THE PRI NCI PAL MUST ADVANCE TO THE AGENT,

SHOULD THE LATTER SO REQUEST, THE SUMS

NECESSARY FOR THE EXECUTI ON OF THE AGENCY.

SHOULD THE AGENT HAVE ADVANCED THEM, THE
PRI NCI PAL MUST REI MBURSE HI M THEREFOR, EVEN
I F THE BUSI NESS OR
UNDERTAKI NG WAS NOT SUCCESSFUL, PROVI DED
THE AGENT I S FREE FROM ALL FAULT.

THE REI MBURSEMENT SHALL I NCLUDE I NTEREST ON
THE SUMS ADVANCED, FROM THE DAY ON WHI CH
THE ADVANCE WAS MADE. ( 1 728)

Art 1912

An agency is for the principals benefit. In case the agent advanced the sums
necessary for the execution of the agency, whether on his own initiative or by
virtue of stipulation, the said advances must be reimbursed by the principal with
interest from the day the advance was made.
Obligation to reimburse agent for funds
advanced by latter.

Obligation founded on implied promise to repay. The
general rule is that, where one is employed or directed by
another to do an act in his behalf, not manifestly wrong,
the law implies a promise by the principal to reimburse
the agent for expenditures incurred as a proximate
consequence of the good faith execution of the agency,
which includes interest thereon.
-rule is based upon the principle that a request to
undertake an agency, the proper execution of which
involves the expenditure of money on the part of the
agent, operates not only as an implied request on the part
of the principal to incur such expenditure but also as a
promise to repay it.
Obligation not affected even if undertaking not
successful. The law adds that the obligation to
reimburse the agent cannot be defeated by the fact
that the business or undertaking was not successful
provided the agent is free from all fault.

-The reason for this rule is that the agent simply
obligates himself to represent the principal and not
that all the business entrusted to him shall be
successful.
THE PRI NCI PAL MUST ALSO I NDEMNI FY THE AGENT
FOR ALL THE DAMAGES WHI CH THE EXECUTI ON OF
THE AGENCY MAY HAVE CAUSED THE LATTER,
WI THOUT FAULT OR NEGLI GENCE ON HI S PART.
( 1 729)

Art. 1913
Obligation to indemnify agent for
damages.
The rule in the above article is based on equity. Since
the principal receives the benefits of the agency and
has a right to demand damages from the agent
should the latter not perform the agency (Art. 1884.),
he should answer for the damages resulting from the
execution thereof without fault or negligence on the
part of the agent.
(1) Where damages caused by the execution of
agency. The agent has the right to assume that the
principal will not call upon him to perform any duty
which would render him liable in damages to third
persons. Having no personal interest in the act other
than the performance of his duty, the agent should
not be required to suffer loss from the doing of an act
apparently lawful in itself, and which he has
undertaken to do by the direction and for the benefit
and advantage of his principal.
Where damages caused by wrongful acts of third
persons. Be it noted, however, that the liability of
the principal for damages is limited only to that
which the execution of the agency has caused the
agent. Thus, no promise to indemnify will be implied
for losses or damages caused by the independent and
unexpected wrongful acts of third persons for which
the principal is in no way responsible.
Example:
A broker while going upon his principals business
should be waylaid by a robber, or should be injured
by the negligence of a motor vehicle driver, the
principal would not be liable more than he would be
if the agent, during the existence of the agency,
should contract a contagious disease or be struck by
lightning. (Mechem on Agency, Sec. 1604, cited in
Teller, p. 155.)





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. (1731)
Art. 1915
Requisites for solidary liability
There are three requisites for the application of the
above article:

1) There are two or more principals;

2) The principals have all concurred in the
appointment of the same agent; and

3) The agent is appointed for a common transaction or
undertaking.
Where principals are members of a non-
profit association
A distinction has been made in respect of the liability of
the principals of a profit association as compared to that
of a non-profit or voluntary association. While the
principals in the first are personally liable on all business
contracts, the principals or members in the second are
liable personally only under two circumstances:

1) Where the member assented to the particular act or
transaction in respect of which personal liability is
sought to be fastened. Such assent is usually indicated by
an affirmative vote at the meeting where the proposal is
discussed.
2) Where the member assented by his conduct
WHEN TWO 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 IN-
COMPATIBLE WITH EACH OTHER,
THAT OF PRIOR DATE SHALL BE
PREFERRED, WITHOUT PREJUDICE
TO THE PROVISIONS OF ARTICLE
1544. (N)
Art. 1916
Example
P authorized A to contract for the construction of his
house for a price of not more than P100,000.00.
Without the knowledge of A, P contracted with B for
the construction of the house for P95,000.00. Later,
A entered into a contract with C for the construction
of the same house for P90,000.00.

Under Article 1916, the contract with B shall be
preferred as it is of prior date.

IN THE CASE REFERRED TO IN THE
PRECEDING ARTICLE, IF THE AGENT
HAS 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. (N)

Art. 1917
THE PRI NCI PAL I S NOT LI ABLE FOR THE EXPENS-
ES I NCURRED BY THE AGENT I N THE FOLLOWI NG
CASES:

( 1) I F THE AGENT ACTED I N CONTRAVENTI ON OF
THE PRINCI - PAL S I NSTRUCTI ONS, UNLESS THE
LATTER SHOULD WI SH TO AVAI L HIMSELF OF THE
BENEFI TS DERI VED FROM THE CONTRACT;

( 2) WHEN THE EXPENSES WERE DUE TO THE FAULT
OF THE
AGENT;

Art. 1918
( 3) WHEN THE AGENT INCURRED THEM WI TH
KNOWLEDGE THAT AN UNFAVORABLE RESULT
WOULD ENSUE, I F THE PRI NCI PAL WAS NOT AWARE
THEREOF;

( 4) WHEN I T WAS STI PULATED THAT THE EXPENSES
WOULD BE BORNE BY THE AGENT, OR THAT THE
LATTER WOULD BE ALLOWED ONLY A CERTAIN SUM.
( N)