Read also: MAY AN AGENT PURCHASE THE PROPERTY ENTRUSTED TO HIM BY THE PRINCIPAL?
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If the agent acted in good faith and within the scope of his authority, the principal incurs liability.
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If the agent acted in bad faith, the agent alone shall be responsible to such third person.
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The relations of an agent to his principal are fiduciary in character.
The relations of an agent to his principal are fiduciary in character since they are based on trust and confidence. The agreement to act on behalf of the principal causes the agent to be a fiduciary, that is, a person having a duty, created by his undertaking, to act primarily for the benefit of another, the principal, in matters connected with his undertaking.
What happens then if the agent acted in good faith or if the agent acted in bad faith?
Under Civil Code:
Two persons may contract separately with the agent and the principal with regard to the same thing. If the two contracts are incompatible with each other, the one of prior date shall be preferred.
This is subject, however, to the rule that:
“If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who, in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.”
And in such cases, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible.
Accordingly, whether the principal or the agent will be the one liable for damages to the third person who has been prejudiced depends on whether the agent acted in bad faith or not. If the agent acted in good faith and within the scope of his authority, the principal incurs liability. If the agent acted in bad faith, he alone shall be responsible to such third person.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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