Page 65 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes A Pakka adatia is a person who guarantees the performance of the contract, not only to his
principal but also to the broker (shroff) on the other side. A peculiarity of pakka adatia is that he
can himself perform the contract instead of offering it to the third party. A Katcha Adatia, on the
other hand, does not guarantee the performance of the contract. However, he guarantees the
performance on the part of the principal. Thus, he will be responsible to the other broker or
shroff who contracts on behalf of the other party, in case of non-performance by his principal.
An indentor is a commission agent, who for a commission procures a sale or a purchase on
behalf of his principal, with a merchant in a foreign country. Such agent gets commission at the
rates mentioned in the indent.

3.4.3 Non-mercantile or Non-commercial Agents

Some of the agents in this category are: wife, estate agent, counsels (advocates), attorneys. The
following principles provide guidelines as regards wife as agent of her husband: (i) If the wife
and husband are living together and the wife is looking for necessaries, she is agent. But this
presumption may be rebutted and the husband may escape liability if he can prove that (a) he
had expressly forbidden his wife from purchasing anything on credit or from borrowing money,
(b) goods, purchased were not necessaries, (c) he had given sufficient money to his wife for
purchasing necessaries, or (d) the trader had been expressly told not to give credit to his wife.
(ii) Where the wife lives apart from the husband, through no fault of hers, the husband is liable
to provide for her maintenance. If he does not provide further maintenance, she has an implied
authority to bind the husband for necessaries, i.e., he would be bound to pay her bills for
necessaries. But where the wife lives apart under no justifiable circumstances, she is not her
husband’s agent and thus cannot bind him even for necessaries.

3.4.4 Sub-agent and Substituted Agent (Ss. 190-195)

The general rule is that agent cannot appoint agent. The governing rule is enshrined in a maxim
‘a delegate cannot further delegate’. Agent being a delegate cannot transfer his duties to another.
The principle underlying the rule is that the principal engages agent ordinarily on personal
consideration and thus may not have the same confidence in the person appointed by the agent.
Hence, sub-agency is not generally recognised. However, s.190 deals with the circumstances as
to when and how far agent can delegate his duties. Agent may appoint agent in the following
circumstances: (i) where expressly permitted by the principal; (ii) where the ordinary custom of
the trade permits delegation; (iii) the nature of agency is such that it cannot be accomplished
without the appointment of a sub-agent; (iv) where the nature of the job assigned to the agent is
purely clerical and does not involve the exercise of discretion, e.g., if Anthony is appointed to
type certain papers, because of lack of time, he assigns the job to another equally competent
typist Bharat, the delegation is valid; (v) in an unforeseen emergency.
Under the above-mentioned circumstances stipulated by s.190, if agent appoints another person
in the matter of the agency, that other person may assume the position of either a sub-agent or
a substituted agent. Section 191 states that a sub-agent is a person employed by and acting under
the control of the original agent in the business of agency. Since the sub-agent is appointed by
the act and under the control of the agent, there is no privity of contract between the sub-agent
and the principal. The sub-agent, therefore, cannot sue the principal for remuneration and,
similarly the principal cannot sue the sub-agent for any moneys due from him. Each of them can
proceed against his immediate contracting party, viz, the agent except where the sub-agent is
guilty of fraud. In that case the principal has a concurrent right to proceed against the agent and
the sub-agent. A sub-agent properly appointed, however, can represent the principal and bind
him for his acts as if he were agent originally appointed by the principal. But where agent,
without having the authority to do so, has appointed a sub-agent, the principal is not represented

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