For some measure of comfort or a little peace of mind, you want something done but can’t do it yourself personally. You may have tons of work/activities to do or are perhaps abroad and can’t accomplish much from there. And so you decide to appoint an agent to finally carry out whatever it is you can’t get done personally. He may not be the 007 kind and will only act with as much license as you give him. But he’s an agent nonetheless or one who, under Art. 1868 of the Civil Code, “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.”
Below are some basic principles to enlighten you on your obligations as principal and those of your agent, as well as the principal-agent relationship as a whole.
Existence of Agency and Special Powers of Attorney
How do you appoint an agent? Well, the agency “may be oral, unless the law requires a specific form.” It may also 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.” (Art. 1869, Civil Code). In the same light, the agent’s acceptance may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. (Art. 1870)
Special powers of attorney are necessary in the following cases:
1) to make payments not usually considered as acts of administration;Special powers of attorney must specifically indicate the specific powers above mentioned. “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.” (Art. 1877)
2) to effect novations which put an end to obligations 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. In fact, Art. 1874 specifically provides that when a sale of a piece of land or any interest therein is through an agent, the agent’s authority shall be in writing; otherwise, the sale is void.
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. (Art. 1878)
A couple more reminders: “A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.” (Art. 1879) “A special power to compromise does not authorize submission to arbitration.” (Art. 1880)
Agent’s Obligations
Of course, the Civil Code provides more than a few. They’re pretty straightforward, so here they are:
The agent shall act in accordance with the instructions of the principal. If there are no particular instructions, he shall do all that a good father of a family would do, as required by the nature of the business. (Art. 1887)
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. (Art. 1890)
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. (Art. 1891)
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:
a) when he was not given the power to appoint one;All acts of the substitute appointed against the prohibition of the principal shall be void. (Art. 1892) Further, the principal may bring an action against the substitute with respect to the obligations which latter has contracted. (Art. 1893)
b) when he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent.
The responsibility of 2 or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (Art. 1894) If solidarity has been agreed upon, each agent is responsible for the non-fulfillment of agency, and for the fault or negligence of his fellow agent/s, except in the latter case when the fellow agent/s acted beyond the scope of their authority. (Art. 1895) Remember, solidarity means one-for-all-and-all-for-one.
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. (Art. 1899) The agent must always be supervised … you never know …
Commission Agent
An agent on commission 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. (Art. 1903) So agents, make sure you are not made liable for goods already damaged once you receive them.
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. (Art. 1905) 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. (Art. 1906)
Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee commission, it means 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. (Art. 1907) Guarantors really are saint, or losers.
Declining the Agency
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. (Art. 1885)
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. (Art. 1886)
An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (Art. 1888)
Notice to Third Persons
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. (Art. 1902)
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. (Art. 1901)
Agent’s Liability
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. (Art. 1884)
The agent is responsible not only for fraud, but also for negligence, which shall be judged with rigor by the courts, depending on whether or not the agency was for compensation. (Art. 1909)
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. (Art. 1889)
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. (Art. 1896)
The agent is not personally liable to the party with whom he contracts (the liability is usually on the principal), unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. (Art. 1897) 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. (Art. 1898)
Obligations of the Principal
When there are agents, there are principals and here are their legal obligations:
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. (Art. 1910)
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. (Art. 1911) So Mr. Principal, once you become aware or maybe even suspicious of your agent’s actions beyond his authority, might be a good time to call everything off.
The principal must advance to the agent, if requested, the sums necessary for the execution of the agency. If the agent advanced them, the principal must reimburse him, even if the business or undertaking was not successful, provided the agent is free from all fault. Reimbursement shall include interest on the sums advanced, from the day on which the advance was made. (Art. 1912) The principal must also indemnify the agent for all damages which the execution of the agency may have caused the latter without his fault or negligence. (Art. 1913) The agent may retain in pledge the things which are the object of the agency until the principal effects such reimbursement and indemnity. (Art. 1914)
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. (Art. 1915)
When 2 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. (Art. 1916) If the agent 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. (Art. 1917)
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 wishes to avail himself of the benefits derived from the contract;Extinguishment of Agency
2) when the expenses were due to the agent’s fault;
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. (Art. 1918)
The agency is extinguished:
1) by its revocation;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. (Art. 1920)
2) by the agent’s withdrawal;
3) by principal or the agent’s death, civil interdiction, insanity or insolvency;
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. 1919)
The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. (Art. 1924)
A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. (Art. 1926)
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. (Art. 1925)
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, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. (Art. 1928)
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. (Art. 1929)
If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were notified thereof. (Art. 1921) 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. But, notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. (Art. 1922) 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 third persons acting in good faith and without notice. (Art. 1923)
The agency shall remain in full force and effect even after the principal’s death, 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. (Art. 1930)
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. (Art. 1927)
Anything done by the agent, without knowledge of the principal’s death 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. (Art. 1931)
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. (Art. 1932)
Note these are basic legal provisions. You can delegate or stipulate as much as you require or like. But remember, they shouldn’t be against the law. And preferably not as convoluted as a certain movie plot we hear …
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