What went wrong
Where you went wrong is doing the
$ git add .
That adds everything, so also foo/bar, to the index of the current repository (ready to be committed thus).
Correct way
If you just don’t do that and continue with
$ git submodule add https://github.com/CarloWood/XYZ.git foo/bar
then that should work; this would detect that foo/bar is an already cloned
repository and add it to the current repository as a submodule.
Note that it is not needed to clone first. You explicitly say you already have done that, but for clarity for other readers I’d like to point out that if you omit the clone right before the git add . too (so there isn’t a foo/bar at all now) then the above git submodule add ... would see there isn’t anything yet and then simply clone it for you.
Note that there is a minor difference between methods. If you start with cloning then foo/.git will be a directory, while if you use git submodule add to do the cloning then this .git repository is put in .git/modules/foo of the parent project and foo/.git is a file containing the path to that. There is no real difference however as using a file for the .git to point anywhere else is generic and could be used anywhere; you can not conclude anything from .git being a file or directory.