The consignee is exempt from liability arising from the loss of consigned goods if such loss

was due to fortuitous event. – Austria v CA

An agent is required to act with the care and diligence of a good father of a family and
becomes liable for the damages, which the principal may suffer through its non-performance. PNB’s
power to collect was expressly made irrevocable so that BPW could very well refuse to make
payments to ATACO itself, and reject any demands by the surety. – PNB v Manila Surety

Articles 1891 and 1909 demand the utmost good faith, fidelity, honesty, candor, and fairness
on the part of the agent (real estate broker) to his principal, the vendor. Hence, an agent who takes
a secret profit in the nature of a bonus, gratuity, or personal benefit from the vendee, without
revealing the same to the principal, is guilty of a breach of his loyalty.
The agent thus forfeits his right to collect commission from the principal, even if the principal
does not suffer any injury by reason of such breach of fidelity, or that he obtained better results from
it. – Domingo v Domingo

The agent is not only estopped from denying his principal's title to the property, but he is also
disabled from acquiring interests therein adverse to those of his principal during the term of the
agency. – Severino v Severino

The commission agent cannot, without the express or implied consent of the principal, sell
on credit. Should he do so, the principal may demand from him payment in cash, but the commission
agent shall be entitled to any interest or benefit, which may result from such sale. - Green Valley
Poultry v IAC

An agent or attorney-in-fact empowered to pay the debts of the principal, and to employ
lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services
rendered in the interests of said principal, and may satisfy them by an assignment of a judgment
rendered in favor of said principal;
When a person appoints two attorneys-in-fact independently, the consent of the one will not
be required to validate the acts of the other unless that appears positively to have been the
principal's intention. - Municipality of Iloilo v. Evangelista

VII. Responsibility for acts of substitutes

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person
appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be void. (1721)

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may
furthermore bring an action against the substitute with respect to the obligations which the latter
has contracted under the substitution. (1722a)

An agent may lawfully appoint a substitute if the principal has not prohibited him from doing
such. The principal shall be bound by the acts of the sub-agent if it is shown that the agent who
appointed such subagent did not act in excess of his authority in doing so. – Del Rosario v La Badenia
 A mere submandatory or sub-agent is not obliged to fulfil more than the contents of the
mandate, and is also NOT required to answer for damages caused to the principal. – International
Films v Lyric Films

VIII. What are the liabilities of agents to third parties?

A. Agent acting within scope of authority
Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal.

In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent. (1717)

Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers. (1725)

Art. 1899. If a duly authorized agent acts in accordance with the orders of the principal, the
latter cannot set up the ignorance of the agent as to circumstances whereof he himself
was, or ought to have been, aware. (n)

B. Agent acting outside of authority

Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers. (1725)

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of the powers granted by the principal.
In this case, however, the agent is liable if he undertook to secure the principal's
ratification. (n)

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable
with the agent if the former allowed the latter to act as though he had full powers. (n)

1. With notice to third parties

Art. 1901. A third person cannot set up the fact that the agent has exceeded his
powers, if the principal has ratified, or has signified his willingness to ratify the agent's
acts. (n)

2. Without notice to third parties

 When an agent negotiates a loan in his personal capacity and executes a promissory
note under his own signature, without express authority from his principal, giving as
security therefore real estate belonging to the letter, also in his own name and not in the
name and representation of the said principal, the obligation do constructed by him is
personal and does not bind his aforesaid principal. – PNB v Agudelo

Absent any proof that the agents exceeded the limits of their authority, they cannot
be held personally liable on contracts with 3rd persons, made in the name of the
principal. – Philippine Products v Primateria

The rule is that "want of authority of the person who executes an obligation as the
agent or representative of the principal will not, as a general rule, affect the surety’s
liability thereon, especially in the absence of fraud, even though the obligation is not
binding on the principal." – NPC v National Merchandising

An agent cannot be permitted to intercept and appropriate the thing which the
principal is bound to deliver, and thereby making performance by the principal
impossible. The agent must be precluded from doing any positive act that could prevent
performance on the part of his principal. Else, such a situation would be an exception to
the general rule that, as regards a contract entered into by the agent with a 3rd person
on behalf of his principal, an action cannot be maintained against the agent. – PNB v
Welch, Fairchild

The fact that the agent has also bound himself to pay the debt does not relieve from
liability the principal for whose benefit the debt was incurred. The individual liability of
the agent constitutes a further security in favor of the creditor and does not affect or
preclude the liability of the principal. The law does not provide that the agent cannot
bind himself personally to the fulfilment of an obligation incurred by him in the name and
on behalf of his principal. On the contrary, it provides that such act on the part of an
agent would be valid. – Tuazon v Orosco

The acts of an agent beyond the scope of his authority do not bind the principal,
unless the latter ratifies the same expressly or impliedly. Furthermore, when the third
person knows that the agent was acting beyond his power or authority, the principal
cannot be held liable for the acts of the agent. If the said third person is aware of such
limits of authority, he is to blame, and is not entitled to recover damages from the agent,
unless the latter undertook to secure the principal's ratification. – Cervantes v CA

C. Agent acting in his own name; exception

Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal.

In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.
 The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent. (1717)

When the agent transacts business in his own name, it shall not be necessary for him to state
who is the principal and he shall be directly liable, as if the business were for his own account, to the
persons with whom he transacts the same – Smith Bell v Sotelo

In order to bind the principal by a mortgage on real property executed by an agent, it must
upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will
bind the agent only. It is not enough merely that the agent was authorized to make the mortgage, if
he has not acted in the name of the principal. Neither is it sufficient that in the mortgage the agent
describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own
name and has set his own hand and seal to the mortgage. – Rural Bank of Bombon v CA

Art. 1717 of the old Civil Code says that generally: when an agent acts in his own name, the
principal shall have no right of action against the person with whom the agent has contracted. It
admits of an EXCEPTION: in cases involving things belonging to the principal. In such cases, the agent
is bound to the principal although he does not assume the character of such agent and appears to be
acting in his own name. - Sy Juco vs. Sy Juco

When things belonging to the principal, the agent's apparent representation yields to the
principal's true representation and that, in reality and in effect, the contract must be considered as
entered into between the principal and the third person. Corollarily, if the principal can be obliged to
perform his duties under the contract, then it can also demand the enforcement of its rights arising
from the contract. - NFA v IAC

When Lincallo (agent) transferred his mining claims to Gold Star, even without disclosing that
Jimena was part owner, he acted as agent of Jimena with respect to Jimena’ share of the claims Art.
1883 applicable. While there is no privity of contract between 3rd party (Gold Star) and principal
(Jimena) in this case, the common subject matter supplies the juridical link. - Gold Star Mining Co v
Lim Jimenez

It is not enough merely that the agent was in fact authorized to make the mortgage, if he has
not acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the
agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his
own name and has set his own hand and seal to the mortgage. This is especially true where the agent
himself is a party to the instrument. – Far East Bank v Spouses Cayetano

IX. What are the obligations and liabilities of principals to agents?

A. Advance/Reimburse
Art. 1912. The principal must advance to the agent, should the latter so request, the sums
necessary for the execution of the agency.
Should the agent have advanced them, the principal must reimburse him therefor, even if
the business or undertaking was not successful, provided the agent is free from all fault.
The reimbursement shall include interest on the sums advanced, from the day on which
the advance was made. (1728)

Art. 1914. The agent may retain in pledge the things which are the object of the agency
 until the principal effects the reimbursement and pays the indemnity set forth in the two
preceding articles. (1730)

Art. 1918. The principal is not liable for the expenses incurred by the agent in the following
cases:

(1) If the agent acted in contravention of the principal's instructions, unless the
latter should wish to avail himself of the benefits derived from the contract;

(2) When the expenses were due to the fault of the agent;

(3) When the agent incurred them with knowledge that an unfavorable result
would ensue, if the principal was not aware thereof;

(4) When it was stipulated that the expenses would be borne by the agent, or that
the latter would be allowed only a certain sum. (n)

B. Indemnify
Art. 1913. The principal must also indemnify the agent for all the damages which the
execution of the agency may have caused the latter, without fault or negligence on his
part. (1729)

C. Solidary Liability
Art. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences of the
agency. (1731)

D. Compensation
Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the
contrary. (n)

E. Agent’s lien
Art. 1914. The agent may retain in pledge the things which are the object of the agency
until the principal effects the reimbursement and pays the indemnity set forth in the two
preceding articles. (1730)

At the time this agency was revoked, the defendant agent had already earned the
commissions agreed upon, and could not be deprived thereof by the arbitrary action of the plaintiff
in declining to execute the contract of sale. It would be the height of injustice to permit the principal
then to withdraw the authority and terminate the agency as against an express provision of the
contract, and perchance reap the benefit of the agent’s labors, without being liable to him for his
commissions. – Macondray v Sellner

For an agent to be entitled to commission, the means employed by him and his efforts must
result in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as
broker.
 "One who has employed a broker can himself sell the property to a purchaser whom he has
procured, without any aid from the broker." – Danon v Brimo