Explanation of Article 500
The article clarified the effect of the principal's breach of the obligation to pay the agent's fee on their relationship.
The first paragraph explained that if the agent has earned the fee upon completion of the work, and the principal refrains from paying the fee, the agent then has the right to retain what he has received on behalf of his principal from funds related to his agency work until he receives his fee. This is on the condition that the fee is due, and what he has received from the agency is related to the agency. It does not matter whether what he received is cash or in kind, and he is not allowed to retain what he received from another agency unrelated to the agency for which the principal did not pay the fee. If the agent retains what he received for his agency work, he is not liable for any loss unless it is due to his negligence or misconduct. He is also not allowed to retain the principal's funds except to the extent necessary to cover the due fee. If the agent collects his fee from the retained funds, he must return the remaining funds to the principal.
What the paragraph decided is an application of the non-performance defense rule stipulated in Article (114), which states that the principal is not obligated to pay the fee until what the agent received for his agency work is delivered; this is due to the connection between the principal's obligation to pay the agent's fee and the agent's obligation to deliver what he received for his agency work to his principal; each is a cause for the other's obligation.
The second paragraph clarified that the agent is allowed to resort to the judiciary to claim his fee from the principal, and he has the right to claim compensation for the damage he suffered due to the principal's failure to pay the agreed fee. The compensation here is estimated based on the damage suffered by the agent as a result, such as loss of opportunity, missed profit, and incurred loss.
In the case of an agency for a fee, the principal is not allowed to refrain from paying the agent's fee if the agent has earned the fee upon completion of the work. The principal has the right to claim compensation from the agent for the damage he suffered due to the agent's failure to deliver what he received from the principal for his agency work.
Related To
Article 500
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The principal shall be liable for any obligations the agent undertakes in the normal performance of the power of attorney.
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The principal shall be liable for any harm sustained by the agent in the normal performance of the power of attorney, unless such harm is due to the agent’s fault.