Must I reimburse what my agent spent out of his own pocket on the job?

Two duties: advance first, reimburse after

Article 1912 places two related duties on the principal — the person who gave the instructions. The first comes before the work: The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Your agent is not obliged to fund your business from his own pocket; he can ask for the money up front. The second applies once he has already paid: Should the agent have advanced them, the principal must reimburse him therefor. Between them, the cost of carrying out your instructions sits with you, not with the person carrying them out.

Success is not the test

The line that surprises most principals is that reimbursement is owed even if the business or undertaking was not successful. This is a rule about who carries an expense, not about who performed well. If you send a relative to negotiate a purchase for you and he pays for the trip, the certifications and the fees, that money went into your project whether or not the deal closed. Refusing to repay because nothing came of it misreads the article. The risk that a venture fails belongs to the principal, because the venture is the principal's.

The limit: the agent must be free from all fault

Reimbursement is conditioned on the agent being free from all fault, and that is a real limit. An agent who spent on something you never asked for, who ignored your instructions, who paid without checking, or whose own carelessness caused the expense cannot simply hand you the bill. The article protects someone who did the job properly and ended up out of pocket; it does not underwrite careless or unauthorised spending. In practice, most disputes turn on this phrase, which is why an agent should get his instructions in writing and keep a document behind every peso he claims.

Interest, and heading off the dispute

The article adds that reimbursement shall include interest on the sums advanced, from the day on which the advance was made. Interest therefore runs from the outlay itself, not from the day you were finally asked to pay. Two practical points follow. Agree at the start how expenses will be handled and what needs prior approval; that one step prevents most of these arguments. And if reimbursement is refused, the claim is an ordinary civil action for a sum of money, proved by receipts and by the record of your instructions. Such claims are subject to time limits, so do not let years pass.

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.

• BP Oil and Chemicals International Philippines, Inc. vs. Total Distribution & Logistic Systems, Inc, G.R. No. 214406, February 6, 2017 — read the decision on LawPhil →
• Pacsports Phils., Inc. vs. Niccolo Sports, Inc, G.R. No. 141602, November 22, 2001 — read the decision on LawPhil →
• Gregorio V. Tongko vs. The Manufacturers Life Insurance Co. (Phils.) Inc. and Renato A. Vergel De Dios, G.R. No. 167622, June 29, 2010 — read the decision on LawPhil →

Related provisions

• Civil Code, Article 1912 — Advancing and Reimbursing Funds