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September 17, 2016

AGENT TO ACT WITHIN THE SCOPE OF HIS AUTHORITY

GENERAL RULE: Once appointed as an agent, you are to strictly
carry out the instructions provided for by the principal. Comply
STRICTLY with the authority given.
Example: Authority to borrow 50 Million, you, as agent, will
borrow only 50 Million.
This rule is not absolute.
EXCEPTIONS:
1. When execution of the authority would manifestly cause
loss and damage to the principal
- It must be clear that such would cause damage and
loss.
Agent had the authority to transfer pigs from Toledo to
Cebu City. Pig must reach the destination not later than 6
AM. But there was a typhoon. At 5 AM, you only started to
move the pigs. Can you move a little later and wait for the
typhoon to pass?
Yes. If in complying with the authority given would
result to a loss on the part of the principal, any
deviation from that authority may excuse the agent
from following strictly the authority.
2. No specific instruction by the principal - the agent may do
such acts that a good father of the family may do in certain
circumstances
3. Authority by necessity
- When demanded by necessity or by an existence of an
emergency.
4. Ratification on the part of the principal
The authority to borrow 50 Million but the agent borrowed
55 Million. Is that allowed? How is ratification done?

Caballero Daileg Gocuan Honoridez Lim Pungos Vergara

Generally, it is not allowed unless the principal allows

it, manifested by his acceptance. When collection
time comes, and the bank collects 55 Million, the
principal cannot later on complain.
In the scenario, the principal did not even weigh the stocks
and he did not verify if it was 50 kilos per sack of rice. It
could be considered that the sacks of rice were of the
correct quantity, taking into consideration the failure of the
principal to verify the quantity thereof. Will the buyer pay 50
kilos worth per bag?
No. The principal cannot say that he never
authorized his agent to enter into such sale because
the former contributed to the act of the latter. In
effect, the principal authorized the sale.
5. If the authority is performed in a manner more
advantageous to the principal than that specified by him
If in the previous illustration, the sale was more
advantageous?
The agent will not be considered to have exceeded
his authority if it was advantageous to the principal.
If the agent was only authorized to sell the product at P50,
000, but he was good at sales talk and was able to sell it at
a higher price, then in this instance he will not be
considered to have exceeded his authority since it was
advantageous to the principal.
6. If the limitations on the authority of the agent could not
have been known by the third party
The principal authorized the agent to sign documents, but
the SPA did not indicate the limitations of the agents
authority to sign on the principals behalf, such that it did
not indicate that he was empowered only to sign certain
kinds of documents.

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September 17, 2016

7. If the principal gave to the agent an instrument in blank,

implied authority is given to the agent to fill it up.
8. If the principal gave to the agent an instrument in blank with
implied authority given to the agent to fill it up
If the principal gave you a blank check already signed by
the principal, but instructed you to fill it up only up to
P50,000. What is your authority?
To fill up the blank only with P50,000
But because you are thinking of going to Hong Kong, you
added one zero. P500,000! You are able to in cash the
check for P500,000. Will the bank be able to deduct the
P500,000 from the account of the principal?
Yes.
AGENT ACTING IN HIS OWN NAME
If you, as an agent, did not place the name of Mr. Dako-dako, your
principal, what will happen?
Dako-dako will not be bound.
Even if you placed the word "by"? If it was an authority to buy, and
you bought it for the principal and indicated only your name. After
you gave the item to the principal, the latter discovered that there
was a defect. Can the principal go to the seller and say "Seller, the
thing that you sold to me was defective. I am suing you for
damages." Do you think the seller will be liable to the principal?
No, because the agent was not able to disclose the
principal.
The one who will be held liable would be the agent
because he was acting in excess of his authority.
Principal P authorized agent A to buy in his behalf from the seller. A
bought it without disclosing the principal. When the principal got
the thing, there was a defect. He then called up the seller. Insofar
as the seller is concerned, the principal does not exist. Can P
compel the seller to pay him for the defect?
Caballero Daileg Gocuan Honoridez Lim Pungos Vergara

No.
On the other hand, can the seller go to P and demand for the
balance of the purchase price?
No. Only the agent is liable.
If P authorized A to buy from the seller and he gave A money, but
instead of paying the seller, A said he would pay within a week.
Can the seller go to P to demand payment?
Yes. Even if P only authorized A to buy in cash, this
instruction is only between P and A. Since the seller has
already given the thing, P is liable if A disclosed P.
Otherwise, only A is liable.
Here is P again, authorizing A to buy land from the seller. The seller
was the former boyfriend of the principal; the seller did not want to
sell to the principal. P told A not to tell the seller that I he was the
one buying. A agreed to buy from the seller. After receiving the
money, A disclosed to the seller that P was the one who bought the
land. Upon knowing this, the seller wanted not to sign the contract
despite receiving the money. There was no agreement as to who
should be named as party in the contract. The seller should sign
regardless of who the principal is.
Study Chapters 2 & 3.