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III. - Power and Authority, Duties and Obligations, Rights of the Agent -…

- - - - MEASURE OF DAMAGES (1884) - Burden of proof is on the claimant to show that damages were suffered by fault or negligence of the agent. Regardless if the agency is gratuitous.
        
        DEFENSE OF GRATUITY - 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. (1726)
        
        SOLIDARY LIABILITY OF AGENTS (1894) - General Rule - The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated
        
        LIABILITY OF THIRD PERSON TO THE AGENT
        
        OWN NAME (1883) - When the agent contracts in his own name, on a matter that is within the scope of the agency.
        
        BENEFICIAL INTEREST (1907) - Agent possesses a beneficial interest in the subject matter of the agency e.g. factor selling under a del credere commission
        
        TORTS (2176) - Third party commits a tort against the agent.
        
        XCPN; WHEN SOLIDARY (1895). - If solidarity has been agreed upon, each of the agents is responsible for:
        
        NON-FULFILLMENT - of the agency
        
        FAULT OR NEGLIGENCE - of his fellows agents, EXCEPT when the fellow agents acted beyond the scope of their authority. This refers to fault or negligence on occasion of the agency. Thus, exceeding scope of authority means no longer an agent.
      - DEATH (Severino v. Severino & 1930-1931) - Although death terminates the contract, 1884 provides an exception for the continued performance of contracts commenced prior to the death of the principal. This stems from agency's character as a preparatory and progressive contract.
    - - POWER TO APPOINT A SUBSTITUTE (1892 - 1893)
        
        GENERAL RULE (1892) - Agent may appoint a substitute if the principal has not prohibited him from doing so.
        
        XCPN (1892) - Agent shall be responsible for the acts of the substitute:
        
        NO EXPRESS GRANT OF POWER - When he was not given the power to appoint one;
        
        INCOMPETENCE/INSOLVENCY - When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent.
        (1721)
        
        EFFECT OF PROHIBITION - All acts of the substitute appointed against the prohibition are unenforceable, subject to ratification of the Principal. (1403)
        All acts of the substitute appointed against the prohibition of the principal shall be void. (Sub-agent bound to agent, not Principal) but P has cause of action against sub-agent under 1893
        
        EFFECTS OF APPOINTMENT OF A SUBSTITUTE
        
        SUB-AGENT APPOINTED PURSUANT TO PRINCIPAL - Here, sub-agent is an agent of the principal as well. Thus, the agent does not bear responsibility for fraud/negligence of the sub-agent.
        
        XCPN (1892 PAR. 2) - Agent may still be liable if person appointed was notoriously incompetent or insolvent AND principal did not designate a person.
        
        SUB-AGENT NOT APPOINTED BY PRINCIPAL (1892) - Agent is responsible for the acts of the substitute.
        
        SUB-AGENT APPOINTED AGAINST PRINCIPAL'S PROHIBITION - Normally, P has no cause of action as no legal relation arose between them BUT 1893 provides for an exception. Here, actions of the Sub-Agent are void.
        
        ACTIONS OF PRINCIPAL(1893) - Principal may bring an action against the substitute with respect to obligations which the sub-agent has contracted under the substitution.
    - - DUTIES OF AGENT IN EXECUTION
        
        DILIGENCE - Shall do all that a good father of a family would do, as required by the nature of the business in the absence of guiding instructions.
        
        EXPRESS INSTRUCTIONS - Even in the presence of express instructions, agent is still bound to observe due diligence in the performance thereof.
        
        POWERS (1881-1882) - Agent has:
        
        Express powers (those granted);
        
        Implied powers (those emanating from express powers; and
        
        Incidental powers (those necessary to achieve the purpose for which the agency was constituted).
        
        XCPN (1882) - Limit of agent's authority not deemed exceeded if they performed obligation in a manner more advantageous to the Principal than that specified by them.
        
        NO NEGLIGENCE;INSTRUCTIONS(1889) - When an agent acts in accordance with the instructions of the Principal, they cannot be considered in fraud or negligent, even if damage was caused to the Principal. 1889 provides that in such an instance, the principal cannot set up the ignorance of the agent as to the circumstances whereof they (P) was ought to be aware.
        
        WHEN FRAUD/NEGLIGENT (1909) - Agent is responsible for fraud and negligence.
        
        Degrees of Diligence
        
        Ordinary Diligence
        
        Extraordinary Diligence
        
        High Diligence
        
        MEASURE OF DILIGENCE - Agent is expected to act based on their own assessment of what is necessary under the situation when it is not covered by express instruction; Business judgment expected from the principal is expected from the agent.
        
        TO NOT CARRY OUT THE AGENCY(1888) - Agent shall not carry out any act that would MANIFESTLY lead to loss or damage to the principal. MANIFESTLY because agent is not a guarantor that principal would suffer no loss or damage. Human error is part of risk assumed by the Principal. NOT CARRY OUT THE AGENCY
        
        Contrasted With Oblicon - No consideration of damage to other party in performance of obligation. 1888 is an exception to the general rule of oblicon. This is because agency is fiduciary i.e. for the benefit of the Principal.
        
        OBEDIENCE (Victorias Milling Co v. CA) - An agent must act in accordance with the instructions of the principal. This is because the distinguishing factor of agency is control, i.e. agent agrees to represent the Principal.
        
        EFFECT OF NON-OBEDIENCE -
        
        No Consent - No element of consent on the part of the Principal as regards to the relationship entered into by the agent.
        
        Agent Contract - The agent becomes personally liable for the juridical relationship entered into. Under 1889, such contract shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. Here, agent is liable if they undertook to secure the principal's ratification.
        
        Damages - Agent is liable for damages arising from a breach of duty of obedience to the principal.
      - GENERAL DUTY OF LOYALTY (1889) - An agency contract is fiduciary in character, thus agents are expected to observe utmost good faith and loyalty to the Principal.
        
        EFFECT OF VIOLATION (1889) - Agent liable for damages if they prefer their own interests over that of the Principal in cases where there is a conflict of interests.
        
        OBLIGATION TO RENDER AN ACCOUNT(1891) - Agent is bound to render an account of his transactions, and to deliver the principal whatever he may have received by virtue of the agency, though it may not be owing to the principal. (Whatever agent acquired in breach of duty of loyalty)
        
        JURISPRUDENCE - Guilty agent is required to forfeit their commission.
        
        CLAW-BACK DOCTRINE - In Corporate Law, when a director or officer violates his duty of loyalty to the corporation, he is bound to disgorge to the corporation all the profits and earnings he obtain from his breach of duty, even when he used his own capital or funds for the contract or transaction. The "claw--back doctrine" is applicable in Agency Law (Villanueva Comment)
        
        XCPN FROM ACCOUNT (1891) - Every stipulation exempting the agent from the obligation to render an account shall be void. (Only the stipulation, not the contract)
        
        PARTICULAR RULES ON COI SCENARIOS
        
        PURCHASE OF PRINCIPAL'S PROPERTY (1491-1492) - Agents are prohibited from acquiring property under their administration/sale of which has been entrusted to them UNLESS Principal has consented.
        
        OTHER APPLICABLE CASES (1492) - This prohibition applies to property subject to legal redemption, compromises and renunciation.
        
        BORROWING OR LENDING OF MONEY (1890) - Contemplates a situation where an agent is empowered to borrow or lend money. Agent may lend money but cannot borrow.
        
        P IS BORROWER - Agent may become lender at current rate of interest. This serves as safeguard to potential conflict-of-interest (6% subject to BSP amendment)
        
        EFFECT OF VIOLATION (Hodges v. Salas & Salas) -
        
        Agent as Lender - Difference between current rate of interest and higher interest rate would be returned to the Principal.
        
        Agent as Borrower - If agent borrows the money given by Principal for lending without consent, then agent liable for current interest + damages.
        
        P IS LENDER - Agent cannot borrow without the Principal's consent. Potential conflict-of-interest where the agent as lender may not borrow the same money given to him to lend.
        
        3. TURNOVER OF ASSETS (1891) - Agent obliged to turn over everything to Principal, though it may not be owing to the same and even if it was given to agent for their benefit.
        
        3B. OBLIGATION TO RENDER ACCOUNT (1891) - Refers to duty to account all profits and gains received in pursuit of the agency. This is arises from duty of loyalty.
        
        UNWAIVABLE - Any stipulation exempting the agent from the obligation to render an account shall be void.
        
        WHEN AGENT MAY WITHHOLD PROPERTY RECEIVED (1914) - Agent may retain in pledge things received until principal effects the reimbursement and pays indemnity provided for in NCC 1912-1913.
        
        AGENT CONTRACTS IN THEIR OWN NAME (1883) - As a general rule, if the agent acts in his own name the principal has no right of action against the person with whom the agent has contracted. The contract exists only between the agent and the other party except, when the contract involves a thing belonging to the principal.
        
        WHEN CONSTITUTING BREACH OF LOYALTY - If the agent entered into a contract in his own name, over matters that are within the scope of their authority OR those pertaining to the business of the principal.
        
        OBLIGATION TO PAY INTEREST (1896) - Agent owes interests on sums used belonging to the Principal from the day sums were used and, on those which they owe after the extinguishment of the agency.
        
        This presumes that there is no violation of duty of loyalty. If there has been breach, agent no longer owes interest if the Principal demands the turnover of what the agent acquired by virtue of the breach. This is because under NCC 1918, such sums are deemed ratified by the Principal.
        
        Conflict of Interest - This serves as an exception as regards to the absence of Conflict of Interest rules in oblicon.
      - FIDUCIARY DUTIES OF AGENT AS TO THIRD PARTIES (1900-1902 & 1911) - As a general rule, every person dealing with an assumed agent is put upon an inquiry and must discovery upon his peril, if he would hold the prinicpal liable as to both the existence and extent of the agency.
        
        SPECIFIC OBLIGATION RULES FOR AGENTS
        
        LIABILITY FOR INTEREST (1896) - This refers to two instances wherein agent would owe interest to the Principal.
        
        2A. FOR PERSONAL USE - Sums which the agent applied to his own use. These are owed interest from the day in which they are used.
        
        2B. SUMS OWED - Refers to sums owed by the agent which remain outstanding at the time the agency is extinguished. Here, interest runs from the time of the extinguishment.
        
        1. OBLIGATION TO ADVANCE FUNDS (1886) - Agent must advance necessary funds in pursuit of an agency contract ONLY when there has been express agreement to do so.
        
        XCPN - When the principal is insolvent. This is because insolvency extinguishes agency as per NCC 1913
        
        COMMISSION AGENTS (1903-1908) - A commission agent, otherwise known as a factor is one whose business it is to receive and sell goods for a commission, and who is entrusted by the principal with the possession of the goods to be sold, and usually selling in his own name.
        
        Possession - An ordinary agent need not have possession of the goods of his principal, while the commission agent must be in possession
        
        Broker - Does not have custody nor possession of the thing that he disposes of. His function is to bring the parties to the transaction. A broker maintains no relation with the thing he purchases or sells. (Pacific Commercial v. Yatco)
        
        SPECIFIC OBLIGATIONS OF A COMMISSION AGENT
        
        1. TAKE CUSTODY OF GOODS (1903) - Agent is responsible for goods received by him in the terms and conditions described in the consignment.
        
        AVOIDING LIABILITY - Unless the agent receives and makes a written statement of damage and deterioration.
        
        2, NOT TO COMMINGLE (1904) - Agent who handles goods of the same kind and mark belonging to different owners must distinguish them by countermarks.
        
        DEPOSIT - This distinguishes comission agents from deposits as in deposit the depositary is allowed to commingle (1976)
        
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        3. NOT TO SELL ON CREDIT WITHOUT AUTHORIZATION (1905) - If the agent sells on credit, the Principal may demand payment in cash from the agent
        
        BENEFIT - BUT the agent is entitled to any interest or benefit which might result from the sale.
        
        4. INFORM PRINCIPAL OF PRE-AUTHORIZED SALES (1906) - If the agent sells on credit with authorization of the Principal, they must then inform the P with a statement of the names of the buyers.
        
        NON-COMPLIANCE - sale is deemed to have been made in cash insofar as the P is concerned.
        
        5. TO BEAR THE RISK IN DEL CREDERE (1907) - agent acts not only as a salesperson, or broker, for the principal, but also as a guarantor of credit extended to the buyer. Here, if the agent receives a guarantee commission + ordinary commission then:
        
        a. Agent Bears the risk of Collection
        b. Agent shall pay the principal the proceeds of the sale on the same terms agreed with the purchaser.
        
        DEFINITION - A del credere agency a commission paid to the commission agent in addition to the ordinary commission agreed upon. There is therefore, an increase in the total commission to be received by agent if business succeeds. However, when there is a guarantee commission, the agent becomes a guarantor in the payment of the purchase price whether the sale is on cash or installment basis.
        
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        6. TO COLLECT CREDITS (1908) - If the agent does not collect the credits of the principal at the time they become due, agent becomes liable for damages.
        
        XCPN - Agent exercises due diligence.
        
        FRAUD AND NEGLIGENCE (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
        
        POWERS AND DUTIES OF AGENT (1900) - Insofar as third parties are concened, the powers and duties of an agent are confined to those which are specified in the written power of attorney. The written instructions of the principal are the binding powers of the agent and cannot be overcome by non-written instructions not made known to third parties.
        
        POWER OF THIRD PARTY (1902) - As a consequence, a third party may require the presentation of the power of attorney or instructions of the principal as regards the agency.
        
        EFFECT OF FAILURE TO INQUIRE (Bacaltos coal v. CA) - Person contracting with agent is chargeable with knowledge of the agent's authority.
        
        BURDEN OF PROOF - Authority/extent of authority of an agent must be on the basis of the manifestations of the PRINCIPAL NOT the AGENT. Burden of proof is upon the third person to establish it.
        
        EFFECT OF RATIFICATION (1901) - Ratification means that third person cannot raise defense that agent acted in excess of authority. Here, P has ratified or signified willingness to ratify. Ratification is retroactive.
        
        EFFECT OF CONTRACTS ON AGENT (1897 & 1910)
        
        AGENT WITHIN SCOPE OF THEIR AUTHORITY (1897) - As a general rule, agents who act within the scope of their authority are not liable to third parties. Thus, any actions on the contract must be brought against the Principal and not the agent.
        
        XCPN (1897)
        
        Express Stipulation - Agent expressly binds themselves to be personally liable
        
        Outside the Scope of Authority
        
        Fraud/Negligence (1909) (PNB v. Fairchild) - Here, the agent becomes joint torfeasors with the principal insofar as the third person is concerned.
        
        No Double Recovery by 3rd Person (Eurotech v. Quizon) - Law does not provide that the 3rd person may recover from both the agent and the principal. Instead, jointly liable (1207).
        
        (PNB v. Fairchild) Jurisprudence states that the agent cannot be permitted to intercept and appropriate the thing which the principal is bound to deliver, and thereby make performance by the principal impossible
        
        RATIONALE - Agent is the Principal here. Representation.
        
        ESTOPPEL IN PAIS (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. (n)
        
        AGENT OUTSIDE SCOPE OF AUTHORITY (1898) - This produces (3) distinct legal effects as regards to the parties involved IF Principal did not ratify and 3rd person was aware. This leads to void contract.
        
        CAPACITY TO SUE (Uy v. CA) - An agent cannot bring an action based on a contract even if they rendered some service on behalf of their principal. This is because they do not become parties to the legal relationship between the Principal and the 3rd party.
        
        AS TO THE PRINCIPAL - The contract entered under the name of the Principal shall be UNENFORCEABLE i.e. VOID IF the Principal DOES NOT RATIFY and the 3rd party was aware of the limits granted by the Principal. (XCPN to unenforceable)
        
        XCPNS- When Principal may be bound:
        
        RATIFICATION (1898 & 1910) - Principal ratifies the contract.
        
        WRITTEN DOCUMENT;THIRD PARTIES (1900 & 1911) - Who rely on the terms of a written power of attorney even if the agent exceeds authority according to a personal understanding with the principal.
        
        AS TO THE AGENT (1897) - Agent becomes personally liable to the 3rd party IF
        
        UNDERTOOK - to secure the principal's ratification OR
        
        EXCEEDS - the limits of his authority without giving such party sufficient notice of his powers
        
        If not, no personal liability to the third person
        
        NOTICE to AGENT - Notice to agent is notice to principal XCPN where the RoC or laws enumerate the specific persons to be notified.
        
        AS TO THE 3RD PARTY - has no cause of action if the agent did not undertake to secure the principal's authority and knew of the limits of the agents authority.
        
        SOLIDARY LIABILITY OF P AND A (1911) ESTOPPEL/APPARENT AUTHORITY - 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. (n)
        
        JOINT TORFEASORS (SJ Ratio) - Here P and A JTs, therefore solidary liability.
        
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        Alternative Remedies (PH Products v. Primateria) - If there has already been a judgment of liability against the Principal, no recovery may be made from the agent.
        
        Broker v. Agent (Schmidt v. RILJ) - A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties
        
        Indentor - An indentor appears in their own name. However, also a middleman between the parties in a sale. In some effect, they are an agent of both the vendor and the vendee. Here, the indentor may expressly obligate themselves to undertake the obligations of the Prinicpal.
        
        Commission (Rocha v. Prats) - Broker entitled to commission only upon bringing the parties to an agreement for a sale. They must be the efficient procuring cause.
        
        3. AGENT ACTS IN HIS OWN NAME (1883) - General Rule, the principal has no right of action against the persons with whom the agent contracted. The contract exists only between the agent and the 3rd person. Thus, 3rd party also cannot sue the P. This is under Privity of Contract.
        
        XCPN PROPERTY OF PRINCIPAL ( NFA v. IAC) - Here, the principal is bound even if the contract was in the name of the agent.
        
        PURPOSE (PINEDA) - To protect third persons against possible collusion between the agent and the Principal.
        
        REMEDY OF PRINCIPAL (1883) - Contract between agent and principal is without prejudice to actions between the Principal and the agent.
        
        APPLICABILITY - When agent, authorized BUT did not disclose the principal (undisclosed principal) and instead contracted in his own name. This means that A is personally bound and P and 3rd not bound to each other.
        
        ATTORNEY-IN-FACT - Agent
    - - GR: Agent may withdraw by due notice BUT must pay any damage by reason of the withdrawal.
        
        XCPN: - Basis of Withdrawal is impossibility of performance without grave detriment to the agent.
        
        INTERIM AGENCY (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. (1737a)