Legal Memorandum: Agent's Delegation of Authority to a Subagent

Issue: Under the laws of the state of Michigan, may an agent delegate authority to act for his or her principal to a subagent without the consent of the principal?

Under the common law, an agent cannot delegate authority obtained under contract with his principal to a subagent, without the principal’s express agreement to employ that agent.*FN1  The rule may be invoked by a principal whenever a subagent seeks to hold it responsible for promises made to it by the agent.  Anno:  Real-Estate Broker’s Right, As Against His Employer, To Commission On Sale By Subagent, 3 ALR2d 532, 533-37 (1949).  Thus, agency agreements do not create any rights in third parties even where the agent owes a duty under the main contract that it hires a subagent to perform.  Koppers Co v Garling & Langlois, 594 F2d 1094, 1098-99 (CA 6, 1979).

For example, in Thrailkill v Crosbyton-Southplains R Co, 246 F 687 (CA 8, 1917), the defendant hired a corporation as its agent to sell a tract of land.  The agent then contracted with a third party to pay a commission upon the sale of the land.  The court held there was no implied contract between the defendant landowner to pay the third party’s commissions.  Id. at 690.  Thus, at common law a subagent engaged by an agent may not recover his compensation from the alleged principal unless the agent was specifically authorized to procure that subagent, and the principal is specifically given notice of the subagency.  Benham v Ferris, 159 Mich 632; 124 NW 538, 538 (1910).  Kinkead v Hartley, 143 NW 591, 595 (Iowa, 1913).