Obligations of the Principal

1910:Obligations
contracted

Bound/Liable
Within the scope of
authority

Not Bound/Not Liable

G.R.: Agent exceeded his

authority
1911

1912: Advancement of
necessary sums plus
interest from the day the
advance was made

1913: Indemnification for

damages the executive of
agency caused the agent
1914
1915: two or more
persons have appointed
an agent for a common
transaction
1916-17: Incompatible
contract of agency

1918: Expenses incurred

by agent

When he ratifies it
If he allowed the agent to act
as though he had full powers
(solidarily liable)

Exceptions

Duty to reimburse
If so requested by agent
If there is a stipulation,
provided principal is not
insolvent (1886)
Even if the business
undertaking was not
unsuccessful, provided agent
is free from fault
Without agents fault

If agent is at fault

The agent may retain in pledge the objects of agency

until reimbursement and indemnity are paid.
Solidarily liable to the agent
for all consequences of
agency
GR: Prior date shall be preferred
Agent in good faith
Agent is in bad faith
principal is liable for
Principal not liable, agent
damages to third persons
only
whose contract must be
rejected
1) principal should wish to
1) Agent acted in
avail himself of the benefits
contravention with
derived from the contract
principals instructions
2) Expenses in the execution
of agency, without fault of
agent
3) Principal was aware of
such knowledge

2) Expenses due to the fault

3) Agent incurred them with

knowledge of unfavorable
result, principal was not
aware
4) When stipulated, or when

the agent will be allowed a

certain sum.

BY REVOCATION
1921: If agency has been
entrusted with the purpose
of contracting with specified
persons
1922: If agent had general
powers

1920
1923

1924

1926: General power of

attorney

MODES OF EXTINGUISHMENT
Without prejudice to
With prejudice
persons
Without notice
With notice

If persons are in good faith

and had no knowledge of the
revocation
Revoked
By the principal at will
(express or implied)
Appointment of a new agent
for the SAME business or
transaction
If the principal DIRECTLY
MANAGES the business and
DEALS DIRECTLY with third
persons
By special one granted to
another agent as regard to
special matter

1927

BY WITHDRAWAL
How: By agent giving due
notice to the principal

Effect

BY DEATH

Cannot be revoked

If a bilateral contract
depends upon it
If it is the means of fulfilling
an obligation already
contracted
If a partner is appointed
manager of a partnership
and his removal is
unjustifiable
Liable for damages: if the
principal should suffer
damages from withdrawal
1929: Agent must continue
to act until the principal had
reasonable opportunity to
take necessary steps to meet
the situation

Not Liable (exception):

impossibility of continuing
the performance without
grave detriment to himself

Death of principal
1930: Agency remains in full
force and effect even after
death of principal

1931: VALID and FULLY

EFFECTIVE with respect to
third persons in good faith
Death of agent

OTHER CAUSES

1932: His heirs must notify

the principal and adopt
measures
Civil interdiction, insanity,
insolvency of principal or
agent, dissolution of firm or
corporation which entrusted
or accepted the agency

If it has been constituted in

the common interest of the
principal and of the agent
In the interest of a third
person who has accepted the
stipulation in his favor
Acts done by agent without
the knowledge of death or
ANY OTHER CAUSE WHICH
EXTINGUISHES THE AGENCY