Explanation of Article 490
After Articles (487) and (488) determined the agent's obligation not to exceed the limits of the agency and to exercise due diligence, Articles (490 - 496) came to clarify some applications of these two obligations in the most important legal transactions that are the subject of the agency, namely, the agency in purchasing and the agency in selling. Articles (490 - 493) addressed the applications of these two obligations in the agency in purchasing, and Articles (494 - 496) addressed their applications in the agency in selling.
This article determined that if an agent is commissioned to purchase something without the principal specifying its price, the agent is obliged to purchase it at the fair market price and is not allowed to buy it for more than the fair market price, even if the increase in price is slight, provided that the item has a known and defined value, like goods that have organized markets where prices are announced. In this case, the principal has the right to claim compensation from the agent for that increase. If the item does not have a defined value, it is permissible to purchase it with a slight increase, as this usually occurs in transactions, but it is not permissible to purchase it at a loss, which is an amount exceeding the fair market price beyond the usual. This is because the agent is required to exercise care in executing the agency, and his actions are tied to the interest of his principal, as the principal places the agent in his own position in legal transactions.
It is understood from the article that the agent purchasing for less than the fair market price, or purchasing for more than the fair market price with the principal's approval, is considered a valid purchase and its legal effects ensue. This is because the purchase in the first case is in the interest of the principal, and in the second case, it is validated by his approval.
Related To
Article 490
An agent appointed to purchase a thing the price of which is not specified may not purchase it for more than the market price.