Facts

• Respondent Philippine Air Lines (PAL) (the principal) issued to petitioner Nicholas Y. Cervantes (the third person dealing with its staff) a round-trip ticket for Manila–Honolulu–Los Angeles–Honolulu–Manila, in connection with the settlement of a claim.
• The ticket bore an express condition that it was valid until March 27, 1990, and further provided that only certain designated PAL officers — the Compensation Manager and specified others — could extend its period of validity. (The limitation was written on the ticket in Cervantes' own hands, so the extent of the agents' authority was knowable to him from the outset.)
• On March 23, 1990, four days before expiry, Cervantes used the ticket to fly to Los Angeles.
• On March 27, 1990, the very date of expiry, he sought to return.
• At the airport in Los Angeles, two PAL station employees — Linda Rodriguez and a supervisor — confirmed his booking and allowed him to check in for the flight to Manila via Honolulu. (Neither was among the officers the ticket named as competent to extend its validity — the agents therefore acting beyond the authority the ticket itself published.)
• At Honolulu, however, PAL personnel refused to allow him to board the connecting flight, the ticket having by then expired.
• Cervantes was obliged to buy a new ticket and sued PAL for damages, arguing that the two employees' act of confirming his booking extended the ticket's validity and bound the airline.
• Trial court — complaint dismissed. The trial court dismissed the complaint.
• Court of Appeals — affirmed. The Court of Appeals affirmed.

Issue

Ruling

Ratio

• The ticket was the contract between the parties, and its conditions formed part of that contract.
• It stated in terms that the validity period could be extended only by specified PAL officers.
• Rodriguez and the supervisor were not among them.
• Their authority as station personnel extended to checking in passengers holding valid tickets — not to reviving one that had lapsed.
• An agent's power is measured by the authority the principal has actually conferred.
• Acts outside it do not bind the principal unless he ratifies§ them (Art. 1910§), and PAL did no such thing — its Honolulu personnel refused boarding at the first opportunity.

• The doctrine of apparent authority§ protects a third person who reasonably and in good faith believes the agent is authorised.
• It cannot be invoked by one who knows or should know of the limitation.
• The restriction was printed in the very document Cervantes held.
• Having been given notice, he could not reasonably rely on the contrary assurance of employees whose want of power the ticket disclosed.

• The Court pointedly observed that Cervantes is a lawyer, and was therefore expected to read and understand the conditions of the contract he held.
• He was in a better position than the ordinary passenger to appreciate that the two employees were not the officers named in the ticket.

• PAL's refusal to carry him on an expired ticket was an exercise of its contractual right, not a breach.
• Absent fraud or bad faith, no moral or exemplary damages lie.

Doctrine

• Authority is limited by the grant. Employees of a principal bind it only within the scope of the authority conferred on them; acts beyond it are ineffective unless ratified.
• Apparent authority requires reasonable good-faith reliance. A third person on notice of the limitation — especially where the limitation appears in the contract he holds — cannot invoke the doctrine.
• Contractual conditions bind the parties. Stipulations designating who may modify a contract are valid and enforceable; the passenger is charged with knowledge of the conditions printed on his ticket.