03-2,3 Obligations of Agent - Responsibility for Acts of Substitutes & Obligations of Agents to Third Parties

Question 1

When may the agent appoint a substitute?

Answer 1

When he has not been prohibited by the principal from doing so.

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. (1721)

Question 2

When will the acts of the substitute be considered void?

Answer 2

The acts of the substitute shall be considered void when they have been appointed against the prohibition of the principal. (Art. 1892 par. 4).

Question 3

When may the principal have a right of action against the substitute?

Answer 3

The principal will have a right of action against the substitute with respect to the obligations which the substitute has contracted under the substitution when:

1. When the agent appoints a substitute even when he was not given the power to appoint one;
2. When the agent who was given the power to appoint a substitute, appoints a notoriously incompetent or insolvent substitute. (Art. 1893)

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 the substitution. (1722a)

Question 4

What is the obligation of the agent to third parties when he acts within the scope of his authority?

Answer 4

The obligation of the agent to third parties when he acts within the scope of his authority are:

1. When the agent acts in his own name except when the contract involves things belonging to the principal (Art. 1883);
2. When the agent expressly binds himself to the third party (Art. 1897);

Question 5

What is the legal effect if an agent acts in his own name but within the authority of the agency?

Answer 5

The agent shall be directly bound in favor of the person with whom he contracted except if the contract involves a thing belonging to the principal.

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions between the principal and the agent. (1717)

Question 6

When is an agent who acts within the scope of the authority and as an agent liable to the party with whom he contracts?

Answer 6

When he expressly binds himself or exceeds the limits of his authority.

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. (1725)

Question 7

What is the legal effect if the agent exceeds the scope of his authority?

Answer 7

• If the principal does not ratify the contract and the third person is not aware of the limits of the agency, the agent shall be liable;
• If the principal does not ratify the contract and the third person is aware of the limits of the agency, the agent shall not be liable because the contract shall be void;
• If the principal ratifies the contract, the principal shall be liable and not the agent;
• If the agent undertakes to secure the principal’s ratification, the agent shall be liable.

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 powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal’s ratification. (n)

Question 8

When will the principal be solidarily liable with the agent even if the agent has exceeded his authority?

Answer 8

When the principal allows the agent to act as if he had full powers.

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. (n)

Question 9

When will the third person be barred from setting up as a defense or ground for cancellation of obligation the fact that the agent has exceeded his powers?

Answer 9

When the principal has ratified, or has signified his willingness to ratify the agent’s acts.

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 agent’s acts. (n)

Question 10

When will the agent who acts in his own name not be liable to the third person with whom he contracts with?

Answer 10

When the contract entered into by the agent involves things belonging to the principal.

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.