Updated: Jul 21, 2021
LAW OF AGENCY (Sns. 182 to 238)
Part of INDIAN CONTRACT ACT.
LAW OF AGENCY
Sns. 182 to 238 Part of INDIAN CONTRACT ACT.
Delegatus non protest delegate :
This rule is in Sn. 190 of the contract acct. It means that "An agent to whom authority has been delegated, cannot redelegate that to a third person". The reason is that the principal's confidence in the Agent, is at the root of the contract of agency. Accordingly, factors, auctioneers, brokers in whom confidence is reposed, have no power to delegate their duty or authority to'others.
Exception : There is an exception. This is the appointment of a sub-agent.
(i) Where the nature or custom of the business requires that authority should be delegated to third persons, the agent may appoint a sub-agent.
ii) Such an authority is implied where the act to be done by the sub-agent is purely ministerial.
iii) Such delegation is implied from usage of trade or by nature of business in unforeseen emergencies. Architects, builders etc. may be appointed as sub-agent by usage.
iv) The principal may allow the agent to appoint a sub-agent expressly by or by implication.
Liability of principal : Where the sub-agent is properly appointed, the principal is represented by the sub-agent. The principalis responsible to third parties for the acts of the sub-agent. But, between the principal and agent, the agent is responsible to principal for the acts of the sub-agent.
2. Where the sub-agent is not properly appointed, the principal is not liable to third parties for the acts of thee sub-agent. The agent is liable. The sub-agent is liable for his acts to the agent. He is not liable to the principal, except in case of fraud, or wilful wrong. Eg: P's agent A appoints a sub-agent S in commission agency, S fraudulently disposes of goods of P. Held, sub-agent liable to principal.
Substituted agent: (Sn. 194)
If an agent who has authority to name a person to act for his principal in doing business, names another person, such a person is called substituted agent and not sub-agent. The authority of agent may be express or implied. P directs his advocate A, to sell his property by auction and toname an auctioneer for this purpose. A names X and W to conduct auction. Here, X and W are substituted agents and not sub-agents. There is a clear and marked line of difference between ordinary sub-agent and substituted agent. The Supreme Court in Union of India Vs. Amar Singh, that when the exigencies or circumstances demand, the rule delegatus non protest delegate is relaxed, and a sub-agent may be appointed. But, when the agent has the authority to name a person, he may duly name a substituted agent. The agent is bound to exercise his discretion, as a man of ordinary prudence would, in his own cause. If he so selects, then he is not responsible for acts of negligence of substituted agent, to the principal. Eg. 1) A asks B, a merchant to buy a ship for him. B employ's a qualified surveyor S for the selection of ship. S does his job negligently. A buys but the ship was un-seaworthy and was lost.Here, B is not liable. But S is liable to A.
2) A sends goods to B to sell by auction. B appoints reputed K and W auctioneers to auction. K and W auction, collect proceeds but become insolvent. Here B is not liable to A.
Del credere agent:
He is one who in consideration of an extra commission, called a del credere commission, undertakes that the persons with whom he enters into contract on behalf of the principal, will be in a position to perform their duties. Such an agency is inferred from the circumstances where extra commission is charged for the risk of bad debts.
A del credere agent incurs only a secondary liability towards the principal. He is in effect a surety to the extent of the default by insolvency of their parties. Certified brokers of Bombay native stock and share brokers association are del credere agents.
Agency coupled with interest:
The general rule is that "the authority of an agent coupled with an interest is irrevocable". The meaning is that where the agent has an interest in the subject matter of the agency, the principal cannot revoke his authority to the prejudice of the agent.
a) P appoints A to sell a plot of land and to pay himself out of the proceeds the advances A has made to P. P cannot revoke hisauthority.
b) A an agent advances money to P. P consigns 1000 bales of cotton to A to pay himself from sale price. P cannot revoke.
There is an exception. The principal may revoke the agent's authority before the agent has exercised the authority so as to bind the principal. However, where the authority has been partly exercised the principal cannot revoke the authority. A authorises B to buy 1000 bales of cotton on account of A and to pay out of A's moneys in B's hands. B buys by making himself personally liable for the price. A cannot revoke B's authority .