Introduction 

• This document sets forth the legal framework governing the relationships, rights, and responsibilities among principals, agents, and sub-agents.  
• It specifically states the circumstances under which sub-agents may be appointed, the legal implications of such appointments, and the resulting obligations and liabilities of all parties involved. 
• Chapter X of the Indian Contract Act, 1872 (ICA) states the provisions regarding sub agents under Agency. 
• The provisions provides herein serve to protect the interests of principals, agents, and third parties while facilitating efficient business operations through properly structured agency relationships.  
• Proper adherence to these guidelines will help minimize legal risks and ensure clear lines of authority and responsibility in agency arrangements. 

Provisions Regarding Sub-Agents 

Section 190: When agent cannot delegate 

• An agent shall not have the authority to employ sub-agents to perform duties which the agent has expressly or impliedly undertaken to perform personally, except under the following circumstances. 
  • Where the ordinary custom of trade permits the employment of a sub-agent. 
  • Where the nature of the agency necessitates the employment of a sub-agent. 

Section 191: “Sub-agent” defined 

• A sub-agent is defined as an individual employed by and operating under the control of the original agent in conducting the business of the agency. 

Section 192: Representation of principal by sub-agent properly appointed 

• When a sub-agent is properly appointed:  
  • The principal is represented by the sub-agent in dealings with third parties. 
  • The principal is bound by the acts of the sub-agent. 
  • The principal bears responsibility for the sub-agent's acts as if the sub-agent were directly appointed by the principal. 

Agent's Liability 

• The original agent maintains responsibility to the principal for all acts performed by the sub-agent. 

Sub-Agent's Liability 

• The sub-agent bears responsibility for their acts to the agent but not to the principal, except in cases involving:  
  • Fraud  
  • Willful wrongdoing 

Section 193: Agent’s responsibility for sub-agent appointed without authority 

• Where an agent appoints a sub-agent without proper authority:  
  • The agent assumes the position of principal in relation to the unauthorized sub-agent.  
  • The agent bears responsibility for the unauthorized sub-agent's acts to both the principal and third parties.  
  • The principal is neither represented by nor responsible for the unauthorized sub-agent's acts. 
  • The unauthorized sub-agent bears no direct responsibility to the principal. 

Section 194: Relation between principal and person duly appointed by agent to act in business of agency 

• When an agent, holding express or implied authority to name another person to act for the principal, makes such an appointment:  
  • The appointed person is not considered a sub-agent. 
  • The appointed person is deemed a direct agent of the principal for the specific business entrusted to them. 

Illustrative Examples 

• When a solicitor, directed to sell property by auction, appoints an auctioneer, the auctioneer becomes the principal's direct agent for conducting the sale. 
• When a merchant authorized to recover monies instructs a solicitor to take legal action, the solicitor becomes the principal's direct legal representative. 

Section 195: Agent’s duty in naming such person 

• In selecting an agent for the principal, the appointing agent must:  
  • Exercise the same level of discretion as a person of ordinary prudence would exercise in their own affairs.  
  • If this standard is met, the appointing agent is not liable for the acts or negligence of the selected agent. 

Illustrations: 

• In the case of a merchant appointing a ship surveyor who negligently selects an unseaworthy vessel, the surveyor, not the merchant, bears responsibility. 
• When a merchant employs a reputable auctioneer who becomes insolvent, the merchant is not liable for unaccounted proceeds. 

Conclusion 

This framework establishes clear guidelines for the creation and management of agency and sub-agency relationships. It delineates the specific circumstances under which such relationships may be formed, the resulting obligations of all parties, and the allocation of liability for actions taken within these relationships. All parties engaging in agency relationships should carefully consider these provisions to ensure compliance and appropriate risk management.