Delegation of authority means to give authority for conducting certain work to another person from the authority holders. The appointment of an agent is a form of delegation of authority. In other words, the agent works under the delegated authority on behalf of his principal. Generally the delegated authority can not be delegated again to the other without consent of the principal. Like wise, the legal provision of Nepal Contract Act has made the provisions under the section 58 that the agent has to obtain consent of the principal before delegating power to sub agent.
Exceptions of the general rule of delegation
There are some exceptions to this general rule. In the following cases the agent can delegate his authority to another or he can appoint a sub-agent and bind the principal.
- Where the principal has expressly permitted delegation of such power.
- Where the principal has impliedly, by his conduct allowed such delegation of authority. Where the principal knows that the agent intends to delegate his authority but doesn't object to it.
- Where the ordinary custom of trade sub-agent may be employed. Stock exchange member brokers generally appoint clerks to transact business on behalf of their client.
- Where the very nature of agency makes it necessary to appoints a sub-agent. For illustration a manager of a shop may employ sales assistant.
- Where unforeseen emergencies arises rendering appointment of the sub-agent is necessary.
- Sub-agent and substitute agent: In Nepalese Contract Act has not any provision about the substitute agent. If an original agent appoints an agent in his placed is known as substituted agent. After appointing such substitute agent then original agent walks out of the scene. The original agent must act with reasonable care in selecting a substituted agent. If he makes the selection carelessly, he becomes liable to the principal for the negligence of the agent so selected.
Nepalese contract Act 2056 has not defined the form substituted agent but the Indian Contract Act 1872 has defined it under Section 194 as a person appointed by the agent according to the express or implied authority of the principal to act on behalf of principal in the business of agency.
Sub-agent and substituted agent
A sub-agent is a person employed by and acting under the control of the original agent in the business of the agency. Thus, a person employee by an agent is called a sub-agent. A sub-agent acts under the control of original agent as for the relation in between themselves is that of agent and principal but the original agent acts as principal for the sub-agent. He has no independent power to work. The sub-agent is liable to the agent. Remuneration or commission to a sub-agent to is paid by the agent.
- Substituted agent:
When an agent has an express or implied authority of his principal to name another person to act for the principal and agent names another person accordingly, such person is not sub-agent but substituted agent of the principal. He has independent power to work. The substituted agent is liable to the principal. The remuneration or commission to a substituted agent is paid by the principal.