DEFINITION OF AGENT AND PRINCIPAL
The Indian Contract Act, 1872 defines the terms “Agent” and “Principal” as: “An “agent” is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the “principal”.”
MEANING OF AGENCY
The relationship between the principal and the agent is called ‘agency’. In this relationship the one person (principal) employs another person (agent) to represent him or to act on his behalf, in dealings with a third person. The law of agency is based on the maxim ‘qui facit per alium per se’, that is, he who does anything through another does it himself. It means that an act done through an agent has the same effect as if it were done by the principal himself.
The agent may be expressly or impliedly authorized to do an act on behalf of the principal. An agent has large discretion, but he is bound to follow his principal’s instructions regarding his dealings with third parties. Correspondingly, the principal is bound to accept the legal relation created by the agent.
SOME FEATURES OF A CONTRACT OF AGENCY
The principal should be competent to contract (Section 183)
Any person who is a major and having sound mind can employ an agent as given under Section 183. Thus it is clear that full contractual capacity is a must for a person to appoint an agent for himself. Hence, a minor, lunatic, drunkard etc. cannot employ an agent for representing their matters with third parties.
The agent may not be competent to contract (Section 184)
According to Section 184, any person may be appointed as an agent. However, when a minor is appointed as an agent, the principal is bound by the acts of the minor agent, but the minor is not responsible to his principal for his acts.
No consideration is necessary to create and agency (Section 185)
Generally, an agent is remunerated by way of commission for the services rendered by him, but no consideration is immediately necessary at the time of his appointment. Though not formally required, this Section cannot be used to deprive an agent of his actual consideration. In Mohd. Moinuddin v. Mir Ahmed, it was held that an agent cannot be deprived of his remuneration where an agreement to work without remuneration has not been proved.
Concept of co-agents
When two or more people are appointed to act as agents for one principal, they are called Co-agents. In the absence of a contract to the contrary, an authority given to two or more agents is presumed to be joint authority and not individual authority. Hence, the principal will be bound by his co-agents’ act only when they both agree in the same manner to an act authorised to be done by them.
Concept of co-principals
When an agent is appointed by two or more principals they are called as co-principals. In such cases, the agent is liable to all the co-principals jointly. He is not bound to account separately to any one of them.
Extent of agent authority (Sections 188 and 189)
An agent having authority to do a work has power to do every lawful act which is necessary to do such work (Section 188). In times of emergency, the agent has additional authority to do all such acts, which are needed for protecting the principal from loss (Section 189).
DELEGATION OF AUTHORITY
Meaning of “delegatus non potest delegare”
An agent cannot delegate his powers or duties to another without the express authority of the principal, except in certain cases. This is based on the maxim “delegatus non potest delegare”, that is, “a delegate cannot further delegate.” An agent, being himself the delegate of his principal, cannot pass on that delegated authority to someone else.
Exception to “delegatus non potest delegare”
However, there are certain exceptions to this rule and they are:
- Where the principal has expressly permitted delegation of such power.
- Where the principal has impliedly, by his conduct, allowed such delegation of authority,
- Where by the ordinary custom of trade a subagent may be employed.
- Where the very nature of agency makes it necessary to appoint a subagent. For example, a manager of a shop may employ sales assistant.
- Where unforeseen emergencies arise rendering appointment of the sub-agent necessary.
Differences between an agent and a sub agent
|An agent is appointed by a principal and is under his control.
|A sub-agent is appointed by an agent and is under the control of the agent.
|An agent acts under the principal.
|A sub-agent acts under an agent.
|A privity of contract exists between a principal and an agent.
|No privity of contract exists between a principal and a sub-agent.
|An agent can ask for remuneration from the principal.
|A sub-agent cannot ask for remuneration from the principal.
Differences between a sub agent and a substituted agent
When an agent who has the authority, names another person to act on behalf of the principal in the business of the agency, then such a person is called a substituted agent and not a sub-agent. Thus a contractual relation comes in existence between the principal and the substitute agent and therefore the substituted agent is directly liable to the principal to perform his duties.
|An agent appoints a sub-agent. Hence, a sub-agent is under the control of an agent.
|A substituted agent is only named by the agent but is under the control of the principal.
|A sub-agent works for under the agent.
|A substituted agent acts independently for his principal and doesn’t come under the control of the agent.
|A sub-agent cannot be held liable by the principal. However in case of fraud, he may be held liable
|A substituted agent can be held liable by his principal as the former comes under the control of the latter
|A sub-agent is not eligible to any remuneration from the principal. It will be the agent who is responsible
|A substituted agent can ask for his compensation and remuneration from his principal.
|No contractual relationship exists between a sub-agent and the principal.
|A contractual relationship exists between the substituted agent and the principal.
|An agent is liable for the acts of the sub-agent,
|An agent is not liable for the acts of substituted agent as the former works directly for the Principal
 A.I.R. 1965 A.P. 409
Author: Aditi Shanmugam,
Chettinad School of Law, 2nd year/ Student