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CMA Intermediate · Business Laws and Ethics · Special Contracts - Indemnity and Guarantee; Bailment and Pledge; Laws of Agency

Mehta, a Mumbai merchant, authorises Joshi to recover money due to Mehta from Kapoor & Co. and gives Joshi implied authority to engage a lawyer. Joshi instructs Desai, a solicitor, to file proceedings against Kapoor & Co. Under Section 194 of the Indian Contract Act, 1872, Desai is:

Desai is Mehta's agent for the legal proceedings. Joshi had authority, express or implied, to name another person, and under Section 194 a person so named is not a sub-agent but an agent of the principal for the part of the business entrusted to him.

  1. AJoshi's sub-agent, so Mehta cannot sue Desai directly
  2. BMehta's agent for the legal proceedingsCorrect
  3. CNot an agent of anyone, merely a service provider to Joshi
  4. DJoshi's agent, with Joshi alone liable for Desai's acts

Explanation

Joshi had authority to name another person to act for the principal. Following Section 194 and its illustration (b), the person named is not a sub-agent but the agent of the principal for the part of the business entrusted to him. Hence Desai is Mehta's agent for the proceedings.

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