OBLIGATIONS OF THE AGENT 1 To carry out the agency.

2. In carrying out the agency, there are 2 obligations of the agent:

(a) To act within the scope of authority

(b) To act in behalf of the principal or in representation of the principal.

3. To render an account of his transactions and to deliver to the principal whatever he may have receive pursuant to an agency even if it not owing to the principal.

1. Primarily, the obligation of the agent is to carry out the agency. If he failed to carry out, he may be held liable.

Q: Should he carry out the agency after the death of the principal?

A: As a rule no, because there is no one to be represented. In fact under 1919, the agency is extinguished by the death of the principal. However, the law provides for an exception - if delay would impair danger for an already began but then unfinished contract, he should continue to

carry out the agency. Again, if it would cause danger.

Q: But if he did not carry out agency, he may not be held liable?

A: As a rule, he is liable for not carrying out the agency.

Q: So what is the exception?

A: Professor de Leon gave an example of this, if the agent was authorized to buy a specific car from a specific person. When the agent was about to buy the car, he was informed by the seller that there is a defect in the brake system of the car. Nonetheless, without informing the principal he bought the car. If damage was caused to the principal because of the defective brake system and a claim is filed against the agent, can the agent invoke that he merely carried out the agency? No, here the law is very clear that he should not carry out agency if it would result in loss / damage in the principal.

Another Example

An agency to buy a parcel of land before the Mt. Pinatubo eruption. During that time, agents all over Luzon, will buy a parcel of land not only in Metro Manila but also in Pampanga and South CALABARZON but if the agent was given authority and he bought parcels of land immediately after the eruption somewhere in Porac / Bacolor Pampanga, mukhang you can be held liable for buying those parcels of land. That it would be a valid sale?

A: Yes, that would be a valid and binding sale as far as the 3rd _{person is concerned. If nakita naman} na puro lahar, nakita mo pa binili mo pa, the agent can be held liable because the act definitely would result in loss or damage to the principal at least for about 15 years.

2. In carrying out the agency, there are 2 obligations of the agent, he should always remember:

(a) To act within the scope of authority

(b) To act in behalf of the principal or in representation of the principal.

(a) To act within the scope of authority

Q: How would you know if the agent was acting within the scope of authority?

A: You will be guided by the power of authority. In fact, as a 3rd _{person, you can demand the power of} attorney, so that you will know whether in fact he had authority to enter into a contract. But sa totoo lng there are some SPAs which would be subject of the case up to the SC pertaining to the scope of authority of the agent.

Linal vs. Puno

Q: Was Puno authorized to sell the land or merely authorize to administer the land?

A: There was a dissenting opinion.

Atty. Uribe: Mas magaling ang dissenting opinion. Sa phraseology ng authority ni Puno he was only to buy, to sell, etc…in the administration of land, so the buying and selling should not be construed as a separate authority from the administration and should be construed as a buying and selling in relation to the administration. If you have to administer a parcel of land, you have to buy so many things, lalo na kapag agricultural land yan. You have to buy tools, fertilizers, and therefore you have the authority to buy. Do you have to authority to sell? Yes, the products of that land. You have the authority to sell pero ung ginawa ni Puno, binenta nya mismo yung land. When the case reached the SC, the majority of the decision was – he has the authority to sell under the power of authority.

One of the bases of the SC in the conclusion that there was a power to sell also because the fact that the agent acted in good faith, that is an incredible argument, by the mere allegation that the agent acted in good faith he already acted within the scope of the his authority? Parang malabo yung dalawang yun. Even if I would claim that I thought I am authorized, does it mean therefore that I was authorized? Those are 2 different things - believing in good faith that you have the authority is different from in fact having the authority.

Nonetheless, again, as a rule you can be guided by the power of attorney but even if without the power of attorney or despite the fact there was a specific mandate of the power of attorney, you should be guided by specific provisions of law whether the act is within the scope of your authority. For example: 1881 - the agent may do such acts as may be conducive for the accomplishment of the purpose of agency. This particular provision has been cited by the SC in the case of Mack vs. Kang, if a person who is an agent has the authority to manage the restaurant, necessarily, he must have the authority to purchase items for the management of the restaurant - the act of buying these items, like plates, these are reasonable and necessary for the accomplishment of the agency.

Another Article which would help you in determining if the act is within the scope of the authority is Article 1882.

Example of this, the principal authorized his agent to sell his car, a specific car for 300k. The agent sold the car for 400K. It is possible for the principal to say that you acted outside the scope of authority, galit pa cya 300k na binebenta pero 400k nabenta. Technically, yes, the agent indeed may be considered to have or may be claimed to have acted outside or in excess of his authority because he told to sell the car for 300k.

Q: What is the reason that the principal would claim that the agent acted outside the scope of his authority?

A: Many reasons: for example he asked to buy somebody to sell his car because he expected sum money to arrive from abroad to buy a brand new car but wala napornada, di binigay ng kapatid yung pera. Therefore, if the car will be sold wala na syang kotse and it is an excuse that the agent acted outside the scope of his authority but the common reason would be because the principal already talked to somebody else which will really buy the car for 400k. When you may choose this 1? Because dun sa isa, walang commission di ba sa 1 may commission. He may not recognize this contract.

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. So under the law, that the act is deemed not in extent of his authority, even on its face parang in excess, the law will consider it as not in excess merely because it is advantageous to the principal.

You distinguish these transactions from an agency to sell 100 kilos of mangoes and there is a specific instruction that the mangoes will be sold 30 pesos per kilo. If you sold the mangoes for 50 pesos, 30 lang binenta 50 pesos per kilo ang nangyari out of 100 kilos sisenta lng ang nabenta, 60 sisenta, 70 sitenta, so instead of 30 pesos per kilo he sold 50 per kilo. Actually, this is a violation of the instructions of the principal kaya siguro di lahat nabenta ung mga mangga binenta nya with a much higher price.

Another Article 1879 - the law specifically provides that the special power to sell excludes the power to mortgage. Even if the agent was authorized to sell, he cannot mortgage that without another power of attorney, as much as the power to mortgage does not include the power to sell as mentioned a while ago the power to compromise does not authorize for the submission to arbitration.

Q: However, if the principal authorized the agent to borrow money without the authority of the principal can the agent himself be the lender?

A: The law provides yes, as long as the interest rate will be the market rate, so the agent may be the lender.

Q: The agent was authorized to lend money of the principal, may the agent himself be the borrower of the money without the consent of the principal?

A: This time hindi na pwede. He may be a good agent to lend the money to other person but he may not be a good debtor. Thus, the law would protect the principal in that case.

But also, be guided by the decision of the SC as to the extent of the authority of the agent. For example in the case of Insular Drug vs. PNB Facts: The agent here was authorized to collect sums of money including checks from the client of Insular. So may agent ang Insular. He did collect the sums of money and the checks, and the checks were payable to Insular but instead of delivering the checks in the Insular, he encashed the check or deposited the checks in his account in PNB.

Issue: Does the authority to collect the checks includes the power to indorse the checks or even the power to encashed the check?

Held: No, the power to collect does not include the power to indorse or the power to encash the checks. So kasalanan ng PNB kung bakit nila tinanggap ung check without the proper indorsement samantalang ang payee ay Insula. Hindi naman si agent.

Atty. Uribe: In fact, the money involved here is 18,000 and I would still remember na Philippine Reports pa itong case. The agent (Mr. Foster) committed suicide when that fraud was committed. Sabi nung isang nagbasa for sure ahead pa sa akin, encircle nya 18,000, gago naman ito 18,000 lng maliit lng ang amount…. But there was another guy, sumunod dun sa isa, sinagot nya, mas gago ka 1932 pa eto eh… 

Q: The obligation to act on behalf of the principal - If the agent acted for himself and did not disclose his principal, would that 3rd _person

has a cause of action against the principal? A: No.

Q: Would that principal have a cause of action against the 3rd _person?

A: Wala din. But there is an exception in this rule if the object involved in the contract entered into by the agent and the 3rd _{person belongs to the} principal - the law grants / gives a cause of action to the 3rd _{person against the principal and vice-} versa. It is because of the possible collusion between the principal and the agent di ba, so that sasabihin ng principal alam ko yang kotse na yan sira sira na makina (may katok). Thus, in actual case the SC said, the vehicle has a “knock” , SC decicion yan! Hehehehehe  Kasi may katok ang kotse, the principal would agree with the agent just to sell it by yourself in your own name so that if there would be a complaint the 3rd _{person has no} cause of action against me and the principal. But to avoid such possibility the law would grant a cause

of action to the 3rd _{person if the object of the} contract belongs to the principal.

BE: A authorized B to borrow sum of money from any bank and he also authorized B to mortgage a specific parcel of land to secure that loan. What B did, he borrowed money for himself from a certain bank without disclosing his principal. Later on, he defaulted. Can the bank go after the principal?

A: Of course no, the contract is between the agent and the bank only. The principal has nothing to do with the contract. Under the facts, the agent borrowed for himself.

However, if you have read the suggested answer, may 2nd _{paragraph - to the effect that the} bank can at least foreclose the mortgage they can. If you remember the question, di tinatanong ng examiner can the bank go after the principal as far as the thing is concerned. The only question pertains to the payment of loan.

Another thing in the suggested answer which is totally wrong - under the facts, the principal authorized the agent to mortgage the property for the loan that will be obtained by the agent in the name of the principal. If indeed he mortgaged the land for a loan in his name, would that mortgage be valid?

A: Definitely not. If he mortgaged it as a mortgagor the mortgage is void. The law requires that the mortgagor must be the absolute owner of the thing mortgaged. On other hand, even if the agent mortgaged the thing on behalf of the principal, the principal is the mortgagor. Would that be a valid and binding mortgage as against the principal? A: Also not. His authority to have the property mortgaged to secure a loan, not to secure any other person’s loan and that therefore it cannot be within the authority of the agent and therefore any foreclosure of such mortgage will not prosper.

Q: If the agent acted within the scope of his authority and in representation of the principal, who will be bound in such contract?

A: Aside from the 3rd _{person, it will be the principal} because again the agent is merely representing the principal.

Q: However, is it possible for the agent himself to be bound in such contract or be held liable under such contract?

A: Yes. If he expressly binds himself to that contract, why he would do that? Agent lang naman sya, when he would bind himself personally / expressly? In the very nature of the agency the 3rd person actually knows that it is the agent and not the principal. Ang nakikita lang ng 3rd _{person sa} palengke eh ung nagtitinda baka ung principal nasa espana. Therefore, the 3rd _{person to whom a}

thing is offered for sale for example the agency to sell, the 3rd _{person will say that “I will buy that if you} also bind yourself as one of the sellers” because I don’t know the principal. Eh ang agent gusto kumita, sige na din di ba. He will bind himself personally in the contract as a seller and not as an agent.

The agent may be held liable in the contract even if he acted within the scope, acted in representation of the principal, he acted negligently or in bad faith di ba.

Article 1909 is consistent also on the law on obligations that every person who is guilty of fraud, negligence, etc.. will be held liable for damages.

But aside from these 2 scenarios, of course, the agent may be held liable if he acted beyond the scope of authority. Also, if he acted beyond the scope of his authority, however, he may not be held liable under such contracts and under certain circumstances:

(a) The principal ratified - then the principal will be held liable and be bound on such contract.

(b) Even if the principal did not ratify, if the 3rd person was notified of the fact that the agent was in excess of his authority or even if he was not notified, he was aware of the fact that the agent was in excess of his authority, the agent will not be held liable because under 1898 that contract is void. So this contract being void, the third person cannot hold him liable for acting within the scope of authority.

3. One important obligation of an agent is to render an account of his transactions and to deliver to the principal whatever he may have receive pursuant to an agency even if it not owing to the principal.

In fact, any stipulation exempting him from this obligation to render an accounting is void.

Domingo vs. Domingo

Facts: The relationship between the principal and the agent was not mentioned in this case but the agent Domingo was authorized to sell a property of the principal Domingo but in pursuant to this authority, he introduced a perspective buyer to the principal Oscar de Leon. Oscar, just any other prospective buyer wanted the price to be lowered. So he was asking that the price be lowered. During the negotiation, this Oscar de Leon bid 1,000 to the agent, which amount the agent did not disclose to the principal. However, may violation na ng obligation ang agent. The principal on the other hand, somehow to only accommodate the demand of the prospective buyer, nakaisip ng paraan, what he did, he had an agreement with the prospective buyer that kunwari the sale would no longer push

through so they have this drama that the prospective buyer was expecting money from abroad and therefore the principal would have a reason to the agent na hindi na matutuloy ang agency and therefore I am revoking your authority as an agent.

Thereafter, the agent discovered that something is wrong with what happened. He went to the register of deeds and he discovered that in fact a sale was executed between Domingo and Oscar de Leon. The agent demanded for his commission. May sub agent pa sya dahil inintroduce cya kay Oscar, did the action prosper?

Held: No, the SC ruled that for the failure of the obligation to deliver to the principal for whatever he may have received pursuant to the agency, even if that is not only to the principal, that is a breach of fiduciary relation which resulted in not giving the agent his commission. But is the 1,000 important? Supposedly, parang 10,000 ang marereceive nya as commission?

A: The answer would be yes because why would the prospective buyer give 1,000 sa agent? hindi dahil mahal nya ang agent?! That would be because he wanted the agent to continue with the principal to lower the price of the thing which would be sold, which is inconsistent with the interest of the principal. As an agent of the principal, he is supposed to protect the interest of the principal not to lower the price to be paid by the buyer. If only for