Sub-Agent under Indian Contract Act: Definition & Delegation

The concept of a sub-agent is one of the most technically intricate corners of the law of agency, and it arises directly from the principle that personal trust is at the foundation of every agency relationship. If the principal appointed his agent because he trusted that particular person's skill and integrity, the question naturally follows — can the agent pass on that trust to someone else?

The Rule: No Delegation

The starting point is the maxim delegatus non potest delegare — a delegate cannot further delegate. Section 190 of the Indian Contract Act, 1872 gives statutory expression to this principle: an agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally. The reason behind this rule is both simple and profound. The principal has chosen his agent on the basis of confidence — confidence in a specific person's judgment, skill, and fidelity. As Bowstead on Agency puts it, "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." To allow the agent to freely sub-delegate would be to deprive the principal of the very thing he bargained for — a trusted representative.

It is on this foundation that Section 190 places its prohibition. However, the section itself carves out the path to delegation in two situations: first, where by the ordinary custom of trade a sub-agent may be employed, and second, where from the nature of the agency itself a sub-agent must be employed. These are not empty exceptions — they reflect the practical reality that many commercial agencies simply cannot be performed without assistance.

Who is a Sub-Agent?

Section 191 defines a sub-agent as "a person employed by, and acting under the control of, the original agent in the business of the agency." The key words are "acting under the control of the original agent." Unlike a substituted agent, who steps into privity with the principal directly, a sub-agent looks entirely to the original agent who appointed him. He is, as between himself and the original agent, in the position of an agent to a principal — bound by the same duties of loyalty and care that an ordinary agent owes to his principal. The sub-agent does not look to the ultimate principal for his remuneration, nor is he ordinarily accountable to that principal.

The Supreme Court brought this into sharp focus in Union of India v. Mohd. Nazim (AIR 1980 SC 431), where a resident of India had sent a value-payable article to a recipient in Pakistan. The Pakistani postal authorities collected the value but never remitted it to the Government of India owing to the suspension of postal services between the two countries. The Court held that no agency — and certainly no sub-agency — was created between the two sovereign governments merely by a postal treaty. A foreign government cannot be described as the sub-agent of another government; the relationship of sub-agency requires the kind of control that one government simply does not exercise over another.

When Can a Sub-Agent Be Employed?

The exceptions to the prohibition on delegation are grounded in common sense and commercial necessity. They may be grouped as follows:

1. Nature of the Agency: Where the business of the agency is such that it is impossible or impracticable to carry it out without the assistance of a sub-agent, delegation is not only permitted but compelled. The classic illustration is that of a ship-owner who employs an agent to effect the sale of his ship at any port where the vessel may call from time to time. Obviously, the agent cannot be personally present at every port around the world. In such a situation, the engagement of sub-agents at each port is an implied necessity, and the law recognises it.

2. Custom or Usage of Trade: If there exists a well-established custom in a particular trade that agents in that business do employ sub-agents, the appointment will be lawful even without express authority. Thus, architects and builders, by the recognised custom of their trade, engage surveyors to take out quantities from their designs — and a surveyor so engaged can even directly claim his charges from the architect's employer. Similarly, it has been held that a bank appointed to lease out houses was entitled, by the nature of its function, to employ house agents as sub-agents.

3. Purely Ministerial Acts: An agent is not required to perform personally every single act associated with the agency. Where an act is purely ministerial — that is, it requires no skill, discretion, or personal judgment — it may be delegated. The authority to sign a document, for instance, has been held to be delegable. The prohibition applies with full force only where personal skill or fiduciary discretion is involved. Significantly, it has been held that a shebait (the manager of a religious endowment) cannot delegate his power to lease trust properties, since no one may delegate a fiduciary discretion.

4. Principal's Express or Implied Consent: The principal may himself authorise delegation — expressly, or by implication from the conduct of the parties or the circumstances of the appointment. Where the principal was aware at the time of appointing the agent that the nature of the business would require sub-agents, or where he subsequently acquiesces in the agent's practice of employing sub-agents, the delegation is valid.

Effects of Proper and Improper Appointment

Once it is established whether the sub-agent has been properly or improperly appointed, the legal consequences diverge sharply.

Where properly appointed (Section 192): The principal is, as regards third parties, represented by the sub-agent and is bound by and responsible for the sub-agent's acts, just as if the sub-agent had been originally appointed by the principal himself. The agent, however, remains responsible to the principal for the acts of the sub-agent. The sub-agent, for his part, is responsible to the agent — but not to the principal — except where the sub-agent is guilty of fraud or wilful wrong. The absence of privity between principal and sub-agent is illustrated with striking clarity in the famous English case of Calico Printers' Association v. Barclays Bank (1931, 145 LT 51), where a sub-agent failed to insure the principal's goods and they were destroyed by fire. The principal could not recover directly against the negligent sub-agent because there was no privity of contract between them.

Where improperly appointed (Section 193): Where the agent appoints a sub-agent without authority, the law treats the agent as the principal of that person. The agent becomes personally responsible for the acts of that unauthorised sub-agent — to the principal as well as to third parties. The principal is neither represented by, nor bound by, nor responsible for the acts of that person; and that person has no rights against the principal.

Sub-Agent Distinguished from Substituted Agent

It is essential not to confuse a sub-agent with a substituted agent under Section 194. When an agent, holding express or implied authority to name another person, appoints such person to act for the principal, that person becomes not a sub-agent but directly an agent of the principal for that part of the business. The solicitor's illustration in Section 194 is instructive: A directs B, his solicitor, to sell his estate by auction and to employ an auctioneer for that purpose. B names C. C is not a sub-agent — he is A's direct agent for the conduct of the sale. In such a case, privity of contract is established directly between the principal and the substituted agent, which is wholly absent in the case of a sub-agency.

The termination of the original agency has a decisive effect on any sub-agency. Section 210 makes it clear that the termination of an agent's authority automatically brings about the termination of the authority of all sub-agents appointed by him. This is a natural consequence of the derivative character of sub-agency: the sub-agent's authority can be no greater, and can last no longer, than that of the agent from whom it flows.