Art. 1910.

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.
Where can the specific obligations and duties of the principal to the agent be
found?
Usually in the contract creating the agency.
Principal obligations of the principal to the agent in the absence of such
agreement:
1.) To comply with all the obligations which the agent may have
contracted in his name and within the scope of his authority;
2.) To advance should the agent so request sums necessary for the
execution of the agency;
3.) To reimburse the agent for all advances made by him provided the
agent is free from fault;
4.) To indemnify the agent for all the damages which the execution of the
agency may have caused the latter without fault or negligence on his
part; and
5.) To pay the agent the compensation agreed upon or the reasonable
value of the latters services.
Liability of the principle to 3rd persons:
Where the relation of agency legally exists, the principal will be liable to 3 rd
persons for all acts committed by the agent in his behalf in the course and
within the actual or apparent scope of his authority, and this is not altered y
the fact that the agent may also be liable, nor by the fact that some of the
acts are to the principals advantage while others are to his disadvantage.
Liability of the principal for mismanagement of the business by the agent:
Mismanagement of the business of the principal by the agent does not
relieve said principal from the responsibility that he had contracted to 3 rd
persons. But where the agents acts bind the principal, the latter may seek
recourse against the agent.
Liability of principal for a tort committed by the agent:
The principal is civilly liable to 3rd persons for torts of an agent committed at
the principals direction or I the course and within the scope of the agents
employment. The principal cannot escape liability whether the tort is
committed willfully or negligently so long as the tort is committed by the
agent while performing his duties in furtherance of the principals business.
Nor is it a defense that the act which caused the tort was unknown to him or
even that it was in disobedience to his instructions.
Meaning of ratification in 2nd paragraph:
Ratification is the adoption or affirmance by a person of a prior act which did
not bind him, but which was done or professed to be done on his account,

thus giving effect to the act as if originally authorized. The doctrine applies
to the ratification of the act of an agent in excess of his authority of the act
of one who purports to be an agent but who is really not. It may be implied
from the acceptance of benefits by the principal under a contract entered in
his name. The authority created by
ratification is subsequent but it is equivalent to prior authority.
Conditions to ratification: [ICK-PEC]
1.) Intent to ratify;
2.) Principal must have capacity & power to ratify;
3.) He must have had knowledge of material facts;
4.) The act must be done in behalf of the principal;
5.) Principal must ratify acts in its entirety;
6.) The act must be capable of ratification.
Effects of ratification with respect to the agent:
1.) Relieves the agent from liability to the 3rd party to the unauthorized
transaction; and
2.) To his principal for acting without authority; and
3.) He may recover compensation due for performing the act which has
been ratified.
Effects of ratification with respect to the principal:
1.) He assumes responsibility for the unauthorized act, as fully as if the
agent had acted under original authority; but
2.) He is not liable for acts outside the authority approved by his
ratification.
Effects of ratification with respect to 3rd persons:
1.) 3rd person is bound by ratification to the same extent as he would have
been bound if the ratified act had been authorized in the 1 st instance;
and
2.) He cannot raise the question of the agents authority to do the ratified
act.
Must ratification be communicated to the agent or to the 3rd party?
No. To be effective, ratification need not be communicated or made known to
the agent or the 3rd party. The act or conduct of the principal rather than his
communication is the key. But before ratification, the 3 rd party is free to
revoke the unauthorized contract.
Art. 1911. 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.

Estoppel: precludes a person from denying or asserting anything contrary to

that which has been established as the truth by his own deed or
representation, either express or implied.
Ratification v. Estoppel Ratification
Estoppel
Rests on intention
Rests on prejudice
Affects the entire transaction from the beginning
Affects
only
relevant parts of
the transaction.
Substance is confirmation of a unauthorized act or conduct after Substance is the
it has been done.
principals
inducement
to
another to act to
his prejudice.
Apparent authority
v.
Authority
by
estoppel Apparent
authority
That which though
not
actually
granted,
the
principal knowingly
permits the agent
to
exercise
or
holds him out as
possessing.

Authority
estoppel

by

Arises in cases
where
the
principal, by his
negligence,
permits his agent
to exercise powers
not granted to him,
even though the
principal may have
no
notice
or
knowledge of the
conduct
of
the
agent.

In case the agent sells the goods for more than his claim, is he entitled to the
excess? No.
What is the nature of the agents right of lien?
Specific or particular. It is not general in the sense that it gives the agent a
right to retain the goods for claims disconnected with the agency.
Art. 1915. 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.
Requisites for application of this article: [2C2]
1.) There are 2 or more principals;
2.) The principals have all concurred in the appointment of the same
agent;

3.) The agent is appointed for a common transaction or undertaking.

Why is solidarity the rule?
Because of the common transaction. Thus, even if the agent was appointed
separately, the rule should apply in the interest of justice.
Art. 1916. 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 incompatible with each other, that of prior
date shall be preferred, without prejudice to the provisions of
Article 1544.
May 2 persons contract with regard to the same thing, one with the agent
and the other with the principal?
Yes.
If this situation arises, which of the contracts will be preferred?
If the contracts are compatible, they will both be given effect. If they are
incompatible, then the contract of prior date shall be preferred.
Art. 1544: If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have 1 st taken
possession thereof in good faith if it should e movable property. Should it be
immovable property, the ownership shall belong to the person acquiring it
who in good faith 1st recorded it in the Registry of Property. Should there be
no inscription, the ownership shall pertain to the person who in good faith
was 1st in possession; and in the absence thereof, to the person who presents
the oldest title, provided there is good faith.
Art. 1917. 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.
Is the principal always liable for damages caused by a 3 rd person or is it the
agent who is liable?
Whether the principal or the agent will be the one liable for damages to the
3rd person who has been prejudiced depends on whether the agent acted in
bad faith or not. If the agent acted in good faith and within the scope of his
authority, the principal incurs liability. If the agent acted in bad faith, he
alone shall be responsible to such person.
What is the extent of liability covered under this article?
Damages.
What is good faith referred to in this article?
Good faith here means that the agent had no knowledge that the principal is
dealing with a 3rd person.
Note: If the contract is one of sale, article 1544 governs and not arts. 1916
and 1917.
Art. 1918. The principal is not liable for the expenses incurred by
the agent in the following cases: [F*CKS]

1.) If the agent acted in contravention of the principals

instructions, unless the latter should wish to avail himself of the
benefits derived from the contract;
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 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.
Instances wherein the principal is not liable for expenses incurred by the
agent?
In the instances enumerated under this article.
Reasons why the principal is not liable for the agents expenses: Under
1.) To punish the agent, but when the principal has availed of the benefits,
he is deemed to have impliedly ratified the agents acts.
2.) Kasi, kasalanan niya, eh.
3.) The agent is guilty of bad faith and lack of diligence;
4.) An express stipulation which is not contrary to law, morals, good
customs, public order or public policy is binding between the parties.