Concept of Sub Agents ( Section 191-195 )

Sub Agents (Section 192)

A sub agent is an agent who is employed under the original agent by the agency in the business. Sub agent acts under the control of original agent. Agent is the one who appoints sub agent and is the one who has a control over him.

Though agent cannot allocate his responsibilities to another person but section 191 of Indian Contract Act (ICA), in certain exceptional circumstances he can appoint a sub agent. Sub Agent is an agent who is employed by the agent and works on his behalf under exception circumstances. An agent cannot employee sub agent strict for his personal work but under exceptional circumstances he has been granted this right to appoint sub agent.

There are certain exceptional circumstances in which the original agent can appoint a sub agent which are as follows

It can be because the nature of the work is very complex or anything.

If the nature of the work say so that the agent can appoint sub agent then he may do so but he cannot do or appoint sub agent for this personal purpose or on his own. Sometimes certain agencies, business or contract gives themselves the Right to appoint sub agent of the agency to the agents for their own beneficial purposes.

There can be custom of trade

If the custom of the trade says so then also the agent can appoint the sub agent because the custom of a trade is by themselves are saying so the agent becomes obligated to appoint the sub agent which will work as an agent only in the absences of sub agent.

Ministerial work and be another reason to appoint sub agents

A sub agent is also been appointed in case of ministerial work. Ministerial work means in an absence of an agent. In an absence of the agent there should be someone there who can work on the behalf of the agent. Thus, sub agent can also be appointed under ministerial work.

Unexpected emergencies can always happen with anyone

Emergencies can always be of any kind so for taking precautions some agencies provide this right to appoint sub agent to the agent so that at the time of emergency even if the agent is not available there then the sub agent can help or work in the company on his behalf.

It can be because of authorise principle.

Also at the last if there is a specific authorise principle there which states that the agent can appoint a sub agent for the agency then also the agent can appoint the sub agent.

Effects of Appointment of sub agents (Section 192)

When a sub agent is appointed, the agent becomes responsible and bound for all his actions. For the time being sub-agent is regarded as the agent only as if he is appointed by the principal, that is because of the responsibilities of which he was bound.

Agent is responsible for the action of sub agent. An Original agent is responsible for all the actions of sub agent to the principal but sub agent is only responsible to the agent for his act but not the principal Unless he is involved in any fraud or wrong.

Effects of appointment of sub agents are as follow:

The Sub agent is represented the principal

The sub agent is represented the principal as sub agent is working as an agent only or in the place of the agent by any cause therefore sub agent is considered as agent while working under him. As when sub agent is working as a agent he is also represents the principal just like an original agent is represented the Principal.

By the action of sub agent, Principal will also be held liable or bound to the third party

The actions of the sub agent plays the key role as action of sub agent will directly effect the principal and the third party as well. As sub agent take the place of the agent and his responsibilities, his acts will directly effect the principal and then the principal will also be bound and answerable to the third party.

An agent is responsible for the sub agent to the principal

An agent is responsible for the act of sub agent to the principal because agent is the only who appoints the sub agent and has control over sub agent and also looks after some of his work of the agency so the agent will be held liable to the principal for sub agent.

A Sub Agent is only responsible to the original agent for his act and not to the principal unless he is involved in any fraudulent or wrongful activities.

A sub agent is only Responsible to the agent and not anyone else because sub agent is appointed by the agent and the agent has been given the control over the sub agent that’s why sub agent is only liable to the agent and agent will be held liable to the principal. Only in cases of any mischief or any fraudulent act, then the sub agent will be responsible or liable to the principal.

Effects where Sub Agents are not properly appointed (Section 193)

When a sub agent is appointed by agent without any specific authorities, then the agent will be held responsible to the principal as well as the third person for all his actions. The principal is not responsible for any act of the sub agent nor then sub agent is responsible to the principal.

Certain effects of sub agent not appointing properly are

The principal is not defined by the act of the subagent,
The principal is also not accountable to the third person for the actions of sub agent,
The original agent is the one who will held answerable or liable for the act of sub agent to both the principal as well as the third person.

Substituted Agent (Section 194)

When the agent names accordingly of another person to the principal for the person to act in the business of agency is called substituted agent. The agent has been given the authority to name another person in place of him to Act, to the principal for business of the agency.

Such a person will be called substituted agent and will act and react like an agent only for such parts He is appointed. Substituted agent is a one who is suggested or appointed by another agent as a substitute to him. The term sub agent is most confused with the substituted agent.

For example:

Principal tells his agent that he wants to make sale and transport of some good but the agent says that he only knew how to make transfer of goods and not the sale part. The Agent suggest of another agent to the principal who knows how to work with the sale and appoints him. The other Agent which is suggested by the Original Agent will be called Substituted Agent and will be responsible for his work.

Following points regarding substituted agents are:

Original agent appoints substituted agent

Original agent appoints the substituted agent to the principal of the agency

So that the substituted agent can work as a substitute for the original agent if he doesn’t have the knowledge of specific work then substituted agent can take it from there.

Substituted agent is only appointed by the original agent when he has authority to do so

Original agent cannot appoint substituted agent on his own. He should have the proper authority given by the principal to do so then only he can appoint the substituted agent.

Substituted agent is directly responsible to the principal and works under his control only.

Substituted agent may have been appointed by the original agent but it is been appointed by the direction or by the order of principal thus substituted agent is directly responsible to the principal and works under his control.

Difference between sub agent and substituted agent are (Section 191)

Sub agent is controlled by the original agent while Principal has a direct control on substituted agent. Sub agent works for the original agent hence original agent has a control over the Sub agent whereas, substituted agent is employed to substitute original agent to the principal for the specific work of the agency. Thus, substituted agent is controlled by the principal.
Sub agent is appointed by the original agent thus he becomes liable to the original agent only. But on the other side substituted agent is appointed by the original agent on the saying of the principal for the agency because of which substituted agent is only liable to the principal.
Original agent is only held liable to the principal for the act of sub agent because sub agent has been appointed for his work which he couldn’t able to do or couldn’t do under exceptional circumstances. But in case of substitutional Agent, he is hired for the agency purple does the original agent will not be held liable to the principal.

Agent duty for appointing of Substituted Agent (Section 195)

An agent is responsible to name a person for substituted agent and he will be selected it on the Basis of choices which any reasonable man would have done and if he does his job properly, he wouldn't be responsible to principal for any act of negligence of the agent.

While appointing substitute agent to the principal, the agent himself is obligated to exercise the same amount of discretion as any common person with ordinary prudence will act on his own case.

For Example: C consign goods to D, a merchant for sale. D employees an auctioneer in good credited to sell the goods of C and allows the auctioneer to receive the proceeds of the sale. The auctioneers afterward will become insolvent with having any account for proceeds. Now B, is free from all responsibilities to C for the proceeds.

Case: State Bank of Hyderabad branch Waranglal vs. Devarakonda Chandra Mouli and another.

S.A. Appeal No. 359 of 1979, Decided On, 31 December 1982

Facts —

Waranglal was the Plaintiff who was the industrial concern for manufacturing Paints and the defendant was an agent of clearing, forwarding, shipping and air cargo. From Germany, 75 pounds of aluminium powder was imported. The defendant was given the work of clearance of goods by the plaintiff, to deal with the goods in an authorised manner. For this purpose, plaintiff made defendant his agent.

A sub agent was been appointed by the agent for clearing the article from the port but due to default and negligence of the sub agent, second defendant lost the consignment of aluminium powder. In his case the defendant argues that the second defendant was the substituted agent and not the Sub agent. Hence the plaintiff and the second defendant had privity of contract before therefore defendant should not be held liable for the consignment of Lost aluminium powder.

Held —

The trial court held that the Plaintiff is entitled to damage as the second defendant did not handle the consignment properly while being appointed as a sub agent, because of which plaintiff has to suffer. Thus, plaintiff is entitled for the damage. It was also challenged in the High Court. The high court give the reference of cases such as —

Mackery vs. Ramsey
Central Bank of India vs. Rupachand

Hence, the high court also held the judgement of trial court.

Conclusion

This Article discusses about the sub agents and the various effects of appointment of sub agents, Effects where Sub Agent are not properly appointed. It also discussed about the sub agents and Agent duty for appointing of Substituted Agent. It also gives the brief discuss about the difference of sub agent and substituted agent.

A sub agent is defined as an agent who is employed under the original agent by the agency in the business. Sub agent acts under the control of original agent. Agent is the one who appoints sub agent and is the one who has a control over him. Substituted agent is a one who is suggested or appointed by another agent as a substitute to him. The term sub agent is most confused with the substituted agent.

Referral: