Sub-Agent Under the Indian Contract Act, 1872

Learn the meaning of a sub-agent, the rules governing delegation of authority, and the liability of the principal, agent and sub-agent under Sections 190–195 of the Indian Contract Act, 1872.

Introduction

The law of agency allows a person to appoint another person to perform acts or represent them in dealings with third parties. However, in commercial transactions, an agent may sometimes need assistance from another person to complete the work entrusted to them. This gives rise to the concept of a sub-agent.

The Indian Contract Act, 1872, regulates the appointment and responsibilities of sub-agents under Sections 190–195. These provisions establish when an agent may delegate their functions, when a principal is bound by the acts of a sub-agent, and who bears responsibility if the sub-agent causes loss through negligence, misconduct or other wrongful conduct.

The general rule is that an agent cannot delegate functions they have expressly or impliedly undertaken to perform personally. However, the law recognises exceptions based on trade custom, the nature of the agency and the authority granted by the principal.

Meaning of a Sub-Agent Under Section 191

Section 191 of the Indian Contract Act, 1872, defines a sub-agent as a person employed by, and acting under the control of, the original agent in the business of the agency.

A sub-agent therefore works under the authority and control of the original agent rather than being directly appointed by the principal in the ordinary course.

Example: A appoints B to sell goods on A’s behalf. B, with proper authority, appoints C to assist in selling those goods under B’s control. C may qualify as a sub-agent under Section 191.

The important elements of a sub-agency relationship are:

• The original agent employs the sub-agent.
• The sub-agent acts in the business of the original agency.
• The sub-agent works under the control of the original agent.
• The appointment must comply with the applicable rules governing delegation.

The last requirement is particularly important because an agent cannot automatically appoint a sub-agent merely because doing so would make the work easier.

Rule Against Delegation of Authority — Section 190

Section 190 establishes the general rule that an agent cannot lawfully employ another person to perform acts that the agent has expressly or impliedly undertaken to perform personally.

However, the provision recognises two important exceptions: where the ordinary custom of trade permits the appointment of a sub-agent, or where the nature of the agency requires a sub-agent to be employed.

This principle is commonly expressed through the maxim delegatus non potest delegare, meaning that a person entrusted with authority generally cannot further delegate that authority unless permitted by law or the circumstances.

Exceptions to the rule against delegation

1. Express authority from the principal

Where the principal expressly authorises the agent to appoint a sub-agent, the agent may delegate the relevant functions within the scope of that authority.

Example: A appoints B to manage a warehouse and expressly permits B to appoint assistants to handle dispatch operations. B may appoint a suitable sub-agent or assistant in accordance with the authority granted.

2. Implied authority

Authority to appoint a sub-agent may arise by necessary implication from the nature and circumstances of the agency.

Example: A appoints B to manage a large commercial operation that reasonably requires assistance in carrying out certain functions. If the circumstances imply authority to appoint a sub-agent, B may do so within the permitted scope.

3. Custom of trade

An agent may employ a sub-agent where the ordinary custom of the relevant trade permits it.

Example: In a commercial transaction involving the sale of goods through established intermediaries, the ordinary practices of the trade may permit the original agent to employ an intermediary to perform a particular part of the work.

4. Necessity arising from the nature of the agency

The nature of the agency may make the employment of a sub-agent necessary for the proper performance of the entrusted business.

The relevant question is whether the appointment is permitted by the circumstances and the applicable law, rather than whether delegation is merely convenient.

Liability Where a Sub-Agent Is Properly Appointed — Section 192

Section 192 deals with the legal consequences of a sub-agent’s proper appointment.

Also Read: Authority of Agent Under the Indian Contract Act, 1872

Where a sub-agent is properly appointed, the principal is, as regards third parties, represented by the sub-agent and is bound by and responsible for the sub-agent’s acts as if the sub-agent had originally been appointed by the principal.

The section also specifies the responsibilities of the original agent and the sub-agent.

Liability of the principal

The principal is bound by and responsible for the acts of a properly appointed sub-agent in the circumstances covered by Section 192.

Example: A authorises B to sell goods and permits B to appoint a sub-agent for the sale. B properly appoints C, who enters into a sale transaction within the relevant authority. A may be bound by C’s acts towards third parties.

Liability of the original agent

Section 192 expressly states that the original agent is responsible to the principal for the acts of the sub-agent.

The original agent therefore remains accountable to the principal for the sub-agent’s conduct under the statutory rule.

Liability of the sub-agent

Section 192 provides that the sub-agent is responsible for their acts to the original agent, but not to the principal, except in cases of fraud or wilful wrong.

This is an important distinction. A properly appointed sub-agent ordinarily operates under the original agent’s control, and the statutory relationship determines the parties to whom the sub-agent is responsible.

Liability Where a Sub-Agent Is Appointed Without Authority — Section 193

Section 193 addresses the consequences of an agent appointing a sub-agent without authority.

Where an agent appoints a person to act as a sub-agent without being authorised to do so, the original agent stands in the relationship of principal to agent towards that person. The original agent is responsible for the person’s acts both to the principal and to third parties.

In this situation, the principal is not represented by, and is not responsible for the acts of, the person so employed under Section 193. The person is also not responsible to the principal under that provision.

Example

A appoints B to sell certain goods but does not authorise B to delegate the work. B nevertheless appoints C to negotiate and complete sales.

If C acts without the authority required for a valid sub-agency, B may be responsible to A and to third parties for C’s acts under Section 193. A is not automatically bound by C’s acts merely because B purported to appoint C.

The precise outcome may also depend on whether the principal subsequently ratifies the transaction or whether the principal’s conduct independently creates a basis for liability under another provision of the Act.

Consequences of unauthorised appointment

• The original agent may be liable to the principal for the unauthorised delegation.
• The original agent may be responsible to third parties for the acts of the person appointed.
• The principal is not automatically represented by the unauthorised sub-agent.
• The person appointed is not responsible to the principal under Section 193.

Section 193 therefore discourages unauthorised delegation and protects the principal from being automatically bound by a person whom the principal did not authorise the agent to appoint.

Difference Between a Sub-Agent and a Substituted Agent — Sections 194 and 195

A sub-agent must be distinguished from a person appointed by an agent who has express or implied authority to select another person to act directly for the principal.

Under Section 194, where an agent has authority to name another person to act for the principal in the business of the agency and appoints that person accordingly, the appointed person is not a sub-agent. Instead, that person becomes an agent of the principal for the part of the business entrusted to them.

This distinction is significant because it determines the legal relationship between the principal, the original agent and the person selected.

Example under Section 194

A instructs B, a solicitor, to sell A’s property by auction and directs B to employ an auctioneer. B appoints C as the auctioneer.

Under the illustration to Section 194, C is not a sub-agent under B. Instead, C is A’s agent for conducting the auction.

The reason is that B was authorised to select another person to act for A, rather than to employ someone who would operate as B’s sub-agent.

Section 195: Duty when selecting another agent

Section 195 provides that an agent selecting another agent for the principal must exercise the same degree of discretion that a person of ordinary prudence would exercise in their own case.

If the original agent exercises that level of care in selecting the person, the original agent is not responsible to the principal for the selected agent’s acts or negligence under the provision.

Example: A authorises B to purchase a ship and permits B to appoint a ship surveyor. B selects a surveyor of good reputation after exercising reasonable care. If the surveyor negligently selects an unseaworthy ship, B is not responsible to A for the surveyor’s negligence under the statutory illustration, provided B exercised the required discretion.

Section 195 does not grant blanket immunity. The original agent must satisfy the statutory standard of care in making the selection.

Also Read: Implied Agency Under the Indian Contract Act, 1872

Difference Between a Sub-Agent and an Agent Under Section 194

Basis	Sub-agent	Agent appointed under Section 194
Appointment	Employed by the original agent	Selected by the original agent under authority to appoint an agent for the principal
Control	Acts under the control of the original agent	Acts as an agent of the principal for the entrusted business
Principal’s relationship	Depends on whether the sub-agent was properly appointed	Direct agency relationship arises for the entrusted part of the business
Relevant provision	Sections 191–193	Sections 194–195
Responsibility for acts	Governed principally by Sections 192 and 193	Depends on the direct agency relationship and applicable law
Example	An authorised sales agent appoints an assistant working under the agent’s control	A solicitor authorised to appoint an auctioneer selects an auctioneer to sell the principal’s property

The central distinction is that a sub-agent works under the original agent’s control, whereas a person appointed under Section 194 acts as an agent of the principal for the business entrusted to them.

Important Case Law on Sub-Agents

1. Kumar V. v. Padmanabha V. (2024)

In Kumar V. v. Padmanabha V., decided on 28 February 2024, the court considered the statutory framework governing sub-agents and the distinction between Sections 190–195 of the Indian Contract Act, 1872.

The decision reproduces and discusses the statutory provisions governing the appointment of sub-agents, the consequences of proper and improper appointments, and the distinction between a sub-agent and a person appointed as an agent of the principal under Section 194.

Legal principle: The legal consequences of delegation depend on the authority to appoint another person and on the nature of the relationship created by that appointment.

2. Sanjay Vaghji Rathod v. Government of India (2022)

In Sanjay Vaghji Rathod v. Government of India, decided on 11 August 2022, the Bombay High Court considered arguments concerning Sections 194 and 195, including whether a person appointed to perform work should be treated as a sub-agent or as an agent of the principal.

The case illustrates why the nature of the appointment and the authority under which it was made are important when determining the legal relationship between the parties.

Legal principle: A person appointed under authority to act directly for the principal may fall within Section 194 rather than being treated as a sub-agent under Section 191.

These decisions should be read in the context of their facts and procedural history. The statutory text of Sections 190–195 remains the primary starting point for analysing a sub-agency problem.

Practical Illustration: Who Is Liable for the Sub-Agent’s Mistake?

Suppose A appoints B to sell goods. B is authorised to appoint C to assist with the sale, and C is properly appointed as a sub-agent.

C negligently mishandles the goods, causing a loss to A.

Under Section 192, B is responsible to A for C’s acts. A’s rights against B will depend on the facts, the nature of the loss and the applicable legal principles. If C commits fraud or wilful wrong, Section 192 also expressly addresses C’s responsibility.

Now suppose B appoints C without any authority to delegate.

Section 193 changes the analysis. B may be responsible to A and third parties for C’s acts, while A is not automatically represented by or responsible for C’s acts merely because B appointed C.

Finally, if B was authorised to select a separate agent to act directly for A, Section 194 may apply instead. In that case, the selected person is A’s agent for the entrusted business, and B’s responsibility in selecting that person is governed by Section 195.

This illustration shows why the authority to appoint, the degree of control and the legal character of the appointment must be examined before determining liability.

Key Points for Law Students

• Section 190 establishes the general rule against delegation, subject to recognised exceptions.
• Section 191 defines a sub-agent as a person employed by and acting under the control of the original agent.
• Section 192 governs proper appointment and the resulting liability of the principal, original agent and sub-agent.
• Section 193 deals with sub-agents appointed without authority.
• Section 194 distinguishes a sub-agent from a person appointed to act directly as an agent of the principal.
• Section 195 requires the original agent to exercise the discretion of a person of ordinary prudence when selecting another agent for the principal.
• Proper appointment and unauthorised appointment can produce substantially different liability consequences.
• A sub-agent should not be confused with an independent contractor or a substituted agent; the actual legal relationship and statutory requirements must be examined.

Conclusion

A sub-agent is a person employed by and acting under the control of the original agent in the business of the agency. Sections 190–195 of the Indian Contract Act, 1872, regulate the appointment of sub-agents and determine the resulting responsibilities of the parties.

Section 190 establishes the general rule against delegation, while Sections 191–193 define a sub-agent and distinguish the consequences of proper and unauthorised appointments. Sections 194 and 195 address a different situation in which an agent selects another person to act directly for the principal.

For examinations, the most important distinction is between a properly appointed sub-agent under Section 192, an unauthorised sub-agent under Section 193, and an agent of the principal appointed under Section 194. Understanding these differences is essential to determining who is legally responsible for the acts of the person appointed.

Frequently Asked Questions (FAQs)

1. What is a sub-agent under the Indian Contract Act, 1872?

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.

2. Which sections deal with sub-agents?

Sections 190–195 of the Indian Contract Act, 1872, govern delegation, the definition of a sub-agent, liability arising from proper or unauthorised appointments, and the appointment of another agent for the principal.

3. Can an agent appoint a sub-agent without the principal’s permission?

An agent generally cannot delegate functions they have undertaken to perform personally. Section 190 recognises exceptions where trade custom permits delegation or the nature of the agency requires it. Express or implied authority may also be relevant.

4. Who is liable when a properly appointed sub-agent causes loss?

Under Section 192, the original agent is responsible to the principal for the sub-agent’s acts. The principal is represented by and responsible for a properly appointed sub-agent’s acts as regards third parties, while the sub-agent is responsible to the original agent except in cases of fraud or wilful wrong, when responsibility to the principal also arises.

5. What happens if an agent appoints a sub-agent without authority?

Under Section 193, the original agent is responsible for the appointed person’s acts both to the principal and to third parties. The principal is not automatically represented by or responsible for that person’s acts.

6. What is the difference between a sub-agent and an agent under Section 194?

A sub-agent acts under the control of the original agent. A person appointed under Section 194 becomes an agent of the principal for the part of the business entrusted to them.

7. What is the duty of an agent under Section 195?

The agent must exercise the degree of discretion that a person of ordinary prudence would exercise in their own case when selecting another agent for the principal.