Under Article 1884 of the new civil code, when an agent accepts the appointment of the principal, a contract of agency arises, and at the point the agent is legally bound to carry out the terms of the agency; otherwise, if he fails or refuses to carry on the agency, he shall be liable for damages suffered by the principal by reason of his non-performance. The article emphasizes the principal that once the agent accepts the principals appointment, the agent is bound to comply with his duty of diligence or care. Despite the obligatory nature of every contract in agency, Art. 1884 emphasizes the point that when an agent refuses to comply with his obligations, the remedy of the principal is to sue him for damages, since an action for specific performance is not available for personal obligations to do. Although a contract of agency is terminated ipso juri upon the death of the principal, nonetheless, Art. 1884, expressly provides that the agent must finish the business already begun upon the death of the principal should delay entail any danger. The obligatory force of the duty of the agent to act with diligence exceeds the formal termination of the agency partnership, which automatically comes about by the death of the principal.
When a person declines the offer to make him an agent, generally no contract of agency arises and thereby no obligation is assumed by such person to the offeror based on the absence of privity. However, Art. 1885 provides for the exceptions. In the event a person declines an agency, he is still 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. This rule is based on equity. The owner, however, must act as soon as practicable either (1) By appointing an agent: or (2) By taking charge of the goods
ART. 1886 (insert provision) As a rule, the principal must advance to the agent, should the later so request, the sums necessary for the execution of the agency. The contract of agency, however, may stipulate that the agent shall advance the necessary funds. In such case, the agent is bound to furnish such funds except when the principal is insolvent. The exception is based on the principals obligation to reimburse the agent. Incidentally, the insolvency of the principal is a ground for extinguishment of agency.
ART. 1887 (insert provision) Instructions are private directions which the principal may give the agent in regard to the manner of performing his duties as such agent but of which a third party is ignorant. They are said to be secret if the principal intended them not to be made known to such party. Article 1887 of the new Civil Code provides succinctly the twin measures of how an agent should act in the execution of the agency, which ought to be as follows: (1) Agent must act in accordance with the instructions of the principal: (2) In default of guiding instructions, the agent shall do all that a good father of a family would do, as required by the nature of the business.
The agent, upon acceptance of the agency, is not bound in all cases to carry out the agency in accordance with the instructions of the principal. Thus, the agent must not carry out the agency if its execution would manifest result in loss or danger to the principal. The reason for article 1888 is obvious. The duty of the agent who is merely an extension of the personality of the principal is to render service for the benefit of the principal and not to act to his detriment. Furthermore, an agent must exercise due diligence in carrying out the agency
When an agent violates his duty of loyalty, as where in a conflict-of-interest situation he prefers his own interest to the detriment of the principal. Agency being a fiduciary relation, the agent is required to observe utmost good faith and loyalty towards his principal. He must look after the principals interest as if they were his own. He is not permitted without the knowledge and consent of the principal, to assume two distinct and opposite characters in the same transaction, acting for himself and pretending to act for his principal. He is prohibited from dealing in the agency matters on his own account and for his own behalf without the consent of his principal, freely affect the transaction. An agent, therefore, is liable for damages if, there being a conflict between his interest and those of the principal, he should prefer his own. As the law does not distinguish, the rule is the same whether the agency is onerous or gratuitous.
United States v. David Podlog Alexander Moysif Yelena Moysif Joseph Forzano Lyudmila Forzano Michael Cardone Ronald Petrino Gennady Chernyakhovsky Adolf Sirotnikov Aron Roizis Yefim Kats Yura Popov, Calogero Badalamenti John Romano Giuseppe Genna and Sergey Mogorichev, Also Known as "Sergio", Also Known as "Seryi", 35 F.3d 699, 2d Cir. (1994)