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Week 5 – Agency, Partnership & Trust

VII. What are the obligations and liabilities of agents to their principals?

Act within scope of authority

ARTICLE 1879. A special power to sell excludes the power to mortgage; and a special power to
mortgage does not include the power to sell.

ARTICLE 1880. A special power to compromise does not authorize submission to arbitration.
(1713a)

ARTICLE 1881. The agent must act within the scope of his authority. He may do such acts as
may be conducive to the accomplishment of the purpose of the agency. (1714a)

ARTICLE 1882. The limits of the agent's authority shall not be considered exceeded should it
have been performed in a manner more advantageous to the principal than that specified by
him. (1715)

ARTICLE 1887. In the execution of the agency, the agent shall act in accordance with the
instructions of the principal.

In default thereof, he shall do all that a good father of a family would do, as required by the
nature of the business. (1719)

Carry out the agency

ARTICLE 1884. The agent is bound by his acceptance to carry out the agency, and is liable for
the damages which, through his non-performance, the principal may suffer.
He must also finish the business already begun on the death of the principal, should delay entail
any danger. (1718)

ARTICLE 1928. The agent may withdraw from the agency by giving due notice to the principal. If
the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him
therefor, unless the agent should base his withdrawal upon the impossibility of continuing the
performance of the agency without grave detriment to himself. (1736a)

Not to carry out the agency

ARTICLE 1888. An agent shall not carry out an agency if its execution would manifestly result in
loss or damage to the principal. (n)

Loyalty

ARTICLE 1889. The agent shall be liable for damages if, there being a conflict between his
interests and those of the principal, he should prefer his own. (n)

ARTICLE 1890. If the agent has been empowered to borrow money, he may himself be the
lender at the current rate of interest. If he has been authorized to lend money at interest, he
cannot borrow it without the consent of the principal. (n)

ARTICLE 1891. Every agent is bound to render an account of his transactions and to deliver to
the principal whatever he may have received by virtue of the agency, even though it may not be
owing to the principal.
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Diligence

ARTICLE 1885. In case a person declines an agency, he is bound to observe the diligence of a
good father of a family in the custody and preservation of the goods forwarded to him by the
owner until the latter should appoint an agent or take charge of the goods. (n)

ARTICLE 1887. In the execution of the agency, the agent shall act in accordance with the
instructions of the principal.

In default thereof, he shall do all that a good father of a family would do, as required by the
nature of the business. (1719)

ARTICLE 1909. The agent is responsible not only for fraud, but also for negligence, which shall
be judged with more or less rigor by the courts, according to whether the agency was or was not
for a compensation. (1726)

Account/deliver

ARTICLE 1891. Every agent is bound to render an account of his transactions and to deliver to
the principal whatever he may have received by virtue of the agency, even though it may not be
owing to the principal.

Every stipulation exempting the agent from the obligation to render an account shall be void.
(1720a)

Solidary liability

ARTICLE 1894. The responsibility of two or more agents, even though they have been appointed
simultaneously, is not solidary, if solidarity has not been expressly stipulated. (1723)

ARTICLE 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-
fulfillment of agency, and for the fault or negligence of his fellows agents, except in the latter
case when the fellow agents acted beyond the scope of their authority. (n)

Pay interest

ARTICLE 1896. The agent owes interest on the sums he has applied to his own use from the day
on which he did so, and on those which he still owes after the extinguishment of the agency.
(1724a)

Fraud; negligence

ARTICLE 1909. The agent is responsible not only for fraud, but also for negligence, which shall
be judged with more or less rigor by the courts, according to whether the agency was or was not
for a compensation. (1726)

Specific obligations of commission agents

ARTICLE 1903. The commission agent shall be responsible for the goods received by him in the
terms and conditions and as described in the consignment, unless upon receiving them he
should make a written statement of the damage and deterioration suffered by the same. (n)

ARTICLE 1904. The commission agent who handles goods of the same kind and mark, which
belong to different owners, shall distinguish them by countermarks, and designate the
merchandise respectively belonging to each principal. (n)
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ARTICLE 1905. The commission agent cannot, without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment in cash,
but the commission agent shall be entitled to any interest or benefit, which may result from such
sale. (n)

ARTICLE 1906. Should the commission agent, with authority of the principal, sell on credit, he
shall so inform the principal, with a statement of the names of the buyers. Should he fail to do
so, the sale shall be deemed to have been made for cash insofar as the principal is concerned.
(n)

ARTICLE 1907. Should the commission agent receive on a sale, in addition to the ordinary
commission, another called a guarantee commission, he shall bear the risk of collection and shall
pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser.
(n)

ARTICLE 1908. The commission agent who does not collect the credits of his principal at the
time when they become due and demandable shall be liable for damages, unless he proves that
he exercised due diligence for that purpose. (n)
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Week 5 – Insurance
Mortgagor/mortgagee

Sec. 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in
his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of
insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor,
who does not cease to be a party to the original contract, and any act of his, prior to the loss,
which would otherwise avoid the insurance, will have the same effect, although the property is in
the hands of the mortgagee, but any act which, under the contract of insurance, is to be
performed by the mortgagor, may be performed by the mortgagee therein named, with the
same effect as if it had been performed by the mortgagor.

Sec. 9. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee,

and, at the time of his assent, imposes further obligation on the assignee, making a new
contract with him, the act of the mortgagor cannot affect the rights of said assignee.

Sec. 13. Every interest in property, whether real or personal, or any relation thereto, or liability
in respect thereof, of such nature that a contemplated peril might directly damnify the insured,
is an insurable interest.

Sec. 53. The insurance proceeds shall be applied exclusively to the proper interest of the person
in whose name or for whose benefit it is made unless otherwise specified in the policy.

lnsurable interest

Sec. 18. No contract or policy of insurance on property shall be enforceable except for the
benefit of some person having an insurable interest in the property insured.

Sec. 25. Every stipulation in a policy of insurance for the payment of loss whether the person
insured has or has not any interest in the property insured, or that the policy shall be received
as proof of such interest, and every policy executed by way of gaming or wagering, is void.

lnsurable interest in life insurance

Sec. 10. Every person has an insurable interest in the life and health:chanroblesvirtuallawlibrary

(a) Of himself, of his spouse and of his children;

(b) Of any person on whom he depends wholly or in part for education or support, or in whom
he has a pecuniary interest;

(c) Of any person under a legal obligation to him for the payment of money, or respecting
property or services, of which death or illness might delay or prevent the performance; and

(d) Of any person upon whose life any estate or interest vested in him depends.

Sec. 184. For purposes of this Code, the term "insurer" or "insurance company" shall include all
individuals, partnerships, associations, or corporations, including government-owned or
controlled corporations or entities, engaged as principals in the insurance business, excepting
mutual benefit associations. Unless the context otherwise requires, the terms shall also include
professional reinsurers defined in section two hundred eighty. "Domestic company" shall include
companies formed, organized or existing under the laws of the Philippines. "Foreign
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company" when used without limitation shall include companies formed, organized, or existing
under any laws other than those of the Philippines.

Beneficiaries

Sec. 11. The insured shall have the right to change the beneficiary he designated in the policy,
unless he has expressly waived this right in said policy.

Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the
beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the
insured; in which event, the nearest relative of the insured shall receive the proceeds of said
insurance if not otherwise disqualified.

Art. 2012. Any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a life insurance policy by the person who cannot make any donation to
him, according to said article. (n)

Art. 739. The following donations shall be void:

(1) Those made between persons who were guilty of adultery or concubinage at the time of the
donation;

(2) Those made between persons found guilty of the same criminal offense, in consideration
thereof;

(3) Those made to a public officer or his wife, descedants and ascendants, by reason of his
office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the
spouse of the donor or donee; and the guilt of the donor and donee may be proved by
preponderance of evidence in the same action. (n)