03-1 Obligations of Agent - General Obligations

Question 1

What are the nuances relevant to the rule that an agent shall act within the scope of his authority?

Answer 1

The nuances to the rule that the agent shall act within the scope of his authority are:

1. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell (Art. 1879);
2. A special power to compromise does not authorize submission to arbitration (Art. 1880);
3. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency (Art. 1881);
4. The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him (Art. 1882);
5. In t he 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 (Art. 1887).

Question 2

When will the agent’s authority not be considered exceeded even if he goes beyond the authority?

Answer 2

When his act is done in a manner more advantageous to the principal than that specified.

Art. 1882. The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715)

Question 3

What is the degree of care required?

Answer 3

Gen. rule: in accordance with the instructions of the principal. Exceptions: if there are no instructions, diligence of a good father of a family.

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. (1719)

Question 4

Obligation of the agent to carry out the agency.

Answer 4

Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable for the damages which, through his non-performance, the principal may suffer.

He must also finish the business already begun on the death of the principal, should delay entail any danger. (1718);

Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. (1736a)

Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (1737a)

Question 5

When should an agent not carry out the agency?

Answer 5

Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n)

Question 6

What are the provisions to ensure the agent’s loyalty to the principal?

Answer 6

Art. 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. (n)

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 authorized to lend money at interest, he cannot borrow it without the consent of the principal.

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: […] (2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal have been given.

Question 7

When is an agent obliged to exercise the diligence of a good father of a family?

Answer 7

An agent is obliged to exercise the diligence of a good father of a family when:

• In case a person (supposed-to-be-agent) declines an agency, and he has custody of the goods forwarded to him by the owner until an agent shall have been appointed by the owner of the thing. The agent must exercise the diligence of a good father of a family in the custody and preservation of the thing (Art. 1885);
• When the agent executes an agency but the principal provides no instructions as to the manner and degree of required in the execution of the agency (Art. 1887);

Question 8

Is an agent obliged to render an accounting for things received by virtue of the agency?

Answer 8

Yes.

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 (1720a).

Question 9

Are agents appointed simultaneously solidarily liable to the principal?

Answer 9

No.

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 stipulated. (1723)

Question 10

What is the requirement in order agents may become solidarily liable to the principal?

Answer 10

Solidarity must be agreed upon. (Art. 1895)

Question 11

What is the legal effect if solidarity has been agreed upon by the multiple agents?

Answer 11

Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment 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. (n)

Question 12

Even if there is solidary liability, when may an agent be exempt from the fault or negligence of his fellow agents?

Answer 12

When the co-agent acted beyond the scope of their authority (Art. 1895).

Question 13

When shall the agent be obliged to pay interest? And from when shall this interest be computed?

Answer 13

The agent shall owe interest if he applied the sums to his own use. It shall be computed from the day he did so and on which he still owes after the agency is extinguished.

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. (1724a)

Question 14

How shall the agent’s responsibility for fraud or negligence be judged?

Answer 14

Depending on whether the agency was or was not for a compensation.

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 a compensation. (1726)

Question 15

What are the obligations of the commission agent?

Answer 15

The commission agent shall be responsible for:

1. The goods received by him in therms and conditions and as described in the consignment, unless he makes a written statement of the damage and deterioration of the goods upon receiving them (Art. 1903);
2. To distinguish goods of the same kind and mark which belong to different owners, and designate them respectively to each principal (Art. 1904);
3. Not to sell the thing on credit without express or implied consent of the principal. Otherwise, the principal may demand from him payment in cash (Art. 1905);
4. If he sells on credit: to inform the principal of the fact that he sold on credit, with a statement of the names of the buyers. Failure to do so will render the sale as deemed to have been made for cash insofar as the principal is concerned (Art. 1906);
5. To collect from the buyer and remit to the principal the proceeds of the sale on the same terms agreed upon with the purchaser in case when the commission agent received guarantee commission in addition to ordinary commission (Art. 1907);
6. To be liable for damages in case of failure to collect the credits of the principal at the time when they become due and demandable, unless it is proven that the agent exercised due diligence for that purpose (Art. 1908).

Question 16

Cervantes v CA and PAL

Answer 16

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.

Question 17

Borja v. Sulyap

Answer 17

Where the agent has exceeded his authority, the act is not void but merely voidable, i.e. capable of being ratified. Failure of the principal to question the agent’s acts may be tantamount to ratification and he may be estopped from assailing the validity thereof.

Question 18

Domingo v. Domingo

Answer 18

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.

This duty does not apply to an agent or broker who merely acts as a middleman. Neither will it apply if the agent or broker had informed the principal of the gift or what he received from the purchaser and his principal did not object thereto.

Question 19

Cosmic Lumber v CA

Answer 19

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.

An agent who is specially authorized to perform a specific task but was not authorized to sell cannot enter into a contract of sale.

Question 20

Austria v CA

Answer 20

A fortuitous event (e.g. robbery) which renders the performance of the agency will not incur liability upon the agent.

Question 21

Severino v. Severino

Answer 21

An agent is estopped from acquiring a title to the property adverse to that of his principal.

Question 22

Municipal Council of Iloilo v. Evangelista

Answer 22

An agent or attorney-in-fact empowered to pay the debts of the principal, and to employ attorneys to defend the latter’s interests, is impliedly empowered to pay the attorney’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.