The general rule is delegatus non potest delegare: a delegate cannot further delegate. An agent must ordinarily perform the duties of the agency personally, because the principal chose that particular agent for his skill, judgement and trustworthiness. S.190 to S.195 set out the exceptions and distinguish two very different legal results: appointment of a sub-agent and appointment of a substituted agent.
Legal Framework
| Provision | Subject | Key Rule |
|---|---|---|
| S.190 | When agent cannot delegate | An agent cannot lawfully employ another to perform acts he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may be employed |
| S.191 | Sub-agent defined | A person employed by, and acting under the control of, the original agent in the business of the agency |
| S.192 | Representation of principal by sub-agent properly appointed | The principal is bound by and responsible for the sub-agent's acts as if he were an agent originally appointed; the sub-agent is responsible to the agent, not to the principal, except for fraud or wilful wrong |
| S.193 | Agent's responsibility for sub-agent improperly appointed | The agent stands towards such person in the relation of a principal to an agent, and is responsible for his acts to the principal and to third persons; the principal is not represented by, or responsible for, that person |
| S.194 | Substituted agent defined | Where an agent, having authority to do so, names another person to act for the principal in the business of the agency, that person is an agent of the principal, not a sub-agent |
| S.195 | Agent's duty in naming a substituted agent | The agent must exercise the same discretion a person of ordinary prudence would in his own case; having done so, he is not responsible for the substitute's acts or negligence |
The General Rule Against Delegation (S.190)
An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally.
Why the rule exists: Agency is a relationship of personal confidence. The principal selected this agent, assessed his competence, and accepted the risk of his judgement. Permitting free substitution would give the principal a representative he never chose and would dilute the accountability that makes the relationship workable.
Exceptions
| Exception | Explanation |
|---|---|
| Ordinary custom of trade | Where the custom of the particular trade permits employment of a sub-agent |
| Nature of the agency requires it | Where the business cannot be done without engaging others, for example a shipping agent using stevedores |
| Principal's express or implied consent | The principal may authorise delegation |
| Ministerial or purely mechanical acts | Acts involving no discretion, such as signing a receipt or posting a letter |
| Unforeseen emergency | Where circumstances compel it and the principal cannot be reached |
Why ministerial acts are excepted: The rule protects the principal's interest in the agent's personal judgement. Where no judgement is engaged, as in copying a document or delivering a parcel, nothing the principal bargained for is lost by having someone else do it. The exception is calibrated to the reason for the rule.
Sub-Agent (S.191 to S.193)
A sub-agent is a person employed by, and acting under the control of, the original agent in the business of the agency. The defining feature is that the sub-agent remains under the original agent's control, and there is no privity between sub-agent and principal.
Properly Appointed Sub-Agent (S.192)
| Relationship | Position |
|---|---|
| Principal and third parties | The principal is bound by and responsible for the sub-agent's acts as if the sub-agent were an agent originally appointed by him |
| Agent and principal | The agent is responsible to the principal for the sub-agent's acts |
| Sub-agent and agent | The sub-agent is responsible to the agent |
| Sub-agent and principal | The sub-agent is not responsible to the principal, except in cases of fraud or wilful wrong |
Why the sub-agent answers to the agent rather than the principal: Privity follows appointment. The sub-agent was engaged by the agent, takes instructions from him, and looks to him for payment. Making the sub-agent directly answerable to a principal with whom he never contracted would distort the chain of contracts. The carve-out for fraud and wilful wrong prevents the structure being used as a shield for deliberate misconduct.
Facts: A bank was instructed to collect payment for goods and to insure them. It employed a foreign bank as sub-agent, which failed to insure. The goods were destroyed by fire. The principal sued the sub-agent bank directly.
Issue: Is a sub-agent directly liable to the principal for negligence?
Held: No. There was no privity of contract between the principal and the sub-agent. The principal's remedy lay against its own agent, the first bank, which in turn could proceed against the sub-agent.
Relevance: The standard authority on the absence of privity between principal and sub-agent, reflecting the rule in S.192.
Improperly Appointed Sub-Agent (S.193)
Where an agent, without authority, appoints a person to act in the business of the agency:
| Relationship | Position |
|---|---|
| Agent and that person | The agent stands as principal to that person |
| Agent's liability | The agent is responsible for that person's acts both to the principal and to third persons |
| Principal's position | The principal is not represented by, nor responsible for, that person's acts |
Practical consequence: The agent who delegates without authority takes the entire risk of the delegate's conduct onto himself. The principal is insulated.
Substituted Agent (S.194, S.195)
A substituted agent arises where an agent, having express or implied authority to name another person to act for the principal, does so. That person becomes an agent of the principal directly, not a sub-agent.
| Feature | Substituted Agent |
|---|---|
| Appointment | By the agent, with authority to name a person to act for the principal |
| Privity | Direct privity between the substituted agent and the principal |
| Control | Under the principal's control, not the original agent's |
| Liability to the principal | Directly liable to the principal |
| Original agent's liability | Limited: liable only for want of ordinary prudence in selecting the substitute (S.195) |
Why the original agent escapes liability after a prudent choice: Under S.194 the agent's task was to select, not to supervise. Once he has selected with the care a person of ordinary prudence would use in his own case, he has discharged the only duty he undertook. Continuing liability for the substitute's later negligence would make him a guarantor of another's performance, which is not what naming a substitute involves.
Facts: An agent was authorised to sell a ship in India, China or Japan at a minimum price, with authority to appoint sub-agents. He appointed the defendant in Japan, who bought the ship himself and resold it at a profit without disclosing this to the principal.
Held: In the circumstances the defendant was in a direct fiduciary relationship with the principal and was accountable to him for the secret profit. Where an agent is authorised to name another to act for the principal and does so, privity may be established directly with the principal.
Relevance: Illustrates the substituted agent analysis and the direct accountability that follows from it.
Illustrations
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Ministerial delegation permitted: A appoints B to sell A's goods. B engages a clerk to prepare and post the invoices. This is a ministerial act involving no discretion, so delegation is permissible despite S.190.
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Delegation by trade custom: A appoints a clearing and forwarding agent B to clear imported cargo. By the ordinary custom of that trade, B engages licensed customs brokers and stevedores. The delegation is permitted under the S.190 exception, and those persons are properly appointed sub-agents under S.192.
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Properly appointed sub-agent, no privity with principal: A bank is instructed to collect payment and insure goods, and engages a correspondent bank abroad which fails to insure. Applying Calico Printers Association v Barclays Bank (1931) and S.192, the principal cannot sue the correspondent bank directly; the remedy is against its own bank, which may then proceed against the correspondent.
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Improper delegation, principal not bound: A appoints B to negotiate a lease, a matter requiring B's personal judgement. Without authority B hands the task to C, who agrees terms unfavourable to A. Under S.193 A is not bound by C's acts, and B is answerable to A as if B were C's principal.
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Substituted agent: A instructs his solicitor B to appoint a suitable advocate to appear in a distant High Court. B, exercising care, engages a competent advocate C. Under S.194 C is A's agent directly and answerable to A. Under S.195 B, having chosen prudently, is not liable for C's later negligence in conducting the hearing.
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Substituted agent negligently chosen: On the same facts, B appoints C without any inquiry, and C turns out to be a person of known incompetence who mishandles the case. B is liable under S.195 for want of the discretion a person of ordinary prudence would have exercised.
Recall Check
- State the maxim underlying S.190 and explain why the rule exists.
- Why is a properly appointed sub-agent not answerable to the principal, and what is the exception?
- What is the extent of the original agent's liability once he has prudently named a substituted agent?
Key Cases
Calico Printers Association v Barclays Bank (1931) Calico Printers Association v Barclays Bank 1931
Issue: Whether a principal may sue a sub-agent directly for negligence.
Rule: There is no privity of contract between principal and sub-agent; the principal's remedy is against his own agent.
Held: The principal could not sue the correspondent bank directly for failing to insure the goods.
De Bussche v Alt (1878) De Bussche v Alt 1878
Issue: Whether a person named by an agent to act for the principal was directly accountable to the principal for a secret profit.
Rule: Where an agent with authority names another to act for the principal, direct privity may arise with the principal.
Held: The defendant was in a direct fiduciary relationship with the principal and had to account for the secret profit.
Distinctions
| Basis | Sub-Agent (S.191) | Substituted Agent (S.194) |
|---|---|---|
| Appointed by | The agent, in his own right | The agent, exercising authority to name a person for the principal |
| Whose control | Under the original agent's control | Under the principal's control |
| Privity with principal | None | Direct |
| Liability to principal | Not liable, except for fraud or wilful wrong | Directly liable |
| Original agent's liability | Responsible to the principal for the sub-agent's acts | Liable only for want of prudence in selection (S.195) |
| Remuneration looks to | The original agent | The principal |
| Basis | Properly Appointed Sub-Agent (S.192) | Improperly Appointed (S.193) |
|---|---|---|
| Principal bound by his acts | Yes | No |
| Principal responsible for his acts | Yes | No |
| Agent's position towards him | Agent remains responsible to the principal | Agent stands as his principal |
| Agent's liability to third persons | Ordinary agency rules | Agent personally responsible |
Flashcards
State the maxim expressing the general rule against delegation.
Delegatus non potest delegare, a delegate cannot further delegate (S.190).
Name the exceptions to the rule against delegation.
Ordinary custom of trade, the nature of the agency requiring it, the principal's consent, purely ministerial acts, and unforeseen emergency.
Who is a sub-agent under S.191?
A person employed by, and acting under the control of, the original agent in the business of the agency.
Is a properly appointed sub-agent liable to the principal?
No, except in cases of fraud or wilful wrong (S.192). The sub-agent is responsible to the agent.
What is the position where a sub-agent is improperly appointed?
Under S.193 the principal is not represented by nor responsible for that person's acts, and the agent stands towards him as a principal and is answerable for his acts.
Who is a substituted agent under S.194?
A person named by the agent, under authority to do so, to act for the principal in the business of the agency. He becomes the principal's agent directly.
What is the original agent's duty when naming a substituted agent?
To exercise the same discretion a person of ordinary prudence would exercise in his own case (S.195). Having done so, he is not liable for the substitute's acts or negligence.
What did Calico Printers Association v Barclays Bank establish?
A principal has no privity with a sub-agent and cannot sue him directly; the claim lies against the principal's own agent.
Exam Scenario
Problem: Anjali, based in Hyderabad, appoints Bhaskar as her agent to export handloom consignments, expressly authorising him to "engage such local representatives at destination ports as may be necessary." For a Chennai shipment Bhaskar engages Chetan, a clearing agent, exercising care in choosing a reputable firm. Chetan negligently mis-declares the cargo, resulting in a penalty of Rs. 2 lakhs. For a separate Kochi shipment, Bhaskar, who had personally undertaken to negotiate the price with the buyer, hands that negotiation to his own assistant Devi without telling Anjali. Devi agrees a price 20 percent below Anjali's floor. Advise Anjali against Bhaskar, Chetan and Devi.
Step 1: Classify each appointee before doing anything else
Everything turns on how Chetan and Devi are characterised. Work through the classification in this order:
- Ask whether Anjali authorised the appointment at all.
- Where the authority was to name a person to act for Anjali, the appointee is a substituted agent under S.194, with direct privity.
- Where there was no authority and the act required Bhaskar's own judgement, the delegation is improper and S.193 applies.
| Appointee | Character | Provision | Privity with Anjali | Answers to Anjali |
|---|---|---|---|---|
| Chetan, Chennai | Substituted agent, named under express authority | S.194 | Yes, direct | Chetan himself, for the Rs. 2 lakh penalty |
| Devi, Kochi | Improperly appointed, no authority to delegate | S.193 | None | Bhaskar, who stands towards Devi as a principal |
Step 2: Chennai, Chetan is directly answerable under S.194
Bhaskar had express authority to engage local representatives at destination ports. That is authority to name a person to act for Anjali, so Chetan is a substituted agent under S.194, not a sub-agent.
There is therefore direct privity between Anjali and Chetan, and Chetan is directly answerable to Anjali for the Rs. 2 lakh penalty caused by his negligence. Support with De Bussche v Alt (1878) on the direct accountability of a person named to act for the principal.
Step 3: Chennai, Bhaskar's own duty under S.195
Under S.195 Bhaskar's duty was confined to selecting with the discretion of a person of ordinary prudence.
He chose a reputable firm with care, so he has discharged that duty and is not liable for Chetan's subsequent negligence.
Step 4: Kochi, improper delegation under S.193
The negotiation of price was a matter Bhaskar had undertaken personally, requiring his judgement, and Anjali gave no authority to delegate it. The delegation was therefore improper and S.193 applies.
Anjali is not bound by Devi's acts and is not responsible for them, so she is not held to the below-floor price.
Under S.193 Bhaskar stands towards Devi as a principal and is responsible for her acts to Anjali, so Anjali may recover from him any loss flowing from the improper delegation.
Do not call Chetan a sub-agent. The express authority to engage local representatives at destination ports makes him a substituted agent under S.194. Mislabel him and the Rs. 2 lakh claim is aimed at Bhaskar instead of at Chetan.
S.195 imposes a duty of selection only. Bhaskar does not guarantee Chetan's work. Having chosen a reputable firm with care, he answers for nothing that Chetan later does negligently.
Devi has no privity with Anjali. Under S.193 she is answerable to Bhaskar, not to Anjali, so Anjali's Kochi claim must be framed against Bhaskar.
Conclusion. Anjali sues Chetan directly for Rs. 2 lakhs and has no claim against Bhaskar for Chennai. She is not bound by the Kochi price and may recover her loss from Bhaskar, who bears the risk of Devi's conduct.
See Also
- Contract of Agency: Definition and Creation : the modes of creating the primary authority which S.190 restricts from being passed on.
- Rights and Duties of Agent : the duty of personal performance and the standard of skill under S.212.
- Personal Liability of Agent : when an agent, including one who delegates improperly, becomes personally answerable.