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1. Even if the agent acted within the scope and in representation, he may still be liable if he acted in
bad faith or if he acted negligently.

He may still be liable with the 3rd person

2. In relation to a loan, the agent acted for himself. He did not act in representation of the principal.
The principal is not bound by the mortgage executed by the agent acting in her own name. In order
for the principal to be bound by the mortgage, not only is it required that the agent act within the
scope, he should act in representation of the principal

3. Obligation of an agent fiduciary obligation

(1) Domingo vs Domingo
(2) Plaintiff is the agent, domingo is the principal
(3) Agent was authorized to sell a parcel of land. Pursuant to his mandate, he introduced a
prospective buyer to the principal
(4) Prospective buyers named Oscar De Leon
(5) Prospective buyer negotiated for a lower price
(6) There was negotiation
(7) During negotiation, Oscar gave the agent 1k by way of propina as a gift
(8) It was taken by the agent and did not give it to the principal
(9) Initially the principal and the prospective buyer could not agree, until they were able to agree on
a solution. The solution is to get rid of the agent so that there will be no commission
(10)Oscar and the principal made a drama before the agent
(11)Oscar said that he will no longer buy the land since the money that expects to receive did not
arrive
(12)Principal then revoked the authority of the agent
(13)But the agent later found out from register of deeds that it was eventually sold to the wife of
Oscar
(14)Agent says he must be given his commission
(15)Principal refused. Agent sued the principal

(16)The action should not prosper

(17)It is true that the revocation of agency was done in bad faith

(18)But even if the principal acted in bad faith, the agent also did not perform one of his obligation
as an agent, and that is to deliver to the principal whatever he may have received pursuant to
the agency, even if it is not owing to the principal

So he breached one of his obligations

 He committed a breach

(19)But the commission is much higher than 1,000. Agent suggest that the 1,000 be deducted from
his commission

(20)SC said no. Because in the first place, the reason the prospective buyer gave him that money is
for him to talk to the principal to lower the price

And that is an act inconsistent with the interest of the principal

As an agent, one is suppose to protect the interest of the principal

That is why the agent here would have to suffer

(21)The wording of the fallo in this case is that the agent forfeited his commission

The implication of this is that, the agent should have been entitled to his commission since the
revocation was done in bad faith

However, he also failed to comply with his own obligation. That is why his supposed to be
commission is forfeited

4. X appoints Y as his agent to sell his products in Cebu City

Can Y appoint a sub agent, and if he does, what are the effects of such appointment?

UP law center:

Yes, Y can appoint a sub agent or substitute. But if he appoints a sub agent or substitute, he shall be
responsible for the acts of such sub agent or substitute, as provided in Art 1892

Comment:

The above answer is defective

Because it treated sub agent and substitute as if they were the same

A sub agent is a totally different creature from a substitute

When an agent appoints a sub agent, he does no dissociate himself from the agency
He remains an agent; it is just that there is now another person who would assist him in the
accomplishment of the purpose of the agency

But if he appoints a substitute, the agent no longer needs to perform his obligation. He is no longer
an agent

In a case, the agent appointed a substitute because he is sick. An agent may also appoint a
substitute if he has to go abroad

The one who will perform the obligation is the substitute.

Therefore the rule cited by the suggested answer, pertains only to substitute. It does not pertain to
sub agents

In so far as sub agents are concerned, the agent may appoint them, unless he is prohibited by the
principal

It may happen that the principal wants the agent to personally carry out the agency. So he would
not want any other person to be associated with the performance. He can prohibit the agent from
getting sub agents. Otherwise, the agent can appoint sub agents

If the agent appoints a sub agent, he will always be responsible for the acts of the sub agent because
he is still an agent.

If the sub agent causes damage, then the agent will be liable

That is not necessarily true with the substitute. Since the original agent is no more.

What are the effects of appointment of a substitute?

If for example, the business of the principal is being managed by the substitute and there were
losses, who will be liable?

Can the principal hold the agent liable, because it is the latter who appointed the substitute?
 Can the principal hold the substitute directly liable?

Yes. Although it appears that there is no privity of contract between them, as they are not the
contracting parties, there are other sources of obligation. Here, it is the law.

The law expressly grants the principal a direct cause of action against the third provision

The law says the principal has cause of action. It did not say that the third person is automatically
liable

It says that if the principal suffered losses while the principals business is being managed by
somebody else, whether it is the agent or substitute. Because the substitute is practically the agent

The agent is not the insurer of the success of the principal

Otherwise, nobody would want to be an agent

5. If the principal files an action against the substitute, will the action prosper?

Yes. If the substitute acted outside his authority or even if he acted within his scope, but he acted
negligently or in bad faith

Then, he will be liable to the principal

6. Can the agent be held liable by the principal for the losses incurred while the property or business
of the principal was being managed by the substitute?Yes, under 1892

(1) Whether or not the agent is liable for the acts of the substitute will depend on whether the
agent was prohibited or not in appointing a substitute

Because if he was prohibited from appointing a substitute, and he appointed one nonetheless,
then he will be liable

Because he acted in contravention or he did not follow the instructions of the principal

In fact, by express provision of the law, all acts of the substitute will be considered void
 But if the principal did not prohibit the agent from appointing a substitute, then the agent
shall be responsible for the acts of the substitute

It is not automatic that the agent is liable, but the acts of the substitute is his responsibility

If the agent was not prohibited, but he was not given the power to appoint, no provision and
no grant of that power, and such agent nonetheless appointed, then he becomes liable
because he is responsible, but only if the substitute acted outside the scope or negligently or
in bad faith

But it is possible that although the substitute acted within the scope, acted in good faith, or
acted with diligence, the principal may still suffer damage

This is because there are factors beyond the control of the substitute

If he was not prohibited, precisely because he was given the power to appoint

7. If the principal granted the agent to appoint a substitute in the SPA, and the principal designated
the person to be appointed, and during the time that the business is being managed by the
substitute, and the principal suffered losses, the principal cannot hold the agent liable because it
was him who designated

But even if it is the principal who designated the substitute, there is a scenario where the agent may
still be liable. If before the appointment, the agent was aware that the substitute is notoriously
incompetent. The least that he can do is to inform he principal that the person the principal would
want to appoint is notoriously incompetent
 But if he did not inform the principal, and the business suffered losses, then he may be liable. The
law provides that the agent should not carry out the agency if it will manifestly result in loss and
damage to the principal

8. If the principal granted the agent to appoint a substitute in the SPA, but the principal did not
designate the specific person to be appointed, in order for the agent not be held not liable, he
only has to appoint one who is neither incompetent nor insolvent.

Whatever happens thereafter, the agent cannot be held liable for any damage that may be caused
to the principal

9. Kinds of agents

(1) The most number of agent are commission agents

Real estate companies

10. If the agent sold the goods on credit, without the consent of the principal, and because it was
sold on credit, it sold on a higher price

If after the sale, without the amount being paid in full, can the principal hold the agent liable for
the price of the item?

Yes. Because the sale on credit was without the consent

So even if the agent has not collected yet from the buyer, he may be compelled to remit to the
principal the proceeds of the sale, less the commission

He will be compelled to remit to the principal, as if it is a cash transaction, less commission

11. If thereafter, the agent was able to collect the full 10k for an item originally priced at 5k, who will
be entitled to the profit?

It will be the agent who will be entitled to the profit

12. If the agent failed to sell the product, can he be held liable?

Yes, since there is failure to perform the obligation.

But there is a defense in agency that is not normally a defense in other contracts

This defense is this: that he exercised the diligence required

Ginawa ko naman lahat ng dapat gawin e

Thus he can raise the defense that he exercised the diligence required in order not to be liable

Because of this fundamental principle in agency, that the agent is not the insurer of the success of
the business of the principal

But this defense is not available to a certain kind of agent

13. As an agent, Al was given a guaranty commission, in addition to his regular commission by DRBI,
after he sold 20 units of refrigerator to a customer HD hotel. The customer however failed to pay
for the unit sold. DRBI demanded from Al payment for the customers accountability. Al objected,
on the ground that his job was only to sell and not to collect payment for units bought by the
customer. Is Als objection valid? Can the principal collect from his or not?

Als objection is not valid, therefore, DRBI can collect from him. This is because he is not an ordinary
commission agent. He is a guaranty commission agent, also called a del credere agent because he
was given a guaranty commission in addition to his regular commission. As such, he does not only
have the obligation to sell, he also has the obligation to collect the proceeds of the sale. And much
more, he bears the risk of collection

That is the reason why his commission is higher

DRBI can collect from Al

14. If there were two or more agents, and one of them caused damage to the principal, what would
be the nature of the liability of the agent?

Joint. The agent who caused the damage is the only one liable.

But it is possible for the agents to be held solidarily liable

As a rule, two or more persons are only held jointly liable, unless the agents bound themselves
solidarily by stipulation

Although the agents bound themselves solidarily, and one of the agents caused damage to the
principal, it is possible that they will not be held solidarily liable if the agent who cause damage to
the principal acted outside the scope of his authority

This is a good rule because when the agents bound themselves solidarily, they must have as a
premise that everyone will act within the scope

So if one of them acted outside, then the agreement to be solidarily liable is no longer applicable.
The liability will now be joint

15. Rights and obligations of the principal

(1) as far as the principal is concerned, his primary obligation is to comply with the obligation which
the agent may have contracted within the scope of his authority and in representation of the
principal

16. Who has the obligation to advance the sums necessary for the accomplishment of the purpose of
the agency?

Under the law, it is the principal

17. If the agent by stipulation says that he will advance the money necessary for the accomplishment
of the purpose, and later on the agent did not advance the money despite the stipulation, will the
agent be liable?

Yes. Ordinarily, the agent will be liable

But it is possible that though the agent did not advance despite the stipulation, he will not be liable

This is when he knows that the principal is already insolvent

Because the principal cannot reimburse the advances

That is why the law would not require the agent to advance even if there is a stipulation

18. But whether or not there is a stipulation for the agent making the advances, and the agent have
incurred certain expenses, the principal is required to reimburse the agent if these expense where
incurred while in the performance of the agents obligation

In Art 1918, it provides cases where the principal is not required to reimburse for expenses
incurred by the agent

(1) if the agent acted in contravention of the instruction of the principal

If the principal would want to avail the benefits of the contravention of contract, then the
principal may be compelled to reimburse the expenses of the agent

(2) When the expense is due to the fault of the agent or when the agent is acting negligently

(3)

(4)

19. The principal entered in to a contract involving a definite thing, the agent entered into another
contract involving the same thing. For example, contract of lease of a warehouse. Which contract
will be considered as binding contract?
 The principle that will be applied is priority in time is priority in right

This is a rule that is beautiful but most taken for granted

The rule is simple, pag may pila, wag kang sumingit

So the question is which contract came first

But this rule is not applicable when it is a contract of sale

Because what is applicable is 1544 the rule on double sales

Because only one contract will be considered binding, then the other party whose contract will
not be considered will suffer damage

If that person will sue both the principal and the agent, who will be held liable?

Ordinarily, only the principal will be liable

Because the agent will be liable in this scenario only if he acted in bad faith

In other words, if the principal and the agent are both in good faith, the only one who would be
liable is the principal

There is wisdom in this rule

The principal is expected to have instituted safety measures to ensure that there will be no double
sale

20. The modes of extinguishment (Art 1919) 6 modes

(1) The enumeration is not exclusive. There are other modes

(2) The loss of the thing to be sold by the agent

(3) The law enumerates, but there are other modes

 (4) EDWARD

(5) EDWARD
i) expiration of the term
ii) death
iii) withdrawal
iv) accomplishment of the purpose
v) revocation
vi) dissolution

21. death and revocation favorite in the bar

22. Marion received from Edgar diamonds value at 500k to be sold on commission basis or to be
returned on demand. In the evening of August 21, 1987, while he was walking home, 2 men
snatched his bag containing the pendant, and ran away. Subsequently the snatchers were
apprehended and charged

During the pendency of the criminal case, Edgar brought an action against Mario for the recovery
of the pendant or its value and damages.

Mario interposed the defense of fortuitous event.

But Edgar contends, that first, the defense of fortuitous event is untenable because there was
negligence on the part of the defendant. Second, that if the defense is tenable, there must be
prior conviction of robbery before it can be availed of. Decide the case.

UP law center:

The second contention is not correct. This issues has already been settled in the case of Austria vs
CA where the court ruled that conviction of the perpetrators is not required. What is only required is
preponderance of evidence
Preponderance of evidence will suffice to prove that this event really happened, which would
exempt him from such obligations, which can be a good defense

The first contention, on the issue of fortuitous event, if indeed the agent was negligent, despite the
fact that the loss was due to fortuitous event, the agent is still liable. Because in order for fortuitous
event to be invoked, the one invoking this defense, must not have concurring negligence

The agent here cannot be held liable and therefore his defense is tenable.

Uribe:
This setting is not identical in the scenario in Austria vs CA.

In the problem the perpetrators were actually caught, apprehended and charged.

In the case cited, the perpetrator was not apprehended

But that was proven by preponderance of evidence

Look also at the date of commission of the act: August 21, 1987

In Austria, the incident happened in 1964

The relevance of this is that had this event happened today (1971) we would have considered the
agent to be negligent. But the incident happened more than 10 years ago. That is why we cannot be
held liable because the act cannot be considered a negligent act

Because in the 60s the criminality was not that high, and therefore there is no need to provide or
institute methods in order for this to not have happened

But in 1971, walking alone at night with diamonds, the agent should have taken measures

He must at least have somebody accompany him or use a car instead

 Negligence is a function of time. The same act may be considered a negligent act after the passage
of time

23. Will the death of an agent end the agency?

Yes, because, first that is expressly provided under Art 1919. The death of either principal or agent is
one of the modes of extinguishing a contract. Because again, agency is representative in character

Will the death of the principal end the agency?

No.

Although it is true that the death of the principal results in the extinguishment of the contract, in Art
1930 there is an exception.

In 1930, if the agency was constituted for the benefit of a third person who accepted such benefit,
despite the death of the principal, the agency shall continue to have full force and effect

That is why the death of the principal in that scenario, will not extinguish the agency

Another exception is found in the decision of Justice Palma in the case of Rios, that the other
exception is the one enshrined in 1931

But to the mind of Uribe, this is not an exception

This law (1931) recognizes the validity of the acts or the contract even if entered into after the death
of the principal.

First, the agent must have no knowledge of the death. Second, the third person must have acted in
good faith

It does not matter if the contract of agency has been extinguished

The contract of agency may have been extinguished, but nonetheless, the law provides that the acts
and contracts entered into by the agent complying with these requisites shall be valid and binding
upon the estate of the deceased principal

It is not an exception. It is far from the phraseology of Art 1930

 1931 is one of the favorites in the bar exam

24. A authorized B to sell his parcel of land in 1950. But A died in 1954. In 1956, the children of A sold
the same land to C. In 1957, C sold the land to D. It appears that C did not register the sale
executed by the children. D who was not aware of the previous sale, registered the sale executed
by B. Whose authority

Assuming that B still has authority to sell the said land, C or D

Given the set of fact, the one who has a better right is C. This is because the authority of the agent
was not in writing

Under 1874, this sale is void. That is why it is C who has a better right

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(1)
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