Chapter 2 OBLIGATIONS OF AN AGENT Art. 1884.

The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his nonperformance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger. Specific obligations of the agent: (1) To carry out the agency in accordance with its terms (2) To answer for the damages which through his nonperformance the principal may suffer (3) To finish the business already begun on the death of the principal, should delay entail any danger (4) To observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed (5) To advance the necessary funds should there be a stipulation to that effect (6) To act in accordance with the instructions of the principal (7) Not to carry out the agency if its execution would manifestly result in loss or damage to the principal (8) To answer for damages should he prefer in case of conflict, his own interests to those of the principal (9) Not to loan to himself without the consent of the principal when he has been authorized to lend at interest (10) To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency (11) To distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same kind and mark, which belong to different owners (12) To be responsible in certain cases for the acts of the substitute appointed by him (13) To pay interest on funds he has applied to his own use (14) To inform the principal, where an authorized sale of credit has been made, of such sale (15) To bear the risk of collection, should he receive also on a sale, a guarantee commission (16) To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become due (17) To answer for his fraud or negligence Obligation to carry out the agency a person is free to refuse to be an agent once he accepts the agency, he is bound to carry it out in accordance with its terms in good faith to follow the instructions, if any, of the principal if he fulfill his duty: he is not personally liable unless he expressly binds himself

Obligation to answer for damages agent fails to carry out agency liable for the damage which the principal may suffer general rule in contracts: any person guilty of fraud, negligence, or delay in the fulfillment of his obligation, or who in any manner fails to comply with the terms thereof shall by liable for damages betrays the confidence reposed on him principal must prove his damages and the amount thereof Obligation to finish business upon principals death death of the principal extinguishes agency agent has obligation to conclude the business already begun on the death of the principal, only should delay entail any danger agency also remains in full force if upon the death of the principal if it has been constituted in the common interest of: the principal and the agent a third person who has accepted the stipulation in his favor Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent. The owner shall as soon as practicable either appoint an agent or take charge of the goods. Obligations of person who declines an agency diligence of a good father of a family based on equity owner must act as soon as practicable: to appoint an agent to take charge of the goods Art. 1929 obligation of an agent who withdraws from an agency Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so except when the principal is insolvent. general rule: principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency (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.) stipulation: agent shall advance the necessary funds exception: when the principal is insolvent

based on the principals obligation to reimburse the agent insolvency of principal extinguished agency in certain cases: principal is not liable for the expenses incurred by the agent (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 principals 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.)

where agent is privileged to do so to protect his security interest in the subject matter of the agency

Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal When agent should not carry out agency agent is not bound in all cases to carry out the agency in accordance with the instructions of the principal agent must not carry out the agency if its execution would manifestly result in loss or damage to the principal duty of the agent is to render service for the benefit of the principal and not to act to his detriment agent must exercise due diligence in carrying out the agency Art. 1889. The agent shall be liable for damages if, there being a conflict between his interest and those of the principal, he should prefer his own Obligation not to prefer his own interest to those of principal (1) reason for the rule agent is required to observe utmost good faith and loyalty towards his principal rule is the same whether agency is onerous or gratuitous (2) basis of the rule to shut the door against temptation on his part to ensure that he places the rights and welfare of his principal above his own in performing his agency preventive, not remedial operates however fair the transaction may have been and however free from every taint of moral wrong Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been empowered to lend money at interest, he cannot borrow it without the consent of the principal. Obligation not to loan to himself requires special power of attorney expressly empowered to borrow money: agent may be lender at current rate of interest current rate of interest has to be paid in any case if the loan were obtained from a third person expressly authorized to lend money: agent cannot be borrower without principals consent agent may prove to be a bad debtor possible conflict of interest may be prejudicial to principal

Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. AUTHORITY extent of limitation of the agents power to represent the principal 3 persons dealing with an agent do so at their own risk and are duty bound to investigate his authority; if the act is done outside the scope of his authority the principal is not bound
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INSTRUCTIONS directions which the principal may give the agent to follow in the discharge of his duties as such agent rd 3 persons need not verify or investigate the instructions of the principal since they concern only the principal and agent

Obligation to act in accordance with principals instructions fundamental duty of the agent: to obey all the reasonable and lawful instructions given to him by his principal agent shall put his own will under the direction of another if agent exceeds, violate, or fails to act upon such instructions liable to the principal for any loss or damage resulting therefrom Rule where there are no specific instructions agent shall do all that a good father of a family would do as required by the nature of the business if he act in good faith and with due care not liable for losses due to errors or mistakes in judgment as regards matters which he is vested with discretionary powers Right to disobey principals instructions where is calls for the performance of illegal acts

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void. Obligation to render accounts duty of the agent: to account for and to deliver to the principal all money and property which may have come into his hands by virtue of or as a result of the agency immaterial whether such money or property is the result of the performance or violation of the agents duty agent cant be permitted to derive advantage from his own neglect or violation of duty if agent fails to deliver and converts or appropriates for his own use the money or property belonging to the principal liable for estafa (intentional deception made for personal gain or to damage another individual) stipulation exempting agent from obligation to render an account void; contrary to public interest may encourage fraud 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. 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 substitution. Subagent a person to whom the agent delegates as his agent, the performance of an act for the principal which the agent has been empowered to perform through his representative Power of agent to appoint subagent or substitute unless prohibited by principal, the agent may appoint a subagent or substitute principal has right of action against agent and substitute exception to the general rule that contracts are binding only between the contracting parties, their assigns and heirs subagent or substitute is actually a stranger to the principal Effects of substitution

(1) substitution prohibited agent exceeds the limits of his authority all acts of the substitute shall be void (2) substitution authorized substitution has the effect of releasing the agent from his responsibility unless the person appointed is notoriously incompetent or insolvent if person is designated by the principal absolute exemption of the agent (3) substitution not authorized, but not prohibited valid if beneficial to the principal if substitution occasioned damage to the principal agent shall be primarily responsible for the acts of the substitute as if he himself executed them principal has also a right of action against the substitute Art. 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly appointed. Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the nonfulfillment of the agency, and for the fault or negligence of his fellow agents, except in the latter case when the fellow agents acted beyond the scope of their authority. Liability of two or more agents towards principal is joint not solidary JOINT LIABILITY SOLIDARY LIABILITY each debtor is liable only for a each debtor is liable for the proportionate part of the debt entire obligation *presumption: obligation is joint If solidarity has been agreed upon, each of the agents becomes solidarily liabie: (1) for the nonfulfillment of the agency (2) for the fault or negligence of his fellow agents provided the latter acted within the scope of their authority innocent agent has a right later on to recover from the quilty or negligent agent Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. Liability of the agent for interest (1) sums belonging to the principal which the agent applied to his own use liable for interest as compensation or indemnity from the day he did so without prejudice to any criminal action that may be brought against him (2) sums which the agent still owes the principal after the expiration of the agency liable for interest from the date the agency is extinguished

Necessity of demand by principal not necessary in order that delay on the part of the agent to exist by provision of law, agent is bound to deliver to the principal whatever he may receive by virtue of the agency 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. When agent may incur personal liability (1) agent expressly binds himself obligates himself personally and by his own act (2) agent exceeds his authority acts without authority unenforceable against the principal agent is personally liable because he deprives the third person any remedy against the principal rd if the agent gave sufficient notice to 3 person of his power neither the principal (contract is unauthorized) nor agent (acted in good faith in disclosing the limits of his powers) are bound 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 power granted by the principal. In this case, however, the agent is liable if he undertook to secure the principals ratification. Effect where 3 person is aware of limits of agents powers (1) agent acts in the name of the principal and within the scope of authority agent assumes no liability; binds the principal as though he personally entered into contract (2) agent acts in the name of the principal but in excess of his authority agent personally liable unless there is subsequent ratification by principal (3) agent acts in the name of the principal but in excess of rd his authority, with notice to 3 person of his powers or rd 3 person aware of limitations agent is not bound; void as between the agent and third person a. agent promised to secure ratification & failed agent personally liable b. ratification obtained principal become liable 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. Effect of ignorance of agent agent acts within the scope of his authority
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if principal appoints an agent who is ignorant fault is principals

Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if such act is within the terms of the power of attorney as written, even if the agent in fact exceeded the limits of his authority according to an understanding between the principal and the agent. Scope of agents authority as to third persons (1) where authority not in writing every person dealing with an agent is under obligation to make an inquiry not only as to existence of the agency but also to the nature and extent of authority of the agent (2) where authority in writing such person not required to inquire further than the terms of the written power of attorney an act of the agent within the terms of the power of attorney as written is within the scope of the agents authority although the agent has in fact exceeded the limits of his actual authority according to the secret understanding between him and the principal to protect the interest of third persons 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 agents acts. When agents lack of authority not available as defense ratification of principal same effect as if he has originally authorized it willingness to ratify is enough third person cannot disaffirm contract Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards to the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. Presentation of power of attorney or instruction as regards agency *A third person deals with an agent at his own peril. it is the third persons duty to require the agent to produce his power of attorney to ascertain the scope of his authority third person may also ask for the instructions of the principal as regards the agency Third person not bound by principals private instructions third person is chargeable with knowledge of the terms of the power of attorney as written and the instructions disclosed to him

he is not bound and cannot be affected by the private or secret orders and instructions of the principal he cant be prejudiced by any understanding between the principal and the agent

sale deemed to be on cash basis upon failure of the agent to inform the principal of such sale on credit with a statement of the names of the buyers to prevent agent from stating that the sale was on credit when it was made for cash

Art. 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. Factor or commission agent one whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold may act in his own name or in that of the principal Liability of commission agent as to goods received responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment (quantity, quality, physical condition) to avoid liability commission agent should make a written statement of the damage or deterioration of the goods received Art. 1904. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal to prevent any possible confusion or fraud Art. 1905. 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. Right of principal where sale on credit made without authority a commission agent can only sell on credit only with express or implied consent of the principal if credit sale is made without authority, the principal has 2 alternatives: require payment in cash; any interest or benefit from the sale shall belong to agent ratify the sale on credit; all risks and advantages will accrue to him Art. 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned. Obligation of commission agent where sale on credit authorized

Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. 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 to compensate the agent for the risks he will have to bear in the collection of the credit due to the principal Del credere agent agent who receives a guarantee commission Art. 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for that purpose. Obligation of commission agent to collect credits of principal a commission agent must collect credits due to the principal at the time they become due and demandable otherwise, he shall be liable for damages unless he can show that the credit could not be collected notwithstanding the exercise of due diligence on his part does not apply to cases where there is a guarantee commission Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for compensation. Liability of agent for fraud the circumstance that the agency is or is not gratuitous will be considered by the courts in fixing the liability of the agent for negligence

Chapter 3 OBLIGATION OF THE PRINCIPAL Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. Specific obligations of the principal

(1) To comply with all the obligations which the agent may have contracted within the scope of his authority and in the name of the principal (2) To advance to the agent, should the latter so request, the sums necessary for the execution of the agency (3) To reimburse the agent, should the latter so request, the sums necessary for the execution of the agency (4) To indemnify the agent for all damages which the execution of the agency may have caused the latter without fault or negligence on his part (5) To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agents services Representation essence of agency obligations contracted by the agent are for and in behalf of the principal to bind him as if he personally contracted agent must: act within scope of his authority act in a representative capacity otherwise, principal assumes no liability Ratification of principal agent who exceeds his authority is not deemed a representative of the principal unless he ratifies the act expressly or impliedly 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. Agency by estoppel Estoppel a bar which precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation either express or implied rd 3 person may demand from either the principal or agent or both, the payment of damages suffered by him agent exempted from liability if he acted in good faith APPARENT AUTHORITY though not actually granted, principal knowingly permits the agent to exercise or holds him out as possessing AUTHORITY BY ESTOPPEL the principal, by his culpable negligence permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent

if caused by agent, agent is liable 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 of fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. Obligation to advance funds principal is obliged to provide the means with which to execute the agency in the absence of stipulation that agent shall advance the necessary funds, the principal must advance to the agent upon his request the sums necessary for the execution of the agency if principal does not advance agent not liable for damages from non-performance Obligation to reimburse agent for funds advanced by agent by own initiative or by stipulation advances must be reimbursed with interest from the day advance was made demand not necessary should be done regardless of whether the business or undertaking was not successful as long as agent has complied with his duty

Art. 1913. The principal must also indemnify the agent for all damages which the execution of the agency may have caused the latter, without fault or negligence on his part. Obligation to indemnify agent based on fairness liability of principal for damages is limited only to that which execution of the agency has caused the agent Art. 1914. The agent may retain in pledge the things which are the object of the agency until the principal effect reimbursement and pays the indemnity set forth in the two preceding articles. Right of agent to retain object of agency in pledge if principal fails to reimburse or indemnify the agent, the latter has a right to retain in pledge the things which are the object of the agency legal pledge or pledge created by operation of law vs. contractual pledge agent not entitled to the excess in case the things are sold to satisfy his claim and the proceeds are more than the amount due Art. 1915. If two or more persons have appointed an agent

Implied agency distinguished from agency by estoppel IMPLIED AGENCY AGENCY BY ESTOPPEL actual agency authority of agent is only apparent principal alone is liable if caused by the principal, he is liable to any third person who relied upon such misrepresentation

for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. When principals solidarily liable to agency Requisites: (1) two or more principals (2) principals have all concurred in the appointment of the same agent (3) agent is appointed for a common transaction or undertaking each agent may be sued by the agent for the entire amount due and not just for his proportionate share Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544. Where two persons contract separately with agent and principal the one of prior date shall be preferred Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who, in good faith was first in the possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable for damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. Liability to third person of agent or principal who contracts separately depends on whether the agent acted in bad faith or not good faith principal incurs liability bad faith agent incurs liability 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 principals 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 without 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. When principal not liable for expenses No. 1 to punish agent No. 2 self evident No.3 agent is guilty of bad faith and lack of diligence No. 4 express stipulation not contrary to law, morals, etc. is binding between the parties