Semester III, Year 2

Subject: Contracts Act-II

SUBSTITUTED AGENT AND THE MAXIM OF ‘DELEGATUS NON POTEST

DELEGARE’- ANALYSIS THROUGH RELEVANT CASE LAWS

INTRODUCTION
The Latin Legal maxim delegatus non potest delegare is one of the important legal maxims in the
application of the contract of agency. The present study do not intend to deal with all the
characteristics of agency, but only the area of application of the above maxim in agency is
considered now. This maxim is mostly used in Constitutional and Administrative law and it states
that “one to whom power is delegated cannot himself further delegate that power” However,
subject to the provisions of the enabling Act.

In the Indian legal scenario, it came up first in A K ROY v. State Of Punjab, (1986) 4 SCC 326,
that sub delegation of delegated power is ultra vires to the act that enables it.

In other words, Any delegated power cannot be further delegated unless the delegating authority
expressly permits such delegation.
ETYMOLOGY OF THE MAXIM
Delegatus non potest delegare is a Latin Maxim. The English meanings of the words are given
below.

Delegatus = delegated

non = not

potest = can

delegare = delegate

This maxim means that a person to whom an authority or decision-making power has been
delegated to from a higher source, cannot, in turn, delegate again to another, unless the original
delegation explicitly authorized it.

Another usage of this maxing is delegata potestas non potest delegari. The English meanings of
the words are given below.

delegata = delegate

potestas = power

no = not

potest = can

delega = delegated

Thus, delegata potestas non potest delegari means delegated authority cannot be delegated.

AGENT AND PRINCIPAL

The concept of this maxim comes out from the basic terms of the Indian Contracts Act, 1872
(Agent and Principle). The Indian Contract Act, 1872 defines the terms “Agent” and “Principal”
as: “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 act is done, or who is so represented, is called the
“principal”. Agent and Principal are defined in Section 182 of the Indian Contracts Act, 1872 and
Principle.
MEANING OF AGENCY
The relationship between the principal and the agent is called ‘agency’. In this relationship the one
person (principal) employs another person (agent) to represent him or to act on his behalf, in
dealings with a third person. The law of agency is based on the maxim ‘qui facit per alium per
se’, that is, he who does anything through another does it himself. It means that an act done through
an agent has the same effect as if it were done by the principal himself.

The agent may be expressly or impliedly authorized to do an act on behalf of the principal. An
agent has large discretion, but he is bound to follow his principal’s instructions regarding his
dealings with third parties. Correspondingly, the principal is bound to accept the legal relation
created by the agent.

WHAT IS A SUB-AGENT
According to Section 191 of the Indian Contract Act, 1872 - A “sub-agent” is a person employed
by, and acting undue the control of, the original agent in the business of the agency. Sub-Agent
works under the control of the Agent. He is the agent of the Principle.

WHAT IS A SUBSTITUTED AGENT?

A Substituted agent is a person who is named by the Agent for performing such part of the business
of the agency as is entrusted to him. Substituted Agent works under the control of the Principle
and he is an agent of the agent.

CREATION CONTRACT OF AGENCY

Formation of an agency may require the following:

Express or implied contract– An agent can be hired indirectly or expressly by the principal. The
contract can be in writing or oral.

Necessity – a person acts in an emergency for another without express authority to do so.
By ratification: either an action committed by someone who had no previous authority to act or
an act that exceeded the authority given to an individual is given consent.

Nevertheless, Ratification is not lawful in the following situations:

If the person’s understanding of the facts of the case is skewed, and only half of them know items
on which they ratify.

An act committed by an agent on behalf of the principal has had an impact of damage or harm to
the person or violated any of his rights.

Through behavior or situation – estoppel – Whereby a person requires another to behave for him
to such a degree that a third party fairly assumes an arrangement between the two develops.

SOME FEATURES OF A CONTRACT OF AGENCY

• The principal should be competent to contract (Section 183)

Any person who is a major and having sound mind can employ an agent as given under Section
183. Thus it is clear that full contractual capacity is a must for a person to appoint an agent for
himself. Hence, a minor, lunatic, drunkard etc. cannot employ an agent for representing their
matters with third parties.

• The agent may not be competent to contract (Section 184)

According to Section 184, any person may be appointed as an agent. However, when a minor is
appointed as an agent, the principal is bound by the acts of the minor agent, but the minor is not
responsible to his principal for his acts.

• No consideration is necessary to create and agency (Section 185)

Generally, an agent is remunerated by way of commission for the services rendered by him, but
no consideration is immediately necessary at the time of his appointment. Though not formally
required, this Section cannot be used to deprive an agent of his actual consideration. In Mohd.
Moinuddin v. Mir Ahmed, it was held that an agent cannot be deprived of his remuneration
where an agreement to work without remuneration has not been proved.
HOW FAR CAN POWERS BE DELEGATED OR SUB-DELEGATED?
Delegated or Sub-delegated powers with prior authorization from the parent authority are valid but
power is not unleashed but limited. Just like delegation, sub-delegation is also subject to the
doctrine of excessive delegation.

For example, this doctrine of excessive delegation is used by courts to measure if the extent of
power transferred is outside the scope or if it’s too broad. In the case of Mahe Beach Trading Co.
v. Union Territory of Pondicherry. 1996 , 3 SCC 741 it was held that “The delegated authority
must only implement stated policy, but if there is an abdication of legislative power by transferring
policy formulation role to the delegate, then there is excessive delegation, which will be
invalidated by the court

In simple words, the power of policy formulation lies with the legislature as conferred by the
Constitution of India. The legislature can delegate powers to frame minor changes to bring these
policies into effect but cannot transfer the whole power of policy formulation to some other body
that is not legislature. That would be too wide delegation and hence invalid under the doctrine of
excessive legislation.

WHO MAY BE AN AGENT?

Sec.184 lays down the concept of who may be an agent. The agent may not be competent to
contract. As between the principal and the third person any person may become an agent, but no
person who is not of sound mind can become an agent, so as to be responsible to his principal
according to the provisions in that behalf therein.

Ordinarily, an agent occupies no personal liability while contracting for his principal and therefore,
it is not necessary, that he should be competent to contract.

Thus, a person can contract with a minor agent but the minor agent will not be responsible to the
principal.

According to Section 185 of Indian Contract Act, generally an agent is remunerated by a way of
commission for services rendered, but no consideration is immediately necessary at the time of
appointment.
KINDS OF AGENTS
Following are kinds of agents.

1. Del-credere agent

A del-credere agent is an agent, who guarantees to his principal that person to whom he sells will
pay for that, if he will not pay, he will be liable. It is a type of mercantile agent.

2. Factor

A factor is an agent to whom goods are entrusted for sale.

3. Mercantile agent

A mercantile agent is the person who has authority to sell the goods or to buy goods or to raise
money on the security of goods.

4. Banker

The relationship between banker and his customer is that of debtor and creditor.

5. Auctioneer

An auctioneer is an agent who is authorized to sell goods to the highest bidder at a public sale for
commission.

6. Sub-agent

A sub-agent is a person employed by and acting under the control of the original agent in the
business of agency.

7. Broker

A broker is an agent employed for buying or selling the goods or other property. He simply acts
between the two parties.

8. Indenter

He is an agent who, buys or sells on behalf of his principal.

9. Advocate
An advocate also acts an agent. He appears on behalf of principal in the court.

10. Co-agent

Who acts jointly is called co-agent

DIFFERENCES BETWEEN AN SUB- AGENT AND A SUBSTITUTED

AGENT
When an agent who has the authority, names another person to act on behalf of the principal in the
business of the agency, then such a person is called a substituted agent and not a sub-agent. Thus
a contractual relation comes in existence between the principal and the substitute agent and
therefore the substituted agent is directly liable to the principal to perform his duties.

SUB-AGENT SUBSTITUTED AGENT

A substituted agent is only named by the

An agent appoints a sub-agent. Hence, a
agent but is under the control of the
sub-agent is under the control of an agent.
principal.

A substituted agent acts independently for

A sub-agent works for under the agent. his principal and doesn’t come under the
control of the agent.

A sub-agent cannot be held liable by the A substituted agent can be held liable by his
principal. However in case of fraud, he may principal as the former comes under the
be held liable control of the latter
 A sub-agent is not eligible to any A substituted agent can ask for his
remuneration from the principal. It will be compensation and remuneration from his
the agent who is responsible principal.

No contractual relationship exists between a A contractual relationship exists between the

sub-agent and the principal. substituted agent and the principal.

An agent is not liable for the acts of

An agent is liable for the acts of the sub-
substituted agent as the former works
agent,
directly for the Principal

TERMINATION OF AGENCY

Section 201 Termination of agency

An agency is terminated by the principal revoking his authority, or by the agent renouncing the
business of the agency; or by the business of the agency being completed; or by either the principal
or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent
under the provisions of any Act for the time being in force for the relief of insolvent debtors.

A contract of agency is a species of the general contract. As such, an agency may terminate in the
same way as a contract is discharged except where the agency is irrevocable. The relation of
principal and agent can only be terminated by the act or agreement of the parties to the agency or
by operation of law. “An agency, when shown to have existed, will be presumed to have continued,
in the absence of anything to show its termination, unless such a length of time has elapsed as
destroys the presumption”. The agent’s duty to act on behalf of the principal comes to an end on
the termination of agency. The timeframe for termination of an agency can be stipulated by a
particular statute or instrument. In such a case, if the instrument specifies in plain and unambiguous
terms that an agency will terminate without action on the part of the principal or agent upon the
expiration of the time specified in the instrument, the agency will in fact, terminate. If, after the
expiration of the time so stipulated in the contract, the parties continue their relationship as
principal and agent, a rebuttable presumption is raised that their relations are governed by the
original contract and that the contract is renewed for a similar period. For instance, if the parties
entered into a contract for one year and continued to act under the contractual terms after one year,
the court will presume that the parties in fact intended to keep the contract alive for another year.

On the other hand, if the parties did not fix any appropriate time for the termination of contract,
the contract is deemed to be terminated after a reasonable time. “What constitutes a reasonable
time during which the authority continues is determined by the nature of the act specifically
authorized, the formality of the authorization, the likelihood of changes in the purposes of the
principal, and other factors”. Moreover, the burden of proving the termination or revocation of an
agency rests on the party asserting it.

“Parol evidence cannot be admitted to add another term to an agreement even if the writing
contains nothing relating to the particular provision to which the parol evidence is directed”. Thus,
courts will not admit parol evidence while determining the duration of an agency contract where
the written contract is viewed as integrated, or unambiguous, or both. An agency continuing for a
reasonable time can be terminated by one party only after giving sufficient notice to the other
party.

AGENT'S RESPONSIBILITY FOR SUB-AGENT

A commission agent for the sale of goods, who properly employs a sub-agent for selling his
principal's goods, is liable to the principal for the sub-agent's fraudulent disposition of the goods
within the course of his employment. The last clause of this section, giving a principal in case of
fraud or wilful wrong the right of recourse to the sub-agent, does not exclude the principal's normal
right of recourse to his agent. In fact, the total effect of the section is to give an option to the
principal where a fraud or wilful wrong is committed by the sub-agent.

Unauthorized sub-agent:- Preceding section dealt with the position when a sub-agent is duly
appointed. This section deals with a situation arising in case a sub-agent is appointed without
authority. In such an event, the principal is not bound by the acts of the sub-agent nor is the latter
liable to the principal. In such an event, the agent is the principal of the sub-agent and the agent is
responsible both to the principal and the third party.

FACTORS LEADING TO THE GROWTH OF DELEGATED

LEGISLATION
Pressure Upon Parliamentary Time

As there is a marvellous increment in the functions of the state, the main part of enactment is great
to the point that it isn’t feasible for the council to dedicate adequate time to examine every one of
the issues in detail. Accordingly, the governing body passes skeleton enactment containing general
approach and enables the executive to fill in the subtleties in this way giving fragile living creature
and blood to the skeleton with the goal that it might live by making vital guidelines, guidelines,
bye-laws and so forth.

Technicality

Sometimes the topic of enactment is of a specialized sort and requires meeting of specialists.
Individuals from Parliament might be best legislators however they are not specialists to manage
very specialized issues which are required to be taken care of by specialists. In such cases, the
administrative power might be appointed to specialists to manage the specialized issues.
Enactment concerning nuclear vitality, atomic vitality, gas, medications or power might be cited
as delineations of such details. Some things are best handled by people who have great experience
in their respective domains, not always can our politicians think like people who have been
committed to their craft for a really long time.

Flexibility

Parliament does not work constantly. At the season of passing any administrative establishment,
it is preposterous to expect to anticipate every one of the possibilities beforehand. In this manner,
control is essentially required to be given to the Executive to meet the unanticipated possibilities.
In this manner, control is fundamentally required to be given to the Executive to meet the
unanticipated possibilities or to modify new conditions emerging often. While parliamentary
procedure includes delays, assigned enactment offers quick apparatus for correction. Police
guidelines and certain financial guidelines identifying with bank rate, imports and fares, outside
trade and so on are cases of such circumstances.

Experimentation

Ordinary legislative process suffers from the limitation of lack of viability and experimentation.
Delegated Legislation enables the executive to experiment. The method permits rapid utilisation
of experience and implementation of necessary changes in the application of the provisions in the
light of such experience. If the rules and regulations are found to be satisfactory, they can be
implemented successfully. On the other hand if they are found to be defective, the defects can be
cured immediately.

Emergency

In the midst of crisis, fast activity is required to be taken. A crisis may ascend by virtue of war,
rebellion, floods, pandemics, financial downturn and preferences. Administrative procedure isn’t
prepared to accommodate earnest answer for meeting the circumstance. It is, along these lines, that
the official must have a control that might be utilized in a flash. Appointed Legislation is the main
helpful cure.

Confidential Matters

In some situations, the public interest demands that the law must not be known to anybody until it
comes into operation. Rationing schemes or imposition of import duty or exchange control are
such matters.

CASE LAWS RELATED TO DELEGATUS NON POTEST DELEGARE

Ultra Tech Cement Limited vs. The Union of India and Ors., the Kerela HC held that sub-
delegation refers to the further delegation of the same powers that was originally delegated by the
legislature. In this context, if the law confers power on the central government to make rules on
behalf of the legislature, the CG cannot further delegate the power to any other officer unless that
parent act permits such delegation.

In the case of The State vs Kunja Behari Chandra And Ors., the Patna HC while referring to
Delegatus Non Potest Delegare has held that the legislative power of the Government is vested
exclusively with the legislature and any action abdicate or transfer such power shall be void. In
other words, the state can never transfer the power of policy-making or formulation of laws to any
agency other than the legislature. Any such delegation shall be unconstitutional.

In Allingham v. Minister of Agriculture, under the Defence Regulations, 1939, the Committee was
authorised by the Minister of Agriculture “to give such directions with respect to the cultivation,
management or use of land for agricultural purposes as he thinks necessary.” The committee sub-
delegated its power to its Subordinate Officer, who issued a direction, which was challenged.
Holding the direction ultra vires, the Court ruled that the sub-delegation of power by the committee
was not permissible.

In States v. Bareno the enabling Act empowered the President to make regulations concerning
exports and provided that unless otherwise directed the functions of President should be performed
by the Board of Economic Welfare.

CONCLUSION
The practice of sub-delegation has been subjected to considerable criticism by jurists. The
position is well established that the maxim ‘Delegatus Non-Potest Delegare’ applies in the area
of delegated legislation also and sub-delegation of power is not permissible unless that power is
conferred either expressly or impliedly. As the appointment of a sub agent itself is a further
delegation of the delegated authority of an agent, all legal questions surrounding sub agency is a
demarcated area of the operation of the legal maxim delegatus non potest delegare. As there are
as much exceptions as per the facts, circumstances, customs and usages of a transaction,
delegation and the maxim in discussion are subject to factual analysis also as well as legal
analysis. Having a history of a few centuries, this maxim has undergone profound evolutions and
is no more a maxim of absolute application. Precedents rule more in this area than legislations.
 ACKNOWLEDGMENT AND DECLARATION

I humbly submit that all the references and links used to research for this topic has been duly
acknowledged and recognized under the column of ”Bibliography”. Furthermore, this project is
for no award or degree purpose in any other institution rather than Dr. Ram Manohar Lohiya
National Law University, Lucknow and has been created for the sole purpose of academic check
in the session of 2020-21. I thank and acknowledge Prof. (Dr.) Vegesna Visalakshi (Professor,
Contracts Act II and Head of Department) for giving me a chance to research on this topic and to
all the sources which turned out to be helpful and informative during project making. I would
also like to extend my gratitude towards the research websites and researchers, articulator and
illustrators who helped me in the formation of contention between the headings and content of
this project.

Submitted By- Yash Bhatnagar

Second Year (Semester 3) Student, Section B (BA LL.B)

Dr. Ram Manohar Lohiya National Law University

Lucknow, Uttar Pradesh

Enrollment Number: 200101157

Submitted To- Prof. Vegesna Visalakshi

(Professor and Head of Department, Contacts Act II)

Dr. Ram Manohar Lohiya National Law University

Lucknow, Uttar Pradesh