Law on Agency PDF

Part Il AGENCY* (Arts. 1868-1932) Chapter 1 NATURE, FORM AND KINDS OF AGENCY Art. 1868. By the contract of agency a person binds h...

Part Il AGENCY* (Arts. 1868-1932) Chapter 1 NATURE, FORM AND KINDS OF AGENCY Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the. consent or authority of the latter. Concept of contract of agency. Article 1868 defines the contract of agency. The definition. ' which is very broad enough to include all situations in which one person is employed to render service for-another, excludes however, from its concept the relationship of employer and ‘employee (Art. 1700.'), of master and servant (Art. 1680.), and of employer and independent contractor. (Art: 1713.) Agencyis a relationship which implies a power in an.age™ to contract with a third person on behalf of a principal. It is this _ power to affect the principal’s contractual relations with thi persons that differentiates the agent from the employee, the servant, and the independent contractor. ply “TUnless otherwise indicated, refer s to Article in the Ciy riil Cod e, 240 cs CamScanner Art. 1868 NATURE, FORM AND KINDS OF AGENCY 241 EXAMPLES: P, owotnethe do any r offola low laning d,. wants to Construct a buiildi n hi ng on it. He may (1) He may hire C a building “pas with u the materials uildin & co. contractor, to construct the and labor to be furnished by C; or (2) He himself. may construct the building, buying the necessary materials and employ ing W, etc. (workers) who shall construct the building under his directio n and supervision; or (3) He may.secure the services of A to supervise and to act for him in all matters connected with the construction work. In the first case, C is an independent contractor; in the second, W, etc. are workers or employees of P; and in the third, A is an agent of P. Thus, the-relationship between the parties — the hirer _ of service and the person whose service has been hired — and their _ rights and duties will depend upon the terms under which one works, represents, or acts for another. | Use the term in other senses. — “Agency” is sometimes used in a sense other than to denote the relationship of principal and agent.. (1) Thus, it may be used to denote the place at which the business is transacted. When used in the sense of place of business, the relationship of principal and agent is not necessarily : , , implied. umen- (2) Likewise; the term may be used in the sense of instr tality by which a thing is done. ae usive right of a person to sell (3) Itis also used to refer to the excl fic territory. - a product of another in a speci te ri st ic s of a co nt ra ct of agency. Charac. The contract of agency 15: t; se it is pe rf ected by mere consen (1) Consensua mn Princinal lbecause becaus it can stand by itself without ; the need of ‘Nother contract; e it ‘ts OW OWN Name; i has its (3) Nominate be ca us cs CamScanner 242 AGENCY Art. 1865 (4) Unilateral if it is gratuitous because it creates obligations for only one of the parties, ie., the agent; or bilateral if it is for compensation because it gives rise to reciprocal rights and obligations; and (5) Preparatory because it is entered into. as a means to an end, i.¢., the creation of other contracts, Essential elements of agency. They are: (1) There is consent, express or implied, of the parties to establish the relationship; 3 A shy» (2) The object is the executionof a juridical act in relation to third persons; : | , ee : 8) The agent acts as a representative and not: for himself; and 7. aa (4) The agent acts within the scope of his authority. In ‘addition, the parties mu st be competent | under the law to act as principal and agent. -. : Nature, basis, and purpose of agency. Th ; e word “agency” when used in its broa dest meanin is both a contract and a representative relation. —_ (2) Agency is also a repres entative re lation. Th some service or does something “in re e agent renders "©presentation or on behalf of another. (Ar ” t. 1868.) Representa tion co nstitutes the ba agency. | sis of (a) The acts of the agent on beh the scope of his authority (Art. 188 alf of the Principal within _ and binding effect as if they 1.) produce the same legal were personally done by the CamScanner  art 1868 NATURE, FORM AND KINDS Ok AGEN CY ane principal. By this legal fic tion of re presentation, the actual or real absence of the principal is juridical presence, tr ansformed into legal or (b) The relation of dna gent to his principal is fiduciary in character since it is based On trust.and confidence. (Severino vs: Severino, 44 Phil. 343.) (3) The purpose of agency is to extend the personality of the ~ principal throu gh the acts of the agent. It enables the activity of man which is naturally limited in its exercise by his physiological conditions. to be extended, permitting him to perform or carry on many diffcrent activities through another, when his physical presence is impossible or inadvisable, at the same time in differ- ent places. (see 11 Manresa 434.). oo Parties to the contract. | The two (2) parties to the contract are the: (1) Principal, — one whom the agent represents and from whom he derives his authority; he is the person represented; and (2) Agent. — ‘one who acts for and represents another; he is the person acting in a representative capacity. The agent may be his tasks as attorney, proxy, delegate, or representa- performing tive, | Agency implies the ‘contemporaneous existence of both the Principal and agent and there is no agency unless one is acting for and in behalf of another with the latter’s express or implied consent or authorization. The principal or agent may be either a natural person or a judicial entity (e.g., corporation). Capacity of the partles. is cap aci tat ed un der the law (see Arts. (1) Any person who , 1329.) to act in his own ig ht may be a principal.. ? 1327 ‘ace he asswate umes No persona 2 se of the agent, since full capacity to patel bitty ta oss not have to possess sons ama nit as third persons are concerned. But per incapacitated, such as insane persons, canno = CamScanner  as his obligations to his principal ane concerned, the agent must be competent to bind himself. aa _ Acts that may/may not be delegated ‘to agents.. (1) In general. — The general rule is that what a man may do in person, he may do through another. Thus, a stockholder may delegate to another his right to inspect the books of the corporation ‘because this is an act which he can+lawfully do personally. , (2) Exceptions. — Some acts, however, cannot be done through an agent, | ee : (a) Personal acts. — If personal performance is required by law or public policy or the agreement of the parti es, the doing of the act by a person‘on behalf of another constitute does not performance by the latter, | 1) The right to. vote during election delegated because voting is considere cannot be d a purely personal act under the law. A member of the corporation cannot'validly act by proboa rd of directors of a xy because his right _ to attend the board meetings _ last par., Corpor is personal to him. (Sec. 25, ation Code). :. 2) The making of a will is a stric "canno t be accomplished through 3) Obviously, statem ents which are re made under oath should be quired to be made personally. 4) Under t ‘he Cor poration C board ] of directors di er Ode, t 1 member o f the trustees of a corp oration cannot Bly,| 68.) S right to attend board ee Seec. c, 25, 25) laik st paar, r, B.P. 5) ‘An agent cannot delega performance of acts Which he te to has 6 a sub-agent. the ented to perform in person. (see Arts, 1892-193.) appoiln CamScanner Art 1868 NATURE, FORM AND KINDS OF AGENCY : a5: (b) Criminal acts or acts not allowed by law. — An attempt to delegate to another authority to do an act which, if done by the princip al would be illegal, is void. (2 C.J. 1039.) 1) Since ‘under our Constitution, aliens are not _ allowed to own private agricultural land (Art. XII, Secs. 3, 7.), an alien cannot purchase a land through a Filipino agent. 2) Persons who, because of their position and relation with the persons under their charge or property under their control are prohibited from acquiring said property, cannot acquire the same through the mediation of another. (Art.1491.) - | Nature of relations between principal and agent. (1) Relations fiduciary in character. — The relations of an agent to his principal are fiduciary in character since they are based on trust and confidence, on a degree which varies considerably from situation to situation. The agreement to act on behalf of the principal causes the agent to be a fiduciary, that is, a person having a duty, created by his undertaking, to act primarily for the benefit of another, the principal, in matters connected with his undertaking. (Restatement of the Law on Agency, p. 45.) (2) Agent estopped from asserting interest adverse to his principal. — Inregard to property forming the subjéct matter of the agency, the agent is estopped from asserting or acquiring a title adverse. to that of the principal. His position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or. | The ritle seeks to remove the temptation that might arise out of such a relation to serve one’s self-interest at the expense of one’s integrity and duty to another, by making it impossible to Profit by yielding to temptation. (3) Agent must not act for an adverse party. — An agent cannot Serve two (2) masters, unless both consent, or unless he is a Mere middleman or intermediary (e.g., real estate broker) with No independent initiative. An agent cannot act as such for both cs CamScanner I _ t 246 AGENCY 7 Att. 1a parties to the same transaction, in the presence of conflictin interests, unless he acts with the knowledge and consent of both, and on failure so to operate, either party rey’ repudiate the transaction involved, ai; (4) Agent must not use or disclose secret information. — Require. ments of good faith and loyalty demand of the agent the duty no to use or divulge confidential information obtained in the course of his agency for his own benefit to the principal's injury and expense. | | Agency distinguished from similar contracts. (1) Loan. — An agent may be given funds by the principal to advance the latter’s business, while a borrower is given money for purposes of his own and he must generally return it whether or not his own business is successful. A lot, however, depends on the intent of the parties. (2 CJ.S. 1030.) _.Q) Lease of service. — In agency, the basis is representation, while ‘in lease of service (Arts. 1644, 1689.), it is employment agency, the agent exercises discretionary powers, while. In in lease of service, the lessor (like a servant) ordinarily performs only ministerial functions. (3) Indep undertakes to accomplish.a certain _ work, the contract is one fc nee pene HOF a piece of work (Art. 1713.) and not agency. (Fressel vs. Mariano Uy Chaco Sons & Co., 34 Phil. 122.) In agency, the agent is subject to the control and direction of the ‘principal whom he' represents: In a con of work, the independent contractor exercises tract for a piece his employment independently, and not in representation of the employer. (4) Partnership. — a partner acts not onlyWhil for e hisan co. agentbites acts only for his princwhip ipa! but also as principal of himself. uae 1767, pel ie partne (5) Negotiorium gestio. ~ In both — astio or the management of the business PA m lial Att. y | CamScanner  - Art, 1869 NATURE, FORM AND KINDS OF AGENCY 247 9144.), there is representation. The distinction lies in the fact that in the first, the representation is expressly conferred, while in the second, it is not only without the authority of the owner of the business but is without his, knowledge. While the agent acts according to the express will of the principal, the gestor acts according to the presumed will of the owner by exercising “all the diligence Of a good father of a family.” (Art. 2145.) Agency is a contract, while negotiorum gestio is a quasi- contract. Hence, their juridical relations are different. (6) Brokerage. — A commission agent is one engaged in the purchase or sale for another of. personal property which, for this purpose is placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchaser _ or vendor, but also with the property which is the subject matter of the transaction. | | On the other hand, a broker has no relation with the thing he buysor sells. He is merely an intermediary between the purchaser and the vendor. He acquires neither the custody nor the possession of the thing he sells. His only office is to bring together the parties to the transaction,. (Pacific Commercial Co. vs, Yatco, 63 Phil. 398.) eae’. (7) Sale. — An agency to sell is different from sale. (Art. 1458, Civil Code.) For the distinctions between the two.and example, see Article 1466, Sales. (par. 13) | _ Art. 1869: Agency may be express, or implied from the acts of the principals, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may: be oral, unless the law requires a Specific form. a Kinds of agency. Agency may be classified as follows: (1) As to manner of its creation: bh cs CamScanner CamScanner  (a) Express, — One where the agent has been actually authorized by the principal either orally or in writing (Ar, 1869.); or _(b) Implied. — One which is implied from the acts of the principal, from his silence or lack of action or his failure to repudiate the agertcy, knowing that another person is acting on his behalf without authority (Ibid.),or from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances. (Art. 1870.) » The enumeration of cases of implied agency in Articles | 1869 and 1870 is not exclusive. An implied agency is an actual agency as much as an express agency. (2) As to its character: ' (a) Gratuitous. — One where the agent receives no com- pensation for his services (Art. 1875.); of 2 (b) Compensated or Onerous. — One where the agent receives compensation for his services. (Ibid.) (3) As to extent of business covered: ye (a) General. — One which comprises all the business of the principal (Art. 1876.);or = (b) Special. — One which comprises one or more specific transactions. (Ibid.) (4) As to authority conferred: (a) Couched in general terms. — One which is created in general terms and is deemed to comprise onlv acts ° administration (Art. 1877.); or meee (b) Couched in specific terms. ~ One authoriding only the performance of.a specific act or acts. (see Art 1878) | (5) As-to its nature and effects:. (a) Ostensible or Representative. — One whe re the age™ acts in the name and representation of the prin cipal; or One where the agent acts. t in his own name. (see A™ yr CamScanner CamScanner  Art. 1070 NATURE, FORM AND KINDS OF AGENCY 249 Form of agency. In general, there are no form al requirem ents governi appointment of an agent. The a gent’s authorit may be ng the oral or y written. An instance when the la W requires a specific form for the agency is Article 1874.. Agency may’ even be implied from the circumstance s. (Art. 1869.) * EXAMPLE; (1) Acts of principal. — A sold the goods belonging to P without the consent of the'‘latter. With knowledge of the facts, P received the _ proceeds of the sale and even gave A a commission. The acts of P constitute ratification (Art. 1317, par. 2, Civil Code.) thereby giving the contract the same effect as if he had originally authorized it. ( ; (2) Principal's silence or lack of action, or failure to repudiate agency. — P's property was being administered by A. Later, B took charge of the administration of said property through the designation by A who had to absent himself from the place for reasons of health. P did not oppose the designation of B nor did P appoint a new agent although the designation was expressly communicated to him. He remained silent for one (1) year allawing B to take charge _ of the property, _ It must be concluded that B acted by virtue of an implied agency equivalent to a legitimate agency, tacitly conferred by P. As indicated in Article 1869, the principal must know “that another person is acting on his behalf without authority” for an agency to be implied. Art. 1870, Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silenceor inaction according to the circumstances. Form of acceptance by agent. Since agency is a contract, there must be consent by both ‘ is: either express or implie implied, d, and this is true i cari UT ihecy vain a arties, cipal (Art. 1869.) as well as on that of the agent, (Art. 1870.) CamScanner  Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives. it without any objection. - - ; Acceptance between persons present. As regards implied acceptance by the agent, the law distinguishes between cases (1) where persons are present (Art, 1871.) and (2) where persons are absent. (Art. 1872.) The agency is impliedly accepted if the agent receives a power of attorney from the principal himself personally without any objection, both being present, The presumption of acceptance may be rebutted by contrary proof. A power of attorney is a “written authorization to an agent to perform specified acts in behalf of his principal which acts, when performed, shall have binding effect on the principal.” (2 Am. Jur. 30.) } | | Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: Se (1) When the principal tra attorney to the agent, who re ceiv es It without any objection; (2) When the principal entrusis to him | of attorney with o Bias Py. giter or telegram a power ‘in which he is hab business pect to the Acceptance between persons abs ent If both the principal and the agent are absent, acceptan the agent is not implied from h IS ce by silence or inaction. agent is not bound to accept the Sin ce the offer. “sency, he can simply ignore the CamScanner Art. 1873187 NATURE,—rFORM AND KINDS OF AGENCY. 251 However, in the two cases mentioned in Arti cle 1872, agency is paket at there is implied acceptance if the agent letter acknow edging teceipt of the writes a power or attorney but offers no objection, to the creati on failure to give a reply d oes of the ; agency*y.. (No. (No. 1.) But his 1.) But his mermere not mean that the agency has accepted unless the “power of attorney” is with respect tobeen the ’ business in which he is habitually engaged as an agent (No. 23), or the acceptance could be inferred from his acts which carry: out the agency (Art. 1870.) as when he begins to act under the authorit y conferred upon him. It should be noted that under Article 1872 , the principal transmits the power of attorney to the agent. In Article 1871 , he personally delivers the power of attorney to the agent. Art. 1873. If a person especially informs another or states by public advertisement that he has givena power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case. with respect to the person who received the special information, and in the latter case with regard to any person. | ; The power shall continue to be in full force until the notice is rescinded.in the same manner in which it was given. Communication of existence of agency. There are two (2) ways of giving notice of agency with different effects: (1) If by special information, the person appointed as agent is considered such with respect to the person to whom it was given; or | (2) If by public advertisement, the agent is considered as such with regard to any person. Public advertisement may be made in anv form — through the newspaper, radiv, ete. and by Posters or billboards. why the agency In either use, is deemed to exist whether there is actually an agency or not. cs CamScanner 252 AGENCY Art. 1874 Manner of revocation of agency. The power of attorney must be revoked in the same manner in which it was given. (par. 2.) If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (Art. 1921.) Nevertheless, revocation made in any manner is effective where the person dealing with the agent has actual knowledge thereof; otherwise, bad faith and fraud would be committed. EXAMPLE: P especially informs X that he’has given A a power of attorney. With respect to X, A thereby becomes a duly authorized agent of P. To rescind the power of attorney, P must give notice in the same manner in which it was given, namely, by special information to X. Public advertisement is not sufficient unless X has actual knowledge of the revocation. But if P makes known the appoint- | ment of A by public advertisement, special information to X is effective against him. ' | Art. 1874. When a sale of a piece of land or any. interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall _ be void. | Sale of land through agent. Under this article, the sale of a piece of land or any ‘interest thereon, like usufruct, mortgage; etc., through an agent is void unless the authority of the agent is in writing. A letter containing the authority to sell is held sufficient. (Jimenez vs. Robot, 38 Phil: 387.) Under Article 1403, No, 2, Paragraph (e) of the Civil Code, an agreement for the sale of real Property or of an interest is unenforceable even if there is no agent. ‘Note that Article 1874 speaks only of an agency for: “sale of a piece of land or any interest therein,” [f may be argued, therefore, cy, that an agency to purchase need not be in wiring, & g. Such an agency: however, is covered by Article 1878(5), y CamScanner arts. 1875-1 876 NATURE, FORM AND KINDS OF AGENCY Art. 1875. Agency is presum 4 pensation unless there j S proof tooe thefe co bentrafora ry. com Presumption as to compensation of agen t. The principal must pay, the agent the compensation agreed upon, OF the reasonable value of the agent’s. services if no compensation was specified. This presupposes, however, that the agent has complied with his obligation as such to the principal. The circumstance that the agency was for compensation or not shall be considered by the court in determining the extent. of liability of an agent for fraud or for negligence. (Art. 1909.). The presumption that the agency is for a compensation may be contradicted by contrary evidence. / Art. 1876. An agency is either general or special. The former comprises all the business of the _ principal. The latter, one or more specific transactions. General and special agencies.. The distinction here is based on the scope of the business _ covered, A general agency is not identical to one couched in general terms.(Art. 1877.) which is a special agency when it involves only one (1) or more specific transactions. (Art, 1876, par. 2.) Agents classified. | agent According to the nature and extent of his authority, an ‘Maybea: - that the (1) Universal agen f * or one authorized to do all acts delegate Principal may personally which he can lawfully to another the power ofrh e doing. SO f ar :as such condition is Possible, the agent is said to have univers 1 authority (2 CJ., p. 427, Mechem, Sec. 58.); 4 a be ! } or one authorizec to 1s transac ! (2) General agen business of his principal, or all unin of. pareapoet iat *Particular place, or in other words to iat (2 CJ. 427.); and * Particular trade, business OT employee cs CamScanner  : _ 254 AGENCY * Art. 1979 (3) Special or particular agent or one authorized to act in one or more specific transactions or to act upon a particular OCCasion, (Mechem, Sec. 61; Art. 1876.) Special types of agent. ah Si The moré common special types of agents are the following: (1) Attorney at law, or one whose business is to represent clients in legal matters or proceedings; (2) Auctioneer, or one whose business is to sell property fo others to the highest bidder at a public sale; — (3) Broker, or one whose business is to act as intermediary between two (2) other parties such as insurance broker and real estate broker; (4) Factor (synonymous with commission merchant), or one, whose business -is to receive and sell goods for a commission, being entrusted with the possession of the goods involved in the transaction (see Art. 1903.); (5) Cashier in bank, or one whose business is to represent a banking institution in its financial transactions; and (6) Attorney-in-fact or one who is given authority by his principal to do a particular act not of a legal character. The term is, in loose language, used to include agents of all kinds, but in its strict legal sense, it means an agent having a special authority granted by: the principal. (see 3 CJ.S. 1037.) , _ Art. 1877. An agency couched in gene ral terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may con- sider appropriate, or even though the agency should authorize a general and unlimited management. Agency couched in general terms. As to the extent of the Power co nferred, agency may be couched in general terms (Art. 1877, ) or couched in specific terms. (Art. 1878.) a P| CamScanner art 1877 NATURE, FORM AND KINDS OF AGENCY a Anagency couched in general terms may bea gene ral agency (Art. 1876, par. 1.) or a special agency. (Ibid., par. 2.) It includes only acts of administration and an express power is necessary to perform any act of strict ownership (Art. 1878.) even if the principal states that: | SS | (1) He withholds no power: (2) The agent may execute such acts as he may consider appropriate; or : (3) He authorizes a general or unlimited management. (Art. 1877.) a Meaning of acts of administration. It seems easy to answer that acts of administration are those which do not imply the authority to alienate for the exercise of which an express power is necessary. Yet what are acts of administration will always be a question of fact, rather than of law, because there can be no doubt that sound management will sometimes require the performance of an act of ownership. Unless the contrary appears, the authority of an agent is presumed to include all the necessary and usual means to carry out the agency — into effect.. | | (I) A person employed to.sell goods in a retail store, can sell without special power of attorney because selling itself is an act of administration. er | of the (2) An attorney-in-fact empowered to pay the debts ’s interests latter Principal and to employ attorneys to defend the for services is impliedly ‘empowered to pay attorney's fees tendered in the interests of the principal. (Municipal Council of lloilovs, Evangelista, 55 Phil. 290.) ati sa -in- fact wi ith the e same (3) A person who is made; an attorney" the Bebe) POwer sit authority to deal with property which might or could have done if personally presen t, may engage t : ship 4 angcea o Services of a lawyer to preserve the owner 6, 7, 8. © principal's property. (see Art. 1878, Nos. charge of certain properties (4) The authority to take it is otherwise 4 greed, the implied authority Ncludes, unless cs CamScanner 256 AGENCY Art. 1879 to take reasonable measures appropriate to the subject Matter to protect it against loss or destruction, to keep it mM Teasonable répair, to recover it if lost or stolen, and, if the subject matter jg ordinarily insured by the owners, to insure it. (2 Am. Jur. 122.) Art. 1878. Special powers of attorney are neces. Sary in the following cases: a (1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obli- gations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbi- tration, to renounce the right to appeal from a judg- ment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which. the ownershipof an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To. make gifts, except customary ones for | charityor those made to employees in the business. managed by the agent; “ (7) To loan or borrow money, unless the latte r act be urgent and indispensable for the the things whi preservation of ch are under administration; (8) To lease any real propertyto another oes for more than one year; | _ (9) To bind the principal to render s han becuice without compensation; (10) To bind the princi Pal in a contract of partnership; (11) To obligate the pringj Pal as a guarantor or surety; | CamScanner art. 1878 NATURE, FORM AND KINDS OF AGENCY 257 (12) To create or convey real rights over immov- able property; (13) To accept or repudiate an inheritance; _ (14) To-ratify or recognize obligations contract- ed before the agency; (15) Any other act of strict dominion. When special powers are necessary. _ Inthe 15 cases enumerated, are general acts of strict dominion or ownership as distinguished from acts of administration. Hence, a special power of attorney is necessary for their execution through an agent. Incidentally, a power of attorney is valid » although no notary public intervened in its execution. (Barretto vs. Tuazon, 59 Phil. 845.) _ (1) To make payment. — Payment is the delivery of money or the performance in any other manner of an obligation. (Art. 1232.) It is an act of ownership because it involves the conveyance of ownership of money or property. But when payment is made in the ordinary course of management it is considered a mere act of administration. It is includedin an agency couched in general terms (Art. 1877.):and hence, no special power of attorney is needed. Thus, a special power to make payment is implied from the authority to buy a désignated piece of land at a certain price. (2) To effect novations. — Novation is the extinction of an obligation through the creation of a new one which substitutes it by changing the object or principal conditions thereof, Substituting a debtor, or subrogating another in the right of the creditor, (Art. 1291.) Note that the obligation must already be in existence at the time the agency was constituted. (3) To compromise, etc. — Compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation Or put ‘an end to one already commenced. (Art. 2028.) Arbitration is where the parties submit their controversies to one or more arbitrators for decision. (Art. 2042.; see Art. 10) ; heat ee of ownership since they involve the possibility'of disposing of the thing or right subject of the compromise or arbitration. The cs CamScanner  , 258 AGENCY Art. 1878 same is true also with respect to the authority, of the agent to waive: (a) the right to appeal from a judgment; (b) objections to the venue of an action; and (c) a prescription already acquired, By prescription, one acquires ownership and other real rights through the lapse of time. In the same way, rights and actions are lost by prescription. (Art. 1106.) The grant of special power regarding one of the acts mentioned in No. 3 of Article 1878 is not enough to authorize the others. | (4) To waive an obligation gratuitously. — This is condonationor remission. (Art. 1270.) The agent cannot waive a right belonging to the: principal without valuable consideration or even for a nominal consideration. He cannot bind the principal who is the obligee unless specially authorized to do so. (5) -To convey or acquire immovable, — Note that No. 5 applies whether the contract is gratuitous or onerous. (see Art. 1874.) Note also that it refcrs only to immovables. (see No. 15.) (6) To make gifts. — Gift.or donation isan act.of liberality ‘whereby a person disposes gratuitously of a thing or right in favorof another who accepts it. (Art. 725.) An agent without special power from the principal cannot, make gifts. But the _ making of customary gifts for charity, or those made to employees in the business managed by the agent are considered acts of administration. ; ae (7) To loan or borrow money. — In a loan of money, the bor- rower “is bound to pay to the creditor an equal amount of the same kind and quality.” (Art. 1953.) Note that the exception in No, (7) refers to “borrow” and not to “loan.” The agent, howeveh may be empowered to borrow money, (Art. 1890.) Note also that INo. (7) refers only to money and not to other fungible things, ( (se ngible things. Art. 1953, Part III-A, Chap. 2,) (8) To lease realty for more than one year, — In the lease of things, the lessor gives to the lessee the enjoyment or use of 2 thing for a price certain, and for a Period which may be definite ‘or indefinite. (Art. 1643.) An unrecorded lease of sil estate is not binding upon third persons, (Art, 1648.) By implication, the y CamScanner  Art. 1878 NATURE, FORM AND KINDS OF AGENCY » 259 lease of realty to another person for one of mere administration provided the leas (1) year or less is an act e is not registered. Note that No. 8 does not refer to lease of real property person from another and to lease of personal property. An agreement for the leasing of real property for a longer period than one (1 ) year is unenforceable unless made in writ ing. (Art. 1403[2, e], ibid.) It follows that even if the agent is especially _ authorized, the lease is not enforceable against the principal if it ‘is not in writing. (9) To bind the principal to render service gratuitously. — The agent may bind himself to render service without compensation. (Art. 1875.) However, to bind the principal to that effect, a special power is necessary. (10) To bind the principal in a contract of partnership. — By the contract of partnership, the partners bind themselves to contribute money, property, or industry to acommon fund with the intention of dividing the profits among themselves. (Art. 1767.) The contract of partnership thus creates obligations the fulfillment of which requires ‘an act of strict ownership. Furthermore, the Principal must personally have trust and ‘confidence in the Proposed partmers. (11) To obligate principal as, guarantor or. surety. — By the contract of guaranty, the guarantor binds himself to fulfill the obligation of the principal debtor in case the latter should fail to do so. If the person binds himself solidarily, he is a surety and the contract is called a suretyship: (Art. 2047.) , It has been held that a contract of guaranty or surety cannot be inferred from the use of vague or general words. Thus, a power of attorney given to sell or to lease the property of the principal and generally “to perform and execute all and every lawful and reasonable act as fully and effectively as I might or could do if personally present” does not operate to authorize the agent to sign in behalf of the principal a surety bond in favor of the 20vernment in connection with the purchase of certain materials dredged from a fish pond. The power to create a contract of Suretyship cannot be inferred; it must be expressed. (Director of Public Works vs. Sing Juco, 53 Phil. 205.) cs CamScanner  260 AGENCY Art. 1879 A contract of guaranty is unenforceable unless it is made in writing. (Art. 1403[2, b].) (12) To create or convey real rights over immovable property belonging to his principal without special power. — That is an act of strict ownership. (13) To accept or repudiate an inheritance. — Any person having the free disposal of his property may accept or repudiate an inheritance. (Art. 1044.) This act is one of strict dominion, Hence, the necessity of a special authority. (14) To ratify obligations contracted before the agency. —-An agent cannot effect novation of obligations existing at the time of the constitution of the agency unless he be specially authorized to do so. (see No. 2.) On the same principle, he cannot ratify or recognize obligations contracted before the agency without special power from the principal. : (15) Any other act of strict dominion, — Generally, a sale or purchase of personal property is an act of strict domin ion. Hence, a special power is necessary in order that the act shall be binding on the principal. Thus, an agent appointed to manage a tailoring shop cannot sell. sewing machines used in said estab- lishment. But a sale or purchase made in the ordinary course of management (¢.g., sale of books in a bookstore) is merely an act of administration and, therefore, includedin an agency couched in general terms. (Art. 1877.) | it 4 Art. 1879. A special Power to sell extliidds the power to mortgage; anda Special power to mortga does not include the power to sell. ge Scope of authority to sell and to mortgage. The agent cannot sell (Art. 187 8, Nos. 5, 15.) or mortgage (Ibid., No. 12.) the property belonging to the principal without special power. An auth ortty-to sell, ue Principal’s Property does not carry with it or imply the authority tO mortgage. And vice versa, the - | CamScanner  | Arts. 1880-1882 NATURE, KORM AND KINDS OE AGEN CY 261 special power to Mortgage is not to be implied from the power to sell, In the absence of special authorit , the sale or mortgage be will unenforceable against the principal as beyond his powers,” (Art the agent “has acted. 1403[1T]; Art. 1881.) Art. 1880. A special power to compromis e does not authorize submission to arbitrat ion. Scope of special power to compromise/ to submit to arbitration. If the agent is granted a special power to compromise (see Art, 1878.) he can do anything which the principal himself can. do to effect a settlement. (2 C.J. 652-653.) But he is not thereby | authorized to submit to arbitration (Ibid.) because while the. principal may have confidence in the agent's judgment, the arbitrator may not possess the trust of the principal. Art. 1881. The agent must act within scope of his authority. He may do such acts as may be conducive to accomplishment of the purpose of the agency. 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. | Authority of an agent defined. Authority of an agent is the power of the agent to affect the legal relations of the principal by acts done in accordance with tha Principal's manifestation of consent to him. (Restatement of th» Law on Agency, pp. 23-24.) Authority distinguished from power. (1) As to existence. — While “authority” and “power” iid Often used synonymously, the former may be considered the Source or cause while the latter, the effect. Thus, an agent granted Authority by the principal has thereby the power to act for him. cs CamScanner  262 | AGENCY ne Arts. 1881-199) (2) As between an agent and a principal. i An ee Within the authority of the agent if it is not-a violation of his: uty to the Principal, and act is within his power, although it Constitutes a violation of his duty to the principal) if he has the legal ability to bind the principal. In fine, an agent with authority to do an ag has also the power to bind the principal but the power may exis, without authority. 3 _ (3) So far as third persons are concerned. — ‘No distinction exists. An act within the power of the agent is deemed within the scope of his authority even if the agent has in fact exceeded the limits of his authority. (see examples under Arts. 1900 and 1911,) _Kinds or types of authority.. The authority of the agent may be: \ (1) Actual, — When it is actual ly granted, and.it may be express or implied; | fo (2) Express. — When it is con ferred by words (Art, 1869.) (3) Implied. — When it is inci dental to the transaction reasonably necess, ary to accomp or lish the Purpose of the agency (Art. 1881.); When it is conferred by co nduct.) Ostensible authority is another ; it refer principal (see Art. 1876,); ® fo all Fothe business e ofae the | (6) Special. — When it is limite transactions (Ibid.); and ed only to one or more specific (7) Authority by necessity, — w te ; ' of the existence of an emergency, hen it is demanded by virtvé EXAMPLE: ; P gave a p ower of a ttomey tg for at least P500,000,09 ayable ; A authorizing him to sell P’s sell the car is express, Payable in cash, Here, the authority of A” CamScanner  wet 981-1882 NATURE, FORM AND'KINDS Ok AG ENCY 263 If A sells the car for P¢ is within the scope of agency's cy S authority. Conversely. princi di tala’ required to honor the transaction ifA sols hen e cp tio If P privately instructed-A not to con summate the sale, the sale ‘by Ais binding upo2on P as A has apparent or ostens ible authority to sell. As far as third persons are concerned, the effe ct is as if A had actual authority to sell. The same is true if P had not authorized A to sell the car but having knowledge that A was acting for him kept silent and after the consummation of the sale, received the proc eeds thereof from A. Here, A’s authority rests on estoppel on the part of P to deny such authority, (see Art. 1911.) Thus, if there is esto ppel based upon the conduct of P, it is, unnecessary to dist inguish between actual and apparent authority since in both cases P is liable, | The authority given to A to sell the car is special and not general because it involves a particular transaction. A has no authority fo use the car for purposes of his. own but he can use it in an emergency as, for example, to take a member of his family who is setiously hurt to a hospital. In this case, his authority is demanded by necessity by virtue of the occurrence of an emergency. If there is no opportunityto consult with P or it is impracticable for A to communicate with P and wait for instructions in emergency Situations (e. g., occurrénce of fire in the stock room), A ibs implied authority to take actions reasonable under the xe ae aa ets use of fire extinguishers of neighbor) including those that may be Contrary to the prior instructions of P). When Principal bound by act of agent. (1) Requisites. — In order that the principal may be bound vent, there are twotwo (2) req - (2) requi wante Persons by the act of the agent, there are es: d (a) The agent must act within the scope of his (actual or | apparent) authority; and | bh cs CamScanner  264 AGENCY Arts, 1881-189) (b) The agent must act on behalf of the principal. - (2) Ratification by principal. — If the “agent” acts without authority or in excess or beyond the scope of his authority, such act shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. (Arts. 1317, 1403(1].) | i. (3) Performance of agency more advantageous to principal, _— But the agentis not deemed to have exceeded the limits of his authority should he perform the agency in a manner more advantageous to the principal than that indicated by him (Art. 1882.) since he is authorized to do such acts as maybe conducive to the accomplishment of the purpose of the agency. (Art. 1881.) If the agent acts within the scope of his authority but in his own name, Article 1883 applies. Ped EXAMPLES: ~ (1) In the preceding example, if A sells the car to B in P’s name for P500,000.00 cash, the transaction is valid. P and B are the only parties. A assumes no personal liability. “shits (2) If A sells the car without authority, or being authorized, he sells the car to B for P400,000.00 cash or for P500,000.00 payable in five (5) monthly installments, the transaction insofar as P is concerned is an unauthorized act which renders it unenforceable. Hence, P is not bound unless he ratifies the sal provid i ed itit has not _ already been/revoked by B.. e sale (3) Suppose A sold the car for P55 0,000.00 cash, did he exceed his power? No, because the price is more adv ant is prohibited is for A to sell ageous to P, What the car at a price less than P50 but there is no prohibition against selling ; vriteaid 0,000.00 price can be obtained. Ing it at a better price i When principal bound by acts of agent bey ond his powers, | As a general rule, the princi ofan lis agent beyon d his limite d pow. Pal ts not bound by the acts ers. In other words, third perso™ dealing with an agent do so at their Peril and a bound toinguit | CamScanner CamScanner  Art. 1883 NATURE, FORM AND KINDS OF AGENCY 265 as to the extent of his powers. There are, however, qualifications whereby the principal is held bound, to wit: (1) Where his (principal’s) acts have contributed to deceive a third person in good faith; (2) Where the limitations upon the power created by him could not have been known by the third person; (3) Where the principal has placed in the hands of the agent instruments signed by himin blank (Strong, et al. vs. Gutierrez _ Repide, 6 Phil. 680; see Art. 1887.); and (4) Where the principal has ratified the acts of the agent. (see Art. 1901.). , Art. 1883. If an agent acts'in his name, the principal has no right of action against the persons with whom the agent has contracted, neither have such persons against the principal. - Y 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 agent. | , Kinds of principal. | The principal may be disclosed, partially ‘disclosed, or undisclosed. = (1) Disclosed principal. — If at the time of the transaction contracted by the agent, the other party thereto has notice that the agent is acting for a principal and of the principal’s identity. This is the usual type of agency. (2) Partially disclosed principal. — If the other party has notice that the agent is or may be acting for a principal but has no notice of the principal’s identity. CamScanner  _ AGENCY Art. 1883 (3) Undisclosed principal. — If the other party has no notice that the agent is acting for a principal. Agency with undisclosed principal. In order that: an agent may bind his principal (whether | identified by name or not) he must act on behalf of the latter (see Art. 1868.) and within the scope-of his authority. (Art. 1881.) (1) Agent directly responsible, — Article 1883 speaks case where of a the agent (a) being authorized to act on behalf of the principal, (b) acts instead in his own name. In. such case, the general rule is that the agent is the one directly. the person with whom he had ¢ontracted liable to were his own. The reason is that there as if the transaction _ principal when the agent acts in his is no representation of the own name. In effect, the resul ting contractual relation is orily between the agent and the thi d person. Therefore, the not have a right of acti on against the principal: ‘does person against him. third pe rson’nor the third (1) P authorized building. A acted in hiAts oowbind raformphim, thej e Constructi of a ce his bid was on be half of p on rtain ‘, without disclosing that If the bid of A was the lowes building would be bound to pe ase thee” A and the owner of the the contract of agency, * But A is liable to P under CamScanner  NATURE, FORM AND KINDS OF AGENCY al B : ay Speier A to sell the former’s car. A sold the car to bel am Own name. Here, the contract involves a thing _ belonging to the principal. The sale is completely valid. The contract is deem ¢ sue P in case th the ed entered into between P and B. ‘ o SoBB can car has hidde| n defects, (3) P told A to buy a car. A bought a car from B with money belonging to P. A acted in his own name. B and P have a right of action against each other. Thus, P can sue B in case the car has ; hidden defects. - STUDY GUIDE I. Definitions , Define or give the meaning of the following. 1, General agent; |. 2. Authority of an agent; 3. Contract of agency; and woe g ty 4. Power of attorney. | ) | Il. Discussions 1. l bound by the act of an agent May a principabe beyond his power? Explain. tement that 2. What do you understand by the : sta ation? agency is a representative rel Giv e at lea st fou r (4) cas es when a special power 3. execution by an agent. of attorney is necessary for their | the: four (4) essential elements of 4,) Enumerate agency. Ill. Problems ie fl y th e ru le or reason for your Explain or state br - answer. ting ve s a po we r of attorney from P appoin 1. Arec ei pect toa particular business transaction. him Hs agent with res CamScanner  _’ Chapter 2 OBLIGATIONS OF THE AGENT 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... Obligation, in general, of agent: to principal. (1) Good faith and loyalty to his trust, agent's first duty. — As has been pointed out (see discussions under ‘Art. 1868.), the relationship existing between principal and agent is a fiduciary one. Accordingly, in all transactions concerning or affecting the subject matter of the agency, it is the duty of the agent to act with the utmost good faith and loyalty for the furtherance and advancement of the interests of the principal. This duty to be: loyal to the principal demands that the agent look out for the best interests of the principal as against his own or those of the third ~ Party. (3 CJ.S. 6-7.) (2) Obedience to principal's instruction, — An agent must obey all lawful orders and instructions of the principal within the Scope of the agency. If he fails to do so, he becomes liable for any loss the principal incurs even though he can show that he acted in good faith. Even a gratuitous agent must follow instructions or become responsible for any loss resulting from failure to do so. 269 cs CamScanner  270 ‘ AGENCY _ Art. 1834 But an agent is not liable if he violates the principal’s instruction, for a good reason. (3) Exercise of reasonable care. — By accepting employmen, the agent impliedly undertakes that he will exercise reasonable care, skill and diligence. He does not agree that he will make no mistake whatsoever, or that he will exercise the highest skil or diligence, but he does agree that he will exercise reasonable skill and take the usual precautions (Mechem, Sec. 524, p. 360: see Art. 1909; British Airways vs. Court of Appeals, 285 SCRA 450.) as a reasonably careful agent would under similar circumstances. Failure to do so constitutes a breach of hig duty, Specific obligations of agent to principal. _ They are: (1) To carry out the agency in accord ance with its terms (Art. 1884.); (2) To answer for the damages which through | his non- performance the principal may suffer (Ibid); (3) To finish the business. already begun on the death of the owner in'case he declines an a (Art. 1885.); me _ 3 (5) To advance the necessary funds ‘shoul beri a stipulation to that effect (Art. 1886,); Should there (6) To actin accordance with wi the instruct: a (Art.1887.); = structions of the pina CamScanner  art 1804 OBLIGATIONS OF THE AGENT | an) (10) To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency (Art. 1891.);_ -_ (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 (Art. 1904.); (12) To be responsible in certain cases for the acts of the substitute appointed by him (Art. 1892.); (13) To pay interest on funds he has applied to his own use (Art. 1896.); ) OF oy (14) To inform the principal, where an authorized sale of credit has been made, of such sale (Art. 1906.); , (15) To bear the risk of collection, should he receive also on asale, a guarantee commission (Art. 1907);. | 3 (16) To indemnify the principal for damages for his failure _ to collect the credits of his principal at the time that they becom due (Art. 1908.); ’ (17) To answer for his fraud or negligence. (Art. 1909.) Obligation to carry out the agency. A person is free to refuse to be an agent (Art. 1885.) but once he accepts the agency, heis bound to carry it out in accordance with its terms in good faith (Art. 1159.) and following the instructions, if any, of the principal. (Art. 1887.) If he fulfills his duty, he is not personally liable unless he expressly binds himself. (Art. 1897.) Obligation to answer for damages. On the other hand, upon his failure to do so, he is liable or the damage which the principal may suffer. This rule is an any {pplication to agency of the general rule in contracts that Person guilty of fraud, negligence, Or delay in the fulfillment of is obligation, or who in any other manner fails to comply with the terms thereof shall be liable for damages. (Art. 1170.) ~_ cs CamScanner  272 AGENCY Art. 1835 - Having free to refuse it, accepted the agen cy, when he was ae the agent ‘4betrays4 the confiden : ce reposed on him if he does not fulfill the mandate. !. The damages to. which the principal is entitled are those which result from the agent’s non-performance. Hence, the principal must prove his damages and the amount thereof. EXAMPLE: In consideration of a fixed compensation, A agreed to collect for P funds which are due and payable periodically from D. For | unexplained reasons, A failed to collect all the moneys falling due in favor of P from D until the latter became insolvent. ‘In:this case, A is liable for the damages which P may suffer through his non-performance. Obligation to finish business upon | principal’s death. Although the death of the principal extinguishes the agenicy (Art. 1919(3].), the agent has an obligation to conclude the _ business already begun on the. death of the principal. But the _ duty exists only should delay-entail any danger. --.. The agency shall also remain in full force even after the death of the principal if it has been ¢onstituted in the common interest of the latter and the agent or in the interest of a third person. who has accepted the stipulation inthis favor, (Art, 1930.) _ Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a good offather the of a famlly in the.to custody forwarded him by the preservation and owner until the latter goods should He an agent. The owner shall as soon aS ' practicable either appoint an a the goods, gent or take charge of Obligationsof person who declines | an agency. | In the eventeal a person : declines an agency, y, he he isis stillsti boun d to observe the diligence of a good father of a family (see Art. 1163.) ~~ | CamScanner  Arts. 1886-1887 OBLIGATIONS OF THE AGENT ae in the custody and Preservation of the goods forwarded to him by dicing This rule is based on equity, The owner, however, must act aS soon as practicable either(1) : by appointing an agent: or (2) by taking charge of the goods, vr te aoe The obligation of an agent who withdraws from an agency is provided in Article 1929. , Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be boundto do so except when the principal is insolvent.. Obligation to advance necessary funds.. - As.a rule, the principal must advance to the agent, should * the latter so request, the sums necessary for the execution of the agency. (Art. 1912.) The contract of agency, however, may stipulate that the agent shall advance the necessary funds. In such case, the agent is bound to furnish such funds except when ° the principal is insolvent. } The exception is. based on the principal's obligation’ to , insolvency of the principal reimburse the agent. Incidentallythe is a ground for the extinguishment of agency. (Art. 1912.) In certain cases; the. principal is not liable for, the expenses incurred by the agent. (see Art. 1918.) | Art. 1887. inthe execution of the agency, the agent shall act in accordance with the instructions of the principal... | | in | defaudefault : th of, he shall it there do all that a goo d father of a family would do, as required by the nature of the business. | | Instructions of principal defined. ich the principal may Instructions are private directions wh ies nner of performing his dut 8ive the agent in regard to the irdma party is ignorant. They are said 4S such agent but of which a th own to be secre? if the principal intended them not to be made kn tO such party. cs CamScanner CamScanner aa AGENCY Art. 1437 Instructions distinguished from authority. Instructions are not to be confused from authority. (1) Authority is the extent or the limitation of the agent's power to represent the principal. Instructions are Private directions which the principal may give the agent to follow in the discharge of his duties as such agent. ; (2) Third persons dealing with an agent do 50 at their own risk and are duty bound to investigate his authority because if the act is done outside the scope of his authority the principal is not bound. But persons dealing with the agent need not verify or investigate the instructions of the principal since they con- cern only the principal and the agent. The rule in Article 1887 (par, 1.) is thus distinct from the rule that the agent must act within the scope of his authority. (Art. 1881; see A. Padilla, Civil Code Annotated,,1953 Ed., Vol. TV, pp. 403-404.). EXAMPLES: (1) PwritestoB thatAis authorized to buy certain merchandise. P privately instructs A not to buy but merely to obtain B's lowest : ‘price. In violation of said instruct on, A buy s the merchandise. In this case, the sale is bindi ng upon P beca : use‘A has authority to make the purchase althoug it is not in accordance with the instruction given, (2) P employed A P’ s horse at the best possible to sell’ with private direction that A ma price, sold the horse as agent of P for y receive P10,000.00, but no less. A only P8,000,00 to T. In this case, P is bound by the sale, P trusts A, who has di scretion on th most mischievous to hold such direct; a compliance with which depended the wef aria sale].” Shr 2 (Hatch v. Taylor, 10 N.H, 538 ; the validi Udity of the [sale makes him liable to P. {1840],) A's Violation of the instruction to sell'the horse, P is not bound CamScanner y- At. 1887 OBLIGATIONS OF THR AGENT ’ aid ‘ gannot be proved by the mere declaration of the agent that he had been given the authority, Obligation to act in accordance with» - principal’s instructions. (1) Duty to obey reasonable and lawful instructions. — It is the fundamental duty of the agent to obey all the reasonable and lawful instructions given to him by his principal. That the agent shall, for the time being, put his own will under the direction of another, is one of the primary elements in the relation. (Mechem, Sec. 1244.) : a ae (2) Liability for loss or damage. —Ifthe agent exceeds, violates - or fails to act upon such instructions, he will be liable to the principal for any loss or damage resulting therefrom. Thus, if an - agent fails to effect an insurance as instructed or sellson credit _ where he has been given instruction to sell for cash, he is liable for the consequent loss. , Rule where there are no specific instructions. " Vas In the absence of specific instructions of the principal, the agent shall do all that good father of a family would do as 2.) tequired by the nature of the business. (Art. 1887, par. If he acts in good faith and with due care, the agent is not liable for losses dueto errors or mistakes of judgment as regards to'matters with'which he is vested with discretionary powers. EXAMPLE: © | vide P of : 1) i’ ei dA, his broker, to sell 10,000 shares at a minimum share. All the transactions in the market showed that the said shares were being traded at P1.10 per share. “f. hare, P | is entitledto at only P1.00 per share10,000 Now, if A sold the shares Shares. Good recover the difference of P0.10 for each of the shares faith and ordinary prudence demand that A should sell the at the price most profitable to P. exa mpl e, A i r the discretion was give 2) Supp ose, i n the sam e not es or eh if he believesit would be profitable to P or to fe cs CamScanner  276 AGENCY Arts. 1884-1449 to sell them if he believes their price would still go up. A sold the shares. The next day the price rose to P1.15 a share. In this case, A is not liable to P if he acted in good faith for losses suffered by P due to A’s error of judgment. Right to disobey principal's instruction. The agent may disobey the principal's instruction where it calls for the performance of illegal acts, or where he is privileged to do so to protect his security interest in the subject matter of the agency. EXAMPLE: , Ahas lien on P’s goods (see Art. 1914.) in A’s possession to the _ extent of all moneys advanced by A to P. (see Art. 1912.) P directs A to‘return the goods or sell them on credit. el Ais not bound to comply with P’s order until P has repaid all advances made by A. Unless privileged, A’s disobedience subjects him to liability in damages and, if material, justifies P in terminating the agency. (Babb & Martin, op, cit., ‘p: 142.) Art. 1888. An agent shall not Carry out an agency If its execution would manifestly result in loss or damage tothe principal. When agent shall not carry out agency. The agent, upon acceptance of the agency, is not bound inall cases to carry out the agency (Art. 1884,) in accordance with the instructions of the principal. (Art. 1887.) Thus, the agent must not carry out the agency if its execution would manifestly result in loss or damage to the principal. ~ The reason for the rule is obvious, The duty of the agent is to render service for the benefit of the principal and not to act to his detriment. Furthermore, an agent must exercise due diligence in carrying out the agency. (Arts, 1884, 1887, par, 2.) Art. 1889. The agent shall b € llable for damages if, there being a conflict between his interests and those of the principal, he should pre fer his own. CamScanner  Art. 1890 OBLIGATIONS OF THE AGENT 277 Obligation not to prefer his own interest to those of principal. (1) Reason for the rule. — Agency, being a fiduciary relation, the agent is required to observe utmost good faith and loyalty _ towards his principal. He must look after the principal's interests as if they were his own. An agent, therefore, is liable for damages if, there being a conflict between his interest and those of the ey he should betray his trust by preferring his own. (Art. 1889.) ee e | As the law does not distinguish, the rile is the same whether ' the agency is onerous or gratuitous. 3 Z (2) Basis of the rule. — The underlying basis of the rule pro- hibiting an agent from engaging in self-dealing is to shut the door against temptation on his part and to ensure that.he places the tights and welfare of his principal above his own in performing his agency, The rule is one of preventive, not remedial justice. It operates however fair the transaction may have been — however free from every taint of moral wrong. (see 3 Am. Jur. 2d'595.) erste a EXAMPLES; 7 cata os } _.(1) P authorized A to. buy specified goods. A must not sell P goods belonging to him (A).' Such sale is voidable although the price may have been just. The reason is that A’s obligation to P requires him’to buy at the lowest possible price while his‘selfP, price obtainable. interest prompts him :to sell at the highest | however, may elect to ratify the sale. n sell to sell g goods, 7 A must not _ (2) Similarly, ifse P authorized A to sell duty to himself either ‘lirectly or indirectly. The reason is that his sell at the highest price for the principal conflicts with his interest to buy at the lowest price possible. -- , ds for a certain price. P authorized A to sell specified §00 3) If 1 oods of the same kind and quality belonging to for damages. He should not him for the same price to B, A is liable prefer his own interests to those of P. been empowered to Art. 1890. If the agent has be he ma y himself the lender at the. borrow mo ne y; ized to If he has been author Current rate of interest. cs CamScanner _ AGENCY Art. 144) -lend money at interest, he cannot borrow it without the consent of the principal. : Obligation not to loan to himself. The agent cannot, without a special power of attorney, loan or borrow money. (see Art. 1878.) | (1) If he has been expressly empowered to borrow money, he may himself be the lender at the current rate of interest for there is no danger of the principal suffering any damage since the current rate of interest would have to be paid in any case if the loan were obtained from a third person. (2) If the agent has been authorized to lend money at interest, he cannot be the borrower without the consent of the principal because the agent may prove to be a bad debtor. There is here a possible conflictof interest. (see Art. 1890.) The transact ion may thus be prejudicial to the principal. Art. 1891, Every agent is bo undto count of his transactions and to delive render an ac- r to the princi- pal whatever he may have receiv ed by virtue of the agency, even tho ugh it may not be owing to the cipal. prin- Every stipulation exe obligation to render an a ccmpting ount ge the agent from th ° shall be void. Obligation to render acco unts, whether such money or property ig n agency. It isis imma i terial or Vv violation of the : age ty “»is th TNE result u of the performan ce permitted to derive advant