Understanding the Concept of Delegation of Authority
In business and legal relationships, a principal often appoints an agent to act on their behalf. This relationship of agency is built upon trust, confidence, and personal competence. However, a fundamental question arises — can an agent further delegate this authority to another person? The concept of delegation of authority addresses this issue under the Indian Contract Act, 1872.
According to the principle “Delegatus non potest delegare”, which means “a delegate cannot further delegate”, an agent who has been entrusted with authority by the principal must personally carry out the duties assigned to him. This principle ensures accountability and protects the interests of the principal.
However, like many rules in law, this principle also has well-defined exceptions. There are specific situations where an agent can lawfully delegate his authority to another person, known as a sub-agent or substituted agent. Understanding these exceptions is essential to grasp how modern business and commercial transactions operate effectively.
Legal Basis of Delegation under the Indian Contract Act, 1872
The concept of delegation of authority is primarily governed by Sections 190 to 195 of the Indian Contract Act, 1872.
Section 190 – Rule Against Delegation
Section 190 clearly states that “an agent cannot lawfully employ another person to perform acts which he has expressly or impliedly undertaken to perform personally,” unless permitted by:
- The principal,
- The nature of the agency, or
- Customs of trade.
This section codifies the general rule that the principal appoints the agent for his skill, integrity, and confidence, and expects personal performance.
Section 191 – Sub-Agent
A sub-agent is a person employed by, and acting under the control of, the original agent in the business of the agency. He represents the principal in dealings with third parties but is responsible to the original agent.
Section 194 – Substituted Agent
A substituted agent is appointed by the agent with the authority of the principal. Once appointed, the substituted agent becomes directly responsible to the principal and not to the original agent.
Together, these sections establish the legal foundation for when and how delegation of authority is permitted in Indian law.
When Can an Agent Delegate His Authority? – Recognized Exceptions
Although the general rule prohibits delegation, there are specific exceptions where delegation becomes legally valid. These exceptions arise out of practicality, custom, and the nature of certain professions.
1. Express Permission by the Principal
When the principal expressly allows delegation, the agent may appoint another person to act on his behalf. The agent’s authority in such cases comes directly from the principal’s consent.
Example:
If A, a businessman, appoints B as his agent to manage a branch office and expressly authorizes him to employ clerks and assistants, B can legally delegate certain tasks.
2. Implied Authority from the Nature of Agency
If the nature of the agency implies that delegation is necessary, the law permits it. For instance, in large-scale transactions or technical matters, the agent cannot perform all duties personally.
Example:
A solicitor (lawyer) handling a property sale may delegate some parts of the work, like valuation or documentation, to his juniors or clerks, as such delegation is implied by the nature of the legal profession.
3. Delegation Permitted by Custom of Trade
When it is customary in a particular trade or business to employ sub-agents, the delegation becomes lawful. This exception acknowledges business realities.
Example:
In shipping or export-import trade, it is a common custom for agents to employ clearing or forwarding sub-agents. Such delegation is valid as per trade usage.
4. Acts of Ministerial Nature
An agent may delegate purely mechanical or ministerial acts that do not involve discretion or judgment. These include routine or clerical tasks necessary for efficiency.
Example:
An estate agent authorized to sell land may employ a clerk to type agreements or maintain records, as these tasks are ministerial.
5. Emergency Situations
When an emergency arises, and it becomes impossible for the agent to act personally, he may delegate authority to another competent person to protect the principal’s interests.
Example:
If A is an agent managing a ship and falls seriously ill during a voyage, he may delegate his responsibilities to another officer to safeguard the goods and the vessel.
6. When Principal’s Interest Requires It
If the principal’s interest would otherwise be jeopardized, the law allows delegation for the sake of necessity. This ensures that the business or transaction continues without harm to the principal.
Example:
If an agent managing a factory must leave suddenly due to a family emergency, he may appoint a temporary manager to prevent loss to the business.
7. Appointment of Substituted Agent under Section 194
When the principal authorizes the agent to appoint another person, the newly appointed person becomes a substituted agent who is directly accountable to the principal, not to the original agent.
Example:
A instructs his lawyer B to appoint an expert in foreign law to handle a case abroad. The expert becomes a substituted agent directly answerable to A.
Legal Consequences of Unauthorized Delegation
If an agent delegates authority without legal justification, the delegation is unauthorized and invalid. The consequences include:
- Principal is not bound by the acts of the sub-agent.
- Agent is personally liable to the principal for any loss or damages.
- The sub-agent has no privity of contract with the principal.
This means that any unauthorized act done by the sub-agent will not bind the principal, and the agent will bear full responsibility.
Real-Life Example: Case Law Illustration
In the case of John McCain v. Phipps (1876), it was held that an agent who was authorized to sell property could not delegate his authority to another person without the consent of the principal. The sale conducted by the sub-agent was declared invalid because it violated the rule of personal performance.
Similarly, in De Bussche v. Alt (1878), the court recognized an exception where delegation was allowed due to the custom of trade in maritime business. The agent was permitted to appoint a sub-agent to manage a ship’s cargo abroad because it was practically necessary and customary.
These cases highlight the delicate balance between trust-based personal duties and practical business needs under the law of agency.
Mnemonic to Remember When Delegation Is Allowed – “E.N.C.T.M.E.S.”
To easily remember the exceptions where delegation of authority is valid, use the mnemonic: “E.N.C.T.M.E.S.”
- E – Express permission by the principal
- N – Nature of agency implies delegation
- C – Custom of trade permits it
- T – Tasks are ministerial or clerical
- M – Mandated by emergency
- E – Essential for principal’s interest
- S – Substituted agent appointment authorized
Mnemonic Sentence:
“Every New Case Teaches My Efficient Sub-Agent.”
This phrase helps recall that delegation is lawful only when justified by the nature of work, trade customs, or the principal’s consent.
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