CHAPTER 1Nature, Form and Kinds of Agency

ARTICLE 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- is a relationship which implies a power in an agent to contract with a third person on behalf of a principal.

Characteristics of a contract of agency:1. Consensual- perfected in mere consent2. Principal- can stand by itself3. Nominate- it has its own name4. Unilateral- it is gratuitous because it creates obligations for only one of the

parties.5. Preparatory- because it is entered into as a means to an end.

Essential Elements:(a) Consent, express or implied, of the parties to establish the relationship;(b) Object, which is the execution of a juridical act in relation to third parties;(c) Agent acts as a representative and not for himself; and(d) Agent acts within the scope of his authority.

The parties to a contract of agency are: • the PRINCIPAL – the person represented • the AGENT – the person who acts for and in representation of another

Agency distinguished from similar contracts:1. Loan2. Lease of service3. Independent contract4. Partnership5. Negotiorium gestio6. Brokerage7. Sale

ARTICLE 1869 Agency may 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.

Kinds of agency:1. As a manner of its creation: a. Express- One where the agent has been actually authorized by the principal either

orally or in writing. b. Implied- One which is implied from the acts of the principal, from the silence or lack

of action or his failure to repudiate the agency, knowing that the other person is acting on behalf without authority, or from the acts of agency, or from his silence or inaction, according to circumstances.

2. As to its character: a. Gratuitous- where the agent receives no compensation b. Compensated or Onerous- where the agent receives compensation for his services3. As to extent of business covered: a. General- which comprises all the business of the principal b. Special- which compromises one or more specific transaction4. As to authority conferred: a. Couched in general terms- which is created in general terms and is deemed to compromise only acts of administration b. Couched in specific terms- authorizing only the performance of a specific act or acts5. As to its nature and effects: a. Ostensible or representative- where the agent acts in the name and representation of the principal b. Simple or commission- where the agent acts for the account of principal but in his own name

ARTICLE 1870 Acceptance by the agent may also be express, or implied from his acts which carry out the or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

Form of acceptance by agent:There must be a consent by both parties. An agency is either express or implied, and this is true on the part of the principal as well as on that of the agent.

ARTICLE 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.

Power of Attorney- 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.

ARTICLE 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.

Acceptance between persons absent: If both principal and the agent are absent, acceptance by the agent is not implied from his silence or inaction. Since the agent is not bound to accept the agency, he can simply ignore the offer.

ARTICLE 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.

Communication of existence of agency:1. If by special information, the person appointed as agent is considered such with

respect to the person to whom it was given; or2. If by public advertisement, the agent is considered as such with regard to any person.

ARTICLE 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: 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.

ARTICLE 1875 Agency is presumed to be for a compensation, unless there is proof to the contrary.

Presumption as to compensation of agent: The principal must pay the agent the compensation agreed upon, or the reasonable due to the agent’s services if no compensation was deposited. This presupposes, however that the agent has compounded with his obligation as such as principal.

ARTICLE 1876 An agency is either general or special.

The former comprises all the business of the principal. The latter, one or more specific transactions.

The distinction between general and special agent: A general agency is not identical to one couched in general terms which is a special agency when it involves only one or more specific transaction.

Agent classified:1. Universal Agent- one authorized to do all acts that the principal may personally do, and

which he can lawfully delegate to another the power of doing.2. General Agent- one authorized to transact all the business of his principal, or all

business of a particular kind or in particular place, or in other words to do all acts, connected with a particular trade, business and employment.

3. Special or Particular Agent- one authorized to act in one or more specific transactions or to act upon a particular occasion.

ARTICLE 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 and unlimited management.

Agency couched in general terms: As to extent of the power conferred, agency may be couched in general terms or

couched in specific terms. An agency couched in general terms may be a general agency or a special agency. It includes only acts of administration and an express power is necessary to perform any act of strict ownership even if the principal states that:

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.

ARTICLE 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.

When special powers are necessary:1. To make payment- Payment is the delivery of money or the performance in any other manner of an obligation.

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, subrogating another in the right of the creditor.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. Arbitration is where the parties submit their controversies to one or more arbitrators for decision. 4. To waive an obligation gratuitously – This is condonation or remission.5. to convey or acquire immovable – It applies whether the contract is gratuitous or onerous.6. To make gifts- Gift or donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it.7. To loan or borrow money- In a loan of money, the borrower “is bound to pay to the creditor to an equal amount of the same kind and quality.”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 a thing for a price certain, and for a period which may be definite or indefinite.9. To bind the principal to render service gratuitously- The agent may bind himself to render service without compensation.10. To bind the principal in a contract of partnership- The partners bind themselves to contribute money, property, or industry to a common fund with the intension of dividing the profits among themselves.

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.

12. To create or convey real rights over immovables 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.

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.

15. Any other act of strict dominion- Generally, a sale or purchase of personal property is an act of dominion.

ARTICLE 1879 A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.

Scope of authority to sell and to mortgage: The agent cannot sell or mortgage the property belonging to the principal without

special power.

ARTICLE 1880 A special power to compromise does not authorize submission to arbitration.

Scope of special power to compromise does not authorize submission to arbitration: If the agent is granted a special power to compromise he can do anything which the

principal himself can do to effect a settlement. But he is not thereby authorized to submit to arbitration because while the principal may have confidence in the agent’s judgment, the arbitrator may not possess the trust of the principal.

ARTICLE 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.

ARTICLE 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 is 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.

Authority Distinguish from Power1) As to existence – while “authority” and “power” are often used synonymously, the former may be considered the source or cause while the latter, the effect.

2) As between an agent and a principal – an act is within the authority of the agent if it is not a violation of his duty 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. 3) So far as third persons are concerned- No distinction exist.

Kinds of authority:1. Implied- When it is actually granted, and it may be express or implied.2. Express- when it is conferred by words.3. Implied- When it is incidental to the transaction or reasonably necessary to accomplish

the purpose of the agency.4. Apparent or ostensible- When it is conferred by conduct or even by silence.5. General- When it refers to all the business of the principal.6. Special- When it is limited only to one or more specific transaction.7. Authority by necessity- When it is demanded by virtue of the existence of an

emergency.

When principal bound by act of agent:8. Requisites a. The agent must act within the scope of his authority. b. The agent must act on behalf of the principal.2. Ratification by principal3. Performance of agency more advantageous to principal

ARTICLE 1883 If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.

Kinds of principal: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 identify.

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

3. Undisclosed principal- if the other party has no notice that the agent is acting for a principal.

Agency with undisclosed principal:4. Agent directly responsible 5. Where contract involves things belonging to principal

CHAPTER 2Obligations of The Agent

ARTICLE 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. Specific obligations of agent to principal: 1. To carry out the agency in accordance it’s terms2. To answer for the damages which through his non-performance the principal may

suffer.3. To finish the business already begun on the death of the principal, should delay detail

and any danger.4. 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 in case he declines an agency, until an agent is appointed .

5. To advance the necessary funds should their be a stipulation to that effect.6. To act in accordance with the instructions of the principal7. Not to carry out the agency if it’s execution would manifestly result in loss or damage

to the principal.8. To answer for damages should he prefer in case of conflict, his own interests to those

of the principal.9. Not to loan to himself without the consent of the principal when he has been

authorized to lend at interest.10. 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 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.12. To be responsible in certain cases for the acts of the substitute appointed by him.13. To pay interest on funds he has applied to his own use.14. To inform the principal, where an authorized sale of credit has been made, of such sale.15. To bare the risk of collection, should he receive also on a sale, a guarantee commission.16. To indemnify the principal for damages for his failure to collect the credits of his principal at

the time that they become due.17. To answer for his fraud or negligence .

ARTICLE 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 or take charge of the goods.

Obligations of person’s who declines an agency: In the event a persons declines an agency, he is still bound to observe the diligence of a good

father of a family in the custody and preservations of the goods forwarded to him by the owner.

ARTICLE 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. ARTICLE 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.

Obligations to advance necessary funds:The principal must advance to the agent, should the latter to request, the sums necessary for the executions of the agency. The contract of agency however, may stipulate that the agent shall advance the necessary funds.

ARTICLE 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 distinguish from authority: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 Obligations to act in accordance with principal’s instructions:1. Duty to obey reasonable and lawful instructions.2. Liability loss or damages.

ARTICLE 1888 An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal.When agent shall not carry out agency : upon acceptance to the agency, is not bound in all cases to carry out the agency in accordance with the instructions of the principals

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

Obligations not to prefer his own interest to those of principal:1.Reason for the rule 2. Basis of the rule

ARTICLE 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.

Obligations not to loan to himself:The agent cannot, without the special power of the attorney, loan or borrow money.

ARTICLE 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.

Obligations to render accounts:It is the duty of the agent to account for and to deliver to the principal all money and property which may have come to his hands by virtue of or as a result of the agency.

ARTICLE 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.

ARTICLE 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.

Subagent is a person to whom the agent delegates as his agent, the performance of an act for the principal which the agent has empowered to perform through his representative.

Effects of substitution:1. Substitution prohibited- when substitute is appointed by the agent against the express

prohibition of the principal, the agent exceeds the limits of his authority.2. Substitution authorized- if in the contract of agency, the agent is given the power to

appoint a substitute, the substitution has the effect of releasing the agent from his responsibility unless the person appointed is notoriously incompetent or insolvent.

3. Substitution not authorized, but not prohibited- if the agent appoints a substitute when he was not given the power to appoint one, the law recognizes the validity of the substitution if the same is beneficial to the principal because the agency has thus been executed in fulfillment of its object.

ARTICLE 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.

ARTICLE 1895 If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of agency, and for the fault or negligence of his fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority.

Liability of two or more agents towards principal is joint not solidary:1. In a joint obligation, each debtor is liable only for a proportionate part of the debt.2. If solidary has been agreed upon, each of the agents becomes solidary liable a. For the non-fulfillment of the agency; and b. For the fault or negligence of his fellow agents provided by the latter acted within the

scope of their authority. The innocent agent has a right later on to recover from the guilty or negligent agent.

ARTICLE 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.

Necessity of demand by principal: It is clear that if by the provision of law the agent is bound to deliver to the principal

whatever he may received by virtue of the agency, demand is no longer necessary.

ARTICLE 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.

Why agent may incur personal liability:1. When the agent expressly binds himself.2. When the agent exceeds his authority

ARTICLE 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.

Effect where the third aware the limits of agent’s powers:3. If the agent acts in the name of the principal and within the scope of his authority, the

agent assumes no liability.4. If the agent acts in excess of his authority, even if he contracts in the name of the

principal, the agent is one personally liable unless there is subsequent ratification by the principal.

5. The agent is not bound in case he gave notice of his powers to the person with whom he has contracted nor in case such person is aware of the limits of the powers granted by the principal.

ARTICLE 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.

Effect of ignorance of the agent:Refers to the liability of the principal towards third persons.

ARTICLE 1900 So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if 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.

Scope of agent’s authority as to the third person:1. Where authority not in writing2. When authority in writing

ARTICLE 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.

When agent’s lack of authority not available as defense: The principal is not bound by the contract of his agent should the latter exceed his power.

However, the principal may ratify the contract, giving it the same effect as if he had originally authorized it.

ARTICLE 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.

Presentation of power of attorney or instructions as regards agency: a third person deals with an agent at his peril. Hence, he is bound to inquire as to extent of the agent’s authority. Ignorance of the agent’s authority is no excuse.

ARTICLE 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.

A factor or commission agent is 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.

ARTICLE 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.

Obligation of commission agent handling goods at the same kind and mark:This provision explain itself. The evident purpose is to prevent any possible confusion or fraud.

ARTICLE 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.

Right of principal where sale on credit made without authority: A commission agent can sell on credit only with the express or implied consent of the principal. If such sale is made without authority, the principal is given the two alternatives:1. He may require payment in cash, in which case, any interest or benefit from the sale

shall belong to the agent since the principal cannot be allowed to enrich himself at the agent’s expenses; or

2. He may ratify the sale on credit in which case it will have all the risks and advantages to him.

ARTICLE 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 commission agent where sales on authorized:An authorized sale on credit shall be deemed to have been on a cash basis insofar as the principal is concerned, upon the failure of the agent to inform the principal of such sale on credit with a statement of the names of the buyers.

ARTICLE 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 (also called credere commission) is one where in the consideration of an increased commission the factor or commission agent guarantees to the principal the payment of debts arising through his agency.

ARTICLE 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 commission agent to collect credits of principal: A 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.

ARTICLE 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.

Liability of agent for fraud and negligence:In the fulfillment of his obligation, the agent is responsible to the principal not only for fraud committed by him but also, for negligence.

Quasi-delict of tort may be committed by act or omission.

CHAPTER 3Obligations of the Principal

ARTICLE 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.

Specific obligations of principal to agent:1. To comply with all the obligations which the agent may have contracted within the scope

of his authority and in the name of the principal.2. To advance to the agent, should the latter so request, the 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.5. To pay the agent the compensation agreed upon, or if no compensation was specified,

the reasonable value of the agent’s services.

ARTICLE 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 is a bar which 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.

Apparent authority distinguished from authority by estoppel:1. Apparent authority2. Authority by estoppel

ARTICLE 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.

Obligation to reimburse agent for funds advanced by latter: In case the agent advanced the sums necessary for the execution of the agency, whether on his own initiative or by virtue of stipulation, the said advances must be reimbursed by the principal with interest from the day the advance was made.

ARTICLE 1913 The principal must also 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.

ARTICLE 1914 The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles.

Right of agent to retain object of agency in pledge: If principal fails to reimburse or indemnify the agent as required, the agent has the right to retain in the pledge the things which are the object of the agency.

ARTICLE 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.

When principals solidarily liable to agency:1. There are two or more principals2. The principals have all concurred in the appointment of the same agent3. The agent is appointed for a common transaction or undertaking.

ARTICLE 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.

Rule where two persons contract separately with agent and principal: Two persons may contract separately with the agent and the principal with regard to the same thing. If two contracts are incompatible with each other, the one of prior shall be preferred.

ARTICLE 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.

Liability to third person of agent or principal who contracts separately: Whether the principal or the agent will be the one liable fot damages to the third person who has been prejudiced under the article 1916 depends on whether the agent is acted in bad faith or not.

ARTICLE 1918 The principal is not liable for the expenses incurred by the agent in the following cases:(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.

CHAPTER 4Modes of Extinguishment of Agency

ARTICLE 1919 Agency is extinguished:(1) By its revocation;(2) By the withdrawal of the agent;(3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent;(4) By the dissolution of the firm or corporation which entrusted or accepted the agency;(5) By the accomplishment of the object or purpose of the agency;(6) By the expiration of the period for which the agency was constituted.

Continuance and capacity of principal and agent: Agency requires the existence and capacity of both the principal and agent. Consequently, the death, civil interdiction, insanity or insolvency of either party terminates the agency.

ARTICLE 1920 The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied.

Agency generally revocable at will by the principal: An agency may be terminated by the subsequent acts of the parties.

Kinds of revocation:Article 1920 adds that the revocation may be expressed or implied. An example of Implied revocation when the principal appoints a new agent for the same business transaction or when the principal directly manages the business entrusted to the agent.

ARTICLE 1921 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. ARTICLE 1922 If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons.

Effect of revocation in relation to third persons:1. Agency to contract with specific persons2. Agency to contract with general public

ARTICLE 1923 The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles.

Revocation by appointment of the new agent: There is implied revocation of the previous agency when the principal appoints a new

agent for the same business or transaction provided there is incompatibility.

ARTICLE 1924 The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons.

Revocation by direct management of business by principal himself:1. Unless the only desire of the principal is for him and the agent to manage the business

together, the effect of the direct management of the business by the principal himself is to revoke the agency for there would no longer be any basis.

2. If the purpose of the principal in dealing directly with the purchaser and himself effecting the sale.

ARTICLE 1925 When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others.

Revocation by one or more principals: The appointment of an agent by two or more principals for a common transaction or

undertaking makes them solidary liable to the agent for all the consequences of the agency.

ARTICLE 1926 A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter.

Partial revocation of general power: Two agents are involved: one to whom the general power is previously granted and the

other, to whom a special power is subsequently conferred. A specific power naturally prevails over a general power.

ARTICLE 1927 An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.

When agency irrevocable: the general rule is that the principal may revoke an agency at will.

Agency coupled with an interest: An agency coupled with an interest cannot be terminated by the sole will of the principal although it is so revocable after the interest ceases.

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

Right of agent to withdraw:1. Without just cause2. With just cause

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

Obligation of agent to continue to act after withdrawal: Even when the agent withdraws from the agency for a valid reason he must continue to act until the principal has had reasonable opportunity to take the necessary steps to remedy the situation caused by the withdrawal.

ARTICLE 1930 The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor.

When death of principal does not terminate agency;Agency is terminated by the death of the principal. The reason is obvious. Agency, being based on representation, there is no one to be represented where the principal is already dead.

ARTICLE 1931 Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith.

Validity of acts of agent after death of principal: the death of the principal extinguishes the agency but in the same way that the revocation of the agency does not prejudice third persons who have dealth with the agent in good faith without notice of the revocation.

ARTICLE 1932 If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter.

Duty of agent’s heirs to protect interest of principal: if the agent dies, the agency is also extinguished.

By: Marinel Santiago Luñoza