Short answer. No. Article 1918 of the Civil Code relieves a principal of liability for expenses the agent incurred with knowledge that an unfavorable result would follow, when the principal was not aware of that forecast. The agent's decision to proceed despite knowing the outcome would be bad is the agent's own risk.
What the law says
The principal is not liable for the expenses incurred by the agent in the following cases: (1) If the agent acted in contravention of the principal's instructions, unless the latter should wish to avail himself of the benefits derived from the contract; (2) When the expenses were due to the fault of the agent; (3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof; (4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum.
Civil Code, Article 1918 — When the Principal Is Not Liable for Expenses. Read the full provision →
The rule: foreseeable bad results at the agent's risk
Article 1918 of the Civil Code specifies four situations where a principal owes no reimbursement to the agent. The third applies precisely to your situation: When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof. If the agent went into a transaction already knowing it would turn out badly — without disclosing that knowledge to you — and incurred expenses in connection with that transaction, you are not required to bear those expenses. The agent's awareness of the anticipated bad outcome, combined with your lack of that information, is what shifts the burden to the agent.
Why both conditions must be present
Article 1918(3) contains two distinct requirements. First, the agent must have had actual knowledge that an unfavorable result would follow. A vague sense of doubt or a general business risk does not trigger this provision — the agent must have known, before incurring the expenses, that the outcome would be bad. Second, the principal must not have been aware of that forecast. If the agent told you the transaction looked risky and you instructed the agent to proceed anyway, the situation changes — you had the information and chose to move forward. The principal's lack of awareness is what makes it unfair to require reimbursement; if you had known, you could have chosen not to authorize the expenditure.
The agent's duty to inform
An agent is expected to act with diligence and care in managing the principal's affairs. A core part of that duty is keeping the principal informed of significant matters that might affect decisions. An agent who knows that a transaction is likely to result in loss and nevertheless proceeds without telling the principal — spending money that the principal will later be asked to reimburse — is not acting in the principal's interest. Article 1918(3) reflects this: the agent's failure to inform, combined with the agent's own knowledge that the venture was doomed, means the agent cannot later turn to the principal for reimbursement of the resulting expenses.
The other grounds for non-liability in Article 1918
For completeness, Article 1918 also protects the principal in three other situations. First, when the agent violated the principal's specific instructions — unless the principal chooses to benefit from what the agent did. Second, when the expenses were caused by the agent's own fault or negligence. Fourth, when the parties agreed in advance that expenses would be borne by the agent, or capped at a specified amount. In your case, the clearest ground is the third: your agent's advance knowledge of an unfavorable outcome, undisclosed to you, is enough on its own to eliminate your obligation to reimburse the expenses incurred.