BUSIESS LAW LAW ON AGENCY

OUTLINE OF LECTURE IN LAW IN AGENCY

(Obligations of the Agent and Principal)

1. Specific obligations of the agent

1. To carry out the agency in accordance with its terms; otherwise, he shall be
liable for damages. (He betrays the confidence reposed on him y the principal.)

2. To answer for the damages which through his non-performance the principal may
suffer;

3. To finish the business already begun on the death of the principal should delay
entail any danger. (In such case, the agency is still deemed in full force.)

4. Not to carry out the agency if its execution would manifestly result in loss or
damage to the principal. (The duty of an agent is to render service for the benefit
and not to the detriment of the principal.)

5. There being a conflict, not to prefer his own interest to those of the
principal (ex. buying goods of the principal or selling his own goods to the
principal without informing the principal); otherwise, he shall be liable of the
damages. (Agency is a fiduciary elation involving trust and confidence.)

6. Not to borrow money of the principal who has authorized him to lend
although at interest, without his consent. The agency may prove to be a bad
debtor. (But if the agent has been authorized to borrow money he may himself
be the lender at the current rate. There is no danger of the principal suffering
any damage.)

7. To render an account of his transactions and to deliver to the principal

whatever the may have received by virtue of the agency though it may not be
owing to the principal. (A stipulation exempting the agent from the
obligation to render an account is declared void. It is a contrary to public policy
as it would encourage fraud.)

2. Sub-agent defined
 A sub-agent (or substitute) is a person to whom the agent delegates, as his agent the
performance of an act for the principal which the agent has been empowered to perform.

3. Cases when an agent is responsible for the acts of the substitute appointed by him

1. When he was not given the power to appoint one

2. When he was given such power, but without designating the person and the
appoint ted was notoriously incompetent or insolvent;
3. When he was prohibited from appointing a substitute.

All acts of the substitute appointed against the prohibition of the principal are void.

Unless prohibited by the principal the agent may appoint a substitute.

4. Agent bound to the party with whom he contracts

1. When he expressly binds himself and

2. When he exceeds the limits of his authority without giving such party sufficient
notice of his powers.

The contract being unenforceable, the third person is deprived of any remedy against the
principal

5. Scope of an agent’s authority as far as third persons are concerned

An act is deemed to have been performed within the scope of the agent’s authority, if
such act is within the terms of the power of attorney, as written even if the agent has in
fact exceeded the limits of his authority according to an understanding between the
principal and the agent.

Purpose: To protect the interests of third persons.

6. Commission agent defined

A commission agent (or factor) is one whose business is to receive and sell goods for a
commission and who is entrusted y the principal with the possession of goods to be sold.
He may act in his own name or in that of the principal.

7. Rights given to the principal where a sale on credit is made without authority
 1. Require payment in cash in which case any interest or benefit from the sale shall
belong to the agent since the principal cannot be allowed to enrich himself at the
agent’s expense; or

2. Ratify the sale on credit in which case I will have all the risk and advantages to
him

A commission agent can sell on credit only with the express or implied consent of the
principal.

8. Del credere commission defined

Del credere commission (also called guarantee commission) is an additional commission

by which the agent (who also gets his ordinary commission) shall bear the risk of
collection and shall pay the principal the proceeds of the sale on the same terms agreed
upon the purchaser. (To compensate the agent for the risks that he will have to bear.)

9. Specific obligations of the principal

1. To comply with all the obligations which the agent may have contracted within he
scope of his authority and in the name of the principal;
2. To advance to the agent, should the latter so request, the 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 he execution of the agency may
have caused the latter without fault or negligence on his part; and
5. To pay he agent the compensation agreed upon, or if no compensation was
specified, the reasonable value of the agent’s services.

10. Principal solidarily liable with the agent even when the latter exceeded his authority

If the principal allowed the agent to act as though he had full powers. This rule is based
on the principle of estoppel.

11. Cases when principal is not liable for the expenses incurred by the agent

1. If the agent acted in the contravention of the principal’s instruction, unless the
latter should wish to avail himself of the benefits derived from the contact;
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; and
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.

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