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Principal's Good Faith Obligations

The document discusses the general obligations of a principal to an agent under agency law. It covers: 1) The primary obligation is for the principal to comply with the terms of any employment contract with the agent. 2) Specific obligations include paying agreed compensation, reimbursing expenses, indemnifying agents for damages incurred during authorized acts, and providing means to execute the agency. 3) Principals are generally liable for authorized acts of their agents and acts done with apparent authority, but not for unauthorized acts or those in violation of instructions.

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Francis Ysabella Balagtas
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143 views9 pages

Principal's Good Faith Obligations

The document discusses the general obligations of a principal to an agent under agency law. It covers: 1) The primary obligation is for the principal to comply with the terms of any employment contract with the agent. 2) Specific obligations include paying agreed compensation, reimbursing expenses, indemnifying agents for damages incurred during authorized acts, and providing means to execute the agency. 3) Principals are generally liable for authorized acts of their agents and acts done with apparent authority, but not for unauthorized acts or those in violation of instructions.

Uploaded by

Francis Ysabella Balagtas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

CHAPTER 3

Obligations of the Principal


General Obligations
of a Principal to an
agent

Should deal fairly


Primarily based
and in good faith
upon the contract
with his agent

Primary Obligation:
Complying with the terms of
their employment contract, if
there is one.
To comply with all
the obligations

Specific Obligations To pay the agent


To advance to the of a Principal to an
agent the compensation
agent for his services

To reimburse the
To indemnify the
agent for all the
agent for all the
advances made by
damages
him
Though not actually granted, the
APPARENT principal knowingly permits the
AUTHORITY agent to exercise or holds him out as
possessing

To comply with all


the obligations

Arises in those cases where the


principal by his culpable negligence
AUTHORITY BY permits his agents to exercise
ESTOPPEL powers that weren’t granted to him
even though the principal may have
no notice or knowledge of the
conduct
Principal should provide
the means with which to
execute agency even with Demand is not
an absence of a necessary
stipulation
To reimburse the
To advance to the agent for all the
agent advances made by
If the principal fails This obligation cannot be
to do so, the agent him defeated by the fact that
will not be liable for “the business or
undertaking was not
damage successful

Since the principal received the benefits, he


should also be the one answering the
damages

To indemnify the
The liability of the principal is limited only to
agent for all the that which the execution of the agency has
damages caused the agent

If he fails to reimburse the agent, the agent


has the right to retain in pledge the things
which are the object of agency
ACTS THAT MAY BE ACTS THAT MAY
RATIFIED NOT BE RATIFIED

Voidable acts Unrevoked Acts


Valid acts Void acts
There are two
or more
principals
TWO PERSONS
CONTRACT SEPARATELY
WITH AGENT AND
The principals PRINCIPAL
REQUISITES IN
have all
ORDER FOR
concurred on
PRINCIPALS TO BE
the
SOLIDARILY LIABLE
appointment of If the two contracts are
TO THE AGENCY
the same agent incompatible with each
other, the one of prior date
shall be preferred.
The agent is
appointed for
the same
transaction or
undertaking
The agent acted in
contravention of
the Principal’s
instructions

Cases where
There is a
principal is not When the expenses
stipulation that the
liable for expenses were due to the
expenses would be
incurred by the fault of the agent
born by the agent
agent

The agent incurred them


with the knowledge that
an unfavorable result
would ensue, if the
principal was not aware
thereof
Situation 1.

On January 1, A who owns a piece of agricultural land gave a general power of attorney to B. On
February 20, A, without the knowledge of B, executed in favor of C a special power of attorney to sel
said piece of land. On February 25, B as attorney-in-fact of A, executed a deed of sale in favor of D. On
the same date, February 25, C under the special power given by A, sold the same piece of land to E.

Assuming that the vendees have not yet registered their respective documents or have taken
possession of the land, which of the two sales is valid and enforceable and who is responsible for
damages if any?

Answer.

The sale of C in favor of E is valid and enforceable because C was specifically granted authority to sell. B
who only had a general power of attorney had NO right to sell since selling ordinarily is not a mere act
of administration. Moreover, under Art. 1878, a special power of attorney is needed to effectuate a sale.
If anyone is liable for damages, it is certainly B who performed an unauthorized sale.

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