Explanation of Article 487
The article refers to the second obligation of the agent's commitments; which is the obligation to exercise care in executing the agency. The article differentiates the standard of care that the agent must exercise, between those who are agents for a fee and those without a fee.
The first paragraph clarifies the standard of care if the agency is without a fee, which is the agency where the interest is for the principal without the agent. In this case, the agent is obligated to exercise the care he exercises in his personal affairs without being required to exert more than the care of an ordinary person.
The second paragraph clarifies the standard of care if the agency is for a fee, which is the agency where the interest is for both contracting parties. In this case, the agent is obligated to exercise the care of an ordinary person.
The agent's liability in the agency is as follows:
First Liability: Agent's Liability for Fraud and Gross Error
The agent is liable for his gross error and fraud whether the agency is for a fee or without a fee; for example, if a person is appointed to sell goods and the agent sells them to himself without the principal's permission or sells them at a low price in collusion with the buyer.
Second Liability: Agent's Liability for Ordinary Error
If the agency is without a fee, the agent is not liable in its execution except for exercising the care he exercises in his own affairs if his care for himself is less than that of an ordinary person. Here, the standard of liability is personal. However, if his care is higher than that of an ordinary person, he is not required to exert more than the care of an ordinary person, making the standard of liability objective. Thus, an agent without a fee is not liable for more than his personal care, nor for more than the care of an ordinary person, being liable only for the lesser of the two cares; because the agent without a fee is volunteering and favoring the principal, and because the agency is in the interest of the principal. An example of this is if a person is appointed to sell goods and the agent neglects to attend the contract appointment until it is missed; he is not liable for that if it is known that he is negligent in his appointments and that this is the level of care he exercises in his personal affairs and private work.
What is included in the paragraph is an exception by the text of the system to what is included in Article (164) of the general rules, which states: "If what is required from the debtor is to preserve the thing or manage it or exercise caution in executing his obligation, he has fulfilled the obligation if he exercises the care of an ordinary person even if the intended purpose is not achieved unless a statutory text provides otherwise."
If the agency is for a fee, the agent is obligated to exercise the care of an ordinary person in its execution; thus, the standard of liability here is objective. The care the agent exercises in his personal affairs is not considered here, whether it is less than or more than that of an ordinary person; because the agency for a fee is in the interest of both contracting parties. An example of this is if a person is appointed to sell goods that need preservation and they are damaged due to his negligence, he is liable for failing to exercise the care of an ordinary person.
The distinction in liability between an agency for a fee and an agency without a fee considers the custom that does not require from a volunteer the same care as is required from someone who takes a fee and practices it professionally.
Third Liability: Agent's Liability for Foreign Cause:
The agent is not liable for a foreign cause such as force majeure, the fault of others, or the fault of the principal whether the agency is for a fee or without a fee.
Related To
Article 487
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If the power of attorney is gratuitous, the agent shall exercise the same care as he would in the conduct of his own affairs and shall not be required to exceed the care of a reasonable person.
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If the power of attorney is for a fee, the agent shall exercise reasonable care in the performance of such power of attorney.