Agency and Sub-Agency Contracts

A person, X is located in New Delhi and he wants to sell of his property that's located in Gurgaon (NCR). For this purpose he asked Y to help him in doing all that which was needed to ensure that X gets a good price for his property and it is sold off appropriately. Y in turn suggested X that Z should be also involved in helping him auction the property for X, to which X agreed. As a result Y involved Z. In light of the aforesaid facts, and relevant statutory provisions, of Indian Contract Act, what type of contracts exists between X, Y and Z? Is it of agency or sub-agency between the three parties? Also mention relevant case-laws.

Asked on November 14, 2013 in agency law.
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1 Answer(s)

An agency is a consensual relationship created by law where the principal gives authority to an agent to act to deal with a third party on his behalf.A subagent is a person to whom the agent delegates as his/her agent.  If an agent feels that the appointment of subagent is necessary for the proper transaction that is committed to the agent, then the agent has an implied authority to make such appointments.[1]

If any damage results from the conduct of such subagent, the agent is only responsible in case he has not exercised due care in the selection of the subagent.[2]Whereas, if the agent employs a subagent on his own account to assist him in the work, then there is no privity between such subagent and the principal.[3]It was observed in that if an agent is authorized by owners to sell certain land, and if he authorizes a subagent to perform the same, then the sale made by such subagent will be binding upon the owners. [4]

Here Y had appointed Z on his own risk and hence there is no privity between Z and X. Y is the agent of X and Z is the subagent that is decided by Y. The relevant statutory provisions in the Indian Contract Act 1872 are Section 182 which defines agent while Section 184 states who can be an agent .Section 191 gives the definition of sub agent.



[1] Consolidated Underwriters Ins. Co. v. Landers, 285 Ala. 677 (Ala. 1970)

[2] McKnight v. Peoples-Pittsburgh Trust Co., 360 Pa. 290 (Pa. 1948)

[3] Baker-Riedt Motor Co. v. Moore, 93 Okla. 153 (Okla. 1923)

[4] Shaw v. O’Byrne, 64 Utah 139 (Utah 1924)

Answered on November 20, 2013.
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