Understanding the Role of an Agent
In the world of business and commerce, agents play a vital role in connecting principals with third parties. The Law of Agency, under the Indian Contract Act, 1872, governs this relationship between the principal and the agent. According to Section 182 of the Act, 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 an act is done is called the principal.
This relationship is based on trust, confidence, and personal skill. When a principal appoints an agent, it is often because of the agent’s personal ability, discretion, or reputation. Therefore, the general rule is that the agent must perform his duties personally and cannot delegate his authority to someone else. This rule is famously known as the principle of “Delegatus Non Potest Delegare,” meaning a delegate cannot further delegate.
This essay discusses the rule that an agent shall not delegate his authority, its legal basis, exceptions, illustrations, and judicial interpretations under the Indian Contract Act, 1872.
Legal Provision: The Principle Under Section 190 of the Indian Contract Act, 1872
The Indian Contract Act, 1872, under Section 190, lays down the fundamental rule that an agent cannot lawfully employ another person to perform acts which he has expressly or impliedly undertaken to perform personally, unless the nature of the agency or the custom of trade permits such delegation.
This section emphasizes that the authority of an agent is personal. When a principal appoints an agent, it is assumed that he trusts that particular person’s judgment, skill, or experience. The agent, therefore, cannot substitute another person to carry out those responsibilities unless the law or the principal allows it.
The rule is designed to protect the principal’s interest, ensuring that his business is conducted by the person he actually appointed, not by an unknown or untrusted third party. Thus, under ordinary circumstances, if an agent delegates his duties without authorization, the principal is not bound by the acts of the sub-agent.
Reason Behind the Rule – Personal Trust and Confidence
The primary reason for this rule lies in the fiduciary nature of the agency relationship. A contract of agency is built on mutual trust, where the principal relies on the personal competence, honesty, and discretion of the agent.
For example, if a principal appoints an agent to negotiate a business deal or purchase property, it is presumed that the agent’s personal judgment and skill are crucial to the transaction. If that agent delegates his authority to another person, it would violate the trust between the principal and agent, potentially exposing the principal to risk, fraud, or loss.
This is why the rule “Delegatus Non Potest Delegare” acts as a safeguard against unauthorized substitutions. It ensures that the principal’s confidence and contractual expectations are respected throughout the agency relationship.
Exceptions to the Rule: When Delegation Is Allowed
Although the general rule prohibits delegation, the law recognizes certain exceptions where delegation by an agent is lawful and valid. These exceptions are based on practicality and necessity.
According to Sections 190–195 of the Indian Contract Act, 1872, an agent may appoint a sub-agent or substitute agent under the following situations:
1. Express Permission by the Principal
If the principal expressly allows the agent to appoint another person to act on his behalf, the delegation becomes lawful.
For instance, if A authorizes B to appoint another person to manage a branch office, B can legally delegate that authority.
2. Implied Authority
Sometimes, the nature of the business implies the necessity of delegation. For example, in large organizations or international operations, it is impractical for one agent to perform all duties personally.
3. Custom of Trade
In certain trades, it is customary for agents to employ sub-agents. For instance, stockbrokers, clearing agents, or shipping agents often act through sub-agents. If such a custom exists, the delegation is considered valid.
4. Acts That Are Ministerial or Mechanical
If the delegated task is purely clerical or mechanical, such as signing routine documents or delivering goods, delegation is allowed. These acts do not require personal judgment or discretion.
5. Emergencies
If an emergency arises where the agent must delegate authority to protect the principal’s interest, such delegation is lawful. For example, if a shipment must be handled immediately and the agent is unavailable, appointing a sub-agent is valid.
6. Appointment of a Substitute Agent (Section 194)
Under Section 194, an agent with authority to name another person to act for the principal may appoint a substitute agent. Here, the relationship is directly between the principal and the substitute agent, not between the original agent and sub-agent.
Liability in Case of Unauthorized Delegation
When an agent unlawfully delegates his authority without the principal’s consent or legal justification, the consequences are serious. The principal is not bound by the acts of the unauthorized sub-agent, and any losses caused due to such delegation must be borne by the agent.
Under Section 193, if the sub-agent acts improperly, the original agent is responsible to both the principal and third parties. The sub-agent has no direct relationship with the principal in such cases and cannot claim any rights against him.
This ensures accountability and prevents agents from carelessly or dishonestly transferring their powers to others.
Judicial Interpretation
Courts have consistently upheld this principle while recognizing legitimate exceptions. In De Bussche v. Alt (1878), the English Court stated that while an agent cannot ordinarily delegate his authority, in cases where delegation is necessary or customary, it may be justified.
Similarly, in Pannalal Jankidas v. Mohanlal (1951 AIR SC 144), the Supreme Court of India emphasized that an agent who appoints a sub-agent without authority acts beyond the scope of his power, making the principal not liable for the sub-agent’s acts.
These judgments reinforce the balance between legal principle and commercial practicality.
Real-Life Example
Imagine that A, a company owner, appoints B as his agent to negotiate and finalize contracts with suppliers because of B’s expertise in market analysis. Without A’s knowledge, B delegates this task to C, who lacks the same experience and makes poor contractual decisions, leading to losses.
Here, since B was specifically trusted by A to use his personal skill, delegating authority to C was unauthorized. Therefore, A is not bound by the contracts made by C, and B is liable for the resulting loss.
However, if A had expressly allowed B to hire assistants or if the business custom permitted such delegation, then B’s appointment of C would have been valid.
Mnemonic to Remember the Rule and Exceptions: “P-I-C-M-E-S”
Use the mnemonic “PICMES” to easily recall the rule and exceptions where delegation is allowed:
- P – Permission by Principal (Express authority)
- I – Implied Authority (Nature of business requires it)
- C – Custom of Trade (Delegation common in the trade)
- M – Ministerial Acts (Mechanical or clerical tasks)
- E – Emergency Situations (Necessity to protect principal’s interest)
- S – Substitute Agent (Sec. 194) (Lawful appointment with principal’s consent)
Mnemonic Sentence: “Principals In Commerce Must Ensure Supervision.”
This reminds you that delegation is prohibited unless it fits PICMES, ensuring trust and supervision in every agency relationship.
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