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.
Agency: A relationship which implies a power in an agent to contract with a
3rd person on behalf of a principal.
Kind of Contract: It is a preparatory contract. It is a contract entered not for
its own end but to be able to enter into other contracts.
Characteristics:
 1.) Consensual: perfected by mere consent;
 2.) Nominate: it has its own name;
 3.) Principal: does not depend on another contract for its existence and
validity;
 4.) Preparatory: entered into as a means to an end;
 5.) Unilateral/Bilateral:
 a.) Unilateral: if contract is gratuitous, it creates obligations for only one
of the parties, i.e. agent.
 b.) Bilateral: if for compensation, it gives rise to reciprocal rights and
obligs.
Basis: Representation.
The acts of the agent on behalf of the principal within the scope of his
authority produce the same legal and binding effects as if the principal
personally did them.
Distinguishing Features:
 1.) Representative character; and
 2.) Derivative authority.
Purpose: To extend the personality of the principal through the facility of the
agent.
Parties:
 1.) Principal; and
 2.) Agent.
Who can be principal?
The principal may be a natural person or a juridical person. He must be
capacitated. The rule is if a person is capacitated to act for himself or in his
own right, he can act through an agent.
Must the agent have capacity?
Insofar as 3rd persons are concerned, it is enough that the principal is
capacitated; but insofar as his obligations to his principal are concerned, the
agent must be able to bind himself.
Essential Elements of Agency:
 1.) Consent, express or implied;
 2.) Object of the contract is the execution of a juridical act in relation to
3rd persons;
 3.) The agent acts as a representative and not for himself;
 4.) The agent acts within the scope of his authority.
Acts that cannot be done through an agent:
 1.) Personal acts: if personal performance is reqd by law or public policy
or agreement;
 2.) Criminal or illegal acts: attempt to delegate another authority to do
an act which, if done by the principal would be illegal, is void.

Nature of Relation between Principal and Agent: Fiduciary, based on trust and confidence.
Agency v. Lease of Work or Service
Agency Lease of Work/Service
Basis is representation. Basis is employment
Agent exercises discretionary powers. Lessor only performs ministerial
functions.
3 persons are involved: principal, Only 2 persons involved: lessor and
agent & 3rd person. lessee
Commercial or business transactions. Matters of mere manual or
mechanical execution.
Agency v. Guardianship
Agency Guardianship
Agent represents a capacitated Guardian represents an incapacitated
person. person.
Agent appointed by principal and Guardian appointed by court and stands
can be removed by him. in loco parentis.
Agent subject to directions of Guardian not subject to directions of
principal. ward but must act for his benefit.
Agent can make principal Guardian has no power to impose
personally liable. personal liability on his ward.
Agency to Sell v. Sale
Agency to sell Sale
Agent receives the goods as the goods of the Buyer receives the goods as
principal. owner.
Agent delivers proceeds of the sale. Buyer pays the price.
Agent can return object in case he is unable Generally, buyer cannot
to sell to a 3rd person. return the object sold.
Agent in dealing with the thing received is Buyer can deal with the thing
bound to act accdg to the instructions of his as he pleases, being the
principal owner.
Agent v. Independent Contractor
Agent Independent Contractor
Represents the principal. Employed by employer.
Acts under the control and Acts according to his own method.
instructions of the principal
Principal liable for torts committed by Employer not liable for torts
agent w/in scope of authority. committed by independent
contractor.
Art. 1869. Agency must be express, or implied from the acts of the principal,
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.
Classifications of Agency: as to•
 1.) Manner of Creation:

 a.) Express: actually authorized, either orally or in writing.

 b.) Implied: implied from acts of principal, from his silence or lack of
action or his failure to repudiate the agency knowing that another person is
acting on his behalf w/o authority.

 2.) Character:

 a.) Gratuitous: agent receives no compensation for his services.

 b.) Onerous: agent does receive compensation.

 3.) Extent of business covered:

 a.) General: comprises all the business of the principal.

 b.) Special: comprises one or more specific transactions.

 4.) Authority conferred:

 a.) Couched in general terms: deemed to comprise only acts of

administration.

 b.) Couched in specific terms: authorizes only the performance of a

specific act/s.

 5.) Nature and effects:

 a.) Representative: agent acts in name and representation of principal.

 b.) Simple/Commission: agent acts in his own name but for the account
of the principal.

Can agency be presumed?

Generally NO because the relationship between the principal and agent must
exist as a fact. The only exceptions to this rule are when agency arises by
operation of law or agency is presumed to prevent unjust enrichment.
Form: Generally, NO formal requirements. Agent•s authority may be oral or
written, it may be in public or private writings. The only exception is when
the law requires a specific form (e.g. sale of real property or any interest
therein by an agent.)
Art. 1870. Acceptance by the agent may also be express, or implied from his
acts which carry out the agency, or from his silence or inaction according to
the circumstances.
Form of Acceptance by Agent:
Acceptance may be express or implied; express when it is oral or written;
implied when it can be inferred from the acts of the agent which carry out
the agency, or from his silence or inaction accdg to the circumstances.
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.
Between 2 persons who are present, when it acceptance deemed implied?
When the agent receives a power of atty from the principal himself
personally without objection.
Is this presumption conclusive?
NO, it can be rebutted by contrary proof.
Power of attorney: An instrument in writing by which one person, as
principal, appoints another as his agent and confers upon him the authority
to perform certain specified acts or kinds of acts on behalf of the principal.
Its primary purpose is to evidence the authority of the agent to 3rd parties
w/ whom the agent deals.
Construction
A power of atty is strictly construed and strictly pursued. The instrument will
be held to grant only those powers which are specified, and the agent may
neither go beyond nor deviate from the power of atty. The only exception is
when strict construction will destroy the very purpose of the power.
Meaning of •present•
Not limited to face-to-face encounters. 2 persons conversing on the phone
are also considered as both •present•.
Art. 1872. Between persons who are absent, the acceptance of the agency
cannot be implied from the silence of the agent, except:
1.) When the principal transmits his power of attorney to the agent, who
receives it without any objection;

 2.) When the principal entrusts to him by letter or telegram a power of

attorney with respect to the business in which he is habitually engaged as an
agent, and he did not reply to the letter or telegram.

2 Ways of Giving Notice of Agency

 1.) By special information; or

 2.) By public advertisement.

Effects:
 1.) Special information: the person appointed as agent is considered such
with respect to the person to whom it was given.

 2.) Public advertisement: Agent is considered such with regard to any

person.

Revocation • An agency is revoked in the same manner as it was given.

General rule: Special information needs special information of revocation.
Except: if you can prove that the 3rd person read the notice in the
newspaper.
Art. 1873. If a person specially informs another or states by public
advertisement that he has given a 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.
Agency by Estoppel: There is really no agency at all, but the alleged agent
seemed to have apparent or ostensible, although no real authority to
represent another.
 1.) Estoppel of Agent • One professing to act as agent for another may
be estopped to deny his agency both as against his asserted principal and
the 3rd persons interested in the transaction in which he is engaged.

 2.) Estoppel of Principal •

 a.) As to Agent • One who knows that another is acting as his agent and
fails to repudiate his acts, or accept the benefits of them, will be estopped to
deny the agency as against such other.

 b.) As to sub-agent • To estop the principal from denying his liability to a

3rd person, he must have known or be charged with knowledge of the fact of
the transmission and the terms of the agreement between the agent and
sub-agent.

 c.) As to 3rd persons • One who knows that another is acting as his
agent or permitted another to appear as his agent, to the injury of 3rd
persons who have dealt with the apparent agent as such in good faith and in
the exercise of reasonable prudence, is estopped to deny the agency.

 3.) Estoppel of 3rd Persons • A 3rd person, having dealt with one as an
agent may be estopped to deny the agency as against the principal, agent or
3rd persons in interest.

 4.) Estoppel of the govt • The govt is neither estopped by the mistake or
error on the part of its agents. But it may be estopped through affirmative
acts of its officers acting within the scope of their authority.

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.
 • A letter is sufficient [Jimenez v. Rabot].

Art. 1875. Agency is presumed to be for a compensation, unless there is

proof to the contrary.
Broker: One who in behalf of others, and for compensation or fee, negotiate
contracts relative to property. He is the negotiator between the parties,
never acting in his own name, but in the name of those who employ him. He
is strictly a middleman and for some purposes, the agent of both parties.
When is a broker entitled to compensation?
A broker is entitled to commission whenever he rings to his principal a party
who is able and willing to take the property, and enter into a valid contract
upon the terms named by the principal, although the particulars may be
arranged and the matter negotiated and completed between the principal
and the purchaser directly. A broker is never entitled to commission for
unsuccessful efforts.
Does the law allow double agency?
Such agency is disapproved by law for being against public policy and sound
morality. The exception is where the agent acted with full knowledge and
free consent of the principals.
In case the agent assumes a double agency, what is his right to
compensation?
 1.) If with knowledge of both principals • recovery can be had from both.

 2.) If without knowledge of both • agent can recover from neither.

 3.) If with knowledge of only one • as to the principal who knew of that
fact and as to the agent, they are in pari delicto and the courts shall leave
them as they were, the contract between them being void as against public
polisy and good morals.

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.
Classification of Agents:
 1.) Universal agent: One employed to do all acts that the principal may
personally do, and which the principal can lawfully delegate to another the
power of doing.

 2.) General agent: One employed to transact all the business of his
principal, or all business of a particular kind or in a particular place, or in
other words, to do all acts connected with a particular trade, business, or
employment.

 3.) Special/Particular agent: One authorized to act in one or more

specific transactions, or to do one or more specific acts, or to act upon a
particular occasion. e.g.:

 a.) Atty at law: One whose business is to represent clients in legal

proceedings.

 b.) Auctioneer: One whose business is to sell property for others to the
highest bidder at a public sale.

 c.) Broker: One whose business is to act as intermediary between 2 other

parties.

 d.) Factor: One whose business is to receive and sell goods for a
commission, being entrusted with the possession of the goods involved in
the transaction.
Attorney-in-fact: One who is given authority by his principal to do a
particular act not of a legal character. In strict legal sense: An agent having
a special authority created by deed.
eneral Agent v. Special Agent [SNETI]

As to• General agent Special agent

Only one or more specific acts in

All acts connected w/ the
Scope of pursuance of particular instructions
business in which he is
authority or w/ restrictions necessarily
engaged.
implied from the act to be done.

Nature of Single transaction or a series of

service Series a transactions involving a continuity transactions not involving
authorized of service. continuity of service.

Extent to By an act within the scope

Cannot in a manner beyond or
which agent of his authority although it
outside the specific acts w/c he is
may bind may be contrary to his
authorized to perform.
principal special instructions.

Termination effective as to 3rd

Apparent authority does party unless agency was for
Termination not terminate by mere purpose of contracting w/ that
of authority revocation of authority
3rd
w/o notice to 3rd parties.
party.

Constructio
n of Strictly construed. Limits the
Merely advisory.
instructions authority of agent.
of principal

Art. 1877. An agency couched in general 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 consider appropriate, or
even though the agency should authorize a general or unlimited
management.
Examples of acts of mere administration:
 1.) To sue for collection of debts;

 2.) To employ workers or servants and employees needed for the

conduct of business;

 3.) To engage counsel to preserve the ownership and possession of the

principal•s property;

 4.) To lease real property to another person for 1 year or less, provided
the lease is not registered;

 5.) To make customary gifts for charity or to employees in the business

managed by the agent
 6.) To borrow money if it be urgent and indispensable for the
preservation of the things under administration.

How are contracts of agency construed?

Contracts of agency as well as general powers of attorney must be
interpreted in accordance with the language used by the parties. The real
intention of the parties is primarily determined from the language used and
gathered from the whole instrument. In case of doubt, resort must be had to
the situation, surroundings and relations of the parties. The intention of the
parties must be sustained rather than defeated. So if the contract be open to
2 constructions, one of which would uphold the intention while the other
would overthrow it, the former is to be chosen.
MEMORIZE THIS: [PNC-WIGLLS-PG-CARS]

Art. 1878. Special powers of attorney are necessary in the following cases:
 1.) To make such payments as are not usually considered as acts of
administration;

 2.) To effect novations which put an end to obligations already in

existence at the time the agency was constituted;

 3.) To compromise, to submit questions to arbitration, to renounce the

right to appeal from a judgment, 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 ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;

 6.) To make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;

 7.) To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
administration;

 8.) To lease any real property to another person for more than one year;

 9.) To bind the principal to render some service without compensation;

 10.) To bind the principal in a contract of partnership;

 11.) To obligate the principal as a guarantor or surety;

 12.) To create or convey real rights over immovable property;

 13.) To accept or repudiate an inheritance;

 14.) To ratify or recognize obligations contracted before the agency;

 15.) Any other act of strict dominion.

Scope of General Authority to Purchase

Where an agent•s power to purchase is general and unrestricted, he has
implied authority to do whatever is usual and necessary in the exercise of
such power. He may:
 1.) Determine the usual and necessary details of the contract,

 2.) agree upon the price,

 3.) modify or rescind the contract of purchase,

 4.) accept delivery for his principal,

 5.) give directions for the delivery of the property purchased, and

 6.) may borrow money to pay for the care and preservation of the
property purchased.

 But he has no special power to

 1.) Settle a contest between the principal and a 3rd person regarding the
ownership of goods purchased, or

 2.) Agree to an account stated, or

 3.) Do anything not usual or necessary to the exercise of such authority.

Scope of Special Authority to Purchase

Where the agency is a special one, or is restricted to purchases upon certain
terms and conditions, the agent has no authority to
 1.) Purchase upon different terms and conditions from those authorized,
or

 2.) Modify or rescind a contract of purchase made by the principal.

Art. 1879. A special power to sell excludes the power to mortgage; and a
special power to mortgage does not include the power to sell.
The ff are included in a Power to Sell:
The power to:
 1.) Find a purchaser or to sell directly;

 2.) Deliver the property;

 3.) Make the usual representation and warranty;

 4.) Execute the necessary transfer documents;

 5.) Fix the terms of the sale unless there be set conditions stipulated by
the principal;

 6.) Sell only for cash;

 7.) Receive the price unless he was authorized only to solicit orders.

The ff are not included in a Power to Mortgage

The power to:
 1.) Sell;

 2.) Execute a 2nd mortgage;

 3.) Mortgage for the agent•s personal benefit or for the benefit of any
3rd person, unless the contrary has been clearly indicated.

Does the principal have the power to revoke a contract giving an agent
exclusive authority to sell?
YES. But he may not have the right to use such power if he has agreed not
to exercise such power during a certain period. In case he fails to comply
with this obligation-not-to-do, he will be liable for damages.
Art. 1880. A special power to compromise does not authorize submission to
arbitration.
Rationale:
A principal may authorize his agent to compromise because of absolute
confidence in the latter•s judgment and discretion to protect the former•s
rights and obtain for him the best bargain in the transaction. If the
transaction would be left in the hands of an arbitrator, said arbitrator may
not enjoy the trust of the principal.
What happens if the agent is specifically authorized to submit to arbitration?
Then the arbitration award binds the principal, provided, of course, that the
agent acted within the scope of his authority.
Art. 1881. 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.
Authority: The power of the agent to affect the legal relations of the principal
by acts done in accordance with the principal•s manifestation of consent to
him. The authority of the agent is the very essence • sine qua non • of the
principal and agent relationship. This authority, unless it is otherwise agreed,
includes only the authority to act for the benefit of the principal, and the
source of the authority is the principal and never the agent.
Kinds of Authority:
 1.) Actual: when it is actually granted, and it may be express or implied.
It results from what the principal indicates to the agent.

 2.) Express: when it is directly conferred by words.

 3.) Implied: when it is incidental to the transaction or reasonably

necessary to accomplish the purpose of the agency, and therefore,
the principal is deemed to have actually intended the agent to possess.

 4.) Apparent or Ostensible: when it is conferred by words, conduct or

even by the silence of the principal which causes a 3rd person reasonably to
believe that a particular person, who may or may not be the principal•s
agent, has actual authority to act for the principal. Ostensible authority is
another name for authority by estoppel.

 5.) General: when it refers to all the business of the principal.

 6.) Special: when it is limited only to one or more specific transactions.

 7.) By necessity or by operation of law: when it is demanded by virtue of
the existence of an emergency; it terminates when the emergency has
passed.

Requisites for Principal to be Bound by Act of Agent:

 1.) The agent must act in behalf of the principal;

 2.) The agent must act within the scope of his authority.

When is a principal not bound by the act of his agent?

When the agent acts without or beyond the scope of his authority; or when
the agent acts within the scope of his authority but in his own name except
when the transaction involves things belonging to the principal.

Authority? Whose behalf? Status of K

With authority Principal•s Valid

With authority Own Depends. [1883]

Without Principal•s Unenforceable

Without Own Valid

Who to sue?
In case the agent acts in the name of the principal and within his scope of
authority, you must name the principal as the defendant.
Note: The authority to look for buyers does not carry with it the authority to
sell.
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.
What happens if the agent exceeds his authority but he performs the agency
in a manner more advantageous to the principal?
It will e as if he did not exceed the limits of his authority since he must do
such acts as may be conducive to the accomplishment of the purpose of the
agency.
Test: Would the principal enter into this transaction?
Art. 1883. If an agent acts in his own name, the principal has no right of
action against the persons with whom the agent 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 agent.
Kinds of Principals:
 1.) Disclosed: if at the time of the transaction contracted by the agent,
the other party thereto has known that the agent is acting for a principal and
has known the principal•s identity.

 2.) Partially disclosed: if the other party knows or has reason to know
that the agent is or may be acting for a principal but is unaware of the
principal•s identity. The partially disclosed principal may enforce against the
3rd person the contract of the agent like any disclosed principal. Similarly,
the 3rd person has a right of action against the principal.

 3.) Undisclosed: if the party has no notice of the fact that the agent is
acting as such for a principal.

General Rule in 1883: If the agent is authorized to act on behalf of the

principal but instead acts in his own name, the agent is the one directly
liable to the person with whom he had contracted as if the transaction were
his own.
Exception: If the contract involves something belonging to the principal.
Remedy of the Principal if this situation arises:
He can demand from the agent damages for his failure to comply with the
agency.
Remedy of the 3rd person with whom the agent contracted in case the oblig
is not complied with:
If the case falls under the general rule, he can sue the agent. But when the
contract involves things belonging to the principal, he can sue the principal.
But if it cannot be determined w/o litigation who is liable, he can sue both.
 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.
General Obligations of an Agent to his Principal:
 1.) To act with the utmost good faith and loyalty for the furtherance and
advancement of the interests of the principal.

 2.) To obey the principal•s instructions.

 3.) To exercise reasonable care.

Specific Obligations:
 1.) To carry out the agency he has accepted.

 2.) To answer for damages which through his nonperformance the

principal may suffer.

 3.) To finish the business already begun on the death of the principal
should delay entail danger.

 4.) To observe the diligence of a good father or a family in the custody

and preservation of the goods forwarded to him by the owner in case he
declines an agency, until an agent is appointed.

 5.) To advance the necessary funds should there be a stipulation to do

so.

 6.) To act in accordance with the instructions of the principal, and in

default thereof, to do all that a good father of a family would do.

 7.) Not to carry out the agency if its execution would manifestly result in
loss or damage to the principal.

 8.) To answer for damages if there be a conflict between his interests

and those of the principal, he should prefer his own.

 9.) Not to loan to himself if he has been authorized to lend money at

interest.

 10.) Not to render an account of his transactions and to deliver to the

principal whatever he may have received by virtue of the agency.

 11.) To be responsible in certain cases for the act of the substitute

appointed by him.

 12.) To pay interest on funds he has applied to his own use.

Art. 1885. In case a person declines an agency, he is bound to observe the
diligence of a good father of a family in the custody and preservation of the
goods forwarded to him by the owner until the latter should appoint an
agent. The owner shall as soon as practicable either appoint an agent or
take charge of the goods.

What is the rule if a person declines agency?

In the event a person declines an agency, he is bound to observe the
diligence of a good father of a family in the custody and preservation of the
goods forwarded to him by the owner.

Duty of Owner in case an Agency is Declined:

He must act as soon as possible by appointing an agent or by taking charge
of the goods.

Art. 1886. Should there be a stipulation that the agent shall advance the
necessary funds, he shall be bound to do so except when the principal is
insolvent.

In a contract of agency, may the parties stipulate that the agent shall
advance the necessary funds? YES.
What is the oblig then of the agent?
He is bound to furnish such funds.
Except: When the principal is insolvent. This exception is based on the
principal•s obligation to reimburse the agent.

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.
Instructions: Private directions which the principal may give the agent in
regard to the manner of performing his duties as such agent.
Authority v. Instructions
Authority Instructions
Sum total of powers committed or Direct the manner of transacting the
permitted to the agent by the authorized business and
principal. contemplates only a private rule of
guidance to the agent.
Relates to the subject with which the Refers to the manner or mode of his
agent is empowered to deal or the action with respect to matters which
kinds of business or transactions upon in their substance are within the
which he is powered to act. scope of permitted action.
Limitations of authority are operative Without significance as against
as against those who have or are those dealing with the agent with
charged with knowledge of them. neither knowledge nor notice of
them.
Contemplated to be made known to Not expected to be made known to
the 3rd person dealing w/ the agent. those w/ whom the agent deals.

Instructions • pertain to the principal and agent Authority• pertain to the

agent and 3rd persons.
Exceptions to the rule that the agent must not depart from the instructions
of the principal: [SAI]
 A departure may be justified by:
 1.) A sudden emergency;
 2.) If the instructions are ambiguous; or
 3.) If the departure is so insubstantial that it does not affect the result
and the principal suffers no damage thereby.
When the Agent has a right to disobey the principal•s instructions:
 1.) When the instruction calls for the performance of illegal acts; or
 2.) Where he is privileged to do so to protect his security/interest in the
subject matter of the agency.

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

Rationale: The duty of the agent who is merely an extension of the

personality of the principal is to render service for the benefit of the principal
and not to act to his detriment. Furthermore, the agent must exercise due
diligence in carrying out the agency.

Art. 1889. The agent shall be liable for damages if, its execution would
manifestly result in loss or damage to the principal.

Note: This provision applies to both onerous and gratuitous transactions.

The law does not distinguish so neither should we.
Rationale: An agent occupies a fiduciary position and therefore is bound to
exercise loyalty, obedience, and diligence with respect to the interest of the
principal.
If the agent follows the principal•s instructions yet his acts still result in
damage to 3rd persons, who is liable?
General rule: The agent is NOT liable.
Except: if before acting that way, it is obvious that the act will result to
damage, then the agent is liable.

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.
Rationale: The agent can lend money to the principal using the agent’s own
funds at the current rate of interest and NOT at a higher interest rate
because the agent is supposed to act for the principal’s benefit.
If the agent is authorized to lend the principal’s money, with interest, to 3rd
persons, the agent can’t be the borrower without the consent of the principal
because the agent may not be a good borrower or he may be insolvent or he
may not be a good risk. There is a danger here that the interest of the
principal would be jeopardized.
This would also seem to be the case if the agent is authorized to lend money
w/o interest because of the same reason.

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.
Rationale: Contrary to public policy as it would encourage fraud. It is in the
nature of a waiver of an action for future fraud w/c is void.
If the agent fails to deliver and instead converts or appropriates for his own
use the money or property belonging to his principal, with what can he be
charged? ESTAFA.

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.

Sub-agent: A person to whom the agent delegates, as his agent, the

performance of an act for the principal which the agent has been empowered
to perform through his representative.

Relation among the principal, agent and sub-agent

In reality, the sub-agent is a stranger to the principal who originally gave life
to the agency. But if the agent is authorized to appoint a sub-agent, the
relation of principal and agent exists between the principal and the sub-
agent. That is, the sub-agent may be the agent of the principal if he is in
actual control of the business and the principal knows of his appointment or
knows that his appointment is necessary. Consequently, any act done by the
sub-agent in behalf of the principal is deemed an act of the principal; so
neither agent nor sub-agent may be held personally liable as long as they
act within the scope of their authority.
When can an agent appoint a sub-agent?
So long as there’s no prohibition. However, he shall be responsible for all the
sub-agent’s acts.

4 Instances where a Sub-agent is appointed and the Effects of each:

Instance
No prohibition
Prohibition
Authority to appoint but
not designated by principal
Authority to appoint and
designated by principal
Effect
Agent responsible for all the acts of sub-agent.
Sub-agent•s acts are VOID as to the principal.
Agent liable for acts of sub-agent if the sub-
agent is notoriously incompetent or insolvent.
Agent is released from any liability from the
acts of

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.

When can the principal sue the substitute?

Under the premises given in the previous provision, the principal can sue
both the agent and the substitute.

Art. 1894. The responsibility of two or more agents, even though they have
been appointed simultaneously, is not solidary, if solidarity has not been
expressly stipulated.

If solidarity is not stipulated, what is the liability to 2 or more agents?

JOINT.

Each is liable only for proportionate part of debt.

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.

What happens if solidarity has been agreed upon?

Then each of the agents becomes solidarily liable for:

 1.) The non-fulfillment of the agency; or
 2.) The fault or negligence of the fellow agent provided the latter acted
within the scope of his authority.
But the innocent agent has a right later on to recover from the guilty or
negligent agent.

What happens if the fellow agent acted beyond the scope of his authority?
Then the innocent agent cannot be liable at all to the principal even if
solidarity had been agreed upon.

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.

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.

Principal • Agent • 3rd Party (wrong party to complain if the principal

doesn•t complain of the agent•s acts)
General rule: •an agent who acts as such is not personally liable to the party
with whom he contracts.• Reason for general rule: Because an agent who
acts as such within the scope of his authority represents the principal so that
his contract is really the principal•s.

Exceptions:
 1.) When the agent binds himself; or
 2.) When he exceeds the limits of his authority without giving the third
party sufficient notice of his powers.
Reasons for exceptions:
 1.) When the agent expressly binds himself, he thereby obligates himself
personally and by his own act.
 2.) When the agent exceeds his authority, he really acts without
authority and therefore, the contract is unenforceable against the principal.
The agent becomes personally liable because y his wrong or omission, he
deprives the 3rd party with whom he contracts of any remedy against the
principal.

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.

Art. 1899. If a duly authorized agent acts in accordance with the orders of
the principal, the latter cannot set up the ignorance of the agent as to
circumstances whereof he himself was, or ought to have been aware.
This article refers to the liability of the principal towards 3rd persons.

What happens if the principal appoints an agent who is ignorant?

Then the fault is the principal’s alone. Equity demands that the principal
should be bound by the acts of the agent if the latter acts within the scope of
his authority and in accordance with the instructions of the former.
Art. 1900. So far as third persons are concerned, an act is deemed to have
been performed within the scope of the agent’s authority, is such act is
within the terms of the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to an understanding
between the principal and the agent.

Requisite for article to apply:

Authority to agent must be in writing.

•Scope of agent•s authority• includes:

Not only the actual authorization conferred upon the agent by the principal,
but also that which has apparently or impliedly been delegated to him.
To hold the principal liable, a 3rd person dealing with an agent must:
Discover upon his peril not only the fact of agency but the nature and extent
of authority of the agent. He is put on inquiry. He must also act with
ordinary prudence and reasonable diligence.

Fundamental principles when inquiring whether authority exists:

 1.) The law indulges in no bare presumptions that an agency exists, it

must be proved and presumed from facts;
 2.) The agent cannot establish his own authority, either by his
representations or by assuming to exercise it;
 3.) An authority cannot be established by mere rumor or general
reputation;
 4.) A general authority is not an unlimited one; and
 5.) Every authority must find its ultimate source in some act or omission
of the principal.
In case the fact of agency or the extent of the authority of the agent is
controverted, the burden of proof is on:
The 3rd person to establish the fact of agency or the extent of authority of
the agent.
Does the 3rd person have to inquire further if the power of attorney is
written?
No. He is not required to inquire further than the terms of the written power
of attorney.
If there is a secret mutual understanding between the principal and the
agent, and such is not expressed in the written power of attorney, does the
3rd person have to inquire?
No. As far as he is concerned, an act of the agent within the terms of the
power of attorney as written, is within the scope of the agent•s apparent
authority notwithstanding that the agent may have exceeded the limits of
his actual authority according to a secret understanding between him and
the principal. In such a case, the principal is estopped from claiming that the
agent exceeded his authority.

Ways by which the agent’s authority may be broadened or restricted: [I•m-

UNDEr]

 1.) By implication • agent•s authority extends not only to express

requests, but also to those acts and transactions incidental thereto. It
embraces all the necessary and appropriate means to accomplish the desired
end.
 2.) By usage and custom •
 a.) An agent•s authority may not be enlarged through usage and custom
in the following cases: Where it is sought to•
 i.) Vary the terms of an express authorization;
 ii.) Dispense with a legal requirement enacted for the principal•s benefit;
 iii.) Change a rule of law or dispense with a formality required by law;
 iv.) Vary an essential quality of the agency relationship.
 b.) General rule: principal must have notice of the alleged custom, before
the agent•s acts, in accordance therewith, may bind the principal.

Exceptions:

 i.) Where the principal and the agent reside in the same community, the
usage is definite and well-known, and the agent has no notice that he is to
act to the contrary;
 ii.) Where the agent is authorized to deal in a particular place or in a
particular market exchange.
 4.) By necessity • the existence of an emergency or other unusual
conditions may operate to invest in an agent authority to meet the
emergency, provided:
 a.) Emergency really exists;
 b.) Agent is unable to communicate w/ the principal;
 c.) Agent•s enlarged authority is exercised for the principal•s protection;
and
 d.) The means adopted are reasonable under the circumstances.
5.) By certain doctrines •
 a.) Apparent authority
 b.) Liability by estoppel;
 c.) Ratification.
 6.) By the ejusdem generis rule • such that where in an instrument of
any kind, an enumeration of specific matters is followed by a general phrase
is held to be limited in scope by the specific matters.
Responsibility of principal when agent acts w/ improper motives:
General rule: Motive of agent in entering into a K w/ a 3rd person is
immaterial.
 Exceptions:

 1.) Where the 3rd person knew that the agent was acting for his benefit,
in w/c case, the principal is not liable to the 3rd person; and
 2.) Where the owner is seeking recovery of personal property of w/c he
has been unlawfully deprived.

Principal•s responsibility for an agent•s misrepresentation:

 1.) Within the scope of the agent•s authority • Principal is subject to

liability for lass caused to another by the 3rd persons reliance upon a
deceitful representation of an agent in the course of his employment if:
 a.) Representation is authorized;
 b.) Within the implied authority of the agent to make for the principal; or
 c.) Apparently authorized.
 2.) Beyond the scope of the agent•s authority • General rule: Principal is
not bound. Exception: when the principal takes advantage of a K made
under the false misrepresentation of his agent.
 3.) For the agent•s own benefit • Principal is liable (motive of agent
immaterial).

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.

Effect of ratification by the principal:

Ratification of a contract gives it the same effect as if the principal had
originally authorized it.

Who must ratify the contract?

Only the principal. But there must be knowledge on the part of the principal
of the things he is going to ratify.
When can the 3rd person repudiate the contract?
Before actual ratification by the principal, or before the principal has signified
his willingness to ratify the agent’s acts.
Effect of the principal receiving the benefits of the transaction:
He is deemed to have ratified it. A principal may not accept the benefits of a
transaction and at the same time repudiate its burdens.

Art. 1902. A third person with whom the agent wishes to contract on behalf
of the principal may require the presentation of the power of attorney, or the
instructions as regards the agency. Private or secret orders and instructions
of the principal do not prejudice third persons who have relied upon the
power of attorney or instructions shown them.
Duty of a 3rd person who deals w/ an agent:
3rd person deals w/ an agent at his peril. He is bound to inquire as to the
extent of the agent’s authority, and this is especially true where the act of
the agent is of an unusual nature. Ignorance of the agent•s authority is no
excuse. It is his duty to require the agent to produce his power of attorney
to ascertain the scope of his authority. He may also ask for the instructions
of the principal.

Do secret orders or private instructions prejudice 3rd persons?

No, he cannot be prejudiced by any secret understanding between the

principal and the agent. Such secret orders cannot be invoked as against 3rd
parties if the agent had apparent authority.

Art. 1903. The commission agent shall be responsible for the goods received
by him in the terms and conditions and as described in the consignment,
unless upon receiving them he should make a written statement of the
damage and deterioration suffered by the same.

Commission agent: One whose business is to receive and sell goods for a
commission and who is entrusted by the principal with the possession of
goods to be sold, and usually selling in his own name.

Ordinary agent v. Commission agent:

Ordinary agent Commission agent
Acts for and behalf of his principal. May act in his own name or in that
of his principal.
Need not have possession of the goods Must be in possession.
of his principal.
Commission agent v. broker:
Commission agent Broker
Has a relation to principal, buyers or No relation w/ the thing w/c he
sellers, and the property itself. purchases or sells. Merely a go-
between.

Liability of commission agent as to goods received:

If the commission agent received goods consigned to him, he is responsible
for any damage or deterioration suffered by the same in the terms and
conditions and as described in the consignment.

Presumption established in this article:

Damage in the merchandise were suffered while in the possession and
custody of the agent.
What the commission agent must do to avoid liability:
Make a written statement of the damage and deterioration if the goods
received by him do not agree w/ the description in the consignment.

Agent v. Depositary:
Agent Depositary
Cannot commingle goods of the same Can commingle goods of the same
kind. kind.

Art. 1904. The commission agent who handles goods of the same kind and
mark, which belong to different owners, shall distinguish them by
countermarks, and designate the merchandise respectively belonging to
each principal.

Purpose of this provision:

Prevent any possible confusion or deception.

Art. 1904 gives the general rule. Exceptions:
 1.) By custom;
 2.) Collecting banks.

Art. 1905. The commission agent cannot, without the express or implied
consent of the principal, sell on credit. Should he do so, the principal may
demand from him payment in cash, but the commission agent shall be
entitled to any interest or benefit, which may result from such sale.

Rule given in this article:

Commission agent can sell on credit only with the express or implied consent
of the principal.

Right of the principal in case the commission agent sold goods on credit
without authority: [CR]

 2 alternatives:
 1.) He may require payment in cash, in w/c case, any interest or benefit
from the sale on credit shall belong to the agent since the principal cannot
be allowed to enrich himself at the agent•s expense; or
 2.) He may ratify the sale on credit, in w/c case it will have all the risks
and advantages to him.
Art. 1906. Should the commission agent, with authority of the principal, sell
on credit, he shall so inform the principal, with a statement of the names of
the buyers. Should he fail to do so, the sale shall be deemed to have been
made for cash insofar as the principal is concerned.
Obligation of the commission agent where a sale on credit was authorized:
An authorized sale on credit shall be deemed to have been on a cash basis
insofar as the principal is concerned if the agent fails to inform the principal
of such sale on credit with a statement of the names of the buyers.
Reason for this article: Prevent the agent from stating that the same was on
credit when in fact it was made for cash.

Art. 1907. Should the commission agent receive on a sale, in addition to the
ordinary commission, another called a guarantee commission, he shall bear
the risk of collection and shall pay the principal the proceeds of the sale on
the same terms agreed upon with the purchaser.

Guarantee commission: One where, in consideration of an increased

commission, the commission agent guarantees to the principal the payment
of debts arising through his agency.

Purpose of guarantee commission: To compensate the agent for the risks he

will have to bear in the collection of the credit due to the principal.

Nature of liability of guarantee commission agent:

Liable to principal if the buyer fails to pay or is incapable of paying. But he is
not primarily the debtor. On the contrary, the principal may sue the buyers
in his own name. In such a case, the agent amounts to no more than a
guaranty. Liability is a contingent pecuniary liability.

Can the agent with a guarantee commission put up the defense of insolvency
of the debtor?
No. an agent receiving a guarantee commission cannot put up the defense
that the debtor-3rd person possesses no property since this is precisely the
risk the commission agent assumes.

Art. 1908. The commission agent who does not collect the credits of his
principal at the time when they become due and demandable shall be liable
for damages, unless he proves that he exercised due diligence for that
purpose.

Obligation of the commission agent under this article:

The commission agent who has made an authorized sale on credit must
collect the credits due the principal at the time they become due and
demandable. If he fails to do so, he shall be liable for damages unless he can
show that the credit could not be collected notwithstanding the exercise of
due diligence on his part. In such a case, the principal•s remedy is to
proceed against the debtor.
Does this article apply to a case where there is a guarantee commission?
No, because the agent already assumed the risks of collection by accepting
the guarantee commission.

Art. 1909. The agent is responsible not only for fraud, but also for
negligence, which shall be judged with more or less rigor by the courts,
according to whether the agency was or was not for a compensation.

Is the agent liable for fraud? Yes, in all cases.

For negligence? Yes, but this shall be adjudged with rigor by the courts.
Why does the court have to take into consideration whether the agency was
gratuitous or for compensation?
In order to fix the liability of the agent for negligence only (not fraud).
 Chapter 3. Obligations of the Principal

Art. 1910. The principal must comply with all the obligations which the agent
may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
Where can the specific obligations and duties of the principal to the agent be
found?
Usually in the contract creating the agency.
Principal obligations of the principal to the agent in the absence of such
agreement:
 1.) To comply with all the obligations which the agent may have
contracted in his name and within the scope of his authority;

 2.) To advance should the agent so request sums necessary for the
execution of the agency;

 3.) To reimburse the agent for all advances made by him provided the
agent is free from fault;

 4.) To indemnify the agent for all the damages which the execution of the
agency may have caused the latter without fault or negligence on his part;
and

 5.) To pay the agent the compensation agreed upon or the reasonable
value of the latter•s services.

Liability of the principle to 3rd persons:

Where the relation of agency legally exists, the principal will be liable to 3rd
persons for all acts committed by the agent in his behalf in the course and
within the actual or apparent scope of his authority, and this is not altered y
the fact that the agent may also be liable, nor by the fact that some of the
acts are to the principal•s advantage while others are to his disadvantage.
Liability of the principal for mismanagement of the business by the agent:
Mismanagement of the business of the principal by the agent does not
relieve said principal from the responsibility that he had contracted to 3rd
persons. But where the agent•s acts bind the principal, the latter may seek
recourse against the agent.
Liability of principal for a tort committed by the agent:
The principal is civilly liable to 3rd persons for torts of an agent committed at
the principal•s direction or I the course and within the scope of the agent•s
employment. The principal cannot escape liability whether the tort is
committed willfully or negligently so long as the tort is committed by the
agent while performing his duties in furtherance of the principal•s business.
Nor is it a defense that the act which caused the tort was unknown to him or
even that it was in disobedience to his instructions.
Meaning of ratification in 2nd paragraph:
Ratification is the adoption or affirmance by a person of a prior act which did
not bind him, but which was done or professed to be done on his account,
thus giving effect to the act as if originally authorized. The doctrine applies
to the ratification of the act of an agent in excess of his authority of the act
of one who purports to be an agent but who is really not. It may be implied
from the acceptance of benefits by the principal under a contract entered in
his name. The authority created by
ratification is subsequent but it is equivalent to prior authority.
Conditions to ratification: [ICK-PEC]
 1.) Intent to ratify;

 2.) Principal must have capacity & power to ratify;

 3.) He must have had knowledge of material facts;

 4.) The act must be done in behalf of the principal;

 5.) Principal must ratify acts in its entirety;

 6.) The act must be capable of ratification.

Effects of ratification with respect to the agent:

 1.) Relieves the agent from liability to the 3rd party to the unauthorized
transaction; and

 2.) To his principal for acting without authority; and

 3.) He may recover compensation due for performing the act which has
been ratified.

Effects of ratification with respect to the principal:

 1.) He assumes responsibility for the unauthorized act, as fully as if the
agent had acted under original authority; but

 2.) He is not liable for acts outside the authority approved by his
ratification.

Effects of ratification with respect to 3rd persons:

 1.) 3rd person is bound by ratification to the same extent as he would
have been bound if the ratified act had been authorized in the 1st instance;
and

 2.) He cannot raise the question of the agent•s authority to do the

ratified act.

Must ratification be communicated to the agent or to the 3rd party?

No. To be effective, ratification need not be communicated or made known
to the agent or the 3rd party. The act or conduct of the principal rather than
his communication is the key. But before ratification, the 3rd party is free to
revoke the unauthorized contract.
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.
Estoppel: precludes a person from denying or asserting anything contrary to
that which has been established as the truth by his own deed or
representation, either express or implied.
Ratification v. Estoppel

Ratification Estoppel

Rests on intention Rests on prejudice

Affects the entire transaction from the Affects only relevant parts of the
beginning transaction.

Substance is confirmation of a Substance is the principal•s

unauthorized act or conduct after it has inducement to another to act to his
been done. prejudice.

Apparent authority v. Authority by estoppel

Apparent authority Authority by estoppel

That which though not
actually granted, the
principal knowingly permits
the agent to exercise or
holds him out as possessing.
Arises in cases where the principal, by his
negligence, permits his agent to exercise
powers not granted to him, even though the
principal may have no notice or knowledge of
the conduct of the agent.

Basis of article 1911:

Principle of estoppel. Necessary for the protection of innocent 3rd persons.
Instance when solidarity is imposed by law.
Art. 1912. The principal must advance to the agent, should the latter so
request, the sums necessary for the execution of the agency.
Should the agent have advanced them, the principal must reimburse him
therefor, even if the business or undertaking was not successful, provided
the agent is free from all fault.
The reimbursement shall include interest on the sums advanced, from the
day on which the advance was made.
Should the principal reimburse the agent for advances made by the latter
even if the agency was unsuccessful?
It depends. Yes, if the agent is free from fault. No, if the agent was with
fault.
Is a broker always entitled to a commission?
A broker is entitled to a commission if the sale is effected, but not if there is
no perfected transaction.
Art. 1913. The principal must also indemnify the agent for all the damages
which the executive of the agency may have caused the latter, without fault
or negligence on his part.
Basis for the above rule: Equity. Since the principal receives the benefits of
the agency, and has a right to demand damages from the agent should the
latter not perform the agency, he should answer for the damages resulting
from the execution thereof without fault or negligence on the part of the
agent.
Art. 1914. The agent may retain in pledge the tings which are the object of
the agency until the principal effects the reimbursement and pays the
indemnity set forth in the two preceding articles.
What happens when the principal fails to reimburse or indemnify the agent
for expenses set forth in arts. 1912 and 1913?
The agent has the right to retain in pledge the things which are the object of
the agency.
In case the agent sells the goods for more than his claim, is he entitled to
the excess? No.
What is the nature of the agent•s right of lien?
Specific or particular. It is not general in the sense that it gives the agent a
right to retain the goods for claims disconnected with the agency.
Art. 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all
the consequences of the agency.
Requisites for application of this article: [2C2]
 1.) There are 2 or more principals;
 2.) The principals have all concurred in the appointment of the same
agent;
 3.) The agent is appointed for a common transaction or undertaking.
Why is solidarity the rule?
Because of the common transaction. Thus, even if the agent was appointed
separately, the rule should apply in the interest of justice.
Art. 1916. When two persons contract with regard to the same thing, one of
them with the agent and the other with the principal, and the two contracts
are incompatible with each other, that of prior date shall be preferred,
without prejudice to the provisions of Article 1544.
May 2 persons contract with regard to the same thing, one with the agent
and the other with the principal? Yes.
If this situation arises, which of the contracts will be preferred?
If the contracts are compatible, they will both be given effect. If they are
incompatible, then the contract of prior date shall be preferred.
Art. 1544: If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have 1st taken
possession thereof in good faith if it should e movable property. Should it be
immovable property, the ownership shall belong to the person acquiring it
who in good faith 1st recorded it in the Registry of Property. Should there be
no inscription, the ownership shall pertain to the person who in good faith
was 1st in possession; and in the absence thereof, to the person who
presents the oldest title, provided there is good faith.
Art. 1917. In the case referred to in the preceding article, if the agent has
acted in good faith, the principal shall be liable in damages to the third
person whose contract must be rejected. If the agent acted in bad faith, he
alone shall be responsible.
Is the principal always liable for damages caused by a 3rd person or is it the
agent who is liable?
Whether the principal or the agent will be the one liable for damages to the
3rd person who has been prejudiced depends on whether the agent acted in
bad faith or not. If the agent acted in good faith and within the scope of his
authority, the principal incurs liability. If the agent acted in bad faith, he
alone shall be responsible to such person.
What is the extent of liability covered under this article? Damages.
What is good faith referred to in this article?
Good faith here means that the agent had no knowledge that the principal is
dealing with a 3rd person.
Note: If the contract is one of sale, article 1544 governs and not arts. 1916
and 1917.
Art. 1918. The principal is not liable for the expenses incurred by the agent
in the following cases: [F*CKS]
 1.) If the agent acted in contravention of the principal•s instructions,
unless the latter should wish to avail himself of the benefits derived from the
contract;
 2.) When the expenses were due to the fault of the agent;
 3.) When the agent incurred them with knowledge that an unfavorable
result would ensue, if the principal was not aware thereof;
 4.) When it was stipulated that the expenses would be borne by the
agent, or that the latter would be allowed only a certain sum.
Instances wherein the principal is not liable for expenses incurred by the
agent?
In the instances enumerated under this article.
Reasons why the principal is not liable for the agent•s expenses: Under•
 1.) To punish the agent, but when the principal has availed of the
benefits, he is deemed to have impliedly ratified the agent•s acts.
 2.) •Kasi, kasalanan niya, eh.•
 3.) The agent is guilty of bad faith and lack of diligence;
 4.) An express stipulation which is not contrary to law, morals, good
customs, public order or public policy is binding between the parties.