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Chapter 1. Nature, Form and Kinds of Agency
Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. Agency: A relationship which implies a power in an agent to contract with a 3rd person on behalf of a principal. Kind of Contract: It is a preparatory contract. It is a contract entered not for its own end but to be able to enter into other contracts.
2nd Sem; 2003
Essential Elements of Agency: 1.) Consent, express or implied; 2.) Object of the contract is the execution of a juridical act in relation to 3rd persons; 3.) The agent acts as a representative and not for himself; 4.) The agent acts within the scope of his authority. Acts that cannot be done through an agent: 1.) Personal acts: if personal performance is reqd by law or public policy or agreement; 2.) Criminal or illegal acts: attempt to delegate another authority to do an act which, if done by the principal would be illegal, is void. Nature of Relation between Principal and Agent: Fiduciary, based on trust and confidence. Agency v. Lease of Work or Service Agency Lease of Work/Service Basis is representation. Basis is employment Agent exercises Lessor only performs discretionary powers. ministerial functions. Only 2 persons involved: 3 persons are involved: lessor and lessee principal, agent & 3rd person. Commercial or business Matters of mere manual or transactions. mechanical execution. Agency v. Guardianship Agency Agent represents a capacitated person. Agent appointed by principal and can be removed by him. Agent subject to directions of principal. Agent can make principal personally liable. Agency to Sell v. Sale Agency to sell Agent receives the goods as the goods of the principal. Agent delivers proceeds of the sale. Agent can return object in case he is unable to sell to a 3rd person. Agent in dealing with the thing received is bound to act accdg to the instructions of his principal
Characteristics: 1.) Consensual: perfected by mere consent; 2.) Nominate: it has its own name; 3.) Principal: does not depend on another contract for its existence and validity; 4.) Preparatory: entered into as a means to an end; 5.) Unilateral/Bilateral: a.) Unilateral: if contract is gratuitous, it creates obligations for only one of the parties, i.e. agent. b.) Bilateral: if for compensation, it gives rise to reciprocal rights and obligs. Basis: Representation. The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if the principal personally did them. Distinguishing Features: 1.) Representative character; and 2.) Derivative authority. Purpose: To extend the personality of the principal through the facility of the agent. Parties: 1.) Principal; and 2.) Agent. Who can be principal? The principal may be a natural person or a juridical person. He must be capacitated. The rule is if a person is capacitated to act for himself or in his own right, he can act through an agent. Must the agent have capacity? Insofar as 3rd persons are concerned, it is enough that the principal is capacitated; but insofar as his obligations to his principal are concerned, the agent must be able to bind himself.
Guardianship Guardian represents an incapacitated person. Guardian appointed by court and stands in loco parentis. Guardian not subject to directions of ward but must act for his benefit. Guardian has no power to impose personal liability on his ward.
Sale Buyer receives the goods as owner. Buyer pays the price. Generally, buyer cannot return the object sold. Buyer can deal with the thing as he pleases, being the owner.
Helen C. Arevalo
2nd Sem; 2003
Agent v. Independent Contractor Agent Independent Contractor Represents the principal. Employed by employer. Acts under the control and Acts according to his own instructions of the principal method. Principal liable for torts Employer not liable for committed by agent w/in torts committed by scope of authority. independent contractor. Art. 1869. Agency must be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form. Classifications of Agency: as to… 1.) Manner of Creation: a.) Express: actually authorized, either orally or in writing. b.) Implied: implied from acts of principal, from his silence or lack of action or his failure to repudiate the agency knowing that another person is acting on his behalf w/o authority. 2.) Character: a.) Gratuitous: agent receives no compensation for his services. b.) Onerous: agent does receive compensation. 3.) Extent of business covered: a.) General: comprises all the business of the principal. b.) Special: comprises one or more specific transactions. 4.) Authority conferred: a.) Couched in general terms: deemed to comprise only acts of administration. b.) Couched in specific terms: authorizes only the performance of a specific act/s. 5.) Nature and effects: a.) Representative: agent acts in name and representation of principal. b.) Simple/Commission: agent acts in his own name but for the account of the principal. Can agency be presumed? Generally NO because the relationship between the principal and agent must exist as a fact. The only exceptions to this rule are when agency arises by operation of law or agency is presumed to prevent unjust enrichment. Form: Generally, NO formal requirements. Agent’s authority may be oral or written, it may be in public or private writings. The only exception is when the law requires a specific form (e.g. sale of real property or any interest therein by an agent.)
Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. Form of Acceptance by Agent: Acceptance may be express or implied; express when it is oral or written; implied when it can be inferred from the acts of the agent which carry out the agency, or from his silence or inaction accdg to the circumstances. Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. Between 2 persons who are present, when it acceptance deemed implied? When the agent receives a power of atty from the principal himself personally without objection. Is this presumption conclusive? NO, it can be rebutted by contrary proof. Power of attorney: An instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. Its primary purpose is to evidence the authority of the agent to 3rd parties w/ whom the agent deals. Construction A power of atty is strictly construed and strictly pursued. The instrument will be held to grant only those powers which are specified, and the agent may neither go beyond nor deviate from the power of atty. The only exception is when strict construction will destroy the very purpose of the power. Meaning of “present” Not limited to face-to-face encounters. 2 persons conversing on the phone are also considered as both “present”. Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: 1.) When the principal transmits his power of attorney to the agent, who receives it without any objection; 2.) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. 2 Ways of Giving Notice of Agency 1.) By special information; or 2.) By public advertisement.
Helen C. Arevalo
) Special information: the person appointed as agent is considered such with respect to the person to whom it was given. The latter. Art. 2. General rule: Special information needs special information of revocation. Except: if you can prove that the 3rd person read the notice in the newspaper. otherwise. having dealt with one as an agent may be estopped to deny the agency as against the principal.) Estoppel of 3rd Persons – A 3rd person. the sale shall be void. 3.Finals Reviewer AGENCY 2nd Sem. and enter into a valid contract upon the terms named by the principal. b. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person. 1875. Effects: 1. He is strictly a middleman and for some purposes. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. the agent of both parties. and in the latter case with regard to any person. When is a broker entitled to compensation? A broker is entitled to commission whenever he rings to his principal a party who is able and willing to take the property. the authority of the latter shall be in writing. Rabot]. agent or 3rd persons in interest. the contract between them being void as against public polisy and good morals. Classification of Agents: 1. Agency by Estoppel: There is really no agency at all. the latter thereby becomes a duly authorized agent. Revocation – An agency is revoked in the same manner as it was given. unless there is proof to the contrary. and which Section II-D . what is his right to compensation? 1. 1873. will be estopped to deny the agency as against such other. is estopped to deny the agency. to the injury of 3rd persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence. The former comprises all the business of the principal. c. although no real authority to represent another.) Estoppel of Agent – One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the 3rd persons interested in the transaction in which he is engaged.) As to Agent – One who knows that another is acting as his agent and fails to repudiate his acts. 3. and for compensation or fee.) Estoppel of Principal – a. although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. Does the law allow double agency? Such agency is disapproved by law for being against public policy and sound morality. but the alleged agent seemed to have apparent or ostensible.) If with knowledge of only one – as to the principal who knew of that fact and as to the agent. they are in pari delicto and the courts shall leave them as they were. Broker: One who in behalf of others. In case the agent assumes a double agency. 4. never acting in his own name. but in the name of those who employ him. he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and subagent. 2003 its agents. or accept the benefits of them. Art. negotiate contracts relative to property. The exception is where the agent acted with full knowledge and free consent of the principals. When a sale of a piece of land or any interest therein is through an agent.) Public advertisement: Agent is considered such with regard to any person. 2.) Estoppel of the govt – The govt is neither estopped by the mistake or error on the part of Helen C. 1.) As to sub-agent – To estop the principal from denying his liability to a 3rd person. A broker is never entitled to commission for unsuccessful efforts.) If without knowledge of both – agent can recover from neither. Agency is presumed to be for a compensation. But it may be estopped through affirmative acts of its officers acting within the scope of their authority. one or more specific transactions.) Universal agent: One employed to do all acts that the principal may personally do. He is the negotiator between the parties. An agency is either general or special. A letter is sufficient [Jimenez v. 2.) If with knowledge of both principals – recovery can be had from both. in the former case with respect to the person who received the special information.) As to 3rd persons – One who knows that another is acting as his agent or permitted another to appear as his agent. 1874. 1876. Arevalo 3 Art. Art.
) Special/Particular agent: One authorized to act in one or more specific transactions. except customary ones for charity or those made to employees in the business managed by the agent.) To sue for collection of debts. c. business. Strictly construed.) To borrow money if it be urgent and indispensable for the preservation of the things under administration.) Auctioneer: One whose business is to sell property for others to the highest bidder at a public sale. provided the lease is not registered. 5. An agency couched in general terms comprises only acts of administration. or to do one or more specific acts. 2003 the principal can lawfully delegate to another the power of doing. 5. So if the contract be open to 2 constructions.) Factor: One whose business is to receive and sell goods for a commission. 3. Limits the authority of of agent. Special Agent [SNETI] As to… General agent Special agent Only one or more Scope of All acts connected specific acts in authority w/ the business in pursuance of which he is particular engaged. the former is to be chosen. In strict legal sense: An agent having a special authority created by deed. to waive objections to the venue of an action or to abandon a prescription already acquired. or in other words. 4. or all business of a particular kind or in a particular place. or to act upon a particular occasion.Finals Reviewer AGENCY 2nd Sem. service. 1878. instructions or w/ restrictions necessarily implied from the act to be done. to renounce the right to appeal from a judgment.) To waive any obligation gratuitously. instructions of principal Art. How are contracts of agency construed? Contracts of agency as well as general powers of attorney must be interpreted in accordance with the language used by the parties. or even though the agency should authorize a general or unlimited management. Cannot in a manner By an act within Extent to beyond or outside the scope of his which agent the specific acts w/c authority although may bind he is authorized to it may be contrary principal perform. 2.) To compromise. to his special instructions.) To engage counsel to preserve the ownership and possession of the principal’s property. 6.) To make customary gifts for charity or to employees in the business managed by the agent 6.) General agent: One employed to transact all the business of his principal. Examples of acts of mere administration: 1. Helen C. Attorney-in-fact: One who is given authority by his principal to do a particular act not of a legal character. surroundings and relations of the parties.) To effect novations which put an end to obligations already in existence at the time the agency was constituted. 2. or employment. to do all acts connected with a particular trade.) Atty at law: One whose business is to represent clients in legal proceedings. one of which would uphold the intention while the other would overthrow it. The intention of the parties must be sustained rather than defeated. 2. b. resort must be had to the situation. 1877.) To make gifts. MEMORIZE THIS: [PNC-WIGLLS-PG-CARS] Art. Single transaction Nature of Series a or a series of service transactions transactions not authorized involving a involving continuity continuity of of service.) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. 3. The real intention of the parties is primarily determined from the language used and gathered from the whole instrument. Arevalo 4 Section II-D .: a. e. 4.) Broker: One whose business is to act as intermediary between 2 other parties. parties.) To make such payments as are not usually considered as acts of administration. d.) To employ workers or servants and employees needed for the conduct of business. In case of doubt. 3. being entrusted with the possession of the goods involved in the transaction. General Agent v.g. Construction Merely advisory. even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate. to submit questions to arbitration.) To lease real property to another person for 1 year or less. Special powers of attorney are necessary in the following cases: 1. Termination Apparent authority Termination of authority does not terminate effective as to 3rd by mere revocation party unless agency of authority w/o was for purpose of notice to 3rd contracting w/ that 3rd party.
To bind the principal in a contract of partnership. 2003 5. he has implied authority to do whatever is usual and necessary in the exercise of such power.) AGENCY 2nd Sem. In case he fails to comply with this obligation-not-to-do.) agree upon the price. Scope of Special Authority to Purchase Where the agency is a special one.) To loan or borrow money.) Determine the usual and necessary details of the contract. 6. 3. 4. Art. said arbitrator may not enjoy the trust of the principal. To bind the principal to render some service without compensation.) Modify or rescind a contract of purchase made by the principal. If the transaction would be left in the hands of an arbitrator. The ff are not included in a Power to Mortgage The power to: 1.) Express: when it is directly conferred by words. To accept or repudiate an inheritance. 2. 1879. The authority of the agent is the very essence – sine qua non – of the principal and agent relationship.) Settle a contest between the principal and a 3rd person regarding the ownership of goods purchased. or 2. Art. 3.) 9. Does the principal have the power to revoke a contract giving an agent exclusive authority to sell? YES. and therefore. the agent has no authority to 1.) Do anything not usual or necessary to the exercise of such authority.) Deliver the property.) give directions for the delivery of the property purchased. or 3.) Find a purchaser or to sell directly.) Fix the terms of the sale unless there be set conditions stipulated by the principal. The ff are included in a Power to Sell: The power to: 1.) 12. the 5 Section II-D Scope of General Authority to Purchase Where an agent’s power to purchase is general and unrestricted. and a special power to mortgage does not include the power to sell. Any other act of strict dominion. 7. unless the latter act be urgent and indispensable for the preservation of the things which are under administration.) Agree to an account stated.) 10. What happens if the agent is specifically authorized to submit to arbitration? Then the arbitration award binds the principal. Authority: The power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestation of consent to him. 8. Art. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. 3. 1880. This authority. To obligate the principal as a guarantor or surety.) accept delivery for his principal. A special power to compromise does not authorize submission to arbitration.) Execute the necessary transfer documents. 2. or 2.) Mortgage for the agent’s personal benefit or for the benefit of any 3rd person.) 15.) 14.) Receive the price unless he was authorized only to solicit orders. 1881.) 13.) Sell.Finals Reviewer 7. Arevalo . and the source of the authority is the principal and never the agent. To lease any real property to another person for more than one year. unless it is otherwise agreed. It results from what the principal indicates to the agent. But he may not have the right to use such power if he has agreed not to exercise such power during a certain period.) Make the usual representation and warranty.) Purchase upon different terms and conditions from those authorized. and it may be express or implied. he will be liable for damages. 4. To ratify or recognize obligations contracted before the agency. He may: 1.) Actual: when it is actually granted.) modify or rescind the contract of purchase. includes only the authority to act for the benefit of the principal. that the agent acted within the scope of his authority. A special power to sell excludes the power to mortgage.) 11. provided. 2. To create or convey real rights over immovable property. Kinds of Authority: 1. and 6. 5. or is restricted to purchases upon certain terms and conditions.) may borrow money to pay for the care and preservation of the property purchased. 3. Helen C. unless the contrary has been clearly indicated. Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s rights and obtain for him the best bargain in the transaction.) Implied: when it is incidental to the transaction or reasonably necessary to accomplish the purpose of the agency. But he has no special power to 1.) Execute a 2nd mortgage. 2.) Sell only for cash. of course. The agent must act within the scope of his authority.
he can sue the agent. except when the contract involves things belonging to the principal. as if the transaction were his own.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principal’s identity. Exception: If the contract involves something belonging to the principal. with whom the agent contracted. the principal has no right of action against the persons Helen C. 1883. Similarly. General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.) 5. he can sue the principal. The agent is bound by his acceptance to carry out the agency and is liable for the damages which. Art. it terminates when the emergency has passed. Requisites for Principal to be Bound by Act of Agent: 1. you must name the principal as the defendant. neither have such persons against the principal. Section II-D . What happens if the agent exceeds his authority but he performs the agency in a manner more advantageous to the principal? It will e as if he did not exceed the limits of his authority since he must do such acts as may be conducive to the accomplishment of the purpose of the agency. 1884. But when the contract involves things belonging to the principal. he can sue both. If an agent acts in his own name. the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Ostensible authority is another name for authority by estoppel.Finals Reviewer AGENCY 2nd Sem. 2. Authority? With authority With authority Without Without Whose behalf? Principal’s Own Principal’s Own Status of K Valid Depends. Apparent or Ostensible: when it is conferred by words.) 6. 2003 4. Kinds of Principals: 1.  Unenforceable Valid Who to sue? In case the agent acts in the name of the principal and within his scope of authority.) Disclosed: if at the time of the transaction contracted by the agent. Note: The authority to look for buyers does not carry with it the authority to sell. General: when it refers to all the business of the principal. The partially disclosed principal may enforce against the 3rd person the contract of the agent like any disclosed principal. who may or may not be the principal’s agent. The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. the 3rd person has a right of action against the principal. has actual authority to act for the principal. Test: Would the principal enter into this transaction? Art. But if it cannot be determined w/o litigation who is liable.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal.) The agent must act in behalf of the principal. 3. or when the agent acts within the scope of his authority but in his own name except when the transaction involves things belonging to the principal. When is a principal not bound by the act of his agent? When the agent acts without or beyond the scope of his authority. 2.) 7. In such case the agent is the one directly bound in favor of the person with whom he has contracted. the other party thereto has known that the agent is acting for a principal and has known the principal’s identity. Special: when it is limited only to one or more specific transactions. Arevalo 6 Chapter 2. Remedy of the 3rd person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule.) principal is deemed to have actually intended the agent to possess. through his non-performance. 1882. the principal may suffer. Obligations of the Agent Art. conduct or even by the silence of the principal which causes a 3rd person reasonably to believe that a particular person. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency. By necessity or by operation of law: when it is demanded by virtue of the existence of an emergency.) The agent must act within the scope of his authority.
Should there be a stipulation that the agent shall advance the necessary funds. Art. may the parties stipulate that the agent shall advance the necessary funds? YES. 2. and in default thereof.) Not to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency. Instructions Direct the manner of transacting the authorized business and contemplates only a private rule of guidance to the agent.) To finish the business already begun on the death of the principal should delay entail danger. to do all that a good father of a family would do. Duty of Owner in case an Agency is Declined: He must act as soon as possible by appointing an agent or by taking charge of the goods. 1885. Instructions: Private directions which the principal may give the agent in regard to the manner of performing his duties as such agent. 1886.) To pay interest on funds he has applied to his own use. Exceptions to the rule that the agent must not depart from the instructions of the principal: [SAI] A departure may be justified by: 1. 8. should delay entail any danger. them. 11. 2. Specific Obligations: 1. In a contract of agency. Refers to the manner or Relates to the subject with mode of his action with which the agent is respect to matters which in empowered to deal or the their substance are within kinds of business or transactions upon which he the scope of permitted action. he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner. the agent deals.) Not to carry out the agency if its execution would manifestly result in loss or damage to the principal. until an agent is appointed.) To advance the necessary funds should there be a stipulation to do so. 12. he should prefer his own. The owner shall as soon as practicable either appoint an agent or take charge of the goods. Contemplated to be made Not expected to be made known to the 3rd person known to those w/ whom dealing w/ the agent. 10. Instructions pertain to the principal and agent Authority pertain to the agent and 3rd persons.) To carry out the agency he has accepted. 4. is powered to act. he shall do all that a good father of a family would do. 2. In the execution of the agency. When the Agent has a right to disobey the principal’s instructions: Helen C.) To obey the principal’s instructions.) To observe the diligence of a good father or a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency. 3. What is the rule if a person declines agency? In the event a person declines an agency. the agent shall act in accordance with the instructions of the principal. Authority v. he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent. Limitations of authority are Without significance as against those dealing with operative as against those the agent with neither who have or are charged knowledge nor notice of with knowledge of them. 2003 He must also finish the business already begun on the death of the principal. 7. 5.Finals Reviewer AGENCY 2nd Sem. he shall be bound to do so except when the principal is insolvent. What is the oblig then of the agent? He is bound to furnish such funds. Art. In default thereof.) Not to loan to himself if he has been authorized to lend money at interest. 6.) To act with the utmost good faith and loyalty for the furtherance and advancement of the interests of the principal. as required by the nature of the business. 9.) If the departure is so insubstantial that it does not affect the result and the principal suffers no damage thereby. Instructions Authority Sum total of powers committed or permitted to the agent by the principal.) To be responsible in certain cases for the act of the substitute appointed by him. or 3. In case a person declines an agency. Arevalo 7 Section II-D .) To act in accordance with the instructions of the principal. This exception is based on the principal’s obligation to reimburse the agent. General Obligations of an Agent to his Principal: 1.) If the instructions are ambiguous.) To exercise reasonable care. Art. Except: When the principal is insolvent. 3. 1887.) A sudden emergency.) To answer for damages if there be a conflict between his interests and those of the principal.) To answer for damages which through his nonperformance the principal may suffer.
An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. Art. Rationale: Contrary to public policy as it would encourage fraud. but he shall be responsible for the acts of the substitute: 1. he cannot borrow it without the consent of the principal. Furthermore. the sub-agent is a stranger to the principal who originally gave life to the agency. Rationale: The duty of the agent who is merely an extension of the personality of the principal is to render service for the benefit of the principal and not to act to his detriment. Relation among the principal. Art. who is liable? General rule: The agent is NOT liable. Art. Art. That is. If the agent is authorized to lend the principal’s money. If the agent fails to deliver and instead converts or appropriates for his own use the money or property belonging to his principal. obedience. Art. so neither agent nor sub-agent may be held personally liable as long as they act within the scope of their authority. even though it may not be owing to the principal.) When the instruction calls for the performance of illegal acts. or 2. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency. Consequently. as his agent. 1892. If the agent follows the principal’s instructions yet his acts still result in damage to 3rd persons.Finals Reviewer AGENCY 2nd Sem. This would also seem to be the case if the agent is authorized to lend money w/o interest because of the same reason. Every stipulation exempting the agent from the obligation to render an account shall be void. he shall be responsible for all the sub-agent’s acts. Arevalo . The law does not distinguish so neither should we. the performance of an act for the principal which the agent has been empowered to perform through his representative. 1888. But if the agent is authorized to appoint a sub-agent. agent and sub-agent In reality. the sub-agent may be the agent of the principal if he is in actual control of the business and the principal knows of his appointment or knows that his appointment is necessary. Sub-agent: A person to whom the agent delegates. Except: if before acting that way.) When he was not given the power to appoint one. its execution would manifestly result in loss or damage to the principal. 2003 1. Rationale: The agent can lend money to the principal using the agent’s own funds at the current rate of interest and NOT at a higher interest rate because the agent is supposed to act for the principal’s benefit. Authority to appoint and Agent is released from any designated by principal liability from the acts of 8 Section II-D Helen C. with what can he be charged? ESTAFA. It is in the nature of a waiver of an action for future fraud w/c is void. with interest. the agent must exercise due diligence in carrying out the agency. If the agent has been empowered to borrow money.) Where he is privileged to do so to protect his security/interest in the subject matter of the agency. it is obvious that the act will result to damage. The agent may appoint a substitute if the principal has not prohibited him from doing so. All acts of the substitute appointed against the prohibition of the principal shall be void. any act done by the sub-agent in behalf of the principal is deemed an act of the principal. but without designating the person. 1891. 1890. 4 Instances where a Sub-agent is appointed and the Effects of each: Instance Effect No prohibition Agent responsible for all the acts of sub-agent. and diligence with respect to the interest of the principal.) When he was given such power. then the agent is liable. 1889. Rationale: An agent occupies a fiduciary position and therefore is bound to exercise loyalty. 2. When can an agent appoint a sub-agent? So long as there’s no prohibition. However. the agent can’t be the borrower without the consent of the principal because the agent may not be a good borrower or he may be insolvent or he may not be a good risk. Note: This provision applies to both onerous and gratuitous transactions. the relation of principal and agent exists between the principal and the sub-agent. he may himself be the lender at the current rate of interest. Prohibition Sub-agent’s acts are VOID as to the principal. There is a danger here that the interest of the principal would be jeopardized. The agent shall be liable for damages if. to 3rd persons. If he has been authorized to lend money at interest. and the person appointed was notoriously incompetent or insolvent. Authority to appoint but Agent liable for acts of not designated by principal sub-agent if the sub-agent is notoriously incompetent or insolvent.
1898. he thereby obligates himself personally and by his own act. 2. What happens if the fellow agent acted beyond the scope of his authority? Then the innocent agent cannot be liable at all to the principal even if solidarity had been agreed upon. is not solidary. each of the agents is responsible for the nonfulfillment of the agency. if solidarity has not been expressly stipulated. 2003 Reason for general rule: Because an agent who acts as such within the scope of his authority represents the principal so that his contract is really the principal’s. Art. Exceptions: 1. is such act is within the terms of the power of attorney. Each is liable only for proportionate part of debt. except in the latter case when the fellow agents acted beyond the scope of their authority.) The fault or negligence of the fellow agent provided the latter acted within the scope of his authority.) The non-fulfillment of the agency. If the agent contracts in the name of the principal. “Scope of agent’s authority” includes: 9 Section II-D Art. however. or 2. even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. the agent is liable if he undertook to secure the principal’s ratification. and for the fault or negligence of his fellow agents. an act is deemed to have been performed within the scope of the agent’s authority.) When the agent binds himself. the principal can sue both the agent and the substitute. The responsibility of two or more agents. Reasons for exceptions: 1. Principal Agent 3rd Party (wrong party to complain if the principal doesn’t complain of the agent’s acts) General rule: “an agent who acts as such is not personally liable to the party with whom he contracts. the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was. In the cases mentioned in Nos. Art. 1900. But the innocent agent has a right later on to recover from the guilty or negligent agent. This article refers to the liability of the principal towards 3rd persons. Equity demands that the principal should be bound by the acts of the agent if the latter acts within the scope of his authority and in accordance with the instructions of the former. 1897. If a duly authorized agent acts in accordance with the orders of the principal. If solidarity is not stipulated. even though they have been appointed simultaneously. Requisite for article to apply: Authority to agent must be in writing. AGENCY 2nd Sem. Art. or ought to have been aware. 1895. he deprives the 3rd party with whom he contracts of any remedy against the principal. The agent becomes personally liable because y his wrong or omission. the contract is unenforceable against the principal.Finals Reviewer the sub-agent. So far as third persons are concerned. If solidarity has been agreed upon. Arevalo . it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. Art. 1896. 1899. What happens if the principal appoints an agent who is ignorant? Then the fault is the principal’s alone. and on those which he still owes after the extinguishment of the agency. Art. When can the principal sue the substitute? Under the premises given in the previous provision. as written.” Helen C.) When the agent expressly binds himself. he really acts without authority and therefore. and the principal does not ratify the contract. What happens if solidarity has been agreed upon? Then each of the agents becomes solidarily liable for: 1. The agent who acts as such is not personally liable to the party with whom he contracts. 1 and 2 of the preceding article. exceeding the scope of his authority. 1893. In this case. or 2. Art.) When the agent exceeds his authority. The agent owes interest on the sums he has applied to his own use from the day on which he did so. Art. unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. what is the liability to 2 or more agents? JOINT. 1894.) When he exceeds the limits of his authority without giving the third party sufficient notice of his powers.
) Where the principal and the agent reside in the same community. provided: a.) The law indulges in no bare presumptions that an agency exists. Exceptions: 1. an act of the agent within the terms of the power of attorney as written. and the agent has no notice that he is to act to the contrary. In case the fact of agency or the extent of the authority of the agent is controverted.) By usage and custom – a. and 2. and 5. before the agent’s acts.) A general authority is not an unlimited one. c. an enumeration of specific matters is followed by a general phrase is held to be limited in scope by the specific matters.) The means adopted are reasonable under the circumstances. It embraces all the necessary and appropriate means to accomplish the desired end.) An agent’s authority may not be enlarged through usage and custom in the following cases: Where it is sought to… Responsibility of principal when agent acts w/ improper motives: General rule: Motive of agent in entering into a K w/ a 3rd person is immaterial. ii. b. the usage is definite and well-known.) Agent’s enlarged authority is exercised for the principal’s protection. the principal is not liable to the 3rd person.) The agent cannot establish his own authority. but also to those acts and transactions incidental thereto. in accordance therewith. either by his representations or by assuming to exercise it. If there is a secret mutual understanding between the principal and the agent. 3. and such is not expressed in the written power of attorney. the burden of proof is on: The 3rd person to establish the fact of agency or the extent of authority of the agent.) Dispense with a legal requirement enacted for the principal’s benefit. He must also act with ordinary prudence and reasonable diligence.) General rule: principal must have notice of the alleged custom. As far as he is concerned. does the 3rd person have to inquire? No.) Ratification. is within the scope of the agent’s apparent authority notwithstanding that the agent may have exceeded the limits of his actual authority according to a secret understanding between him and the principal. the principal is estopped from claiming that the agent exceeded his authority.) Agent is unable to communicate w/ the principal.) By implication – agent’s authority extends not only to express requests. Exceptions: i.) Emergency really exists. Arevalo . and d.) Where the owner is seeking recovery of personal property of w/c he has been unlawfully deprived. it must be proved and presumed from facts. but also that which has apparently or impliedly been delegated to him. He is put on inquiry. 2003 Vary the terms of an express authorization. 4. Does the 3rd person have to inquire further if the power of attorney is written? No. 6. iv. 5.) Within the scope of the agent’s authority – Principal is subject to liability for lass caused to another by the 3rd persons reliance upon a deceitful representation of an agent in the course of his employment if: 10 Section II-D Helen C.) Where the 3rd person knew that the agent was acting for his benefit.) 2nd Sem.) By necessity – the existence of an emergency or other unusual conditions may operate to invest in an agent authority to meet the emergency. b. To hold the principal liable. in w/c case. Fundamental principles when inquiring whether authority exists: 1. c. Not only the actual authorization conferred upon the agent by the principal.) By the ejusdem generis rule – such that where in an instrument of any kind.) Change a rule of law or dispense with a formality required by law.Finals Reviewer AGENCY i.) Liability by estoppel. He is not required to inquire further than the terms of the written power of attorney. In such a case. may bind the principal.) Every authority must find its ultimate source in some act or omission of the principal. 2.) Apparent authority b. Ways by which the agent’s authority may be broadened or restricted: [I’m-UNDEr] 1. 2. ii. a 3rd person dealing with an agent must: Discover upon his peril not only the fact of agency but the nature and extent of authority of the agent.) By certain doctrines – a. iii. Principal’s responsibility for an agent’s misrepresentation: 1. 4.) Vary an essential quality of the agency relationship.) An authority cannot be established by mere rumor or general reputation.) Where the agent is authorized to deal in a particular place or in a particular market exchange.
) By custom. 11 Section II-D . Depositary: Agent Cannot commingle goods of the same kind. What the commission agent must do to avoid liability: Make a written statement of the damage and deterioration if the goods received by him do not agree w/ the description in the consignment. 2. Merely a go-between. Commission agent: Ordinary agent Commission agent Acts for and behalf of his May act in his own name principal. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney. Helen C. Need not have possession of the goods of his principal. Ignorance of the agent’s authority is no excuse. and usually selling in his own name. and this is especially true where the act of the agent is of an unusual nature. Do secret orders or private instructions prejudice 3 persons? No. property itself. shall distinguish them by countermarks. or has signified his willingness to ratify the agent’s acts. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment.) Beyond the scope of the agent’s authority – General rule: Principal is not bound. No relation w/ the thing buyers or sellers. Agent v. 3. Liability of commission agent as to goods received: If the commission agent received goods consigned to him. unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. 2003 a. Art. which belong to different owners. Art. 1904. 1901. Depositary Can commingle goods of the same kind. Such secret orders cannot be invoked as against 3rd parties if the agent had apparent authority. or c. Presumption established in this article: Damage in the merchandise were suffered while in the possession and custody of the agent. Who must ratify the contract? Only the principal. Purpose of this provision: Prevent any possible confusion or deception. But there must be knowledge on the part of the principal of the things he is going to ratify. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. Exception: when the principal takes advantage of a K made under the false misrepresentation of his agent. It is his duty to require the agent to produce his power of attorney to ascertain the scope of his authority. Effect of ratification by the principal: Ratification of a contract gives it the same effect as if the principal had originally authorized it. Commission agent: One whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold. if the principal has ratified. Exceptions: 1. he cannot be prejudiced by any secret understanding between the principal and the agent.) For the agent’s own benefit – Principal is liable (motive of agent immaterial).) Apparently authorized. 1902. A third person cannot set up the fact that the agent has exceeded his powers. Commission agent v. Arevalo rd Art.Finals Reviewer AGENCY 2nd Sem. He is bound to inquire as to the extent of the agent’s authority. Art. or before the principal has signified his willingness to ratify the agent’s acts. When can the 3rd person repudiate the contract? Before actual ratification by the principal. Must be in possession. and the w/c he purchases or sells. 1903. 1904 gives the general rule.) Representation is authorized. Ordinary agent v. The commission agent who handles goods of the same kind and mark. and designate the merchandise respectively belonging to each principal. He may also ask for the instructions of the principal. Art. b. Effect of the principal receiving the benefits of the transaction: He is deemed to have ratified it. broker: Commission agent Broker Has a relation to principal. 2. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens.) Within the implied authority of the agent to make for the principal. he is responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment. or in that of his principal. or the instructions as regards the agency. Duty of a 3rd person who deals w/ an agent: 3rd person deals w/ an agent at his peril.) Collecting banks.
Chapter 3. he shall so inform the principal. Rule given in this article: Commission agent can sell on credit only with the express or implied consent of the principal. but also for negligence. If he fails to do so. 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages. Should he do so. the sale shall be deemed to have been made for cash insofar as the principal is concerned. Right of the principal in case the commission agent sold goods on credit without authority: [CR] 2 alternatives: 1. Obligations of the Principal Art. in w/c case. the principal may sue the buyers in his own name. Liability is a contingent pecuniary liability. unless he proves that he exercised due diligence for that purpose. the principal may demand from him payment in cash. 1905. any interest or benefit from the sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agent’s expense. 1906. the agent amounts to no more than a guaranty. or 2. in all cases. but the commission agent shall be entitled to any interest or benefit. The agent is responsible not only for fraud. but this shall be adjudged with rigor by the courts. Section II-D . the principal’s remedy is to proceed against the debtor. he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. Art. 1910. in addition to the ordinary commission. Purpose of guarantee commission: To compensate the agent for the risks he will have to bear in the collection of the credit due to the principal. 1907. an agent receiving a guarantee commission cannot put up the defense that the debtor-3rd person possesses no property since this is precisely the risk the commission agent assumes. Art. Nature of liability of guarantee commission agent: Liable to principal if the buyer fails to pay or is incapable of paying. For negligence? Yes.Finals Reviewer AGENCY 2nd Sem. with a statement of the names of the buyers. which may result from such sale.) He may ratify the sale on credit. Should the commission agent. 1909. Arevalo 12 On the contrary. But he is not primarily the debtor. Obligation of the commission agent under this article: The commission agent who has made an authorized sale on credit must collect the credits due the principal at the time they become due and demandable. in w/c case it will have all the risks and advantages to him. Obligation of the commission agent where a sale on credit was authorized: An authorized sale on credit shall be deemed to have been on a cash basis insofar as the principal is concerned if the agent fails to inform the principal of such sale on credit with a statement of the names of the buyers. Why does the court have to take into consideration whether the agency was gratuitous or for compensation? In order to fix the liability of the agent for negligence only (not fraud). sell on credit. the commission agent guarantees to the principal the payment of debts arising through his agency. Art. Helen C. Should he fail to do so. Art. which shall be judged with more or less rigor by the courts.) He may require payment in cash. with authority of the principal. In such a case. In such a case. Guarantee commission: One where. without the express or implied consent of the principal. 2003 Art. the principal is not bound except when he ratifies it expressly or tacitly. As for any obligation wherein the agent has exceeded his power. Reason for this article: Prevent the agent from stating that the same was on credit when in fact it was made for cash. another called a guarantee commission. sell on credit. because the agent already assumed the risks of collection by accepting the guarantee commission. in consideration of an increased commission. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. The commission agent cannot. Does this article apply to a case where there is a guarantee commission? No. according to whether the agency was or was not for a compensation. Can the agent with a guarantee commission put up the defense of insolvency of the debtor? No. Should the commission agent receive on a sale. Is the agent liable for fraud? Yes. he shall be liable for damages unless he can show that the credit could not be collected notwithstanding the exercise of due diligence on his part.
) He may recover compensation due for performing the act which has been ratified. Liability of the principle to 3rd persons: Where the relation of agency legally exists. The principal cannot escape liability whether the tort is committed willfully or negligently so long as the tort is committed by the agent while performing his duties in furtherance of the principal’s business. Conditions to ratification: [ICK-PEC] 1. But before ratification. 3.) To advance should the agent so request sums necessary for the execution of the agency. Meaning of ratification in 2nd paragraph: Ratification is the adoption or affirmance by a person of a prior act which did not bind him. 2. 2. 6.) Principal must ratify acts in its entirety. and 5.Finals Reviewer Where can the specific obligations and duties of the principal to the agent be found? Usually in the contract creating the agency.) The act must be capable of ratification. Estoppel: precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation. It may be implied from the acceptance of benefits by the principal under a contract entered in his name. The authority created by Helen C.) 3rd person is bound by ratification to the same extent as he would have been bound if the ratified act had been authorized in the 1st instance. but which was done or professed to be done on his account. Liability of the principal for mismanagement of the business by the agent: Mismanagement of the business of the principal by the agent does not relieve said principal from the responsibility that he had contracted to 3rd persons. 5. as fully as if the agent had acted under original authority. ratification need not be communicated or made known to the agent or the 3rd party. Liability of principal for a tort committed by the agent: The principal is civilly liable to 3rd persons for torts of an agent committed at the principal’s direction or I the course and within the scope of the agent’s employment. 4. either express or implied. the 3rd party is free to revoke the unauthorized contract. 13 Principal obligations of the principal to the agent in the absence of such agreement: 1. but 2. and this is not altered y the fact that the agent may also be liable. 2003 ratification is subsequent but it is equivalent to prior authority. the principal will be liable to 3rd persons for all acts committed by the agent in his behalf in the course and within the actual or apparent scope of his authority.) The act must be done in behalf of the principal.) He cannot raise the question of the agent’s authority to do the ratified act. Substance is the principal’s inducement to another to act to his prejudice. the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.) Relieves the agent from liability to the 3rd party to the unauthorized transaction.) He must have had knowledge of material facts.) To pay the agent the compensation agreed upon or the reasonable value of the latter’s services. nor by the fact that some of the acts are to the principal’s advantage while others are to his disadvantage. thus giving effect to the act as if originally authorized.) Intent to ratify. Section II-D .) He assumes responsibility for the unauthorized act. 1911. and 2. But where the agent’s acts bind the principal.) To comply with all the obligations which the agent may have contracted in his name and within the scope of his authority. and 3. the latter may seek recourse against the agent. Even when the agent has exceeded his authority. The act or conduct of the principal rather than his communication is the key. Nor is it a defense that the act which caused the tort was unknown to him or even that it was in disobedience to his instructions. and 2. Art. Effects of ratification with respect to 3rd persons: 1. Estoppel Ratification Rests on intention Affects the entire transaction from the beginning Substance is confirmation of a unauthorized act or conduct after it has been done. Effects of ratification with respect to the agent: 1. Ratification v. 4.) To his principal for acting without authority.) To reimburse the agent for all advances made by him provided the agent is free from fault.) To indemnify the agent for all the damages which the execution of the agency may have caused the latter without fault or negligence on his part. To be effective. Arevalo Estoppel Rests on prejudice Affects only relevant parts of the transaction.) Principal must have capacity & power to ratify. The doctrine applies to the ratification of the act of an agent in excess of his authority of the act of one who purports to be an agent but who is really not.) He is not liable for acts outside the authority approved by his ratification. 3. AGENCY 2nd Sem. Effects of ratification with respect to the principal: 1. Must ratification be communicated to the agent or to the 3rd party? No.
one of them with the agent and the other with the principal. the rule should apply in the interest of justice. from the day on which the advance was made. If two or more persons have appointed an agent for a common transaction or undertaking. Why is solidarity the rule? Because of the common transaction. Basis of article 1911: Principle of estoppel. What is the nature of the agent’s right of lien? Specific or particular. The principal must also indemnify the agent for all the damages which the executive of the agency may have caused the latter. 1916. the principal must reimburse him therefor. Art. Is a broker always entitled to a commission? A broker is entitled to a commission if the sale is effected. which of the contracts will be preferred? If the contracts are compatible. without fault or negligence on his part. 1915. The principal must advance to the agent. even exercise or holds him out though the principal may as possessing. without prejudice to the provisions of Article 1544. 1913. provided the agent is free from all fault. and in the absence thereof. In the case referred to in the preceding article. Art. Helen C. they shall be solidarily liable to the agent for all the consequences of the agency. 1912. 1912 and 1913? The agent has the right to retain in pledge the things which are the object of the agency.) The agent is appointed for a common transaction or undertaking. Art. 3. Basis for the above rule: Equity. the sums necessary for the execution of the agency. Should it be immovable property. If they are incompatible. Should there be no inscription. Art. What happens when the principal fails to reimburse or indemnify the agent for expenses set forth in arts. they will both be given effect. one with the agent and the other with the principal? Yes.) The principals have all concurred in the appointment of the same agent. even if the agent was appointed separately. the ownership shall belong to the person acquiring it who in good faith 1st recorded it in the Registry of Property.Finals Reviewer AGENCY 2nd Sem. Necessary for the protection of innocent 3rd persons. the ownership shall be transferred to the person who may have 1st taken possession thereof in good faith if it should e movable property. Art. 1544: If the same thing should have been sold to different vendees. the ownership shall pertain to the person who in good faith was 1st in possession. the negligence. In case the agent sells the goods for more than his claim. It is not general in the sense that it gives the agent a right to retain the goods for claims disconnected with the agency. Since the principal receives the benefits of the agency. The agent may retain in pledge the tings which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles. Instance when solidarity is imposed by law. 2. and the two contracts are incompatible with each other. even if the business or undertaking was not successful.) There are 2 or more principals. If this situation arises. he should answer for the damages resulting from the execution thereof without fault or negligence on the part of the agent. provided there is good faith. Art. When two persons contract with regard to the same thing. if the agent is free from fault. that of prior date shall be preferred. No. should the latter so request. he alone shall be responsible. Arevalo 14 Section II-D . The reimbursement shall include interest on the sums advanced. if the agent was with fault. 1914. Yes. the principal shall be liable in damages to the third person whose contract must be rejected. to the person who presents the oldest title. Should the agent have advanced them. If the agent acted in bad faith. Art. and has a right to demand damages from the agent should the latter not perform the agency. have no notice or knowledge of the conduct of the agent. Thus. 1917. 2003 Apparent authority v. then the contract of prior date shall be preferred. Should the principal reimburse the agent for advances made by the latter even if the agency was unsuccessful? It depends. May 2 persons contract with regard to the same thing. but not if there is no perfected transaction. is he entitled to the excess? No. by his actually granted. permits his principal knowingly agent to exercise powers permits the agent to not granted to him. Authority by estoppel Apparent authority Authority by estoppel Arises in cases where the That which though not principal. if the agent has acted in good faith. Requisites for application of this article: [2C2] 1.
) Present.) An express stipulation which is not contrary to law. Helen C. 2003 2. Generally the death of one of several principals does not revoke the agent’s authority nor does the death of one of several agents put an end to the agency. civil interdiction. he alone shall be responsible to such person. If the agent acted in good faith and within the scope of his authority.) Revocation. Agency is extinguished: [WR-DEAD] 1. and 6. The agent can only demand damages.) Accomplishment of the object or purpose of the agency.) Dissolution of the firm/corp which entrusted or accepted the agency. kasalanan niya. Meaning of Presumption of continuance of agency: When once shown to have existed. insanity or insolvency of the principal or of the agent. 2.) If the agent acted in contravention of the principal’s instructions. the principal incurs liability. 3. 2. insanity or insolvency of the principal or of the agent. he is deemed to have impliedly ratified the agent’s acts. If the agent acted in bad faith. Reasons why the principal is not liable for the agent’s expenses: Under… 1. Why is presence necessary? Because the general rule in art 1919 is that death of any of the parties extinguishes agency. Art. 5.) Death.) Solvent. morals. Is the principal always liable for damages caused by a 3rd person or is it the agent who is liable? Whether the principal or the agent will be the one liable for damages to the 3rd person who has been prejudiced depends on whether the agent acted in bad faith or not. good customs. Arevalo .) By the dissolution of the firm or corporation which entrusted or accepted the agency.) When the agent incurred them with knowledge that an unfavorable result would ensue. 3. The principal is not liable for the expenses incurred by the agent in the following cases: [F*CKS] 1. 6. Note: Even if the reason for extinguishing the agency is not true.) By the withdrawal of the agent.) “Kasi.) Withdrawal of the agent. 1919. Modes of extinguishment. article 1544 governs and not arts.) By its revocation. 2. 4. 5. 1916 and 1917. eh. an agency relation will be presumed to have continued in the absence of anything to show its termination. The intention of the parties controls.) By operation of law. Who has the burden of proving the revocation/termination of agency? The burden of proving a revocation or other termination of agency is on the party asserting it. Note: If the contract is one of sale. civil interdiction.) By the expiration of the period for which the agency was constituted. generally: [ASO] 1. 15 Section II-D Chapter 4. Modes of Extinguishment of Agency Art.) Expiration of the period for which the agency was constituted.) By the death. unless the latter should wish to avail himself of the benefits derived from the contract.) Capacitated.) Subsequent acts of the parties which may be either: a.) By the act of both parties or by mutual consent.) By the accomplishment of the object or purpose of the agency. 2. specifically: [WR-DEAD] 1.) When it was stipulated that the expenses would be borne by the agent. or that the latter would be allowed only a certain sum. public order or public policy is binding between the parties. whether the death of one principal or of one agent terminates the agency would depend on the intention of the parties. 3.” 3.) The agent is guilty of bad faith and lack of diligence. 3. the agent can’t insist on reinstatement. b. 1918. 4. Modes of extinguishing an agency. What is the extent of liability covered under this article? Damages. but when the principal has availed of the benefits. 4. 2. What is good faith referred to in this article? Good faith here means that the agent had no knowledge that the principal is dealing with a 3rd person.) To punish the agent.) By the unilateral act of one of them. Instances wherein the principal is not liable for expenses incurred by the agent? In the instances enumerated under this article. However in the case where you have several principals and/or several agents. 3.) Agreement.Finals Reviewer AGENCY 2nd Sem. if the principal was not aware thereof. Necessary characteristics of the parties for the continuance of the agency: [PCS] 1. 4.) When the expenses were due to the fault of the agent.
then he may be liable for damages for his wrongful terminating act. If the loss was brought about by the principal as in the case where the principal sells the subject matter to another party notwithstanding that an agency had been constituted in reference to it. Why does dissolution of a firm or corp extinguish the agency? Dissolution of a corp extinguishes its juridical existence. the insolvency of the agent will ordinarily put an end to the agency. The general rule actually is.) If it is possible to substitute other material for that which was destroyed without substantial detriment to either party. upon the break of war. the principal and the agent. terminates as a matter of law with the destruction of the trust. But the list is not exclusive. the authority of the agent to act for his principal ceases by operation of law upon an adjudication of the principal’s insolvency. the fulfillment of the purpose for which the agency was created ipso facto terminates the agency. as a matter of law. does the principal incur any liability? It depends. even though the purpose for which the agency was created has not been accomplished. it deprives the offender during the period of his sentence of the right to manage his property and dispose of such property by any act or any conveyance inter vivos.) If the destroyed subject matter was not in fact essential to the contract.) If the act of the agent was executed without the knowledge of the death of the principal and the 3rd person who contracted w/ the agent acted in good faith. the expiration of such period ends the agency. 2003 Why is capacity necessary? For instance. like loss of the thing and novation (see art. a sub-agent’s authority terminates with the termination of the principal’s authority. 1919 gives only those causes of extinction which are particular to agency. or 2. Exceptions: 1. at least if it is in any way connected with the agent’s business which has caused his failure. Same is true for insane people. What happens when the object or the purpose of the agency is accomplished? As between the parties. no liability is assumed by him. Art. the principal loses control of the subject matter of the agency. What happens if the principal’s authority terminates? A position which flows from a trust relationship whether directly or indirectly. Arevalo 16 In the absence of any agreement by the parties to the contrary. Does war extinguish agency? During the existence of war. General rule as to death of the principal or agent: By reason of the very nature of the relationship between the principal and the agent (which is fiduciary – argh!). Exceptions: Section II-D .) A partial loss or destruction. and 3. But since it is generally conceded that war suspends all commercial intercourse between the residents of 2 belligerent states.) The circumstances of the parties.) If the agency is coupled with an interest. What happens when the term for which the agency was supposed to continue expires? When an agency is created for a fixed period.Finals Reviewer AGENCY 2nd Sem. an agency may be extinguished by the modes of extinguishments of obligations in general whenever they are applicable. On the other hand. a contract of agency is inoperative if the agent or the principal is an enemy alien. An agency then terminates if a change in the law makes the purpose of the agency unlawful. What happens if the subject matter of the agency is lost or destroyed? Helen C. Can the period be implied? Yes. In case of loss of the subject matter. agency is distinguished ipso jure upon the death of the principal. cannot validly give consent. What happens if no time is specified? The agency terminates at the end of a reasonable period of time. 2. the general rule is that agency is terminated. from… 1.) The terms of the agreement. Why is solvency necessary? As by an act of insolvency.) Purpose of the agency. Consequently. authority of agent is terminated. the loss or destruction of the subject matter of the agency terminates the agent’s authority to deal with reference to it. A person under civil interdiction hence. But if the subject matter is lost without the fault of the principal. Are the modes of extinguishments of agency exclusive? No. Will a change of conditions affect the agency? General rule: When there is a basic change in the circumstances surrounding the transaction not contemplated by the parties which would reasonably lead the agent to believe that the principal would not desire him to act. Exceptions: 1. and 3. in the case of civil interdiction. 2. Does legal impossibility terminate agency? Implied in every contract is the understanding that it shall be capable of being carried out legally at the time called for by the contract. 1231).
is there any way by which the agent can hold him liable for damages? Yes. Kinds of Revocation: 1.) As to former customers. Reasons: 1. or has reason to know. 1. Does it matter if the agency is gratuitous or with compensation when we speak of revocation by the principal? No. what a court does is to determine 2 things: 1. e. but subject to the contractual obligations owing the principal.) Express. and compel the agent to return the document evidencing the agency. the agent’s authority may be revived. Is express notice of revocation to the agent necessary? As between the principal and the agent. Arevalo .) When the principal directly manages the business entrusted to the agent. and 2. the principal shall be liable in damages occasioned by the wrongful discharge of the agent before the expiration of the period fixed. it’s called revocation. 2.g.) As to other persons. actual notice must e given to them because they always assume the continuance of the agency relationship. express notice to the agent that the agency is revoked is not always necessary.) Where the principal and agent are in close daily contact.) Confidence being the cardinal basis of the relation. Some clearly is of so general a nature that equity ought not attempt to restrict its subsequent use. 3. there is sufficient notice. Such revocation may be express or implied. it stands to reason that it should cease when such confidence disappears.) Since the authority of the agent emanates from the principal. not all knowledge acquired by the agent is of a confidential nature. when he does so. after the service is terminated. if the principal wishes to terminate the agency the law must enable him to do so. Principle behind enjoining an agent from using confidential information: There is in the contract of service subsisting between the principal and the agent an implied contract on the part of the agent that he will not. the principal can be held liable for damages. Is notice of revocation to the agent necessary? Yes. or b. Art. Confidential information It is difficult to determine whether information is confidential or not.) If the original circumstances are restored within a reasonable period of time. For instance. Reason for requiring agent to return the document evidencing the agency: To prevent the agent from making use of the power of attorney and thus avoid liability to 3rd persons who may subsequently deal with the agent on the faith of the instrument. May the agent renounce the agency at will? Yes. 2. use information which he has gained while the service has been subsisting to the detriment of his former employer.) The principal-agent relationship is consensual and personal in nature. A revocation without notice to the agent will not render invalid an act done in pursuance of the authority. Reason: The essence of the principal-agent relationship is the consent and willingness of the agent to act for the principal. 1920. Is notice of revocation to 3rd persons necessary? Yes. 2. or 2. (The principal cannot even sue for affirmative specific performance because that would lead to involuntary servitude!) 17 Section II-D Helen C.) If the agency was constituted for a fixed period. May an agency be terminated by a subsequent act of the agent? Yes. the agent’s authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions.) If the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid payment of commission about to be earned. If the party to be notified actually knows.Finals Reviewer AGENCY 2nd Sem. The law cannot compel the parties to continue an agency if they do not want to do so.) Whether the knowledge or information is indeed confidential. agent could contract principal for instructions if possible). No one can nor should In case a principal does revoke an agency. facts indicating that his authority has been terminated or suspended. The principal may revoke the agency at will. (But when in doubt. his authority will not be terminated if he acts reasonably. it’s called withdrawal or renunciation.) When the principal appoints a new agent for the same business or transaction.) Where the agent has reasonable doubts as to whether the principal would desire him to act. because while the relation of principal and agent is confidential. 2003 be forced to retain another as his agent against his will. 2.) Whether its subsequent use ought to be prevented.) Implied. notice by publication is enough. May an agency be terminated by a subsequent act of the principal? Yes. art 1920 makes no distinction.: a. Usually. 1. What kind of notice should you give 3rd persons? 1. 3.
Art. What does the above article provide? It provides for another case of implied revocation. If the agency has been entrusted for the purpose of contracting with specified persons. its revocation shall not prejudice the latter if they were not given notice thereof.) Where he has conducted himself in a manner incompatible with his duties as agent. Effect of direct management of the business by the principal himself: Generally.) There is implied revocation of the previous agency when the principal appoints a new agent for the same business or transaction if there is incompatibility. without prejudice to the provisions of the two preceding articles. dealing directly with third persons. any one of them may revoke the same without the consent of the others. 1924. Arevalo 18 General rule: Special information needs special information of revocation. What is the effect of revocation in relation to 3rd persons if the agent was authorized to contract with specified persons? If the agency is created for the purpose of contracting with specified persons. that in art. 1923. Does a violation of the instructions of the principal amount to a renunciation? No. The agency is revoked if the principal directly manages the business entrusted to the agent. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. 1921. Mere fact that agent violates his instructions does not amount to renunciation.) There is no implied revocation where the appointment of another agent is not incompatible with the continuation of like authority in the 1st agent. 2003 know. But the revocation does not become effective as between the principal and the agent unless it is in some way communicated to the latter. 1922 Must be personal. or 3. 2. Art. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent. the fact that the revocation was advertised in a newspaper of general circulation would be sufficient to 3rd persons for publication constitutes notice upon everybody and this is true whether or not such 3rd persons have read the newspaper concerned. notice is not required if the 3rd persons already know of the revocation. But of course. Except: If you can prove that the 3rd person read the notice in the newspaper. the rights of 3rd persons who acted in good faith and without knowledge of the revocation will not be prejudiced thereby. Again. 1925. Art. its revocation will not prejudice such 3rd persons until notice thereof is given them. he does not cease to become an agent. as for example… 1. Art. or if the 1st agent is not given notice of the appointment of the new agent. Effect of revocation in relation to 3rd persons if the agent was authorized to contract with the public in general: In case the agent has general powers. revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. they have a right to presume that the representation continues to exist in the absence of notification by the principal. Art. Revocation must be known Even if 3rd person doesn’t Helen C.) When he abandons the object of his agency and acts for himself in committing a fraud upon his principal. Rationale: Since the appointment of an agent by 2 or more principals for a common transaction or undertaking makes them solidarily liable to the agent for all consequences of the agency. 2nd Sem.) When he files a complaint against the principal and adopts an antagonistic attitude towards him. and although he may thus render himself liable to the principal. What does this article mean? 1. or 2. He can do so impliedly. Exception: when the only desire of the principal in doing so is for him and the agent to manage the business together. it revokes the agency because there would no longer be any basis for the representation previously conferred. In this case. 1921 Art. Notice required in art. Form of renunciation: It is not always necessary for the agent to renounce the agency expressly. May be personal. The reason for this is obvious. Since 3rd persons have been made to believe by the principal that the agent is authorized to deal with them. however. When two or more principals have granted a power of attorney for a common transaction. 1922. If the agent had general powers. as long as there is publication in a newspaper of general circulation. then each one of the principals should be granted the right to revoke the Section II-D .Finals Reviewer AGENCY to 3rd person informed of the appointment. 1921 v. 1922: Art. innocent 3rd parties dealing with the agent will not e prejudiced by the revocation before they had knowledge thereof.
Arevalo 19 Section II-D . Even without the consent of the principal. 3. An agency cannot be revoked if a bilateral contract depends upon it. The terminology is not controlling. Remember that in a solidary obligation. is such terminology controlling in all cases? No. the agent must indemnify him therefor. Art. unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself.) When the agency is the means of fulfilling an obligation already contracted. the act of one is the act of all. 1926.) Indemnify the principal should the latter suffer any damage by reason of such withdrawal. If the latter suffer any damage by reason of the withdrawal. e. as regards the special matter involved in the latter. pledge or lien created by the principal with the agent being given the power If the contract of agency stipulates that such will be irrevocable. pledge or lien effectual. he may be subject to liability for breach of contract or for tort.) When the interest is already terminated. Art. and he is looking to the exercise of the power as the means of reimbursement or indemnity. Obligation of agent if he withdraws from agency without just cause: 1. in the latter case. Basis: Constitutional prohibition against involuntary servitude. 2. Even if an agency is made in terms irrevocable. If an agency is coupled with an interest.g.) When the interest in the thing concerning which the power is to be exercised arises from an assignment.) When the agent has parted with value or incurred liability at the principal’s request. Exceptions: [BF=Partner] 1. does this mean that the principal can never ever revoke it? No.) Effect of the issuance of a special power as regards the general power: The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. An agency coupled with an interest removes that control. A general power of attorney is revoked by a special one granted to another agent. and 2. But.) Notify principal (even if w/ just cause). (Note that this can also apply if a special power is subsequently given to the same agent. Another to whom a special power is given. Instances of an agency coupled with an interest: 1. the fact will not prevent its revocation by the principal when the agency is not in fact coupled with an interest. coupled with an interest. or if it is the means of fulfilling an obligation already contracted. one to whom a general power is previously granted. Helen C. 2003 to deal with the thing in order to make the assignment.: 1. Why is it said that agencies coupled with interest are not true agents? Because persons with proprietary interests in the subject matter of their agency are not true agents at all. Requisite for agency to be irrevocable for being coupled with a interest: Interest of the agent must be in the subject matter of the power conferred and not merely an interest in the exercise of the power.) Irrevocability can never be used as a shield for the perpetration of acts in ad faith. The law will never permit the agent to commit frauds against the principal.) When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.) When a bilateral contract depends on the agency. 2. How many agents are involved in this article? 2. 2. General rule: Principal may revoke an agency at will since the essence of agency is the agent’s duty of obedience to the principal. breach of confidence or betrayal of trust. be terminated by the sole will of the principal? No. Reason for indemnity: To answer for losses and damages occasioned by the non-fulfillment of his obligation as agent. 1928. 1927. power of attorney even without the consent of the others. or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.Finals Reviewer AGENCY 2nd Sem. You can still revoke in extreme situations. Art. Whether an interest will make an agency irrevocable exists in a particular case is to be determined from the entire agreement between the parties and from the facts and circumstances. Can an agency. The agent may withdraw from the agency by giving due notice to the principal. One of the hallmarks of the agency relation is the control of the principal over the acts of the agent and over the subject matter of the agency. Does the agent have a right to renounce or withdraw from the agency at any time? Yes.
If the agent dies.) The withdrawal is based on the impossibility of continuing the agency without grave detriment to himself. or a presumed or tacit agency. being based on representation. I don’t think the problems are all that important. but I wouldn’t have had to if you didn’t stamp your huge seal right smack center of every page! Section II-D . and 2. or in the interest of a third person who has accepted the stipulation in his favor. Besides. 2. Quimson problems not Enrile’s. 2003 Is the agent liable for indemnity if the withdrawal was for just cause? No. General rule: Agency is terminated instantly by the death of the principal. This is to prevent damage or prejudice to the principal. GOOD LUCK! ☺ This is for that small syndicate of people who name themselves after a labor case! I basically just typed up the reviewer minus the cases and problems. Can the heirs continue the agency? General rule: No.) If the agency has been constituted in the common interest of the principal and the agent. even if he should withdraw from the agency for a valid reason. If the agent dies. Art.) Adopt such measures as the circumstances may demand in the interest of the principal. such 3rd persons are also protected where it is not shown that the agent had knowledge of the termination of the agency because of the death of the principal or any other like cause which extinguishes the agency. Sorry. But in the Helen C. and 2. In case of death of agent. what must the heirs do? 1. The agency shall remain in full force and effect even after the death of the principal. Exceptions: 1. The agent. his heirs must notify the principal thereof. we just have to find them! Thanx to that other group of people who name themselves after “an imaginary perfect place”. Anything done by the agent. he must continue to act until the principal has had reasonable opportunity to take the necessary steps like the appointment of a new agent to remedy the situation caused by the withdrawal. 1930. without knowledge of the death of the principal or of any other cause which extinguishes the agency.) Fortuitous event. Art. However. extinguishes the agency. 1931. Obligation of agent after withdrawal: Even when withdrawal is for a valid reason.) If the agency has been constituted in the interest of a 3rd person who has accepted the stipulation in his favor.) Agency by operation of law. Exceptions: 1. What happens when the agent sues the principal? Equivalent to withdrawal of the agent. both agent and 3rd person must be. Our case outline differs from theirs a bit too. I plagiarized your reviewer guys. Arevalo 20 same way that revocation of the agency does not prejudice 3rd persons who have dealt with the agent in good faith without notice of revocation. we’re all set with case digests na. What does this article provide? It provides that the death of the principal or any other like cause. the principal’s heirs have no obligation to tell the agent. there is no one to e represented where the principal is already dead.) Notify the principal to enable the latter reasonable opportunity to take such steps as may be necessary to meet the situation. Art. must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation.Finals Reviewer AGENCY 2nd Sem. is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. since an agency calls for personal services on the part of the agent. and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. 1929. or 2. his heirs should tell the principal. they’re Atty. if it has been constituted in the common interest of the latter and of the agent. Rationale: Agency.) Agency is coupled with an interest in the subject matter of the agency. if the principal dies. Art. Does this article only require the agent to be in good faith? No. 1932. Agent cannot be held liable if the agent withdraws for a valid reason as when: 1.