A principal-agent relationship is like a tripartite contract where the agent enters into any legal transaction on behalf of the principal. Art 2199 of the Civil Code defines agency as “a contract whereby a person, the agent, agrees with another person, the principal, to represent him and perform on his behalf one or several legally binding acts.” Such an authority can be conferred by court or by agreement of the parties.
If it is given by agreement of the parties, it can be either implied or express. The agent is expected to act in strictest good faith and diligently. He must avoid collusion with the third party to avoid conflict of interest. Art 2187(1) orders the cancellation of the agency contract if there is conflict of interest. The agent is accountable to the principal and must confine his/her acts with the scope of authority conferred. Art 2202(1) says that if the scope of the agency is not expressly known, it has to be fixed according to the nature of the transaction.
The scope of agency can be general (Art 2203 in conjunction with 2204) or special agency (Art 2205). An agent cannot sign bill of exchange, effect a settlement, invest capitals, alienate or mortgage real estate, make donations, bring/defend actions or sign arbitration agreement without special authority given to him/her.
For the services offered, the agent is entitled to contractual remuneration. Nevertheless, if remuneration is not stipulated in the contract, “the agent shall not be entitled to remuneration unless he carried out the agency within the scope of his professional duties or where such remuneration is customary” (Art 2220(1)).
Needless to emphasize, the relation between the agent and the third party is based on the original contract between the principal and the agent. The main theme of this essay is not to talk about the agent-third party relation, but the principal-agent contractual agreement. It is unlikely that the principal-agent agreement will be signed without remuneration. Consequently, if the principal and the agent disagree on any matter, they can resolve their dispute by court litigation or arbitration.