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AGENCY, TRUST AND PARTNERSHIP WWW [EH 403 SY 2017-2018]
September 23, 2017
OBLIGATIONS OF A PRINCIPAL
Atty: What are the obligations of a principal?
Student: [C-A-R-I-P]
1. To comply with all the obligations which the agent may have
contracted within the scope of his authority and in the name of the
principal;
2. To advance funds to the agent, should the latter so request
and in the manner of the principal;
3. To reimburse the agent for all advances made by him,
provided the agent is free from fault, plus interest;
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;
5. To pay the agent the compensation agreed upon if so
stipulated, if not stipulated then he is only obliged to pay when the
agent fulfilled his obligation. The presumption is agency is
onerous.
GUAVA LEAF SITUATION: You were appointed as an agent and
you were authorized to sell a parcel of land, you went to a house
of a potential buyer who has been looking for a parcel of land.
Upon reaching the house of the potential buyer you knocked at the
door, potential buyer was there but he shouted to you “sud lang
kay nagtambal kos akong bata” the child of that buyer was sick
and so because she wanted to impress the potential buyer. So
nangita syag bayabas/guava leaves gitutho-an hahaha. So hoping
when the child recovers, of course the buyer will be “ma-ikog so
paliton na nalang niya.” But that was only a wish of the agent.
Unfortunately, the condition got worsened. “Nisaka ang
hilanat, from 38 to 41. Prompting the mother to bring the child to
the hospital on emergency and after the doctor examined, the dr.
said “nisamot mani kay murag nay foreign body sa sulod” and so
for that foreign body the mother incurred medical expenses,
hospitalization for 1 week.
So 1 week after you advanced funds. Will you be
entitled for reimbursement?
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Student: In that situation, I as an agent will not be entitled to
reimbursement from my principal. So to identify if the agent will
be entitled to reimbursement we should undergo to test. The
MOTIVATION-DEVIATION TEST.
1. Motivation test – if the agent acted with the desire to
follow the instructions of his principal
2. Deviation test – if there was no extreme or excessive
deviation on his part from the instruction.
Student:
First test (Motivation): If the agent acted with the desire to follow
the instruction of his principal
Second test(Deviation): There was no excessive deviation on the
part of the agent from the instruction.
In this example, I passed the first test but failed on the
second test because although my desire was for the potential
client to buy the land, I, however excessively deviated from the
instruction as quack doctor in a sense causing liability. Therefore,
as I agent I must solely be liable not entitled to reimbursement.
JEWELRY STORY: On the other hand, this time your authority
was to sell jewelry. You were having a discussion with the potential
buyer “Kita tas Colon, dia koy aryos”. Nagkita mos Colon and you
showed him the jewelry. Suddenly somebody bumped you and
tried to grab the jewelry. Somebody was trying to help you and
“FIRED” at the robber. The robber fell. But another was hit
because the bullet, after hitting the robber, went to the
other person and the other person died. The other person is
now suing you for either homicide or for homicide by inducement.
Because it was you who cried for help?” there! There! Shoot him!”.
You are now sued for damages and you paid to avoid the
embarrassment of being prosecuted then you went to the
principal. Are you entitled for reimbursement?
Student: So again, in order to determine if the agent is entitled to
reimbursement we must undergo with the MOTIVATION-
DEVIATION test.
Motivation – I was motivated to serve the principal hence passed.
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Deviation – It was not an extreme deviation from my authority
because it was my duty to preserve the jewelry, hence passed.
Atty: Why was it not an extreme deviation? So ano? Tinira siya
kasi pag hindi yun tinira hindi matutuloy yung bentahan. Sa tingin
mo tama ba yon? Bat kaya siya tinira? Upang matuloy ang
bentahan o may ibang dahilan? “LOL!”
Meg: The agent would still be not entitled because it was not his
intention to serve the principal but to protect himself from the
gunshot. But if it was on the act of self-defense, then it would
have been different.
Atty: So if it was an act of self-defense, will it help the principal
at all? Imo man na giprotektahan imong kaugalingon nganong
mangayyo man ka nako? What could be a good reason to seek
reimbursement?
Cesante: Because she asked help in order to protect the
jewelry.
Atty: See?! Convincing. Agent will say because I am safe. So what
if he is safe? At least I can carry out the agency to earn
commission. So what? The best reason, kung namatay ko,
wagtang nata nang jewelry nimo. I did that to preserve and
protect your property.
Actually, when we talk of agency, what happens again?
Cesante: Individual consents to act in a representative capacity for
a principal. In short the act of the agent is the act of the
principal.
Atty: He who does it in behalf of another does it himself. Agent is
an extension of the principal hence whatever the agent commits
latter is bound because he is my agent.
WHEN MAY AN AGENT INCURR PERSONAL LIABILITY
(1897)
Meg:
GENERAL RULE: Act of agent is act of principal.
EXEMPTIONS:
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1. Agent exceeded his authority.
2. If he expressly binds himself to be liable.
3. If he prevents the performance of the principal.
4. If he acts without authority or without principal.
5. If he represents an incapacitated principal.
Atty: IOW, he who acts in behalf through another acts himself. So
that if the agent properly carries out the agency. What happens to
the principal?
Meg: The principal shall be liable.
Atty: However, there are occasions when the agent can seek
reimbursement as illustrated in the guava leave and the jewelry.
Because supposedly, the principal should be liable for the expenses
that the agent may have incurred. And tonight we learn, two
things before an agent can be entitle to a reimbursement.
Meg: Yes. This is what we call the MOTIVATION-DEVIATION
TEST. The agent must comply.
First: He must perform his act in the desire to serve the principal.
Second: Act must be an extreme deviation of the instructions of
the principal.
Guava leaf situation:
The agent failed to satisfy the second requirement because it was
an extreme deviation from the principal's instructions. IOW, he did
not have a reason at all to pretend that she can heal. In acting as
a quake doctor, there was extreme deviation.
Jewelry Story:
Agent is entitled to reimbursement because had she not acted that
way, the jewelries would have been stolen. IOW, the act which
lead to the death of someone else was not an extreme deviation
because it was in accordance to her obligation to preserve and
protect the property of the principal.
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AGENCY, TRUST AND PARTNERSHIP WWW [EH 403 SY 2017-2018]

SUMMARY:

OBLIGATIONS OF A PRINCIPAL [C-A-R-I-P]

1. To comply with all the obligations which the agent may have
contracted within the scope of his authority and in the name of the
principal;
2. To advance funds to the agent, should the latter so request
and in the manner of the principal;
3. To reimburse the agent for all advances made by him,
provided the agent is free from fault, plus interest;
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;
5. To pay the agent the compensation agreed upon if so
stipulated, if not stipulated then he is only obliged to pay when the
agent fulfilled his obligation. The presumption is agency is
onerous.

MOTIVATION-DEVIATION TEST
The agent must comply.

First: He must perform his act in the desire to serve the principal.
Second: Act must be an extreme deviation of the instructions of
the principal.

GENERAL RULE: Act of agent is act of principal.

EXEMPTIONS:
1. Agent exceeded his authority.
2. If he expressly binds himself to be liable.
3. If he prevents the performance of the principal.
4. If he acts without authority or without principal.
5. If he represents an incapacitated principal.

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