According to Section 191, a “sub-agent” is a person employed by, and acting under the control of, the original agent in the business of agency.
Position when sub-agent properly appointed
So Where there is proper delegation of authority by the agent to the sub-agent or the appointment of the sub-agent is valid, the position is governed by the provision of Section 192, which reads as under :
“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 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.
The sub-agent is responsible for his acts to the agent, but not to the principal, except in cases of fraud or wilful wrong.”
The following position emerges from the above stated provision:
The acts of the sub-agent bind the principal towards third persons
When the sub-agent is properly appointed, he gets vested with the power to represent the principal, and, therefore, for the acts of such a sub-agent, the principal becomes bound towards third persons. In such a case, the principal is represented by and is responsible for the acts of the sub-agent towards third persons as if such sub-agent was originally appointed by the principal. It means that the act of the sub-agent would bind the principal in the same way as an act of any duly appointed agent.
Responsibility of the Agent or Sub-agent towards the Principal
There is privity of contract only between :
(i) Sub-agent and the Agent, and
(ii) Agent and the Principal.
Therefore, the sub-agent is responsible to the agent, but he is not directly responsible to the principal. Similarly, the agent is responsible to the principal for the acts of the sub-agent. There is no privity of contract between the sub-agent and the principal and, therefore, he is not personally responsible to the principal, and for the acts of the sub-agent, the responsibility of the agent towards the principal arises. When the principal appoints an agent to do some work and the agent prefers to get the work done from the sub-agent, it becomes the agent’s responsibility to see that the sub-agent properly performs his duties and, therefore, the agent is responsible for the same to the principal.
Although as a general rule, the sub-agent is responsible for his wrongs to the agent, but not to the principal because there is no contractual relationship between the principal and the sub-agent, this rule does not apply when the sub-agent commits a tort. In case of tortuous acts like fraud or wilful wrong committed by the sub-agent, the sub-agent becomes directly answerable to the principal. In case of fraud and wilful wrong, the principal has a choice to bring an action against the agent or the sub-agent.
Position when sub-agent not properly appointed
When an agent makes improper delegation of his authority, i.e., when the appointment of the sub-agent is not covered by any of the exceptions which permit such an appointment, the agent is responsible both to the third person and the principal. Section 193 makes the following provision in this regard :
“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 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 person; the principal is not represented by or responsible for the acts of the person so employed, nor is that person responsible to the principal.”
When the agent makes the appointment of a sub-agent without having an authority to do so, the principal is not represented by or responsible for the acts of the sub-agent. It means that for the acts of the sub-agent, the principal will not be bound towards any third person. The sub-agent is also not responsible for his acts to the principal. For the acts of the sub-agent, it is the agent who is responsible towards the third person as well as the principal. Between the agent and the sub-agent, the position is considered to be that of the principal and agent, and, therefore, the agent is answerable for the acts of the sub-agent.
Like a sub-agent, the appointment of a substituted agent is made by an agent. A sub-agent is the agent of the agent, whereas a substituted agent is an agent of the principal, though he is not appointed by the principal himself but through the efforts of an agent. An agent, having been so authorized by the principal, may name a person (substituted agent) to act for the principal in the business of agency. A substituted agent is the agent of the principal. There is a privity of contract between the principal and the substituted agent. The principal becomes bound by the acts of the substituted agent towards third person, and the substituted agent is directly responsible towards the principal. Section 194 explains the relation between the principal and the substituted agent. The provision is as follows:
“194. Relation between principal and person duly appointed by an 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 sub-agent but an agent of the principal for such part of the business of the agency as is entrusted to him.
(a) A directs B, his solicitor, to sell his estate by auction, and to employ an auctioneer for this 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 authorizes C, a merchant in Calcutta, to recover the money 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.”
It has been noted above that when an agent having an authority to appoint a substituted agent does so, then the agent goes out of the picture. An agent’s only function is to appoint substituted agent with due care. After a substituted agent has been appointed, the work of agency is to be performed by the substituted agent, and the principal is represented by the substituted agent in relation to third person. A substituted agent is himself responsible towards the principal.
Agent’s duty in appointing a substituted agent
While selecting a substituted agent for the principal, the agent must exercise due care. Section 195 explains the nature of an agent’s duty in this regard. The provision is as follows:-
“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 of negligence of the agent so selected.”
It has been noted above that when the agent exercises due care in selecting a substituted agent for his principal his responsibility is over. The agent is not responsible for the acts of negligence of the substituted agent. This may be explained by the following 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 sale. The auctioneer afterwards becomes insolvent without having accounted for the proceeds. B is not responsible to A for the proceeds.
Sub-agent and Substituted agent distinguished
One thing common between a sub-agent and a substituted agent is that their appointment is made by the agent and not by the principal. The points of distinction between the two are as under:
(i) A sub-agent is the agent’s agent, whereas a substituted agent is the principal’s agent, in conducting the agency work. A sub-agent is responsible for his acts to the agent, and the agent in his turn is responsible for the sub-agent’s acts to the principal. A sub-agent is not responsible to the principal, except in case of fraud or wilful wrong. A substituted agent is directly responsible to the principal for his acts.
(ii) After appointing a sub-agent, the agent continues to be responsible for the acts of the sub-agent towards the principal. An agent’s responsibility, on the other hand, is over when he names a substituted agent. He then goes out of the picture.