If my agent advanced money on several different dates for my business, do I compute interest separately for each advance, or only from when he demands reimbursement?

Interest runs from the date of advance, not from demand

Many principals assume interest only starts once they are formally asked to pay or once the agency winds up, but Article 1912 fixes the starting point at "the day on which the advance was made." That means an agent who fronted money in January and is only reimbursed in December is entitled to interest for the full intervening period, calculated advance by advance if the agent made several payments on different dates.

The advance is owed even if the venture failed

The obligation to reimburse, with interest, does not depend on the agency succeeding. The law expressly covers the case where "the business or undertaking was not successful," which protects an agent who spent his own money in good faith pursuit of the principal's instructions but the deal fell through for reasons outside his control. This allocates the ordinary commercial risk of a venture to the principal who authorized it, not to the agent who merely carried it out; the principal cannot refuse repayment simply because the outcome disappointed him.

The one condition: the agent must be free from fault

This guarantee has a limit. Reimbursement and interest are owed only if the agent "is free from all fault" for the failure. If the agent's own negligence or disregard of instructions caused the undertaking to collapse, the principal can resist paying back advances tied to that failure, even though the agent genuinely spent the money. The burden of showing fault normally falls on the principal who wants to avoid payment, since Article 1912 states the agent's entitlement as the rule and treats fault as the exception to it.

Why the agent isn't required to advance funds in the first place

Article 1912 works together with the principal's separate duty to advance funds when the agent asks for them before spending his own money. An agent is not obliged to dip into his own pocket unless he agreed to, or unless refusing to would clearly harm the principal's interests; the interest rule exists precisely because agents are often left to cover costs upfront and wait to be made whole.

What rate of interest applies

Where the parties did not fix an interest rate in their agreement, the legal rate of interest generally applies, computed on each advance separately from the date it was made until actual reimbursement. In practice the agent will typically need to show receipts or other proof of each amount advanced and the date it was spent, since interest is tied to a specific starting date rather than a lump-sum estimate. A principal who disputes the dates or amounts should ask for that documentation before paying, rather than after.

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
• Civil Code, Article 1913 — Indemnifying the Agent
• Civil Code, Article 1914 — Agent's Right of Retention