MODULE: LAW ON SALES, AGENCY, AND CREDIT TRANSACTION

CHAPTER 7: OBLIGATIONS OF THE PRINCIPAL

Obligation of the principal

1. To comply with all the obligations which the agent may have contracted within the scope of his authority;
2. To advance to the agent, should be latter to request, the sums necessary for the execution of the agency;
3. To reimburse the agent for all advances made, even if the business was not successful, provided the
agent is free from all fault;
4. To indemnify the agent for all the damages which the execution of the agency may have cause the latter,
without fault or negligence on his part; and
5. To be bound for any obligation wherein the agent has exceeded his power if he ratifies such obligation
expressly or tacitly

Acts which binds the principal even if the agent acted beyond his powers
1. Where the principal allowed the agent to act though he had full powers (agency by estoppel)
2. Where the limitations upon the power created by the principal could not have been known by a 3 rd person;
and
3. Where the principal has placed in hands of the agent instruments signed by him in blank.

The principal is not liable for expenses incurred by the agent

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 ensure, if the principal
was not aware thereof; or
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.

Incompatible contracts with agent and principal

When two person’s contract with regard to the same thing, one of them with the agent and the other with principal,
and the two contracts are incompatible with each other, the prior date shall be preferred, without prejudice to the
provision of the following rule:
1. If the object id movable – the ownership shall belong to:
 The first possessor in good faith;
 In the absence thereof, the contract with a prior date

2. If the object is immovable – the ownership shall belong to:

 First registrant in good faith;
 If none, to the first possessor in good faith;
 In the absence of the both, the one who present the oldest title in good faith.

Reference:

THE LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS DE LEON 2010

For further discussion please refer to the link provided:

Articles 1910 – 1918: https://youtu.be/JneHUK0Rbyc

Obligations of an Principal Agent: https://youtu.be/xhqx_fWdbAo
Rights and Duties of the Principal: https://youtu.be/THlz7C1clTY

MODES OF EXTINGUISHMENT OF AGENCY

Modes of extinguishment of the agency (E-D-W-A-R-D)

 MODULE: LAW ON SALES, AGENCY, AND CREDIT TRANSACTION

1. Its revocation by the principal

2. Withdrawal of the agent
3. Death, civil interdiction, insanity, or insolvency (DICI) of the principal or of the agent
4. Accomplishment of the object or purposes of the agency
5. Dissolution of the firm or corporation which entrusted and accepted the agency
6. Expiration of the period for which the agency was constituted

Other modes of extinguishment of agency:

7. Mutual consent;
8. Loss of the subject matter of agency;
9. Change of law
10. Outbreak of war if inconsistent with agency

Requisites for the revocation of the agency

1. In must not be done in bad faith
2. In the proper cases, it must be brought to the attention of specified third person.

Manners of implied revocation

1. Appointing another agent for the same business or transaction;
2. Directly managing the business entrusted to the agent unless the motive is only to help the agent in the
management of the business;
3. Granting a special power of attorney as regards the same business to another agent, where he had
previously granted a general power of attorney to one agent.

Rules on revocation by principal and withdrawal by agent at will

As a general rule, the principal may revoke the agency at will. The agent can also put to an end the agency at
will.

Exception to the rule that the principal can revoke the agency at will
1. When the agency is “coupled with an interest” ( the agent has acquired some interest of his own n the
execution of the authority granted him in addition to his mere interest in the contract of employment with
the resulting gains)
2. When a bilateral contract depends on the agency
3. When the agency is the means of fulfilling an obligation already contracted

Case 12
Panday borrows P20,000 from Andak. Panday pledges his ring to Andak as security for the debt and gives the
latter the power to dispose of it should former default. Ca he revoke the agency at will?

No, this is an agency coupled with an interest. Here, Panday cannot revoke the agency at will for Andak
has an interest in the ring.

Withdrawal by agent
The agent may withdraw from the agency by giving due notice to the principal. If the principal suffer any damage
by reason of the withdrawal, the agent must indemnify him therefore, unless the agent should base his withdrawal
upon the impossibility of continuing the performance of the agency without grave detriment if himself.
The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal
had reasonable opportunity to make the necessary step to meet the situation.

Death of the principal

The death of the principal extinguishes the agency, except:
1. When the agency has been constituted in the common interest of the principal and agent
2. When the agency has been constituted in the interest of a third person who has accepted the situation in
his favor (stipulation pour autri)

Act done by agent after the death of the principal

Anything done by the agent in good faith after the death of the principal is valid and binding if:
1. The agent acted with knowledge of the death of the principal; and
2. The third person who may have contracted with the agent was not aware of the death of the principal at
the time he contracted with said agent.
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3. Death of the agent

4. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures
as the circumstances may demand in the interest of the latter.
 MODULE: LAW ON SALES, AGENCY, AND CREDIT TRANSACTION

Reference:

THE LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS DE LEON 2010

For further discussion please refer to the link provided:

Articles 1919 – 1932: https://youtu.be/6vAH7qOWOvE

Termination of Agency: https://youtu.be/IyzRtGiYyuw
Modes of Extinguishment of Agency: https://youtu.be/hgm4nY8Q4Q0