchaser assented to the clerk's
signing for him)

clxxxvii[clxxxvii] John McCann & Co v. Pow [1975] 1 All ER 129

clxxxviii[clxxxviii] De Bussche v. Alt. (L. R.8 Ch.D. 810)

clxxxix[clxxxix] 1 Smith.L.G, notes to Coggs v. Bernard

cxc[cxc] Adamson v. Jarvis 4 Biug 66

cxci[cxci] Higgins v. Senior 8 M&W 834, Trueman v. Loden 11 Ad. & E. 587

cxcii[cxcii] Southwell v. Bowditch LR 1 CPD 374, Fleet v. Murton LR 5 QB 131

cxciii[cxciii] 2 Smith, LC, page 379, notes to Thompson Davenport

cxciv[cxciv] Per Willies J., Dresser v. Norwood 14 CBNS 574

cxcv[cxcv] Beckham v. Drake 9 M&W 98

cxcvi[cxcvi] Armstrong v. Stokes LR 7 QB 603

cxcvii[cxcvii] Humble v. Hunter 12 QB 810

cxcviii[cxcviii] Lewis v. Nicholson 18 QB 503, Hancock v. Yunker 83 Ill 208

cxcix[cxcix] Collen v. Wright 8 E. & B. 647

cc[cc] At p. 658

cci[cci] See Ballou v. Talbot, 16 Mass. 461 ; Harper v. Little, 2 Greenl. 14; McHenry v. Duffield, 7 Blackf. 41 ;
Hancock v. Yunker, 83 Ill 208, which hold that an action on the case is the proper remedy.

ccii[ccii] Kelner v. Baxter LR 2 CP 184

cciii[cciii] Chami Narayanan v. V.R. Krishna Iyer And Ors AIR 1998 Ker 365

cciv[cciv] Section 187 under head: 'Implied Authority (footnotes)

ccv[ccv] Registration Act 1908, s 32, which provides that a document may be presented for registration
by an agent duly authorised by power of attorney executed and authenticated in the manner given in s
33 of that Act

ccvi[ccvi] Companies Act 1956, s 176(5)

ccvii[ccvii] Code of Civil Procedure 1908, O III, R 4

ccviii[ccviii] For distinction between various persons see Chitty on Contracts, twenty eighth edn, vol II,
paras 32-010

ccix[ccix] Amrit LaI C Shah v. Ram Kumar AIR 1962 Punj 325

ccx[ccx] Rolled Steel Products (Holdings) Ltd v. British Steel Corp [1985] 3 All ER 52

ccxi[ccxi] British Bank of the Middle East v. Sun Life Assurance Co of Canada (UK) Ltd (1983) 2 Lloyd's
Rep 9 (HL)
ccxii[ccxii] Cockran v. Irlam (1813) 2 M&S 301; Henderson v Barnewall (1827) 1 Y&J 387

ccxiii[ccxiii] Henley v. Dixon [1874-80] All ER Rep 1004

ccxiv[ccxiv] Houghton v. Matthews (1803) 3 B&P 485

ccxv[ccxv] Smart v. Sandars (1846) 3 CB 380

ccxvi[ccxvi] Drinkwater v. Goodwin [1775-1802] All ER Rep 87

ccxvii[ccxvii] Dingle v. Hare (1859) 7 CBNS 145

ccxviii[ccxviii] Guerreiro v. Peile (1820) 3 B & Ald 616

ccxix[ccxix] Cockran v. Irlam (1813) 2 M&S 301

ccxx[ccxx] Halsbury's Laws of England, 'Agency', fourth edn, reissue, vol 1 (2), para 66

ccxxi[ccxxi] Clauss v. Pir [1988] Ch 267, [1987] 2 All ER 752 (power of attorney cannot authorise
verification of personal documents by affidavit); Parkin v. Williams (1986) 1 NZLR 294 (purely
ministerial acts may be delegated)

ccxxii[ccxxii] Thirteenth Report of the Law Commission of India, 1958, para 147 recommending
amendment to the section as follows: (proposed amendment in italics)

ccxxiii[ccxxiii] De Bussche v. Alt [1874-80] All ER Rep 1247

ccxxiv[ccxxiv] B Mohinder Das v. P Mohan Lal AIR 1939 All 188; Leiboak Syndicate v. Finlay Fleming &
Co AIR 1923 Ran 84

ccxxv[ccxxv] De Bussche v. Alt [1874-80] All ER Rep 1247

ccxxvi[ccxxvi] De Bussche v. Alt [1874-80] All ER Rep 1247

ccxxvii[ccxxvii] De Bussche v. Alt [1874-80] All ER Rep 1247

ccxxviii[ccxxviii] Moon v. Witney Union (1837) 3 Bing NC 814

ccxxix[ccxxix] Ex p Birmingham Banking Co IN RE. [1868] LR 3 Ch 461; B Mohinder Das v. P Mohan

Lal AIR 1939 All 188 (a bank appointed to lease out houses is entitled to employ house agents)

ccxxx[ccxxx] London and Mediterranean Bank, ex p Birmingham Banking Co IN RE. [1868] 3 Ch App
651

ccxxxi[ccxxxi] Allam & Co Ltd v. Europa Poster Services Ltd [1968] 1 All ER 826

ccxxxii[ccxxxii] Shri Gopal Sridhar Mahadeb v. Sashibhusan Sarkar AIR 1933 Cal 109

ccxxxiii[ccxxxiii] Quebec and Richmond Rly Co v Quinn (1858) 12 Moo PCC 232

ccxxxiv[ccxxxiv] De Bussche v. Alt [1874-80] All ER Rep 1247; Gwilliam v. Twist [1895-99] All ER Rep
1200 (CA)