Can a Third person (purchaser) deal with a REN instead of a REA? Can the principal reject the contract by saying that buyer did not deal with his REA but his REN who went missing?
S.145 Representation of principal by sub-agent properly appointed.
In S.145, Contracts Act, 1950 it says the sub-agent (REN) if property appointed, is as good as the agent (REA) himself. What this means is when a buyer calls up this REN and deals with him, it is as good as if he has directly dealt with the REA.
However, how about the relationship of this REN to the principal (seller)? Is the REN as good as the REA in relating to the principal?
The answer is NO! REN is not equivalent to the REA in legal position to the principal. This is specified in S.145 (3).
(3) A sub-agent is responsible for his acts to the agent (REA), but NOT to the principal, except in case of fraud or wilful wrong.
What this means is REN can legally comes into binding contract with a Third Party (buyer) representing the Principal, but the duty of agency relationship with the principal is in his employer (REA). He is not legally in agency contract with the principal, his REA (boss) is.
Unless, there is fraud and wilful wrong. This means when this REN cheated the Third Party then, this Sub-agent (REN) is responsible for the fraud personally, although the principal cannot turn away, claiming innocent.
For example, a REN took some booking fee and went missing. The buyer (Third Party) went to look for the seller claiming that he has booked the property. The Seller (principal) is held in binding contract with the buyer. The fraud (money cheated) is not the problem of the Third Party. It is the responsibility of the Seller (principal) to honour this binding contract.
This case will continue.