Sub-Agents and Substituted Agents under Contract Act

Forums The Indian Contract Act, 1872 Sub-Agents and Substituted Agents under Contract Act

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  • #3382
    leaglesamiksha
    Keymaster

    The Indian Contract Act, 1872 deals with the topic of Agency in detail. Two peculiar sections use seemingly similar terms in relation to the agent. The terms are – ‘sub-agent’ and ‘substituted agent’, defined by Sec 191 and Sec 194 of the Act respectively.
    Ques: What is the difference between a ‘sub-agent’ and a ‘substituted agent’? Are these two different in the scope?

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    • #3383
      Intern
      Participant

      Define the rights and responsibilities of ‘Sub-Agents’ and ‘Substituted Agents’.
      Section 191 defines ‘Sub Agent’. Sub Agent is the agent of agent.
      Section 192 says that if the sub-agent is properly appointed then the principal would be represented by sub-agent and also responsible for his acts in regard to the third person. Even if the sub-agent is properly appointed, there is no privity of contract between him and the principal. Simple meaning sub-agent is not directly responsible to the principal but to the agent and the reason for this is that there is no contractual relationship between the duos (principal and sub-agent). But there is an exception to this rule that in case of tortuous acts like fraud or willful wrong committed by sub-agent, the principal will be responsible for it.
      Section 193 talks about when the sub-agent is appointed without authority. In such a case the principal is neither represented nor responsible for the acts of sub-agent.
      Section 194 defines ‘Substituted Agent’. Substituted Agent is the agent who substitutes the original agent.
      Section 195 says that while appointing a substituted agent, the agent should act in such a manner that a man with ordinary prudence would do in his own case.
      Both these sub-agents and substituted agents are appointed by the agent and not by the principal. But they are very different as stated earlier that the sub-agent is the agent of the agent but the substituted agent is the agent of the principal. For the act of sub-agent, the agent is responsible (except in the case of fraud or willful wrong, where sub-agent is directly responsible to the principal) but for the acts of a substituted agent, the principal is responsible toward the third person. After appointing sub-agent, the agent continues to be responsible for his acts to his principal but in the case of the substituted agent, as soon as the substituted agent is appointed, the original agent goes out of the picture.
      ~ CHETAN KUMAR

    • #3384
      Intern
      Participant

      A sub-agent has been defined by Section 191 of the Indian Contract Act. “A sub-agent is a person employed by and acting under the control of the original agent in the business of the agency)’.
      A substituted agent is defined by Section 194 thus, “Where an agent, holding an express or implied authority to name another person or act for the principal in the business of agency, has named another person accordingly, such person is not a sub- agent but an agent , but an agent of the principal for such part of the business of the agency as is entrusted to him.”
      Coming towards the difference part:
      A sub agent is responsible for all the acts of the original agent along with the fraud taken place or any willful wrong took place to the goods. On the other hand, substituted is only responsible to the principle alone.
      There is no direct contract between the sub- agent and the Principle whereas, there is direct contract between the substituted agent and the principle.
      The agent pays the remuneration or the commission to a sub-agent. But in the case of the substituted agent the principle directly makes the payment.
      The scope of the duty depends on the Agent and in the case of these two different agents yes definitely they both have different roles to present in case of sub agent he is responsible to his agent for any misleading in the contract whereas in the case of substituted agent he is directly responsible to the principle. A sub agent will not be sued for any fraud and will not pay to the principle.

      ~ Priya Singh

    • #3385
      Intern
      Participant

      1) Sub Agent:
      a) Control – A sub-agent is the agent of the original agent as he works under the control of the agent.

      b) Responsibility – A sub-agent is responsible for all the acts to original agent and for the acts of fraud and willful wrong to the principal.

      c) Contract – There is no direct contract between the sub-agent and the principal.

      d) Appointment – An agent appoints sub-agent only when he finds it necessary as per the custom of trade or the nature of agency.

      e) Liability – Sub-agent is liable to the agent.

      f) Remuneration to agents – The agent pays remuneration or commission to a sub-agent.

      g) Responsibility to 3rd Party – A principal is not responsible to the 3rd parties for the acts committed by the sub-agent provided he has not been appointed by the consent of the principal.

      2) Substitute Agent:
      a) Control – A substitute agent is the agent of the principal because he works under the control of the principal.

      b) Responsibility – A substitute agent is responsible to the principal alone.

      c) Contract – There is direct contract between the substitute agent and the principal.

      d) Appointment – A substitute agent is appointed by the agent when he has express or implied authority to do so from the principal.

      e) Liability – Substitute agent is liable to the principal.

      f) Remuneration to agents – The principal makes the remuneration or commission to the substitute agent.

      g) Responsibility to 3rd Party – The principal is bound to all the acts of a substituted agent in the same way and extent as he is liable to the acts of his agent.

      ~ Anushka Rai

    • #3386
      Intern
      Participant

      The difference can be studied on the basis of-:
       Appointed- A sub-agent is appointed by an agent whereas a substituted agent maybe appointed by an agent or principle himself.
       Responsibility-: A sub-agent is responsible to the original agent whereas a substituted-agent can be responsibe to the principle for all his acts.
       Direction and control-: Likewise a sub-agent works under the instructions and control of the agent but a substituted agent works under the control of principle.
       Privity of control-: A privity of control is made between the principle and the substituted agent, so both can sue each other. Whereas there is no privity of control between principle and the sub-agent.
       Liability-: The agent is responsible to the principle for the acts of the sub agent but he is not made liable for the acts of the substituted agent, stating that he has taken proper care in choosing them.
      Yes they are very much distinct in scope; sub agent has a wider scope than substituted agent.
      ~ Shruti Kulshrestha

    • #3387
      Intern
      Participant

      A sub-agent is an agent of the original agent while the Substituted Agent is the agent of the Principal.
      Following are the basis of the difference between the Sub-Agent & Substituted Agent –
      • Section
      Sub-Agent – Sub-Agent is stated under Section 191 of the Indian Contract Act, 1872.
      Substituted Agent – Substituted Agent is stated under Section 194 of the Indian Contract Act, 1872.
      • Meaning
      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.
      Substituted Agent – A substituted agent is a person who is appointed by the agent but works under the authority of the Principal.
      • Responsible for
      Sub-Agent – A sub-agent is responsible for the agent.
      Substituted Agent – A substituted agent is responsible to the principal.
      • Appointed by
      Sub-Agent – A sub-agent is appointed by the original agent.
      Substituted Agent – A substituted agent is appointed by the original agent on behalf of the Principal.
      • Acts under
      Sub-Agent – A sub-agent acts under the authority & control of the original agent.
      Substituted Agent – A substituted agent acts under the control & authority of the Principal.
      • Liability
      Sub-Agent – The principal cannot hold the sub-agent liable, except in case of fraud.
      Substituted Agent – The principal can hold the substitute agent liable.
      • Contractual Relation
      Sub-Agent – There is no privity of contract between sub-agent and principal.
      Substituted Agent – There is a contractual relationship between the substituted agent & the Principal.
      • Responsibility towards the third party
      Sub-Agent – Principal cannot be held responsible towards the third party for the acts of the sub-agent as the sub-agent works under the authority of the original agent.
      Substituted Agent – The Principal is held responsible towards the third party for the acts of the substituted agent as he was appointed on behalf of the Principal & also works under the authority of the Principal.

      Are these two different in the scope?
      Yes, Both the Sub-agent & substituted agent are different in the scope because Sub-Agent is the agent of the original agent, he works under the control of the agent & original agent is responsible to pay remuneration to him & the agent is liable for the acts of the sub-agent; while the Substituted agent is the agent of the Principal, he works under the authority of the Principal & Principal is responsible to pay remuneration to the substituted agent & Principal is liable for the acts of the substituted agent.
      ~ Ayush Patria

      • #3388
        Intern
        Participant

        As per the Sec 191 of Indian Contract act,
        A “sub-agent” is a person employed by, and acting under the control of, the original agent in the business of the agency.
        Whereas ‘Substitute agent’ has been defined in Sec 194 of Indian Contract Act as, Relation between principal and person duly appointed by agent to act in business of agency.
        When 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.

        A sub agent acts under the agent as per his orders and as his subordinate, whereas a substitute agent acts on the place of the main agent instead of him, he is not abide to work under the main agent unlike the sub agent.
        They both have different scope,
        Sub agent has a narrower scope as well as authority and works under the agent as per the hierarchy
        whereas the substituted agent has a wider scope as well as authority and does not work under the main agent but on his place

    • #3389
      Intern
      Participant

      A sub-agent is the agent of the original agent because he works under the control of the agent
      whereas, a substituted agent is the principal’s agent as he works under the control of the
      principal. A sub-agent is responsible to the original agent for all the acts and the acts of fraud or
      willful wrong to the principal. A substituted agent is responsible solely to the principal. No
      direct contract is there between the principal and the sub-agent whereas there is a direct
      contract between the principal and the substituted agent.
      An agent appoints a sub-agent only when he deems it important as per the nature of agency or
      the custom of trade. Whereas, a substituted agent is appointed by the agent when he has

      implied or express authority to do so from the principal. Sub-agent is liable to the agent. O the
      other hand, the substituted agent is liable to the principal.
      The agent pays commission or remuneration to a sub-agent. In the case of a substituted agent,
      the principal makes the payments.
      A principal is not responsible to the third parties for the acts committed by the sub-agent
      provided he has not been appointed by the principal’s consent. The principal is bound to all the
      acts of a substituted agent in the same way and extent as he is liable to the acts of his agent

    • #3390
      Intern
      Participant

      SUB AGENT:
      Section 191 of Indian contract Act, A “sub-agent” is a person employed by and acting under the control of the original agent in the business of the agency.

      CONTROL:
      Sub-agents work under the control of an agent

      CONTRACTUAL RELATIONSHIP:
      There is no contract between the sub-agent and the principal.

      LIABILITY:
      The sub-agent is cannot be held liable by the principal, except in case of fraud. Also, the principal and the sub-agent cannot sue each other directly

      RESPONSIBILITYAND REMUNERATION:
      The agent is responsible for the acts of the sub-agent and he can delegate his work to his sub-agent. But, the sub-agent is not entitled to get any remuneration from the principal.

      SUBSTITUTED AGENT:
      The substituted agent is a person named by the agent for the principal. He is an agent for a part of the agency entrusted to him. Here the agent must hold an implied or express authority from the principal to name another person act as an agency business source. So such person is an agent of principal for the part of the work entrusted to him.

      CONTROL:
      The substituted agent works under the control of the principal.

      CONTRACTUAL RELATIONSHIP:
      There exists a contractual relationship between the substituted agent and the principal.

      LIABILITY:
      A substituted agent can be held liable by his principle. Also, the principal and the substituted agent can sue each other.

      RESPONSIBILITY AND REMUNERATION:
      The agent is not responsible for the acts of the substituted agent and he cannot delegate his work to his substituted agent but, the substituted agent can get remuneration from his principal.

    • #3656
      leaglesamiksha
      Keymaster

      yes, sub-agent and substituted agent are in different scope. The main difference between them is as follow:
      Sub Agent:
      1. A sub-agent is an agent who operates under the supervision of the primary agent.
      2. The sub-agent and the principal do not have a direct contract.
      3. A sub-agent is liable for any acts committed by the original agent, as well as for acts of deception and wilful wrongdoing committed by the principal.
      4. Only when the custom of the trade or the nature of the agency requires it, can an agent designate a sub-agent.
      5. A sub-agent receives compensation or commission from the agent.
      6. If the sub-agent was not appointed with the primary’s approval, the principal is not liable to third parties for the activities of the sub-agent.
      7. The agent is responsible for the sub-agent.
      Substituted Agent
      1. Because he works under the direction of the principal, a substitute agent is known as the principal’s agent.
      2. Because he works under the direction of the principal, a substitute agent is known as the principal’s agent.
      3. A substituted agent is solely accountable to the principal.
      4. When the agent has express or implicit permission from the principal, he appoints a substitute agent.
      5. The substitute agent is compensated or paid a commission by the principal.
      6. The substitute agent is compensated or paid a commission by the principal.

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