Art. 1910.

The principal must comply The primary obligation of the principal to the agent is to simply
with all the obligations which the agent comply with the terms of their employment contract, if one exists.
may have contracted within the scope
of his authority. He is not bound to perform his part when the agent has already
As for any obligation wherein the agent violated the contract
has ex. ceeded his power, the principal
is not bound except when he ratifies it Specific obligations of the principal:
expressly or tacitly. 1. Comply with all the obligations which the agent may have
contracted
2. Advance to the agent the sums necessary for the execution
of the agency
3. Reimburse the agent for all advances
4. Indemnify the agent for the damages he has caused without
fault or negligence
5. Pay the agent the compensation if agreed or reasonable
value of the agent’s services.

Art. 1911. Even when the agent has

exceeded his authority, the principal is
solidarily liable with the agent if the estoppel prevents one person from contradicting an action or
former allowed the latter to act as statement from the past.
though he had full powers.

Art. 1912. The principal must advance

to the agent, should the latter so Although the undertaking of the agent was not successful, for as
request, the sums necessary for the long as the agent has carried out the mission with the diligence of a
execution of the agency. good father of a family and is free from all faults, the principal still
must reimburse the agent.
Should the agent have advanced
them, the principal must reimburse him If the advances were made by the agent, the said advances must
therefor, even if the business or be reimbursed by the principal with interest from the day the
undertaking was not successful, advance was made
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.

Art. 1913. The principal must also Since the agent is liable to the principal for damages which latter
indemnity the agent for all the suffers from the former’s non-performance/ negligence/ fraud, it is
damages which the execution of the also fair that the principal answers for the damages that the agent
agency may have caused the latter, has suffered from the execution of the contract
without fault or
negligence on his part. The liability of the principal for damages is limited only to that which
the execution of the agency has caused the agent.

Art. 1914. The agent may retain in If ever the principal fails to reimburse or indemnify the agent, the
pledge the things which are the object agent has the right to retain the things which are the object of the
of the agency until the principal effects contract.
the reimbursement and pays the
indemnity set forth in the two Pledge: A type of security interest in which a lender takes
preceding articles. possession of personal property as security for an obligation

Art. 1915. If two or more persons have 3 requisites to apply the article
appointed an agent for a common 1. There should two or more principals
transaction or undertaking, they shall 2. The principals have appointed the same agent
be solidarily liable to the agent for all 3. The agent is appointed for a common transaction
the consequences of the agency.
The liability of the principals is solidary for all the consequences of
the agency. So, a principal can be sued by the agent for the entire
amount due and not just his proportionate share.

Art. 1916. When two persons contract There are instances when two persons make a contract separately
with regard to the same thing, one of with the agent and the principal with regards to the same thing. In
them with the agent and the other with this case, whoever contracts with a prior date will be preferred,
the principal, and the two contracts are subject to the rules under Article 1544:
incompatible with each other, that of
prior date shall be preferred, without
prejudice to the provisions of article
1544.

Art. 1917. In the case referred to in the Talks about the liability to a third person who made a contract either
preceding article, if the agent has with the agent or principal and was rejected. If the agent acted in
acted in good faith, the principal shall good faith and within the scope of his authority, the principal is
be liable in damages to the third liable to the third person. If the agent acted in bad faith, he alone
person whose contract must be shall be liable to the third person.
rejected. If the agent acted in bad faith,
he alone shall be responsible.

Art. 1918. The principal is not liable for Article 1918 provides 4 situations wherein the principal is not
the expenses incurred by the agent in responsible for the expenses incurred by the agent.
the following cases: 1. the agent did not follow the principals instructions
2. The agent had a fault
(1) If the agent acted in contravention 3. Agent is guilty of bad faith and lack of diligence
of the principal's instructions, unless 4. Express stipulation not contrary to law, morals, etc.
the latter should wish to avail himself
of the benefits derived from the
con-tract,

(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;

MODES OF EXTINGUISHMENT OF AGENCY

Art. 1919. Agency is extinguished: Agency may be terminated by:

1. Agreement
(1) By its revocation; 2. Subsequent acts of the parties either
a. Act of both parties/mutual consent
(2) By the withdrawal of the agent; b. Unilateral acts of one of them
3. Operation of law
(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.

Art. 1920. The principal may revoke When the principal wants to exercise the power to terminate the
the agency at will, and compel the agency, it is called “revocation”
agent to return the document
evidencing the agency. Such Implied: principal appoints a new agent or directly manages the
revocation may be express or implied. business

Express: agency was in writing and the principal cna compel the
agent to return that document evidencing the agency.

The principal is liable in damages occasioned by the wrongful

discharge of the agent before the expiration of the period fixed

Art. 1921. If the agency has been If the purpose of the agency is to contract with specified persons,
entrusted for the purpose of then its revocation will not prejudice to third persons until such
contracting with specified persons, its notice was given to them.
revocation shall not prejudice the latter
if they were not given notice thereof. The third person has a right to presume that the agency continues
to exist in the absence of notification by the principal.

Revocation must be personal, notice of revocation must be

personal

Art. 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.

Art. 1923. The appointment of a new In case the principal appoints a new agent for the same
agent for the same business or business/transaction, the revocation does not become effective
transaction revokes the previous until the former agent receives notice.
agency from the day on which notice
thereof was given to the former There is implied revocation if P has exclusively given to the new
agency, without prejudice to the agent the authority to sell.
provisions of the two preceding
articles. There is no implied revocation if the intention of P may be to
authorize both agents for the same transaction
 There is no implied revocation where the
- appointment of another agent is not incompatible with the
continuation of a like authority in the 1st agent.
- 1st agent not given notice of the appointment of the new
agent

Art. 1924. The agency is revoked if the Another way of implied revocation
principal directly manages the
business entrusted to the agent, “P appointed A as its agent for the sale of P’s logs to Japanese
dealing directly with third persons. firms. During the existence of the contract of agency, P sold its logs
directly to several Japanese firms. This act of P constituted an
implied revocation of the contract of agency with A.”

“A, an agent of P, deployed T as a helper under a 12-month

contract. After the termination of the employment contract, P
directly negotiated with T and entered into a new and separate
contract. There is an implied revocation of A’s agency relationship
with P”

Art. 1925. When two or more principals When there are two or more principals who are solidarily liable to
have granted a power of attorney for a the agent, one of them can revoke the power of attorney without
common transac-tion, any one of them the consent of the others.
may revoke the same without the
consent of the others. In a solidary obligation, the act of one is considered by the law as
an act of all.

Art. 1926. A general power of attorney Two agents are involved:

is revoked by a special one granted to 1. An agent who has general powers previously granted
another agent, as regards the special 2. An agent who has special power subsequently conferred
matter involved in the latter.
A specific power naturally prevails over a general power. In this
case, the agent granted with general power is revoked. As to
matters not covered by the special power, the general power
remains valid

Art. 1927. An agency cannot be Gen Rule: principal may revoke an agency at will
revoked if a bilateral contract depends
upon it, or if it is the means of fulfilling Exception: Agency is created..
an obligation already contracted, or if a 1. not only for the interest of the principal but also for the
partner is appointed manager of a interest of third persons
partnership in the contract of 2. For the mutual interest of both the P and A
partnership and his removal from the So, agency cannot be revoked by the sole will of the principal
management is unjustifiable.
Agency coupled with interest can be defined as: - A agent having
possession or control of the property of his principal and
possessing legal rights against interference by third parties

Art. 1928. The agent may withdraw Just how the principal has the power to revoke the agency at will,
from the agency by giving due notice the agent likewise has the right to withdraw from the agency at any
to the principal. If the latter should time.
suffer any damage by reason of the
withdraw-al, the agent must indemnify If he withdraws without just cause, then A has the duty to indemnify
him therefor, unless the agent should the P if P suffers damages caused by the withdrawal.
base his withdrawal upon the
impossibility of continuing the If he withdraws with just cause, such as the withdrawal is based on
performance of the agency without the impossibility of continuing a performance without grave
grave detriment to himself. detriment to himself, the agent cannot be held liable

Art. 1929. The agent, even if he should Although the agent withdraws from the contract of agency, he is still
withdraw from the agency for a valid bound to act until the principal has taken the necessary steps (such
reason, must continue to act until the as the appointment of a new agent) to remedy the situation.
principal has had reasonable
opportunity to take the necessary
steps to meet the situation.

Art. 1930. The agency shall remain in Gen Rule: agency is extinguished by the death of P(Art. 1919)
full force and effect even after the
death of the principal, if it has been Exception: if the agency has been constituted
constituted in the common interest of 1. In the common interest of P and A
the latter and of the agent, or in the 2. In the interest of a 3rd person who has accepted the
interest of a third person who has stipulation in his favor
accepted the stipulation in his favor.

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

Art. 1932. If the agent dine me heirs The agency is extinguished when the agent dies. In this case, the
must not, the principal thereof, and in heirs have 2 obligations by operation of law
the meantime adopt such measures as 1. Notify the principal to enable the principal to take necessary
the circumstances may demand in the steps to meet the situation
interest of the latter. 2. Adopt such measures that the principal demands for his
interest.