Agency

OBLIGATIONS OF THE AGENT

(Art. 1884 – Art. 1909)

Art. 1884

Accepted agency
= agent is bound to carry out the agency
= agent is liable for damages if he does not carry out the agency
= if agent fulfills his duty, he is not liable personally

Effect of the death of principal

= agent is still liable to finish business
Already begun on the death of principal
Delay entail danger

Art. 1885

Rule if a person declines the agency

Agent = bound to observe the diligence of a good father of a

family in custody and preservation of the goods forwarded to him
by the owner until the latter should appoint an agent

Owner = as soon as practicable either appoint an agent or take charge of

the goods

Art. 1886

Advance of necessary funds

There is stipulation
Principal is bound to do so

Except = principal is insolvent

Art. 1887

Execution of agency
= agent shall act in accordance with the instructions of the principal
 Without instructions:
= agent shall do all that a good father of a family would do so as required
by the nature of the business

AUTHORITY INSTRUCTIONS

Principal affects only 3rd persons,

because if act is done outside the
Concern only the principal and agent
scope of the agent’s authority, the
principal is not bound

3rd person must verify or investigate the 3rd persons do not have to investigate or
authority verify the instructions

Principal cannot be held liable if agent does not follow principal’s instruction
except:

Where principal’s act have contributed to deceive a third person in good faith;
Where the limitations upon the power created by the principal counld not have been
known by a 3rd person;
Where the princiapl has place in the hands of the agent instrument signed by him in
blank.

Effect if agent follows instruction:

= agent cannot be held responsible for the failure of his principal to accomplish
the object of the agency unless:
Agent exceeded authority
Has acted with negligence, deciet or fraud

Example.

A authorized B to sell a parcel of land. A made it clear to B that he has to sell the
parcel of land only to a couple engaged to be married. B made a transaction with
X and Y, a couple. X and Y paid to B the whole amount for the parcel of land
owned by A. However, later X and Y found out that the land has already been
occupied and registered under the name of Wail. X and Y sued B. Will the action
prosper?

Art. 1888

When agency should not be carried out:

Manifestly result in loss

 Manifestly result to damages to the principal

Reasons:

Agent should exercise due diligence

Must presumably act for the benefit and not the detriment of the principal

Example:

A, residing in Manila, authorized B, who is in cebu, to shipped the goods

owned by A to Manila with the specific instruction that it should be shipped
through M/V Princess of the Orient on August 8, 2008. B, however, received a
report that a strong storm is coming on such week that the goods could only be
transported for Manila on the following week. B decided not to follow the
instrcution of A and had the goods transported only on August 15, 2008. By that
time, the prices of the goods had already depreciated by 30%. A sued B. Will B
be liable to A?

Art. 1889

Conflict of interest

= agent liable for damages if he prefers his own interest

Example:

A authorize B to sell his Partnership, Agency and Trust Book authored by

de leon. B also owned the same book. X showed his interest to B to buy
such kind of Book in the amount of P1500. B, sold his book to X. Whats
is the liability of B to A, if thereis?

Art. 1890

Agent empowered to borrow money

= agent may lend money to principal at the current rate of interest
Reason : no injury to principal

Agent authorized to lend money at interest

= agent cannot borrow without consent of the principal
Reason : the interest of the principal might be prejudice in case of
insolvency, not beeing a good borrower the agent is
Art. 1891

Duty of Agent

Render account of his transaction

Deliver to the principal whatever he may have received by virtue of agency
(even not owing to the principal)

Void stipulation
= exempting agent to render account
= against public policy
= conducive to fraud

Example:
A authorized B to sell a parcel of land owned by the former. A told B that
he can sell the land for the minimum amount of 1M and if B can sell the
same for more than 1M, B would get 10% of the excess as commission. B
transacted with X, a rich balik-bayan, who paid 2M for the said land. More
than that, X, very thankful to B, he gave the latter 500,000 as a
bonus/commission. Thereafter, B rendered accounting to A , turning over
the amount of 2M. B asks for his commission. In the meanwhile, A,
learned that X gave 500k to B and the same was not reported to him. A
refused to give the commission of B. B sued A. Would A be liable?

(Domingo vs Domingo, 42 SRCA 131)

= on account of breach of loyalty to principal, the forfeiture of

commissio will take place, even if the principal does not suffer any
injury by reason of such breach of loyalty. Indeed agent has an
absolute duty to make a full disclosure or accounting to his
principal of all transactions and material facts that may have some
relevance with the agency

Art. 1892 (BAR)

Appointment of Substitute for Agent

= if there is no prohibition
= if there is appointment even with prohibition, the same is VOID

Agent responsible for the acts of the substitute:

He has was not given the power to appoint one;

Given such power but without designating the person and the person appointed was
 notoriously incompetent or insolvent

Example:
A authorized B to sell his car. Even with A’s prohibition, B appointed C to
sell the car owned by A. C sold the car to X. Is the sale valid?

= No, all acts of the substitute shall be void.

Art. 1893

Principal can Sue the subtitute

Example:
A authorized B to sell his car. There is nothing in the contract prohibiting
B to appoint a substitute, B appointed C as a substitute. Suppose C
violated an instruction of A. Whom can A hold liable?

Answer: B and C

Since B is a good friend of A, the latter opted to sue C. C raised the

defense of privity of contracts, that A is not a party to the contract between
B and C. Is his defense tenable?

Answer : No, under Art. 1893

Art. 1894

Liability of two or more agents

= joint and personal
= not solidary liability
= except if expressly stipulated
= regards to liability to PRINCIPAL not 3rd person
Art. 1895

When solidarity has been aggreed

Each of the agents is responsible for the non-fulfillment of the agency
For the fault or negligence of his fellow agents
= except : fellow agent acted beyond his scope of duty

Example:
A authorized B and C to sell his Honda Vios car. True the fault of B, the
agency was not fulfilled. Can A sue C for damages?

Answer:
No, Art. 1894
 What if there is a stipulation in the contract of agency? Can A sue C for
damages?

Answer:
If B acted within the scope of his authority, C can be held liable.

If B instead of selling the Honda Vios of A, sold, the latters Mercedes

Benz, Can C be held liable to the actuations of B?

Answer:
No, B acted beyond the scope of his obligation.

Art. 1896

Liability of Agent for Interest

Sums he applied to his own use

= from the day on which he did so
Sum he owes after the extinguishment of the agency

Art. 1897

Agent has no personal liabilty unless:

Expressly binds himself
Exceeds the limits of his authority without giving such party sufficient notice of his
powers

Proper parties to a suit: = principal not agent unless: (above)

Art. 1898

= refers to liability of agent to 3rd person

Contract is VOID:

Agent contracts in the name of the principal

Exceed the scope of his authority
Principal does not ratify the contract
3rd party is aware of the limits of the powers granted by principal
(if 3rd party aware: see Art. 1911)

Agent will be held liable:

= he undertook to secure principal’s ratification

Example:
A authorize B to sell his Partnership, Agency and Trust Book authored by
de leon. B, however, sold A’s book on Insurance to X. Give status of
 sale?

Answer:
Valid, if X has no knowledge of B limitations. (Art. 1911)

Art. 1899

Effect of the ignorance of agent

= principal is bound

Art. 1900

Act within the scope of authority (as to 3rd person)

Within the terms of the power of attorney (written)
Even if the agent exceeded the limits of authority according to the understanding
between the principal and the agent

= applied only to written authority

Example:
A gave B a special power of attorney authorizing B to sell the properties
of A, in Cebu City, Mandaue and Lapu-lapu. However, A and B made an
agreement that B will sell only the property located in Mandaue City.
Now, B sold all 3 properties. Is the sale of all properties valid? Can A be
held liable?
Art. 1901

Effect of Ratification

Art. 1902

3rd person
= May require the presentation of the power of attorney or instructions

Private or secret orders and instruction

= do not prejudice 3rd persons who have relied upon the power of attorney
or instructions shown
Art. 1903

Commission Agent
= merchant or broker
= having the option of acting in his own name or in that of the principal

Commission Agent
= engaged in the purchase and sale for a principal of personal property
= for such purpose, it has to be placed in his possession and his disposal
 = has a relation as to his principal, buyer and sellers but also with the
property which constitute the object of transaction

Broker
= maintains no relation with the thing which he purchases or sells
= merely an intermediary between the seller and buyer
= he does not have either the custody or the possession of the thing that he
disposes of
= only function is to bring parties to the transaction

Art. 1904

Duty of the Commission Agent in goods belonging to different principal

Art. 1905

Sale on Credit = needs consent of the principal

If sold in credit:
Principal may demand payment in cash
Principal may ratify

Art. 1906

Duty of Commission agent on Sale on credit

= if not made : treated as Cash Basis
= not prejudice the 3rd person

Art. 1907

Guarantee commission
= del credere commission
= one where, in consideration, of an increased commission, the
factor or commission agent guarantees to the principal the payment
of debts arising through his agency

Art. 1908

Failure of the commission agent to collect

= damages
= except : exercise of due diligence

Art. 1909

Liability of agent : fraud and negligence