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Art 1868. By the contract of agency a person binds himself to render Consent: (1) by contract; (2) by conduct; (3) by ratification; (4) by
some service or to do something in representation or on behalf of presumption or operation of law.
another, with the consent or authority of the latter. Agency is both a Knowledge of Agent imputed to Principal. The knowledge of the agent is
contract and a representative relation. It is essential, for a contract of agency imputed to the principal even though the agent never communicated such
to exist, that the principal consents that the other party, the agent, shall act knowledge to the principal. The knowledge of the principal cannot be
on its behalf and the agent consents so as to act. (Apex Mining Co., Inc. vs. imputed to his agent.
Southeast Mindanao Gold Mining Corp). XP:
(1) Where the agent’s interest are adverse to those of the principal;
Characteristics of a contract of agency: (2) Agent’s duty is not to disclose the information, as where he is
(1) Consensual, perfected by mere consent. informed by way of confidential information;
(2) Principal, stand by itself without other contracts. (3) The person claiming the benefit of the rule colludes with the
(3) Nominate, has its own name. agent to defraud the principal.
(4) Unilateral, obligation for only one party; Bilateral, reciprocal
obligations. Agency vs. Partnership. An agent acts only for his principal; a partner acts
(5) Preparatory, means to an end. not only for his co-partners and the partnership but also as a principal of
himself. An agent must submit to the principal’s right to control, while a
Purpose of Agency: to extend the personality of the principal through the partner’s power to bind his co-partner is not subject to the co-partner’s right
facility of the agent. It enables the activity of man which is naturally limited to control unless there is an agreement to that effect. An agent assumes no
in its exercise by the impositions of his physiological conditions to be legally personal liability when he acts within the scope of his authority, while a
extended by permitting him to be constructively present. partner acting as agent for the partnership binds not only the firm members
but himself as well.
 Principal – one whom the agent represents and from who he derives
his authority; he is the person represented. (A principal must be Agency vs Trusts. In a trust, the title and control of the property passes to the
capacitated or have the legal capacity to enter into contract in his trustee who acts in his own name, while the agent represents and acts for his
own right. ) principal. A trust may be terminated only by the fulfillment of its purpose,
 Agent – one who acts for and represents another; he is the person while an agency may be revoked at any time. An agent has the authority to
acting in a representative capacity. one who has derivative authority make contracts which will be binding on his principal, while a trustee does
in carrying out the principal’s business. (Anyone can be an agent. not necessarily possess such authority to bind the trustor. An agency is a
His capacity is usually immaterial contractual relation, while a trust may be the result of a contract or by law.

Elements of Agency: Art 1869. Agency may be express, or implied from the acts of the
(1) Consent principal, from his silence or lack of action, or his failure to repudiate
(2) Object is the execution of a juridical act in relation to third persons the agency, knowing that another person is acting on his behalf without
(3) Agent acts as a representative authority. Agency may be oral, unless the law requires a specific form.
(4) Acts within the scope of his authority
Kinds of Agency:
1. As to creation:

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(1) Express – the agent has been actually authorized by the principal, XP: agency by operation of law.
either orally or in writing.
(2) Implied – implied from the acts of the principal, from his silence Art 1870. Acceptance by the agent may also be express, or implied from
or lack of action, or his failure to repudiate the agency. his acts which carry out the agency, or from his silence or inaction
*Ratification may produce the effects of an express or implies according to the circumstances.
agency. It results in agency by ratification.
Since agency is a contract, there must be consent by both parties.
2. As to its character:
(1) Gratuitous – agent receives no compensation for services. Art 1871. Between persons who are present, the acceptance of the agency
(2) Compensated or Onerous – agent receives compensation. may also be implied if the principal delivers his power of attorney to the
3. As to extent of business covered: agent and the latter receives it without any objection.
(1) General – one which comprises all the business of the principal.
(2) Special – one which comprises one or more specific transactions. Implied acceptance by the agent: (1) where persons are present; (2) where
4. As to authority conferred: persons are absent. The agency is impliedly accepted if the agent receives a
(1) Couched in general terms – one which is created in general power of attorney from the principal himself personally without any
terms and is deemed to comprise only acts of administration. objection, both being present.
(2) Couched in specific terms – one authorizing only the
performance of a specific act.  Power of Attorney – a person, as principal, appoints another as his
5. As to its nature and effects: agent and confers upon him the authority to perform certain specified
(1) Ostensible or Representative – one where the agent acts in the acts or kinds of acts on behalf of the principal (the written
name and representation of the principal. authorization itself is the power of attorney). It is to evidence the
(2) Simple or Commission – one where the agent acts in his own authority of the agent to third parties within whom the agent deals.
name but for the account of the principal. Except as required by statute, a power of attorney is valid although
no notary public intervened in its execution. The instrument should
Form of Agency, the Law requires certain formalities: always be deemed to give such powers as are essential or usual and
GR: there are no formal requirements governing the appointment of an reasonably necessary and proper in effectuating the express powers.
agent. It may be oral or written, in public or private writing. It can also (Angeles vs. Philippine National Railways)
be implied from the words and conduct of the parties and the
circumstances of the particular case. GR: a power of attorney is strictly construed and strictly pursued –
XP: held to grant only those powers which are specified and defined.
1. Validity of the contract XP: if the language will permit, a construction should be adopted
2. To make the contract effective against third persons which will carry out, instead of defeat, the purpose of the
3. Proving the existence of a contract as provided in the Statute of appointment.
Frauds
Art 1872. Between persons who are absent, the acceptance of the agency
Presumption of Agency cannot be implied from the silence of the agent, except: (1) when the
GR: Agency is generally not presumed. The relation between principal and principal transmits his power of attorney to the agent, who receives it
agent must exist as a fact. without any objection; (2) when the principal entrusts to him by letter or
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telegram a power of attorney with respect to the business in which he is (1) Estoppel of agent – one professing to act as agent for another may be
habitually engaged as an agent, and he did not reply to the letter or estopped to deny his agency both as against his asserted principal
telegram. and the third persons interested.
(2) Estoppel of principal:
There is implied acceptance if the agent writes a letter acknowledging receipt (a) As to agent – one who knows that another is acting as his agent
of the power of attorney but offers no objection to the creation of the agency. and fails to repudiate his acts, or accepts the benefits, will be
estopped to deny the agency.
In Art 1871, the principal personally delivers the power of attorney to the (b) As to sub-agent – to estop the principal from denying his liability
agent; while in 1872, the principal transmits the power of attorney to the to a third person, he must have known or be charged with
agent. knowledge of the fact of the transaction and the terms of the
agreement between the agent and the sub-agent.
Art 1873. If a person specially informs another or states by public (c) As to third persons – one who knows that another is acting as his
advertisement that he has given a power of attorney to a third person, agent or permitted another to appear as his agent, to the injury of
the latter thereby becomes a duly authorized agent, in the former case third persons who have dealt with the apparent agent, is estopped
with respect to the person who received the special information, and in to deny the agency.
the latter case with regard to any person. The power shall continue to be (3) Estoppel of third persons – a third person, having dealt with one as
in full force until the notice is rescinded in the same manner in which it an agent may be estopped to deny the agency as against the principal,
was constituted. agent, or third persons in interest.
(4) Estoppel of the government – the government is neither estopped by
Communication of existence of agency: mistake or error on the part of its agents. But it may be estopped
(1) If by special information. The person appointed as agent is through affirmative acts of its officers acting within the scope of their
considered such with respect to the person to whom it was given. authority.
(2) If by public advertisement. The agent is considered as such with
regard to any person. Agency by estoppel vs Implied agency. In an agency by estoppel, one is not
an agent at all, but one assuming to act as agent has apparent or ostensible,
Notice of the revocation in a newspaper of general circulation is a sufficient although not real, authority to represent another, as against the principal, has
warning to third persons. Nevertheless, revocation made in any manner is none of the rights of an agent, except where the principal’s conduct or
effective where the person dealing with the agent has actual knowledge representations are such that the agent reasonably believed that the principal
thereof; otherwise, bad faith and fraud would be committed. On the intended him to act as an agent in the matter. (1) If estoppel is caused by the
termination of an agency, persons who have dealt with the principal through principal, he is liable to any third person who relied on the misrepresentation.
the agent may continue to do so, in the absence of knowledge of the fact, and (2) If the estoppel is caused by the agent, then only the agent is liable. In an
the principal will be bound by the acts of the former agent as fully as if his implied agency, there is a real agent with all the rights and liabilities; he has
authority had not ceased. actual authority to act on behalf of the principal, and the principal alone is
liable. In implied agency it must be proved by deductions or inferences from
Estoppel to deny agency: other facts.

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Art 1874. When a sale of a piece of land or any interest therein is compensation until the principal realizes the profit, and there is no profit as
through an agent, the authority of the latter shall be in writing; yet through the mere signing of the contract of sale.
otherwise, the sale shall be void.
GR: a broker or agent is not entitled to any commission until he has
GR: the agent’s authority may be express or implied; oral or written. It is successfully done the job given to him.
generally not required to be in writing; the contract may be oral unless the XP: (1) Where it appears that the offer of the owner to sell his lands was
law requires a specific form. formally accepted by the buyer after the exclusive authority in favor of the
XP: (1) Sale of land and any interests therein; (2) Employment agency; (3) real estate broker to negotiate the sale had expired and the broker was not the
Special Power of Attorney. efficient pro- curing cause in bringing about the sale, broker had diligently
taken steps to bring back together the owner and the buyer to whom the
Sale of land not in writing should be considered as merely voidable since the owner previously had offered the sale of the property, for his efforts and
sale can be ratified by the principal. The written authorization need not assistance in the transaction which was finalized and consummated after the
contain a particular description of the property which the agent is permitted expiration of his exclusive authority; (2) broker or agent was the sufficient
to sell. *under Art 1403(2), an oral agreement for the sale of real property or procurring cause in bringing the sale, notwithstanding the expiration of his
of an interest therein is unenforceable even if there is no agent. authority, nonetheless, took diligent steps to bring back together the parties
such that a sale was finalized and consummated.
Art 1875. Agency is presumed to be for a compensation, unless there is
proof to the contrary. Sale through another agent: the broker cannot complain of the principal’s
 Gratuitous agent – a person who agrees to act as an agent without conduct in selling the property through another agent before the broker’s
compensation. The promise of a gratuitous agent to perform is not efforts are successful.
enforceable. He is, however, bound by his acceptance to carry out the
agency. Right of agent to compensation in case of double agency:
(a) With knowledge of both the principals – entitled to compensation.
Liability of principal to pay compensation: the principal must pay the (b) Without knowledge of both principals – cannot recover
agent the compensation agreed upon, or the reasonable value of the agent’s compensation.
services if no compensation was specified. (c) With knowledge of one principal – can recover compensation from
the guilty employer or principal.
Procurring the cause of the transaction: the agent must prove that he was  Double compensation – an agent acting at once for both contracting
the guiding cause for the transaction; otherwise, he is not entitled to the parties (e.g., vendor and vendee).
stipulated commission. A broker is never entitled to commissions for
unsuccessful efforts. The risk of failure is only his. The reward comes only Factors in fixing the amount of Attorney’s fees:
with his success. (Dañon vs. Brimo & Co). In determining the amount of the fee, it is proper to consider:
(1) The time and labor required, the novelty and difficulty of the questions
 Procurring cause – refers to a cause originating a series of events involved, and the skill requisite to conduct properly the cause;
which, result in the accomplishment of the prime objective. (2) Whether the acceptance of employment in the particular case will
preclude the lawyer’s appearance for others in cases likely to arise out of the
Compensation contingent on profits: where the compensation is contingent or transaction, and in which there is a reasonable expectation that otherwise he
dependent upon the realization of profit, the agent is not entitled to
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would be employed, or will involve the loss of other business while (2) General agent – employed to transact all the business of his
employed in the particular case or antagonisms with other clients; principal, to do all acts, connected with a particular trade, business or
(3) The customary charges of the bar for similar services; employment.
(4) The amount involved in the controversy and the benefits resulting to the (3) Special or Particular agent – one authorized to act in one or more
client from the services; specific transactions, or to do one or more specific acts, or to act
(5) The contingency or the certainty of the compensation; and upon a particular occasion.
(6) The character of the employment, whether casual or for an established
and constant client. Special types of agents:
 Attorney at law. One whose business is to represent clients in legal
No one of these consideration in itself is controlling. They are mere guides proceedings.
in ascertaining the real value of the service. In fixing fees, it should never be  Auctioneer. One whose business is to sell property for others to the
forgotten that the profession is a branch of the administration of justice and highest bidder at a public sale.
not a mere money- getting trade.36 (Sec. 12, Canons of Professional Ethics.)  Broker. One whose business is to act as intermediary between two
other parties.
Art 1876. An agency is either general or special. The former comprises  Factor. One whose business is to receive and sell goods for a
all the business of the principal. The latter, one or more specific commission, being entrusted with the possession of goods involved
transactions. in the transaction.
 Cashier in bank. One whose business is to represent a banking
General agency: comprises all the business of the principal. Authorized to institution in its financial transactions
conduct a series of transactions over time involving a continuity of service.  Attorney-in-fact. One who is given authority by his principal to do a
May bind his principal by an act within the scope of his authority although it particular act not of a legal character. An agent having a special
may be contrary to his special instructions. Does not terminate by mere authority created by deed.
revocation of his authority without notice to the third party.
Art 1877. An agency couched in general terms comprises only acts of
Special agency: involves only one or more specific transactions. Authorized administration, even if the principal should state that he withholds no
to conduct a single transaction or a series of transactions not involving power or that the agent may execute such acts as he may consider
continuity of service. Cannot bind his principal in a manner beyond or appropriate, or even though the agency should authorize a general and
outside the specific acts which he is authorized. Termination of the unlimited management.
relationship between principal and agent is effective unless the agency has
been entrusted for the purpose of contracting with such third party. Agency couched in general terms: It may be a general agency or a special
agency. It includes only acts of administration. An express power is
Classes and kinds of agents: necessary to perform any act of strict ownership.
As according to their nature and extent of authority:
(1) Universal agent - Employed to do all acts that the principal may Acts of administration: an act in the ordinary course of business, this is
personally do, and which he can lawfully delegate to another the determined by the nature of the business that has been placed under the
power of doing. administration of the agent.

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 If the act is a matter that, from the nature of the business, is deeds which do not sufficiently include property or subject under which the
expected to occur, and which would not change the course of the agent is to deal. The act done must be legally identical with that authorized
business, it is a mere act of administration. to be done (Woodchild Holdings, Inc. vs. Roxas Electric & Construction Co)
 If the act is something that is not expected to happen in the day-to-
day affairs, it is an act of ownership or strict dominion. The requirement of a special power of attorney is met if there is a clear
mandate from the principal specifically authorizing the performance of act
Art 1878. Special powers of attorney are necessary in the following (Bravo- Guerrero vs. Bravo).
cases:
(1) To make such payments as are not usually considered acts of When SPA is needed:
administration; 1. Acts of strict dominion
(2) To effect novations which put an end to obligations already in 2. Gratuitous contracts
existence at the time the agency was constituted; 3. Contracts for personal trust is of the essence
(3) To compromise, to submit questions to arbitration, to renounce
the right to appeal from judgment, to waive objections to the To make payment: It is an act of ownership as it involves the conveyance of
venue of an action or to abandon a prescription already ownership of money or property. But when payment is made in the ordinary
acquired; course of management, it is considered a mere act of administration.
(4) To waive any obligation gratuitously;  Payment - the delivery of money or the performance in any other
(5) To enter into any contract by which the ownership of an manner of an obligation.
immovable is transmitted or acquired either gratuitously or for  Novation – the extinction of an obligation through the creation of a
valuable consideration new one which substitutes it by changing the object or principal
(6) To make gifts, except customary ones for charity or those made conditions thereof.
to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and To compromise: A compromise must be strictly construed. A judgment
indispensable for the preservation of the things which are under based on a compromise entered into by an attorney without specific authority
administration from the client is null and void.
(8) To lease any real property to another person for more than one  Compromise – a contract whereby the parties, by making reciprocal
year; concessions, avoid a litigation or put an end to one already
(9) To bind the principal to render some service without commenced.
compensation;  Arbitration – parties submit their controversies to an arbitrator for
(10) To bind the principal in a contract of partnership; decision.
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property; Absence of an SPA does not render the compromise agreement void. In such
(13) To accept or repudiate an inheritance; a case, the compromise is merely unenforceable.
(14) To ratify or recognize obligations contracted before the agency; To waive an obligation gratuitously: The agent cannot waive a right
(15) Any other act of strict dominion belonging to the principal without valuable consideration or even for a
nominal consideration. A waiver may not be inferred when the terms thereof
Construction of powers of attorney. — Powers of attorney are generally do not explicitly and clearly prove an intent to abandon the right.
construed strictly and courts will not infer or presume broad powers from
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To make gifts: an agent without special power from the principal cannot To ratify obligations contracted before the agency: an agent cannot ratify
make gifts. The making of customary gifts for charity, or those made to or recognize obligations contracted before the agency without SPA from the
employees in the business managed by the agent, are considered acts of principal.
administration.
 Gift or Donation –a person disposes gratuitously of a thing or right in Art 1879. A special power to sell excludes the power to mortgage; and a
favor of another. special power to mortgage does not include the power to sell.

To loan or borrow money: for a loan or borrowing of money to be allowed, The agent cannot sell or mortgage the property belonging to the principal
an execution of a power of attorney is required. Authority to borrow money is without special power. An authority to sell the principal’s property does not
rarely inferred unless such borrowing is usually incident to the performance carry with it or imply the authority to mortgage. And vice versa, the power to
of acts which the agent is authorized to perform, or unless it is impossible for sell is not to be implied from the special power to mortgage.
the agent to communicate with his principal and borrowing is indispensable
to the continuance of the business or to prevent a considerable loss. In the absence of special authority, the sale or mortgage will be
unenforceable against the principal as the agent has acted beyond his powers.
To lease realty for more than one year: The lease of realty to another
person for one year or less is an act of administration. An agreement for the Art 1880. A special power to compromise does not authorize submission
leasing of real property for a longer period than one year is unenforceable to arbitration.
unless made in writing. The requirement of SPA extends to renewal or
extension of lease of real property. The authority of the agent to compromise or make settlements of claims or
accounts for the principal included the power to do whatever things are usual
To obligate principal as guarantor or surety: The power to create a and necessary to effectuate such compromise but he is not authorized to
contract of suretyship and contract of guaranty cannot be inferred; it must be submit to arbitration.
expressed. A contract of guaranty is unenforceable unless it is made in
writing. Art 1881. The agent must act within the scope of his authority. He may
 Contract of guaranty – the guarantor binds himself to fulfill the do such acts as may be conducive to the accomplishment of the purpose
obligation of the principal debtor in case the latter should fail to do of the agency.
so.
 Contract of suretyship – the surety guarantees the performance by the Art 1882. The limits of the agent’s authority shall not be considered
principal in favor of the obligee. He binds himself solidarily. exceeded should it have been performed in a manner more advantageous
to the principal than that specified by him.
To create or convey real rights over immovable property: An agent
cannot create or convey real rights over immovable property belonging to his  Authority – the power of the agent to affect the legal relations of the
principal without special power. This is an act of strict dominion. principal by acts done by the principal’s manifestation of consent to
him.
To accept or repudiate an inheritance: this is an act of strict dominion,
hence a special authority is required. Authority vs Power. Authority is the source or cause while power is the effect.

Kinds of Authority:
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(1) Actual – when it is actually granted, either express or implied. 1. Where his principal’s acts have contributed to deceive a third
(2) Express – conferred by words. person in good faith;
(3) Implied – when it is incidental to the transaction or necessary, and 2. Where the limitations upon the power created by him could not
the principal intended it although nothing was said. have been known by the third person;
(4) Apparent or Ostensible – when it is conferred by words, conduct or 3. Where the principal has placed in the hands of the agent
even by silence of the principal, which causes a third person to instruments signed by him in blank;
believe that one has actual authority. 4. Where the principal has ratified the acts of the agent.
(5) General – refers to all the business of the principal. (2) Agent: The agent who exceeds his authority is personally liable either
(6) Special – limited to only to one or more specific transactions. to the principal or the third party.
(7) By necessity or Operation of law – when it is demanded by necessity (a) If the principal is liable to the third party on the ground of
or emergency and such authority terminates when the emergency has apparent authority, the agent’s liability is to the principal.
passed. (b) If the principal is not liable to the third person because the facts
are such no apparent authority is present, the agent’s liability is
When is the principal bound by the act of the agent: to the third party.
a. The principal is liable to the agent if he breaches his contractual or (c) If the agent personally assumes responsibility for the
any duty to the agent. transaction, if the principal defaults, he becomes obligated as a
b. The principal is liable to third persons if the agent acted within the co-principal.
scope of his authority and in behalf of the principal.
c. If the principal subsequently ratifies the act done by the agent.
An action must be brought by and against the principal. An action is not
When a principal is not bound by the acts of his agent properly instituted when not in the name of the principal, the real party-in-
a. Acts without or beyond his authority interest. The bringing of the action against the agent cannot have any legal
b. Acts within the scope of his authority but in his own name, and not in effect except that of notifying the agent of the claim. Beyond such
behalf of the principal. XP: when the transaction involves things notification, the filing of the action can serve no other purpose. There is no
owned by the principal. law giving any effect to such action upon the principal. (Ang vs. Fulton Fire
Insurance Co).
When acts in excess of authority but more advantageous to the principal
The agent is not deemed to have exceeded the limits of his authority should Art 1883. If an agent acts in his own name, the principal has no right of
he perform the agency in a manner more advantageous to the principal than action against the person with whom the agent has contracted; neither
that indicated by him. However, acts that would be disadvantageous to the have such person against the principal. In such case, the agent is one
principal will be considered to have been acted upon in excess of his directly bound in favor of the person with whom he has contracted, as if
authority. the transaction were his own, except when the contract involves things
belonging to the principal. The provisions of this article shall be
Liability of principal/agent for acts of agent beyond his authority: understood to be without prejudice to the actions between the principal
(1) Prinipal: and agent.
GR: the principal is not bound by the acts of an agent beyond his
limited powers. Kinds of principal:
XP:
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(1) Disclosed principal – the other party knows the agent is acting for (3) To finish the business already begun on the death of the principal
the principal and the principal’s identity. should delay entail any danger;
(2) Partially disclosed principal – other party only knows that the agent (4) To observe the diligence of a good father of a family in the custody
is acting in behalf of a principal but not oh the principal’s identity. and preservation of the goods forwarded to him by the owner in case
(3) Undisclosed principal – other party has no notice of the fact that the he declines an agency, until an agent is appointed;
agent is acting on behalf for a principal. (5) To advance the necessary funds should there be a stipulation to do
so;
An agent who enters into a contract in his own name without disclosing the (6) To act in accordance with the instructions of the principal;
identity of his principal renders himself personally liable even though the (7) Not to carry out the agency if its execution would manifestly result in
third person knows that he is acting as agent, unless it affirmatively appears loss or damage to the principal;
that it was the mutual intention of the parties to the contract that the agent (8) To answer for damages if there being a conflict between his interests
should not be bound. and those of the principal, he should prefer his own;
(9) Not to loan to himself if he has been authorized to lend money at
Although according to Article 1883, when the agent acts in his own name he interest;
is not personally liable to the person with whom he enters into a contract (10) To render an account of his transactions and to deliver to the
when things belonging to the principal are the subject thereof, yet such third principal whatever he may have received by virtue of the agency;
person has a right of action not only against the principal but also against the (11) To distinguish goods by countermarks and designate the
agent. merchandise;
(12) To be responsible for the acts of the substitute appointed by him;
Art 1884. The agent is bound by his acceptance to carry out the agency (13) To pay interest on funds he applied to his own use;
and is liable for the damages which, through his non-performance, the (14) To inform the principal, where an authorized sale of credit has been
principal may suffer. He must also finish the business already begun on made;
the death of the principal, should delay entail any danger. (15) To bear the risk of collection, a guarantee commission;
(16) To indemnify the principal for damages for his failure to collect the
Obligations of agent to principal: credits of his principal when they became due;
(1) Good faith and loyalty to his trust (17) To be responsible for fraud and damages.
(2) Obedience to principal’s instruction
(3) Exercise of reasonable care Art 1885. 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
 Conversion - the unauthorized exercise of the right of ownership the goods forwarded to him by the owner until the latter should appoint
over goods or property of another person. an agent. The owner shall as soon as practicable either appoint an agent
or take charge of the goods.
Specific obligations of the agent to the principal:
(1) To carry out the agency which he has accepted; If a person declines an agency, he is till bound to observe the diligence of a
(2) To answer for damages which through his performance the principal good father of a family in the custody and preservation of the goods
may suffer; forwarded to him.

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Art 1886. Should there be a stipulation that the agent shall advance the The principal will be liable to third persons, under the doctrine of estoppel,
necessary funds, he shall be bound to do so except when the principal is for any unauthorized acts of the agent who exceeds the instructions given to
insolvent. him.

GR: The principal must advance to the agent if requested, the sums necessary Obligation to act in accordance with principal’s instructions
for the execution of the agency. (1) Duty to obey reasonable and lawful instructions. But the agent need
XP: if the contract of agency stipulates that the agent shall advance the not follow instructions that are outside the scope of the agency
necessary funds. relationship agreed upon or that may subject him to unreasonable
XP to the XP: when the principal is insolvent. risk or injury.
(2) Liability for loss or damage. If the agent exceeds, violates or fails to
The insolvency of the principal is a ground for the extinguishment of agency. act upon such instructions, he will be liable to the principal for any
loss or damage resulting therefrom.
Art 1887. In the execution of agency, the agent shall act in accordance (3) Duty to act in good faith and with due care. The agent shall do all
with the instructions of the principal. In default thereof, he shall do all that a good father of a family taking care of the business as if it were
that a good father of a family would do, as required by the nature of the his own. If the agent acts in GF and with DC, the agent is not liable
business. for losses due to errors or mistakes of judgments as to matters with
 Instructions – private directions given by the principal to the agent in which he is vested with discretionary powers.
regard to the performance of his duties. (4) Exemption from liability for failure of undertaking. When an agent
carries out the instructions given to him by the principal and has not
Instructions vs Authority. Instructions is the direct manner of transacting the exceeded his authority or to have acted with negligence, or fraud, he
authorized business and a private rule of guidance to the agent. Instructions cannot be held liable or responsible for the failure of his principal to
limiting the agent’s authority are without significance as against those accomplish the object of the agency.
dealing with the agent. On the other hand, Authority is the sum total of the (5) Right to disobey principal’s instructions. The agent may disobey the
powers committed or permitted to the agent by the principal. Authority principal’s instructions when it call for the performance of illegal
relates to the subject with which the agent is empowered to deal with or act acts, or where he is privileged to do so to protect his security
upon. Limitations of authority are operative as against those who have interests.
knowledge of them.
When departure from principal’s instruction is justified
Effect of violation of principal’s instruction 1. By sudden emergency;
Liability of principal to third persons – if the agent’s act is within the scope 2. Ambiguous instructions;
of his authority, although contrary to the instructions of the principal, the 3. Insubstantial departure from principal’s instruction
principal will still be liable unless the third person knew that the agent was
exceeding his authority or violating the principal’s instruction. Art 1888. An agent shall not carry out an agency if its execution would
manifestly result in loss or damage to the principal.
Third persons dealing with an agent do so at their peril and are bound to
inquire as to the extent of his authority. The duty of the agent is to render service for the benefit of the principal and
not to act to his detriment.

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Art 1889. The agent shall be liable for damages if, there being a conflict cannot be permitted to derive advantage from his own default. (Dumaguin
between his interests and those of the principal, he should prefer his vs. Reynolds).
own.
An agent who takes a secret profit (e.g. bonus, gratuity, or personal benefit
Agency being a fiduciary relation, the agent is required to observe utmost from the vendee) without revealing it to his principal is guilty of breach of
good faith and loyalty towards his principal. He must look after the his loyalty to the principal and forfeits his right to collect commission from
principal’s interests as if they were his own. An agent is liable for damages if, his principal. The fact that the principal may have been benefited by the
there being a conflict of interest and those of the principal, he should prefer valuable services of the said agent does not exculpate the agent who has only
his own. himself to blame for such a result by reason of his treachery or perfidy.
(Domingo vs. Domingo).
GR: The agent has the duty to prefer the principal’s interests over his own.
XP: where the agent’s interests are superior, such as where he has security Liability for conversion. If the agent fails to deliver and instead
interests in the goods. converts or appropriates for his own use the money or property
 Self-dealing – when a fiduciary acts in their own best interest in a belonging to the principal, the agent is liable for estafa.
transaction, rather than the best interest of their clients.

Art 1890. If the agent has been empowered to borrow money, he may
Art 1892. The agent may appoint a substitute if the principal has
himself be the lender at the current rate of interest. If he has been not prohibited him from doing so; but he shall be responsible for
authorized to lend money at interest, he cannot borrow it without the the acts of the substitute: (1) When he was not given the power to
consent of the principal. appoint one; (2) When he was given such power, but without
designating the person, and the person appointed was notoriously
The agent cannot, without a special power of attorney, loan or borrow money. incompetent or insolvent. All acts of the substitute appointed
against the prohibition of the principal shall be void.
Art 1891. Every agent is bound to render an account of his transactions
and to deliver to the principal whatever he may have received by virtue Art 1893. In the cases mentioned in Nos. 1 and 2 of the preceeding
of the agency, even though it may not be owing to the principal. Every article, the principal may furthermore bring an action against the
stipulation exempting the agent from the obligation to render an account
substitute with respect to the obligations which the latter has
shall be void.
contracted under the substitution.
It is the duty of the agent to account for and to deliver to the principal all
money and property which may have come into his hands or of a sub-agent  Sub-agent – a person employed or appointed by an agent as his
appointed by him. This includes gifts from third parties in connection with agent, to assist him in the performance of an act for the
the agency. principal which the agent has been empowered to perform.

If profit accrues from his violation of duty while executing the agency, that Unless prohibited by the principal, the agent may appoint a sub-agent
likewise belongs to the principal, not only because the principal has to or substitute. An agent may not delegate to a subagent where the work
assume the responsibility of the transaction, but also because the agent

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entrusted to him requires special knowledge, skill, or competence Art 1895. If solidarity has been agreed upon, each of the agents is
unless he has been authorized by the principal. responsible for the non-fulfillment of the agency, and for the fault
or negligence of his fellow agents, except in the latter case when
The principal has a right of action to both the agent and sub-agent with the fellow agents acted beyond the scope of their authority.
respect to the obligations which the latter has contracted under the  Joint agents – agents appointed by one or more principals and it
substitution. is the principal’s intent that all should act in conjunction in
consummating the transaction.
Relation among the principal, agent, and sub-agent
(1) Sub-agent appointed by agent on latter’s sole account – the The presumption is that one is a joint liability. Only by express stipulation
sub-agent is a stranger to the principal. The principal will not may agency be solidarily liable.
be liable to third persons for the sub-agent’s acts but the agent
In a joint obligation, each debtor is liable only for a proportionate part of the
will be liable to the principal or third parties if the sub-agent
debt. In a solidary agency, each of the agents becomes solidarily liable for
acts wrongfully. the entire obligation. However, they may reimburse what they have paid to
(2) Sub-agent appointed by agent with authority from principal – the other agents as to their proportionate shares.
Any act done by the substitute or sub-agent in behalf of the
principal is deemed an act of the principal. Neither the agent Art. 1216. The creditor may proceed against any one of the solidary debtors or some
nor the sub-agent can be held personally liable so long as they or all of them simultaneously. The demand made against one of them shall not be an
ob- stacle to those which may subsequently be directed against the others, so long as
act within the scope of their authority. the debt has not been fully collected. (1144a)
(3) Effect of death of principal/agent:
If authority from principal – the death of the agent does not Art. 1207. The concurrence of two or more creditors or of two or more debtors in
one and the same obligation does not imply that each one of the former has a right to
affect his authority. demand, or that each one of the latter is bound to render, entire compliance with the
If sub-agent is a substitute of the agent and authority is from prestations. There is a solidary liability only when the obligation expressly so states,
him – death of the agent terminates his authority. or when the law or the nature or the obligation requires solidarity. (1137a)

Art. 1208. If from the law, or the nature or the wording of the obligations to which
If the substitution is not authorized, but not prohibited. The law the preceding article refers the contrary does not appear, the credit or debt shall be
recognizes the validity of the substitution if the same is beneficial to pre- sumed to be divided into as many equal shares as there are creditors or debtors,
the credits or debts being considered distinct from one another, subject to the Rules
the principal. If the substitution has occasioned damage to the of Court governing the multiplicity of suits. (1138a)
principal, the agent shall be primarily responsible for the acts of the
substitute. Art 1896. 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
Art 1894. The responsibility of two or more agents, even though after the extinguishment of the agency.
they have been appointed simultaneously, is not solidary, if
solidarity has not been expressly stipulated. Liability of agent for interests
(1) Sums belonging to the principal which the agent applied to his own
use
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(2) Sums which the agent still owes the principal after the If the agent acts in excess of his authority, even if he contracts in the name of
extinguishment of the agency the principal, the agent is the one personally liable unless there is subsequent
ratification by the principal.
Demand not essential for delay to exist. If by provision of law the agent is
bound to deliver to the principal whatever he may have received by virtue of The liability of an agent who exceeds the scope of his authority depends
the agency, demand is no longer necessary. upon whether the third person is aware of the limits of the agent’s power.
The agent is not bound nor liable for damages in case he gave notice of his
Art 1897. The agent who acts as such is not personally liable to the party powers to the person with whom he has contracted.
with whom he contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice of his Art 1899. If a duly authorized agent acts in accordance with the orders
powers. of the principal, the latter cannot set up the ignorance of the agent as to
the circumstances whereof he himself was, or ought to have been, aware.
The agent acquires no rights nor does he incur any liabilities arising from the
contract entered into by him on behalf of his principal. an agent is not liable Art 1900. So far as third persons are concerned, an act is deemed to have
to a third person for failure to give his principal notice of facts communicated been performed within the scope of the agent’s authority, if such act is
to him by the third person. (Reid vs. Humber). within the terms of the power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority according to an
The agent is liable to third persons for his torts which result in an injury to understanding between the principal and the agent.
the third person. If the tort is committed by the agent within the scope of his
authority, both the principal and agent are liable. Scope of agent’s authority includes not only the actual authorization
conferred upon the agent by his principal, but also that which has apparently
Unauthorized assumption of agency. Liable for the damage to those dealing or impliedly been delegated to him.
with him in reliance on his assumed authority in that they are deprived of the
benefit of the responsibility of the principal. Scope of agent’s authority as to third persons
(1) Where authority not in writing – every person dealing with an
GR: The agent is nor personally liable to the third party unless he expressly assumed agent is put upon an inquiry and must discover the nature
binds himself or he exceeds the limits of his authority. and extent of authority of the agent.

Third party’s liability toward agent. A third party’s liability on agent’s In approaching the consideration of the inquiry whether an assumed
contracts is to the principal, not to the agent. authority exists in a given case, there are certain fundamental
principles which must not be overlooked. Among them are:
Art 1898. If the agent contracts in the name of the principal, exceeding (1) that the law indulges in no bare presumptions that an agency
the scope of his authority, and the principal does not ratify the contract, exists; it must be proved and presumed from facts;
it shall be void if the party with whom the agent contracted is aware of (2) that the agent cannot establish his own authority, either by his
the limits of the powers granted by the principal. In this case, however, representations or by assuming to exercise it;
the agent is liable if he undertook to secure the principal’s ratification. (3) that an authority cannot be established by a mere rumor or
general reputation;
(4) that even a general authority is not an unlimited one; and
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(5) that every authority must find its ultimate source in some act or
omission of the principal. An assumption of authority to act as agent Responsibility of principal where agent acted with improper motives
for another of itself challenges inquiry. GR: the motive of the agent in entering into a contract with a third person is
immaterial.
(2) Where authority is in writing – if the authority of the agent is in XP: (principal is not liable)
writing, such person is not required to inquire further than the terms 1. When the third person knew that the agent was acting for his private
of the written power of attorney. benefit.
2. Where the owner is seeking recovery of personal property of which
 Special power of attorney – refers to a clear mandate specifically he has been unlawfully deprived.
authorizing the performance of a specific power and of express acts
subsumed therein. Principal’s responsibility for agent’s misrepresentation
Within the scope of his authority – a principal is subject to liability for loss
Methods of broadening and restricting agent’s authority caused to another by the other’s reliance upon a deceitful representation of an
(1) By implication – agent’s authority extends not only to the express agent in the course of his employment if the representation is authorized, or
requests, but also to those acts and transactions incidental thereto. within the implied authority of the agent, whether the agent was authorized
(2) By usage and custom – they may enlarge as well as restrict the scope by him or not.
of the agent’s authority.
XP: an agent’s authorization may not, however, he enlarged Beyond the scope of agent’s authority – The principal is not bound by the
through usage and custom in the ff: misrepresentation of his agent committed beyond the scope of his authority.
1. Sought to vary the terms of an express authorization;
2. Sought to dispense with a legal requirement enacted for For the agent’s own benefit – the principal is still liable for the agent’s
the principal’s benefit. fraudulent acts committed within the scope of his authority, though done by
3. Sought to change a rule of law the agent solely to effect acts for his own benefit.
4. Sought to vary an essential quality of agency
relationship Art 1901. A third person cannot set up the fact that the agent has
exceeded his powers, if the principal has ratified, or has signified his
GR: requires that the principal must have notice of the alleged custom before willingness to ratify the agent’s acts.
the agent’s acts, in accordance therewith, may bind the principal.
XP: these are deemed to have notice of a given usage even though he did not A third person cannot set up the fact that the agent exceeded his authority to
in fact have such notice disaffirm his contract not only after the principal has ratified the agent’s acts
1. Where the principal and agent reside in the same community; but even before such ratification where he has signified his willingness to
2. Where the agent is authorized to deal in a particular place or in a ratify.
particular market or exchange.
(3) By necessity – an agency can never be created by necessity; what is Only the principal can stamp the imprimatur of ratification. There must be
created is additional authority. knowledge of the principal of the things he is going to ratify. One cannot
(4) By certain doctrines – the doctrines (a) apparent authority, (b) impugn the validity of the compromise agreement on the ground that it was
liability by estoppel, (c) ratification executed by the counsel of the owner of the property, without any showing of
(5) By the rule of ejusdem generis “of the same kind or species” having been especially authorized to bind the property thereby, because such
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alleged lack of authority may be questioned only by the principal or client, countermarks, and designate the merchandise respectively belonging to
and the principal has on the contrary confirmed and ratified the compromise each principal.
agreement. (Commissioner of Public Highways vs. San Diego).
GR: An agent cannot commingle the goods without authority.
The receipt by principal of benefits of transaction is considered as an act of XP: Permitted to mingle principal’s properties with their own properties.
ratification of the acts of his agent. A principal may not accept the benefits of 1. Agent auctioneers;
a transactions and repudiate its burdens. 2. Agent collecting banks

Art 1902. A third person with whom the agent wishes to contract on Property owned in common, and as it is not possible to determine whose
behalf of the principal may require the presentation of the power of property was withdrawn and whose was not, the mass remaining must
attorney, or the instructions as regards the agency. Private or secret pertain to the original owners in the proportion of the original amounts
orders and instructions of the principal do not prejudice third persons owned by each of them. (Montelibano vs. Bacolod Murcia Milling Co.).
who have relied upon the power of attorney or instructions shown to
them. Art 1905. The commission agent cannot, without the express or implied
consent of the principal, sell on credit. Should he do so, the principal
GR: A third person deals with an agent at his peril. He is bound to inquire as may demand from him payment in cash, but the commission agent shall
to the extent of the agent’s authority. be entitled to any interest or benefit, which may result from such sale.

Third person not bound by principal’s private instructions. The third person A commission agent can sell only with the express or implied consent of the
is not bound and cannot be affected by the private or secret orders and principal. If such sale is made without authority, the principal maya: (1)
instructions of the principal. As to the third person, an agent has apparent Require payment in cash; (2) Ratify the sale on credit. In both remedies, the
authority of the business or undertaking. interest or benefit shall belong to the agent. (e.g. sold something via
overprice, the profit or interest from such sale need not be given to the
Art 1903. The commission agent shall be responsible for goods received principal, as this belongs to the agent to avoid unjust enrichment by the
by him in the terms and conditions and as described in the consignment, principal to the agent.)
unless upon receiving them he should make a written statement of the
damage and deterioration suffered by the same. Art 1906. Should the commission agent, with authority of the principal,
sell on credit, he shall so inform the principal, with a statement of the
 Factor/Commission agent – one whose business is to receive and sell names of the buyers. Should he fail to do so, the sale shall be deemed to
goods for a commission (factorage) and who is entrusted by the have been made for cash insofar as the principal is concerned.
principal with the possession of goods to be sold, and usually selling
in his own name. An authorized sale on credit shall be deemed to have been on a cash basis.

To avoid liability, the commission agent should make a written statement of Art 1907. Should the commission agent receive on a sale, in addition to
the damage or deterioration of the goods. the ordinary commission, another called a guarantee commission, he
shall bear the risk of collection and shall pay the principal the proceeds
Art 1904. The commission agent who handles goods of the same kind of the sale on the same terms agreed upon with the purchaser.
and mark, which belong to different owners, shall distinguish them by
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 Guarantee commission – in consideration of an increased obligation wherein the agent has exceeded his power, the principal is not
commission, the factor or commission agent guarantees to the bound except when he ratifies it expressly or tacitly.
principal the payment of debt arising through his agency. (guarantees
payment of the customer’s account). Liable to the principal if the General Obligations of Principal to the agent. (1) Contractual duties; (2)
buyer fails to pay. deal fairly in good faith with his agent.

The principal may sue the buyer in his own name not the agent who is a mere Specific Obligations of principal to agent
guaranty. The agent’s liability is a pecuniary liability. (1) Comply with all the obligations which the agent may have contracted
within the scope of his authority and in the name of the principal;
The del credere agent may sue in his name in the event of non-performance (2) To advance to the agent, should the latter so request, sums necessary
of the buyer. for the execution of the agency;
(3) Reimburse the agent for all advances made by him;
Art 1908. The commission agent who does not collect the credits of his (4) Indemnify the agent for damages which the execution of the agency
principal at the time when they become due and demandable shall be have caused;
liable for damages, unless he proves that he exercised due diligence for (5) Pay the agent compensation
that purpose.
Liability of principal to third persons
Art 1909. The agent is responsible not only for fraud, but also for GR: principal is liable for the acts committed by the agent and obligation
negligence, which shall be judged with more or less rigor by the courts, contracted by him in the principal’s behalf and within the scope of his
according to whether the agency was or was not for a compensation. authority.

The agent is responsible to the principal for fraud and negligence. An agent is Third person’s tort liability to the principal
laible when he does not discharge the agency with due promptness, or 1. TP damages or injures property or interest of the principal;
according to the instructions of his principal, or within the limits of his 2. TP colludes with the agent to injure or defraud principal;
authority, or when he does not make use of the powers conferred on him. 3. TP induces the agent to violate his contract with the principal to
betray the trust reposed upon him
The principal is not liable for torts committed willfully or intentionally by his
agent. The principal is solidarily liable if the tort was committed by the agent An agent does not have legal title to property entrusted to his possession by
while performing his duties. the principal, but in some cases he possesses a power to effect a transfer,
valid as against the principal.
An agent who gratuitously assumes the agency obligation and neglects to
carry it out is generally not liable for his nonfeasance. But where the agent Liability of principal for mismanagement of agent
knows or should know that the principal, in reliance upon his promise to do GR: the mismanagement by his agents does not relieve the principal from his
the given act, will refrain from doing the act himself, liability for responsibility to third persons with which the agent has contracted. As
nonfeasance attaches. (see Merselman vs. Wicker). between two innocent parties, the one who made it possible for the wrong to
be done should be the one to bear the resulting loss. (Cuison vs. Court of
Art 1910. The principal must comply with all the obligations which the Appeals).
agent may have contracted within the scope of his authority. As for any
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Business Hazard Theory. The hazards of a business should be borne by the 2. By a change in the nature of the contract as originally entered
business directly. When the agent is doing or attempting to do the very thing into.
which he was directed to do, the principal is liable though the agent’s (4) Criminal acts – Subject to qualification. In forgery cases, it cannot be
method of doing it, ratified.
(5) Tortious acts – An agency to commit a tort is generally inoperative.
 Ratification – the adoption or affirmance by a person of a prior act However in certain cases, based on the circumstance, ratification of
which did not bind him, but which was done or professed to be done tortious acts may be allowed.
on his account.
An act to be capable of ratification, must be done in behalf of the principal.
The bringing of the legal proceedings is not deemed a ratification, even
though based on the validity of the agent’s unauthorized act, where the Effects of ratification by principal
principal’s action is undertaken to avert a greater loss rather than to assert a With respect to an agent. Relieves the agent from liability to a third party to
gain. (Robinson Machine Works vs. Borse). the unauthorized transaction.
With respect to the principal himself. The principal assumes responsibility for
Conditions for Ratification the unauthorized act.
(1) capacity and power to ratify; With respect to third persons. A third person is bound by a ratification to the
(2) have knowledge and reason to know material or essential facts; same extent as he would have been bound if the act has been authorized in
(3) ratify the acts in entirety; the first instance.
(4) act must be capable of ratification;
(5) done in behalf of the principal To be effective, ratification need not be communicated or made known to the
agent or third party. The act or conduct of the principal is what is essential.
Forms of Ratification
1. Express notification Ratification has a retroactive effect. The authority created by ratification is
2. Implied notification subsequent but it is equivalent to initial approval or prior authority.

The third party has a right to withdraw from the transaction prior to Art 1911. Even when the agent has exceeded his authority, the principal
ratification. The principal will not be permitted to ratify after the third party is solidarily liable with the agent if the former allowed the latter to act as
has indicated a desire to withdraw from the transaction. though he had full powers.
 Estoppel – a bar that precludes a person from denying or asserting
anything contrary to that which has been established as the truth by
Acts that may be ratified his own deed or representation.
(1) Valid/void acts – Acts that are valid can be ratified. Acts which are
void cannot be authorized nor ratified. Through estoppel, an admission or representation is conclusive upon the
(2) Voidable acts – acts which are merely voidable can be ratified. person making it and cannot be denied or disproved as against the person
(3) Unrevoked acts – these are capable of ratification. relying on it.
How can one act be revoked:
1. By express revocation; Ratification vs Estoppel. In Ratification it rests on the intention of the
principal, it is retroactive. Whereas estoppel rests on prejudice to another and
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operates upon something which has been done after the misleading act and There is no indemnification if the damages were caused by third persons and
extend to so much of such act. the principal is in no way responsible.

Apparent Authority vs Authority by estoppel. Apparent Authority, though not Art 1914. The agent may retain in pledge the things which are the object
granted, the principal knowingly permits the agent to exercise or holds him of the agency until the principal effects the reimbursement and pays the
out as possessing. Authority by estoppel permits his agent to exercise powers indemnity.
not granted to him, even though the principal has no notice or knowledge of
the conduct of the agent. This is an instance of legal pledge, which are pledges created by operation of
law.
Implied agency vs agency by estoppel. In an implied agency, there is an
actual agency and the principal is solely liable. In an agency by estoppel, the Nature of agent’s lien
authority of the agent is not real but only apparent. (1) Right limited to subject matter of agency;
(2) Requires possession by agent of the subject matter;
Art 1912. The principal must advance to the agent, should the latter so (3) Right generally in favor of the agent.
request, the sums necessary for the execution of the agency. Should the
agent have advanced them, the principal must reimburse him therefore, Art 1915. If two or more persons have appointed an agent for a common
even in the business or undertaking was not successful, provided that the transaction or undertaking, they shall be solidarily liable to the agent for
agent is free from fault. The reimbursement shall include interest on the all the consequences of the agency.
sums advanced, from the day on which the advance was made.
The liability of the principal is solidary for all the consequences of the
In the absence of stipulation that the agent shall advance the necessary funds, agency; each principal may be sued by the agent for the entire amount due
the principal must advance to the agent upon his request the sums necessary and not just their proportionate share.
for the execution of the agency.
Art 1916. When two persons contract with regard to the same thing, one
In case the agent advanced the sums necessary for the execution of the of them with the agent and the other with the principal, and the two
agency, whether on his own initiative or by virtue of stipulation, the said contracts are incompatible with each other, that of prior date shall be
advances must be reimbursed by the principal with interest from the day the preferred.
advance was made. Demand is not necessary in order that delay on the part
of the principal shall exist. Art 1917. In the case referred to in the preceding article, if the agent has
The obligation to reimburse the agent cannot be defeated by the facts that the acted in good faith, the principal shall be liable in damages to third
business or undertaking was not successful, provided that the agent was free person whose contract must be rejected. If the agent acted in bad faith,
from fault. he alone shall be responsible.

Art 1913. The principal must also indemnify the agent for all the Art 1918. The principal is not liable for the expenses incurred by the
damages which the execution of the agency may have caused the latter, agent in the following cases:
without fault or negligence on his part. (1) If the agent acted in contravention of the principal’s instructions,
unless the latter should wish to avail himself of the benefits
derived from the contract;
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(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 ensure, 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.

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