Chapter X - Agency
Section 195
Section 195: Prudent selection of another agent
An agent selecting another agent for the principal must exercise ordinary prudent discretion.
On this page
Need advice on Section 195?
This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
In selecting such agent for his principal, an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own case; and, if he does this, he is not responsible to the principal for the acts or negligence of the agent so selected.
Illustrations
(a)A instructs B, a merchant, to buy a ship for him. B employs a ship-surveyor of good reputation to choose a ship for A.
The surveyor makes the choice negligently and the ship turns out to be unseaworthy and is lost. B is not, but the surveyor is, responsible to A.
(b)A consigns goods to B, a merchant, for sale. B, in due course, employs an auctioneer in good credit to sell the goods of A, and allows the auctioneer to receive the proceeds of the sale. The auctioneer afterwards becomes insolvent without having accounted for the proceeds. B is not responsible to A for the proceeds.
Rule and business relevance
If the selecting agent meets that standard, the section excludes responsibility to the principal for the selected agent’s acts or negligence. The focus is the prudence of selection.
Limits and related provisions
A poor outcome alone does not establish careless selection, but reputation and suitability should be evidenced. This is not immunity for the selecting agent’s own lack of prudence.
Hypothetical business example
Hypothetical example: An authorised representative selects a reputable specialist after reasonable checks. Later negligence by the specialist is distinguished from negligence in selecting that specialist.
Practical decision flow
Identify the selection task and available candidates.
Record suitability and reputation checks reflecting ordinary prudence.
Separate selection conduct from the appointee’s later acts.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Identify the selection task and available candidates.
- Record suitability and reputation checks reflecting ordinary prudence.
- Separate selection conduct from the appointee’s later acts.
Avoid
- A poor outcome alone does not establish careless selection, but reputation and suitability should be evidenced. This is not immunity for the selecting agent’s own lack of prudence.
Glossary
- Prudent discretion
- The care in selection an ordinarily prudent person would exercise in their own case.
- Selection responsibility
- Responsibility for the choice, distinct from every later act of the selected agent.
Frequently asked questions
Is the selecting agent always liable for the appointee’s negligence?
No, if the statutory prudent-selection standard was met.
What should be documented?
The reasons and checks supporting the selection.
Does the protection excuse negligent selection?
No. It depends on exercising the required discretion.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026