Legal and Regulatory der the control and supervision of the former (i.e., original agent).

). As per Section 191, ‘a sub-agent

Environment of is a person employed by, and acting under the control of, the original agent in the business of the
Business agency’. Thus, in a way, the sub-agent is the agent of the original agent.
Notes Impact of the appointment of a sub-agent  The impact or legal effect related to sub-agents de-
pends on whether their appointment is proper or improper. Sections 192 and 193 of the Contract Act
have defined the legal course in both the circumstances, which have been discussed subsequently.
In case of proper appointment  In such a case, as per Section 192, the following consequences
arise:
1. So far as regards third persons, the principal is bound to and responsible for the acts of
the sub-agent, as if he were an agent originally appointed by the principal.
2. The agent is responsible to the principal for the acts of the sub-agent. For example, a
commission agent for the sale of goods who appoints a sub-agent for selling the goods
of his principal shall be liable to the principal for any misappropriation of sale proceeds
by the sub-agent during the course of such sub-agency. There is no privity of contract
between the principal and the sub-agent and, therefore, the principal cannot sue the
sub-agent for negligence. In Calico Printers’ Association vs Barclay’s Bank11, a sub-agent
failed to insure the principal’s goods, which were destroyed in fire. But the principal could
not recover against the sub-agent.
3. The sub-agent is responsible for his acts to the [original] agent, but not to the principal, ex-
cept in case of fraud or wilful misconduct. Thus, this provision gives the principal, in case of
fraud or wilful wrong, the right of recourse to the sub-agent. But in such a case the principal
has the choice to sue either the agent or the sub-agent [Nensukhdas vs Birdichand 12]. This is
so because the provision does not in any way exclude the principal’s normal right of recourse
to his agent [Section 192].
In case of improper appointment  In terms of Section 193, improper appointment of a sub-agent
results in the following consequences:
1. The principal is not responsible for the acts of the person so employed (i.e., sub-agent).
2. The agent is liable for the acts of the sub-agent both to the principal and to third party. In
other words, the agent is the principal of the sub-agent, both to the principal and the third
party.
3. The sub-agent is not at all responsible to the principal.

Substituted agent
A substituted agent is defined by Section 194 thus: ‘Where an agent, holding an express or implied
authority to name another person to act for the principal in the business of the agency, has named
another person accordingly, such person is not a sub-agent, but an agent of the principal for such
part of the business of the agency as is entrusted to him’.
The analysis of this section shows that substituted agents are different from sub-agents. A sub-
agent cannot replace a substituted agent. A substituted agent, in fact, is the agent of the principal.
The reason behind the same is quite obvious. The moment the substituted agent is appointed,
privity of contract is established between him and the principal, and the original agent ceases to
remain in the picture.
In selecting a ‘substituted agent’ for his principal, the agent ought to exercise as much care as
a man of ordinary prudence would exercise in his own case. Examples to this effect are presented
in Box 6.11.

Rights of Agent
The agent enjoys the following rights against the principal:
1. Right to remuneration
2. Right of retainer
3. Right of lien
4. Right to be indemnified against consequences of lawful acts
5. Right to be indemnified against consequences of acts done in good faith
Self-Learning 6. Right to compensation.
110  Material