Short answer. An agent is responsible not just for fraud but also for negligence. How strictly that negligence is judged depends on whether the agency was paid or unpaid — courts apply more rigor to a compensated agent and judge an unpaid one somewhat more leniently, though carelessness is never excused entirely.
What the law says
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.
Civil Code, Article 1909 — Agent Liable for Fraud and Negligence. Read the full provision →
Fraud is not the only thing that makes an agent liable
Article 1909 starts by ruling out a common misunderstanding: an agent is not off the hook simply because he did not act dishonestly. The article states plainly that the agent is responsible not only for fraud, but also for negligence. A principal does not have to prove the agent deliberately schemed against them — ordinary carelessness in handling the principal's affairs, without any intent to deceive, is enough on its own to expose the agent to liability.
Why compensation changes how strictly the agent is judged
The article ties the degree of scrutiny to whether the agency was paid: negligence "shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation." An agent being paid for the service is held to a stricter standard, because he is undertaking the work as a professional obligation in exchange for pay. An agent acting gratuitously, as a favor, is judged somewhat more leniently — the law recognizes that someone doing an unpaid favor should not face the same exacting standard as someone being paid to get it right.
What this does not mean for an unpaid agent
A more lenient standard is not the same as no standard. The article does not exempt an unpaid agent from liability for negligence — it only adjusts how rigorously that negligence is measured. Carelessness serious enough to count as negligence under the more lenient standard that applies to gratuitous agency still exposes the agent to liability; the difference is in degree, not in whether negligence matters at all.
What this means when weighing a claim against an agent
Anyone assessing whether an agent's conduct was negligent enough to be liable has to ask two questions rather than one: what actually went wrong in handling the affairs entrusted to the agent, and whether the agency was for compensation or not. The same lapse might fall short of liability under the more lenient standard applied to an unpaid agent while clearing the bar for a paid one, because the article expressly makes the degree of rigor turn on that distinction rather than fixing a single uniform test for every agent.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Yon Mitori International Industries vs. Union Bank of the Philippines, G.R. No. 225538, October 14, 2020 — read the decision on LawPhil →
- Associate Bank vs. Vicente Henry Tan, G.R. No. 156940, December 14, 2004 — read the decision on LawPhil →
- Pleasantville Dev't. Corp. vs. Court of Appeals, et al, G.R. No. 79688, February 1, 1996 — read the decision on LawPhil →