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Consequently, the agent must act and is bound c. To reimburse the agent for all advances made by
according to the instructions of the principal. If there him provided the agent is free from fault [Ibid];
are goods involved, the principal remains the owner
of the goods and retains the right to control the d. To indemnify the agent for all damages which the
handling or disposition thereof. execution of the agency may have caused the later
without fault or negligence on his part [Article 1913,
What then are the obligations of the agent? Under the Civil Code]; and
Civil Code, the principal obligations of an agent are:
e. To pay the agent the compensation agreed upon, or
1. To carry out the agency in accordance with its if no compensation was specified, the reasonable
terms [Article 1884, Civil Code]; value of the agents services. [Articles, 1875 and
1306, Civil Code; De Leon, The Law on Sales,
2. To answer for the damages which through his non- Agency and Credit Transactions, 1999, pp. 277-278]
performance the principal may suffer [Article 1884,
Civil Code]; How are third parties or customers affected by the
principal-agent relationship? What if the agent acted
3. To act in accordance with the instructions of the without authority? What if he acted under his own
principal [Article 1887, Civil Code]; name? As to relations with third parties such as
customers, the effects will vary depending on the
4. Not to carry out the agency if its execution would authority of the agent and for whom the act was
manifestly result in loss or damage to the principal executed. However, the following principles may
[Article 1888, Civil Code]; serve as a guide:
5. To answer for damages should he prefer, in case of 1. If the agent acts with authority and on behalf of the
conflict, his own interests to those of the principal principal, the transaction is valid. Hence, the
[Article 1889, Civil Code]; principal is liable to the third party while the agent is
not personally liable unless he bound himself [Article
6. To render an account of his transactions and to 1897, Civil Code].
deliver to the principal whatever he may have
received by virtue of the agency [Article 1891, Civil 2. If the agent acts with authority but in his own
Code]; name, it is not binding on the principal who has no
right of action against third persons with whom the
7. To be responsible for the goods received by him, to agent has contracted. Neither have such persons
sell on credit only with the consent of the principal against the principal. In such case, the agent is the
and to collect with due diligence the credits of the one directly bound in favor of the person with whom
principal [Articles 1903-1908, Civil Code]; and he has contracted, as if the transaction were his own,
except when the contract involves things belonging to
8. To answer for his fraud or negligence. [Article the principal. This shall be without prejudice to the
1909, Civil Code] actions between the principal and agent. [Article
1883, Civil Code] If it involves things belonging to
On the other hand, in the absence of contractual the principal, then the contract must be considered as
stipulations to the contrary, the following are the entered into between the principal and the third
obligations of the principal: person and consequently, if the obligations belong to
the former, to him alone must also belong the rights Code] In addition, the agency may likewise be
arising from the contract. [Sy-Juco and Viardo vs. Sy- terminated or extinguished by operation of law, such
Juco, 40 Phil. 634, 1920] as death, civil interdiction, insanity or insolvency of
the principal or agent or the dissolution of the
3. If the agent acted without authority and in his own principal corporation [Article 1919 (3) (4), Civil
name, it will not bind the principal. However, it shall Code]
be valid, as regards the agent, whether or not the
thing belongs to the principal, provided that at the
time of delivery to the third party, the agent can
legally transfer the ownership of the thing (such as
when the agent becomes the owner of the thing).
Otherwise, the agent shall be liable to the third party
for breach of warranty against eviction or damages.
[National Bank vs. Aguledo, 58 Phil. 655, 1933]