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Finals Reviewer

Chapter 1. Nature, Form and Kinds of


Agency
Art. 188. !y the contract of agency a person
"inds himself to render some service or to do
something in representation or on "ehalf of
another, with the consent or authority of the
latter.
Agency# A relationship which implies a power in an
agent to contract with a $rd person on "ehalf of a
principal.
Kind of Contract# %t is a preparatory contract. %t is a
contract entered not for its own end "ut to "e a"le to
enter into other contracts.
A&'NC(
)nd *em+ ),,$
'ssential 'lements of Agency#
1.- Consent, e.press or implied+
).- /"0ect of the contract is the e.ecution of a
0uridical act in relation to $rd persons+
$.- 1he agent acts as a representative and not for
himself+
2.- 1he agent acts within the scope of his authority.
Acts that cannot "e done through an agent#
1.- 3ersonal acts# if personal performance is re4d "y
law or pu"lic policy or agreement+
).- Criminal or illegal acts# attempt to delegate
another authority to do an act which, if done "y
the principal would "e illegal, is void.
Nature of Relation "etween 3rincipal and Agent#
Fiduciary, "ased on trust and confidence.
Agency v. 5ease of 6or7 or *ervice
Agency5ease of 6or78*ervice
!asis is representation.!asis is employment
Agent e.ercises5essor only performs
discretionary powers.ministerial functions.
/nly ) persons involved#$ persons are involved#
lessor and lesseeprincipal, agent 9 $rd
person.
Commercial or "usiness:atters of mere manual or
transactions.mechanical e.ecution.
Agency v. &uardianship
Agency
Agent represents a
capacitated person.
Agent appointed "y
principal and can "e
removed "y him.
Agent su"0ect to directions
of principal.
Agent can ma7e principal
personally lia"le.
Agency to *ell v. *ale
Agency to sell
Agent receives the goods
as the goods of the
principal.
Agent delivers proceeds of
the sale.
Agent can return o"0ect in
case he is una"le to sell to
a $rd person.
Agent in dealing with the
thing received is "ound to
act accdg to the
instructions of his principal
Characteristics#
1.- Consensual# perfected "y mere consent+
).- Nominate# it has its own name+
$.- 3rincipal# does not depend on another contract
for its e.istence and validity+
2.- 3reparatory# entered into as a means to an end+
;.- <nilateral8!ilateral#
a.- <nilateral# if contract is gratuitous, it
creates o"ligations for only one of the
parties, i.e. agent.
".- !ilateral# if for compensation, it gives
rise to reciprocal rights and o"ligs.
!asis# Representation.
1he acts of the agent on "ehalf of the principal within
the scope of his authority produce the same legal and
"inding effects as if the principal personally did them.
=istinguishing Features#
1.- Representative character+ and
).- =erivative authority.
3urpose# 1o e.tend the personality of the principal
through the facility of the agent.
3arties#
1.- 3rincipal+ and
).- Agent.
6ho can "e principal>
1he principal may "e a natural person or a 0uridical
person. ?e must "e capacitated. 1he rule is if a person
is capacitated to act for himself or in his own right, he
can act through an agent.
:ust the agent have capacity>
%nsofar as $rd persons are concerned, it is enough
that the principal is capacitated+ "ut insofar as his
o"ligations to his principal are concerned, the agent
must "e a"le to "ind himself.
&uardianship
&uardian represents an
incapacitated person.
&uardian appointed "y
court and stands in loco
parentis.
&uardian not su"0ect to
directions of ward "ut
must act for his "enefit.
&uardian has no power to
impose personal lia"ility on
his ward.
*ale
!uyer receives the goods
as owner.
!uyer pays the price.
&enerally, "uyer cannot
return the o"0ect sold.
!uyer can deal with the
thing as he pleases, "eing
the owner.
?elen C. Arevalo 1 *ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
Agent v. %ndependent Contractor
Agent%ndependent Contractor
Represents the principal.'mployed "y employer.
Acts under the control andActs according to his own
instructions of the principal method.
3rincipal lia"le for torts'mployer not lia"le for
committed "y agent w8intorts committed "y
scope of authority.independent contractor.
Art. 18A. Agency must "e e.press, or implied
from the acts of the principal, from his silence or
lac7 of action, or his failure to repudiate the
agency, 7nowing that another person is acting on
his "ehalf without authority.
Agency may "e oral, unless the law re4uires a
specific form.
Classifications of Agency# as toB
1.- :anner of Creation#
a.- '.press# actually authoriCed, either
orally or in writing.
".- %mplied# implied from acts of principal,
from his silence or lac7 of action or his
failure to repudiate the agency 7nowing
that another person is acting on his
"ehalf w8o authority.
).- Character#
a.- &ratuitous# agent receives no
compensation for his services.
".- /nerous# agent does receive
compensation.
$.- '.tent of "usiness covered#
a.- &eneral# comprises all the "usiness of
the principal.
".- *pecial# comprises one or more specific
transactions.
2.- Authority conferred#
a.- Couched in general terms# deemed to
comprise only acts of administration.
".- Couched in specific terms# authoriCes
only the performance of a specific act8s.
;.- Nature and effects#
a.- Representative# agent acts in name and
representation of principal.
".- *imple8Commission# agent acts in his
own name "ut for the account of the
principal.
Can agency "e presumed>
&enerally N/ "ecause the relationship "etween the
principal and agent must e.ist as a fact. 1he only
e.ceptions to this rule are when agency arises "y
operation of law or agency is presumed to prevent
un0ust enrichment.
Form# &enerally, N/ formal re4uirements. AgentDs
authority may "e oral or written, it may "e in pu"lic or
private writings. 1he only e.ception is when the law
re4uires a specific form Ee.g. sale of real property or any
interest therein "y an agent.-
Art. 18F,. Acceptance "y the agent may also "e
e.press, or implied from his acts which carry out
the agency, or from his silence or inaction
according to the circumstances.
Form of Acceptance "y Agent#
Acceptance may "e e.press or implied+ e.press when
it is oral or written+ implied when it can "e inferred from
the acts of the agent which carry out the agency, or
from his silence or inaction accdg to the circumstances.
Art. 18F1. !etween persons who are present,
the acceptance of the agency may also "e implied
if the principal delivers his power of attorney to
the agent and the latter receives it without any
o"0ection.
!etween ) persons who are present, when it acceptance
deemed implied>
6hen the agent receives a power of atty from the
principal himself personally without o"0ection.
%s this presumption conclusive>
N/, it can "e re"utted "y contrary proof.
3ower of attorney# An instrument in writing "y which
one person, as principal, appoints another as his agent
and confers upon him the authority to perform certain
specified acts or 7inds of acts on "ehalf of the principal.
%ts primary purpose is to evidence the authority of the
agent to $rd parties w8 whom the agent deals.
Construction
A power of atty is strictly construed and strictly
pursued. 1he instrument will "e held to grant only those
powers which are specified, and the agent may neither
go "eyond nor deviate from the power of atty. 1he only
e.ception is when strict construction will destroy the
very purpose of the power.
:eaning of GpresentH
Not limited to face@to@face encounters. ) persons
conversing on the phone are also considered as "oth
GpresentH.
Art. 18F). !etween persons who are a"sent,
the acceptance of the agency cannot "e implied
from the silence of the agent, e.cept#
1.-6hen the principal transmits his power
of attorney to the agent, who receives it
without any o"0ection+
).-6hen the principal entrusts to him "y
letter or telegram a power of attorney
with respect to the "usiness in which he
is ha"itually engaged as an agent, and he
did not reply to the letter or telegram.
) 6ays of &iving Notice of Agency
1.- !y special information+ or
).- !y pu"lic advertisement.
?elen C. Arevalo ) *ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
its agents. !ut it may "e estopped through
affirmative acts of its officers acting within the
scope of their authority.
'ffects#
1.- *pecial information# the person appointed as
agent is considered such with respect to the
person to whom it was given.
).- 3u"lic advertisement# Agent is considered such
with regard to any person.
Revocation I An agency is revo7ed in the same manner
as it was given.
&eneral rule# *pecial information needs special
information of revocation.
'.cept# if you can prove that the $rd person read the
notice in the newspaper.
Art. 18F$. %f a person specially informs another
or states "y pu"lic advertisement that he has
given a power of attorney to a third person, the
latter there"y "ecomes a duly authoriCed agent, in
the former case with respect to the person who
received the special information, and in the latter
case with regard to any person.
1he power shall continue to "e in full force until
the notice is rescinded in the same manner in
which it was given.
Agency "y 'stoppel# 1here is really no agency at all, "ut
the alleged agent seemed to have apparent or
ostensi"le, although no real authority to represent
another.
1.- 'stoppel of Agent I /ne professing to act as
agent for another may "e estopped to deny his
agency "oth as against his asserted principal
and the $rd persons interested in the transaction
in which he is engaged.
).- 'stoppel of 3rincipal I
a.- As to Agent I /ne who 7nows that
another is acting as his agent and fails
to repudiate his acts, or accept the
"enefits of them, will "e estopped to
deny the agency as against such other.
".- As to su"@agent I 1o estop the principal
from denying his lia"ility to a $rd person,
he must have 7nown or "e charged with
7nowledge of the fact of the
transmission and the terms of the
agreement "etween the agent and su"@
agent.
c.- As to $rd persons I /ne who 7nows that
another is acting as his agent or
permitted another to appear as his
agent, to the in0ury of $rd persons who
have dealt with the apparent agent as
such in good faith and in the e.ercise of
reasona"le prudence, is estopped to
deny the agency.
$.- 'stoppel of $rd 3ersons I A $rd person, having
dealt with one as an agent may "e estopped to
deny the agency as against the principal, agent
or $rd persons in interest.
2.- 'stoppel of the govt I 1he govt is neither
estopped "y the mista7e or error on the part of
?elen C. Arevalo $
Art. 18F2. 6hen a sale of a piece of land or any
interest therein is through an agent, the authority
of the latter shall "e in writing+ otherwise, the sale
shall "e void.
A letter is sufficient JKimeneC v. Ra"otL.
Art. 18F;. Agency is presumed to "e for a
compensation, unless there is proof to the
contrary.
!ro7er# /ne who in "ehalf of others, and for
compensation or fee, negotiate contracts relative to
property. ?e is the negotiator "etween the parties,
never acting in his own name, "ut in the name of those
who employ him. ?e is strictly a middleman and for
some purposes, the agent of "oth parties.
6hen is a "ro7er entitled to compensation>
A "ro7er is entitled to commission whenever he rings
to his principal a party who is a"le and willing to ta7e
the property, and enter into a valid contract upon the
terms named "y the principal, although the particulars
may "e arranged and the matter negotiated and
completed "etween the principal and the purchaser
directly. A "ro7er is never entitled to commission for
unsuccessful efforts.
=oes the law allow dou"le agency>
*uch agency is disapproved "y law for "eing against
pu"lic policy and sound morality. 1he e.ception is where
the agent acted with full 7nowledge and free consent of
the principals.
%n case the agent assumes a dou"le agency, what is his
right to compensation>
1.- %f with 7nowledge of "oth principals I recovery
can "e had from "oth.
).- %f without 7nowledge of "oth I agent can
recover from neither.
$.- %f with 7nowledge of only one I as to the
principal who 7new of that fact and as to the
agent, they are in pari delicto and the courts
shall leave them as they were, the contract
"etween them "eing void as against pu"lic polisy
and good morals.
Art. 18F. An agency is either general or
special.
1he former comprises all the "usiness of the
principal. 1he latter, one or more specific
transactions.
Classification of Agents#
1.- <niversal agent# /ne employed to do all acts
that the principal may personally do, and which
*ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
the principal can lawfully delegate to another the
power of doing.
).- &eneral agent# /ne employed to transact all the
"usiness of his principal, or all "usiness of a
particular 7ind or in a particular place, or in
other words, to do all acts connected with a
particular trade, "usiness, or employment.
$.- *pecial83articular agent# /ne authoriCed to act
in one or more specific transactions, or to do
one or more specific acts, or to act upon a
particular occasion. e.g.#
a.- Atty at law# /ne whose "usiness is to
represent clients in legal proceedings.
".- Auctioneer# /ne whose "usiness is to
sell property for others to the highest
"idder at a pu"lic sale.
c.- !ro7er# /ne whose "usiness is to act as
intermediary "etween ) other parties.
d.- Factor# /ne whose "usiness is to receive
and sell goods for a commission, "eing
entrusted with the possession of the
goods involved in the transaction.
Attorney@in@fact# /ne who is given authority "y his
principal to do a particular act not of a legal character.
%n strict legal sense# An agent having a special authority
created "y deed.
&eneral Agent v. *pecial Agent J*N'1%L
As toB&eneral agent*pecial agent
/nly one or more*cope ofAll acts connected
specific acts inauthorityw8 the "usiness in
pursuance ofwhich he is
particularengaged.
instructions or w8
restrictions
necessarily implied
from the act to "e
done.
*ingle transactionNature of*eries a
or a series ofservicetransactions
transactions notauthoriCedinvolving a
involving continuitycontinuity of
of service.service.
Cannot in a manner!y an act within'.tent to
"eyond or outsidethe scope of hiswhich agent
the specific acts w8cauthority althoughmay "ind
he is authoriCed toit may "e contraryprincipal
perform.to his special
instructions.
1erminationApparent authority1ermination
of authoritydoes not terminate effective as to $rd
"y mere revocation party unless agency
of authority w8owas for purpose of
notice to $rdcontracting w8 that
$rd party.parties.
*trictly construed.Construction :erely advisory.
5imits the authorityof
of agent.instructions
of principal
Art. 18FF. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power
or that the agent may e.ecute such acts as he may
consider appropriate, or even though the agency
should authoriCe a general or unlimited
management.
'.amples of acts of mere administration#
1.- 1o sue for collection of de"ts+
).- 1o employ wor7ers or servants and employees
needed for the conduct of "usiness+
$.- 1o engage counsel to preserve the ownership
and possession of the principalDs property+
2.- 1o lease real property to another person for 1
year or less, provided the lease is not
registered+
;.- 1o ma7e customary gifts for charity or to
employees in the "usiness managed "y the
agent
.- 1o "orrow money if it "e urgent and
indispensa"le for the preservation of the things
under administration.
?ow are contracts of agency construed>
Contracts of agency as well as general powers of
attorney must "e interpreted in accordance with the
language used "y the parties. 1he real intention of the
parties is primarily determined from the language used
and gathered from the whole instrument. %n case of
dou"t, resort must "e had to the situation, surroundings
and relations of the parties. 1he intention of the parties
must "e sustained rather than defeated. *o if the
contract "e open to ) constructions, one of which would
uphold the intention while the other would overthrow it,
the former is to "e chosen.
:':/R%M' 1?%*# J3NC@6%&55*@3&@CAR*L
Art. 18F8. *pecial powers of attorney are
necessary in the following cases#
1.-1o ma7e such payments as are not
usually considered as acts of
administration+
).-1o effect novations which put an end to
o"ligations already in e.istence at the
time the agency was constituted+
$.-1o compromise, to su"mit 4uestions to
ar"itration, to renounce the right to
appeal from a 0udgment, to waive
o"0ections to the venue of an action or to
a"andon a prescription already ac4uired+
2.-1o waive any o"ligation gratuitously+
;.-1o enter into any contract "y which the
ownership of an immova"le is
transmitted or ac4uired either
gratuitously or for a valua"le
consideration+
.-1o ma7e gifts, e.cept customary ones for
charity or those made to employees in
the "usiness managed "y the agent+
?elen C. Arevalo 2 *ection %%@=
Finals Reviewer
F.-
A&'NC(
)nd *em+ ),,$
;.- Fi. the terms of the sale unless there "e set
conditions stipulated "y the principal+
.- *ell only for cash+
F.- Receive the price unless he was authoriCed only
to solicit orders.
8.-
A.-
1,.-
11.-
1).-
1$.-
12.-
1;.-
1o loan or "orrow money, unless the
latter act "e urgent and indispensa"le for
the preservation of the things which are
under administration+
1o lease any real property to another
person for more than one year+
1o "ind the principal to render some
service without compensation+
1o "ind the principal in a contract of
partnership+
1o o"ligate the principal as a guarantor
or surety+
1o create or convey real rights over
immova"le property+
1o accept or repudiate an inheritance+
1o ratify or recogniCe o"ligations
contracted "efore the agency+
Any other act of strict dominion.
1he ff are not included in a 3ower to :ortgage
1he power to#
1.- *ell+
).- '.ecute a )nd mortgage+
$.- :ortgage for the agentDs personal "enefit or for
the "enefit of any $rd person, unless the contrary
has "een clearly indicated.
=oes the principal have the power to revo7e a contract
giving an agent e.clusive authority to sell>
('*. !ut he may not have the right to use such
power if he has agreed not to e.ercise such power
during a certain period. %n case he fails to comply with
this o"ligation@not@to@do, he will "e lia"le for damages.
Art. 188,. A special power to compromise does
not authoriCe su"mission to ar"itration.
Rationale#
A principal may authoriCe his agent to compromise
"ecause of a"solute confidence in the latterDs 0udgment
and discretion to protect the formerDs rights and o"tain
for him the "est "argain in the transaction. %f the
transaction would "e left in the hands of an ar"itrator,
said ar"itrator may not en0oy the trust of the principal.
6hat happens if the agent is specifically authoriCed to
su"mit to ar"itration>
1hen the ar"itration award "inds the principal,
provided, of course, that the agent acted within the
scope of his authority.
Art. 1881. 1he agent must act within the scope
of his authority. ?e may do such acts as may "e
conducive to the accomplishment of the purpose of
the agency.
Authority# 1he power of the agent to affect the legal
relations of the principal "y acts done in accordance with
the principalDs manifestation of consent to him. 1he
authority of the agent is the very essence I sine 4ua
non I of the principal and agent relationship. 1his
authority, unless it is otherwise agreed, includes only
the authority to act for the "enefit of the principal, and
the source of the authority is the principal and never the
agent.
Kinds of Authority#
1.- Actual# when it is actually granted, and it may
"e e.press or implied. %t results from what the
principal indicates to the agent.
).- '.press# when it is directly conferred "y words.
$.- %mplied# when it is incidental to the transaction
or reasona"ly necessary to accomplish the
purpose of the agency, and therefore, the
; *ection %%@=
*cope of &eneral Authority to 3urchase
6here an agentDs power to purchase is general and
unrestricted, he has implied authority to do whatever is
usual and necessary in the e.ercise of such power. ?e
may#
1.- =etermine the usual and necessary details of the
contract,
).- agree upon the price,
$.- modify or rescind the contract of purchase,
2.- accept delivery for his principal,
;.- give directions for the delivery of the property
purchased, and
.- may "orrow money to pay for the care and
preservation of the property purchased.
!ut he has no special power to
1.- *ettle a contest "etween the principal and a $rd
person regarding the ownership of goods
purchased, or
).- Agree to an account stated, or
$.- =o anything not usual or necessary to the
e.ercise of such authority.
*cope of *pecial Authority to 3urchase
6here the agency is a special one, or is restricted to
purchases upon certain terms and conditions, the agent
has no authority to
1.- 3urchase upon different terms and conditions
from those authoriCed, or
).- :odify or rescind a contract of purchase made
"y the principal.
Art. 18FA. A special power to sell e.cludes the
power to mortgage+ and a special power to
mortgage does not include the power to sell.
1he ff are included in a 3ower to *ell#
1he power to#
1.- Find a purchaser or to sell directly+
).- =eliver the property+
$.- :a7e the usual representation and warranty+
2.- '.ecute the necessary transfer documents+
?elen C. Arevalo
Finals Reviewer A&'NC(
)nd *em+ ),,$
2.-
;.-
.-
F.-
principal is deemed to have actually intended
the agent to possess.
Apparent or /stensi"le# when it is conferred "y
words, conduct or even "y the silence of the
principal which causes a $rd person reasona"ly to
"elieve that a particular person, who may or
may not "e the principalDs agent, has actual
authority to act for the principal. /stensi"le
authority is another name for authority "y
estoppel.
&eneral# when it refers to all the "usiness of the
principal.
*pecial# when it is limited only to one or more
specific transactions.
!y necessity or "y operation of law# when it is
demanded "y virtue of the e.istence of an
emergency+ it terminates when the emergency
has passed.
with whom the agent contracted+ neither have
such persons against the principal.
%n such case the agent is the one directly "ound
in favor of the person with whom he has
contracted, as if the transaction were his own,
e.cept when the contract involves things
"elonging to the principal.
1he provisions of this article shall "e
understood to "e without pre0udice to the actions
"etween the principal and agent.
Kinds of 3rincipals#
1.- =isclosed# if at the time of the transaction
contracted "y the agent, the other party thereto
has 7nown that the agent is acting for a principal
and has 7nown the principalDs identity.
).- 3artially disclosed# if the other party 7nows or
has reason to 7now that the agent is or may "e
acting for a principal "ut is unaware of the
principalDs identity. 1he partially disclosed
principal may enforce against the $rd person the
contract of the agent li7e any disclosed principal.
*imilarly, the $rd person has a right of action
against the principal.
$.- <ndisclosed# if the party has no notice of the
fact that the agent is acting as such for a
principal.
&eneral Rule in 188$# %f the agent is authoriCed to act
on "ehalf of the principal "ut instead acts in his own
name, the agent is the one directly lia"le to the person
with whom he had contracted as if the transaction were
his own.
'.ception# %f the contract involves something "elonging
to the principal.
Remedy of the 3rincipal if this situation arises#
?e can demand from the agent damages for his
failure to comply with the agency.
Remedy of the $rd person with whom the agent
contracted in case the o"lig is not complied with#
%f the case falls under the general rule, he can sue
the agent. !ut when the contract involves things
"elonging to the principal, he can sue the principal. !ut
if it cannot "e determined w8o litigation who is lia"le, he
can sue "oth.
Re4uisites for 3rincipal to "e !ound "y Act of Agent#
1.- 1he agent must act in "ehalf of the principal+
).- 1he agent must act within the scope of his
authority.
6hen is a principal not "ound "y the act of his agent>
6hen the agent acts without or "eyond the scope of
his authority+ or when the agent acts within the scope of
his authority "ut in his own name e.cept when the
transaction involves things "elonging to the principal.
Authority>
6ith authority
6ith authority
6ithout
6ithout
6hose "ehalf>
3rincipalDs
/wn
3rincipalDs
/wn
*tatus of K
Nalid
=epends. J188$L
<nenforcea"le
Nalid
6ho to sue>
%n case the agent acts in the name of the principal
and within his scope of authority, you must name the
principal as the defendant.
Note# 1he authority to loo7 for "uyers does not carry
with it the authority to sell.
Art. 188). 1he limits of the agentDs authority
shall not "e considered e.ceeded should it have
"een performed in a manner more advantageous
to the principal than that specified "y him.
6hat happens if the agent e.ceeds his authority "ut he
performs the agency in a manner more advantageous to
the principal>
%t will e as if he did not e.ceed the limits of his
authority since he must do such acts as may "e
conducive to the accomplishment of the purpose of the
agency.
1est# 6ould the principal enter into this transaction>
Art. 188$. %f an agent acts in his own name, the
principal has no right of action against the persons
?elen C. Arevalo
Chapter ). /"ligations of the Agent
Art. 1882. 1he agent is "ound "y his acceptance
to carry out the agency and is lia"le for the
damages which, through his non@performance, the
principal may suffer.
*ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
?e must also finish the "usiness already "egun
on the death of the principal, should delay entail
any danger.
&eneral /"ligations of an Agent to his 3rincipal#
1.- 1o act with the utmost good faith and loyalty for
the furtherance and advancement of the
interests of the principal.
).- 1o o"ey the principalDs instructions.
$.- 1o e.ercise reasona"le care.
*pecific /"ligations#
1.- 1o carry out the agency he has accepted.
).- 1o answer for damages which through his non@
performance the principal may suffer.
$.- 1o finish the "usiness already "egun on the
death of the principal should delay entail danger.
2.- 1o o"serve the diligence of a good father or a
family in the custody and preservation of the
goods forwarded to him "y the owner in case he
declines an agency, until an agent is appointed.
;.- 1o advance the necessary funds should there "e
a stipulation to do so.
.- 1o act in accordance with the instructions of the
principal, and in default thereof, to do all that a
good father of a family would do.
F.- Not to carry out the agency if its e.ecution
would manifestly result in loss or damage to the
principal.
8.- 1o answer for damages if there "e a conflict
"etween his interests and those of the principal,
he should prefer his own.
A.- Not to loan to himself if he has "een authoriCed
to lend money at interest.
1,.- Not to render an account of his transactions
and to deliver to the principal whatever he may
have received "y virtue of the agency.
11.- 1o "e responsi"le in certain cases for the act of
the su"stitute appointed "y him.
1).- 1o pay interest on funds he has applied to his
own use.
Art. 188;. %n case a person declines an agency,
he is "ound to o"serve the diligence of a good
father of a family in the custody and preservation
of the goods forwarded to him "y the owner until
the latter should appoint an agent. 1he owner
shall as soon as practica"le either appoint an
agent or ta7e charge of the goods.
6hat is the rule if a person declines agency>
%n the event a person declines an agency, he is
"ound to o"serve the diligence of a good father of a
family in the custody and preservation of the goods
forwarded to him "y the owner.
=uty of /wner in case an Agency is =eclined#
?e must act as soon as possi"le "y appointing an
agent or "y ta7ing charge of the goods.
Art. 188. *hould there "e a stipulation that the
agent shall advance the necessary funds, he shall
"e "ound to do so e.cept when the principal is
insolvent.
%n a contract of agency, may the parties stipulate that
the agent shall advance the necessary funds> ('*.
6hat is the o"lig then of the agent>
?e is "ound to furnish such funds.
'.cept# 6hen the principal is insolvent. 1his e.ception is
"ased on the principalDs o"ligation to reim"urse the
agent.
Art. 188F. %n the e.ecution of the agency, the
agent shall act in accordance with the instructions
of the principal.
%n default thereof, he shall do all that a good
father of a family would do, as re4uired "y the
nature of the "usiness.
%nstructions# 3rivate directions which the principal may
give the agent in regard to the manner of performing his
duties as such agent.
Authority v. %nstructions
Authority
*um total of powers
committed or permitted to
the agent "y the principal.
%nstructions
=irect the manner of
transacting the authoriCed
"usiness and contemplates
only a private rule of
guidance to the agent.
Refers to the manner orRelates to the su"0ect with
mode of his action withwhich the agent is
respect to matters which inempowered to deal or the
their su"stance are within7inds of "usiness or
transactions upon which he the scope of permitted
action.is powered to act.
5imitations of authority are 6ithout significance as
against those dealing withoperative as against those
the agent with neitherwho have or are charged
7nowledge nor notice ofwith 7nowledge of them.
them.
Contemplated to "e madeNot e.pected to "e made
7nown to the $rd person7nown to those w8 whom
dealing w8 the agent.the agent deals.
%nstructions pertain to the principal and agent
Authority pertain to the agent and $rd persons.
'.ceptions to the rule that the agent must not depart
from the instructions of the principal# J*A%L
A departure may "e 0ustified "y#
1.- A sudden emergency+
).- %f the instructions are am"iguous+ or
$.- %f the departure is so insu"stantial that it does
not affect the result and the principal suffers no
damage there"y.
6hen the Agent has a right to diso"ey the principalDs
instructions#
?elen C. Arevalo F *ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
1.- 6hen the instruction calls for the performance of
illegal acts+ or
).- 6here he is privileged to do so to protect his
security8interest in the su"0ect matter of the
agency.
Art. 1888. An agent shall not carry out an
agency if its e.ecution would manifestly result in
loss or damage to the principal.
Rationale# 1he duty of the agent who is merely an
e.tension of the personality of the principal is to render
service for the "enefit of the principal and not to act to
his detriment. Furthermore, the agent must e.ercise due
diligence in carrying out the agency.
Art. 188A. 1he agent shall "e lia"le for damages
if, its e.ecution would manifestly result in loss or
damage to the principal.
Note# 1his provision applies to "oth onerous and
gratuitous transactions. 1he law does not distinguish so
neither should we.
Rationale# An agent occupies a fiduciary position and
therefore is "ound to e.ercise loyalty, o"edience, and
diligence with respect to the interest of the principal.
%f the agent follows the principalDs instructions yet his
acts still result in damage to $rd persons, who is lia"le>
&eneral rule# 1he agent is N/1 lia"le.
'.cept# if "efore acting that way, it is o"vious that
the act will result to damage, then the agent is lia"le.
Art. 18A,. %f the agent has "een empowered to
"orrow money, he may himself "e the lender at
the current rate of interest. %f he has "een
authoriCed to lend money at interest, he cannot
"orrow it without the consent of the principal.
Rationale# 1he agent can lend money to the principal
using the agentDs own funds at the current rate of
interest and N/1 at a higher interest rate "ecause the
agent is supposed to act for the principalDs "enefit.
%f the agent is authoriCed to lend the principalDs
money, with interest, to $rd persons, the agent canDt "e
the "orrower without the consent of the principal
"ecause the agent may not "e a good "orrower or he
may "e insolvent or he may not "e a good ris7. 1here is
a danger here that the interest of the principal would "e
0eopardiCed.
1his would also seem to "e the case if the agent is
authoriCed to lend money w8o interest "ecause of the
same reason.
Art. 18A1. 'very agent is "ound to render an
account of his transactions and to deliver to the
principal whatever he may have received "y virtue
of the agency, even though it may not "e owing to
the principal.
'very stipulation e.empting the agent from the
o"ligation to render an account shall "e void.
Rationale# Contrary to pu"lic policy as it would
encourage fraud. %t is in the nature of a waiver of an
action for future fraud w8c is void.
%f the agent fails to deliver and instead converts or
appropriates for his own use the money or property
"elonging to his principal, with what can he "e charged>
'*1AFA.
Art. 18A). 1he agent may appoint a su"stitute if
the principal has not prohi"ited him from doing so+
"ut he shall "e responsi"le for the acts of the
su"stitute#
1.-6hen he was not given the power to
appoint one+
).-6hen he was given such power, "ut
without designating the person, and the
person appointed was notoriously
incompetent or insolvent.
All acts of the su"stitute appointed against the
prohi"ition of the principal shall "e void.
*u"@agent# A person to whom the agent delegates, as
his agent, the performance of an act for the principal
which the agent has "een empowered to perform
through his representative.
Relation among the principal, agent and su"@agent
%n reality, the su"@agent is a stranger to the principal
who originally gave life to the agency. !ut if the agent is
authoriCed to appoint a su"@agent, the relation of
principal and agent e.ists "etween the principal and the
su"@agent. 1hat is, the su"@agent may "e the agent of
the principal if he is in actual control of the "usiness and
the principal 7nows of his appointment or 7nows that his
appointment is necessary. Conse4uently, any act done
"y the su"@agent in "ehalf of the principal is deemed an
act of the principal+ so neither agent nor su"@agent may
"e held personally lia"le as long as they act within the
scope of their authority.
6hen can an agent appoint a su"@agent>
*o long as thereDs no prohi"ition. ?owever, he shall
"e responsi"le for all the su"@agentDs acts.
2 %nstances where a *u"@agent is appointed and the
'ffects of each#
%nstance'ffect
No prohi"itionAgent responsi"le for all
the acts of su"@agent.
3rohi"ition*u"@agentDs acts are N/%=
as to the principal.
Authority to appoint "utAgent lia"le for acts of
not designated "y principal su"@agent if the su"@agent
is notoriously incompetent
or insolvent.
Authority to appoint andAgent is released from any
designated "y principallia"ility from the acts of
8 *ection %%@= ?elen C. Arevalo
Finals Reviewer
the su"@agent.
A&'NC(
)nd *em+ ),,$
Reason for general rule# !ecause an agent who acts as
such within the scope of his authority represents the
principal so that his contract is really the principalDs.
'.ceptions#
1.- 6hen the agent "inds himself+ or
).- 6hen he e.ceeds the limits of his authority
without giving the third party sufficient notice of
his powers.
Reasons for e.ceptions#
1.- 6hen the agent e.pressly "inds himself, he
there"y o"ligates himself personally and "y his
own act.
).- 6hen the agent e.ceeds his authority, he really
acts without authority and therefore, the
contract is unenforcea"le against the principal.
1he agent "ecomes personally lia"le "ecause y
his wrong or omission, he deprives the $rd party
with whom he contracts of any remedy against
the principal.
Art. 18A8. %f the agent contracts in the name of
the principal, e.ceeding the scope of his authority,
and the principal does not ratify the contract, it
shall "e void if the party with whom the agent
contracted is aware of the limits of the powers
granted "y the principal. %n this case, however,
the agent is lia"le if he undertoo7 to secure the
principalDs ratification.
Art. 18AA. %f a duly authoriCed agent acts in
accordance with the orders of the principal, the
latter cannot set up the ignorance of the agent as
to circumstances whereof he himself was, or ought
to have "een aware.
1his article refers to the lia"ility of the principal
towards $rd persons.
6hat happens if the principal appoints an agent who is
ignorant>
1hen the fault is the principalDs alone. '4uity
demands that the principal should "e "ound "y the acts
of the agent if the latter acts within the scope of his
authority and in accordance with the instructions of the
former.
Art. 1A,,. *o far as third persons are
concerned, an act is deemed to have "een
performed within the scope of the agentDs
authority, is such act is within the terms of the
power of attorney, as written, even if the agent
has in fact e.ceeded the limits of his authority
according to an understanding "etween the
principal and the agent.
Re4uisite for article to apply#
Authority to agent must "e in writing.
G*cope of agentDs authorityH includes#
A *ection %%@=
Art. 18A$. %n the cases mentioned in Nos. 1 and
) of the preceding article, the principal may
furthermore "ring an action against the su"stitute
with respect to the o"ligations which the latter
has contracted under the su"stitution.
6hen can the principal sue the su"stitute>
<nder the premises given in the previous provision,
the principal can sue "oth the agent and the su"stitute.
Art. 18A2. 1he responsi"ility of two or more
agents, even though they have "een appointed
simultaneously, is not solidary, if solidarity has not
"een e.pressly stipulated.
%f solidarity is not stipulated, what is the lia"ility to ) or
more agents> K/%N1.
'ach is lia"le only for proportionate part of de"t.
Art. 18A;. %f solidarity has "een agreed upon,
each of the agents is responsi"le for the non@
fulfillment of the agency, and for the fault or
negligence of his fellow agents, e.cept in the
latter case when the fellow agents acted "eyond
the scope of their authority.
6hat happens if solidarity has "een agreed upon>
1hen each of the agents "ecomes solidarily lia"le for#
1.- 1he non@fulfillment of the agency+ or
).- 1he fault or negligence of the fellow agent
provided the latter acted within the scope of his
authority.
!ut the innocent agent has a right later on to recover
from the guilty or negligent agent.
6hat happens if the fellow agent acted "eyond the
scope of his authority>
1hen the innocent agent cannot "e lia"le at all to the
principal even if solidarity had "een agreed upon.
Art. 18A. 1he agent owes interest on the sums
he has applied to his own use from the day on
which he did so, and on those which he still owes
after the e.tinguishment of the agency.
Art. 18AF. 1he agent who acts as such is not
personally lia"le to the party with whom he
contracts, unless he e.pressly "inds himself or
e.ceeds the limits of his authority without giving
such party sufficient notice of his powers.
3rincipal Agent
$rd 3arty Ewrong party to complain if
the principal doesnDt complain
of the agentDs acts-
&eneral rule# Gan agent who acts as such is not
personally lia"le to the party with whom he contracts.H
?elen C. Arevalo
Finals Reviewer A&'NC(
i.-
)nd *em+ ),,$
Nary the terms of an e.press
authoriCation+
ii.-=ispense with a legal re4uirement
enacted for the principalDs "enefit+
iii.-Change a rule of law or dispense
with a formality re4uired "y law+
iv.-Nary an essential 4uality of the
agency relationship.
".- &eneral rule# principal must have notice
of the alleged custom, "efore the agentDs
acts, in accordance therewith, may "ind
the principal. '.ceptions#
i.-6here the principal and the agent
reside in the same community, the
usage is definite and well@7nown,
and the agent has no notice that he
is to act to the contrary+
ii.-6here the agent is authoriCed to
deal in a particular place or in a
particular mar7et e.change.
2.- !y necessity I the e.istence of an emergency or
other unusual conditions may operate to invest
in an agent authority to meet the emergency,
provided#
a.- 'mergency really e.ists+
".- Agent is una"le to
communicate w8 the principal+
c.- AgentDs enlarged authority is
e.ercised for the principalDs
protection+ and
d.- 1he means adopted are
reasona"le under the
circumstances.
;.- !y certain doctrines I
a.- Apparent authority
".- 5ia"ility "y estoppel+
c.- Ratification.
.- !y the e0usdem generis rule I such that where
in an instrument of any 7ind, an enumeration of
specific matters is followed "y a general phrase
is held to "e limited in scope "y the specific
matters.
Not only the actual authoriCation conferred upon the
agent "y the principal, "ut also that which has
apparently or impliedly "een delegated to him.
1o hold the principal lia"le, a $rd person dealing with an
agent must#
=iscover upon his peril not only the fact of agency
"ut the nature and e.tent of authority of the agent. ?e
is put on in4uiry. ?e must also act with ordinary
prudence and reasona"le diligence.
Fundamental principles when in4uiring whether authority
e.ists#
1.- 1he law indulges in no "are presumptions that
an agency e.ists, it must "e proved and
presumed from facts+
).- 1he agent cannot esta"lish his own authority,
either "y his representations or "y assuming to
e.ercise it+
$.- An authority cannot "e esta"lished "y mere
rumor or general reputation+
2.- A general authority is not an unlimited one+ and
;.- 'very authority must find its ultimate source in
some act or omission of the principal.
%n case the fact of agency or the e.tent of the authority
of the agent is controverted, the "urden of proof is on#
1he $rd person to esta"lish the fact of agency or the
e.tent of authority of the agent.
=oes the $rd person have to in4uire further if the power
of attorney is written>
No. ?e is not re4uired to in4uire further than the
terms of the written power of attorney.
%f there is a secret mutual understanding "etween the
principal and the agent, and such is not e.pressed in the
written power of attorney, does the $rd person have to
in4uire>
No. As far as he is concerned, an act of the agent
within the terms of the power of attorney as written, is
within the scope of the agentDs apparent authority
notwithstanding that the agent may have e.ceeded the
limits of his actual authority according to a secret
understanding "etween him and the principal. %n such a
case, the principal is estopped from claiming that the
agent e.ceeded his authority.
6ays "y which the agentDs authority may "e "roadened
or restricted# J%Dm@<N='rL
1.- !y implication I agentDs authority e.tends not
only to e.press re4uests, "ut also to those acts
and transactions incidental thereto. %t em"races
all the necessary and appropriate means to
accomplish the desired end.
).- !y usage and custom I
a.- An agentDs authority may not "e
enlarged through usage and custom in
the following cases# 6here it is sought
toB
Responsi"ility of principal when agent acts w8 improper
motives#
&eneral rule# :otive of agent in entering into a K w8
rda $ person is immaterial.
'.ceptions#
1.- 6here the $rd person 7new that the agent was
acting for his "enefit, in w8c case, the principal
is not lia"le to the $rd person+ and
).- 6here the owner is see7ing recovery of personal
property of w8c he has "een unlawfully deprived.
3rincipalDs responsi"ility for an agentDs
misrepresentation#
1.- 6ithin the scope of the agentDs authority I
3rincipal is su"0ect to lia"ility for lass caused to
another "y the $rd persons reliance upon a
deceitful representation of an agent in the
course of his employment if#
1, *ection %%@= ?elen C. Arevalo
Finals Reviewer A&'NC(
)nd *em+ ),,$
a.- Representation is authoriCed+
".- 6ithin the implied authority of the agent
to ma7e for the principal+ or
c.- Apparently authoriCed.
).- !eyond the scope of the agentDs authority I
&eneral rule# 3rincipal is not "ound.
'.ception# when the principal ta7es advantage
of a K made under the false misrepresentation of
his agent.
$.- For the agentDs own "enefit I 3rincipal is lia"le
Emotive of agent immaterial-.
Art. 1A,1. A third person cannot set up the fact
that the agent has e.ceeded his powers, if the
principal has ratified, or has signified his
willingness to ratify the agentDs acts.
'ffect of ratification "y the principal#
Ratification of a contract gives it the same effect as if
the principal had originally authoriCed it.
6ho must ratify the contract>
/nly the principal. !ut there must "e 7nowledge on
the part of the principal of the things he is going to
ratify.
6hen can the $rd person repudiate the contract>
!efore actual ratification "y the principal, or "efore
the principal has signified his willingness to ratify the
agentDs acts.
'ffect of the principal receiving the "enefits of the
transaction#
?e is deemed to have ratified it. A principal may not
accept the "enefits of a transaction and at the same
time repudiate its "urdens.
Art. 1A,). A third person with whom the agent
wishes to contract on "ehalf of the principal may
re4uire the presentation of the power of attorney,
or the instructions as regards the agency. 3rivate
or secret orders and instructions of the principal
do not pre0udice third persons who have relied
upon the power of attorney or instructions shown
them.
=uty of a $rd person who deals w8 an agent#
$rd person deals w8 an agent at his peril. ?e is "ound
to in4uire as to the e.tent of the agentDs authority, and
this is especially true where the act of the agent is of an
unusual nature. %gnorance of the agentDs authority is no
e.cuse. %t is his duty to re4uire the agent to produce his
power of attorney to ascertain the scope of his authority.
?e may also as7 for the instructions of the principal.
=o secret orders or private instructions pre0udice $rd
persons>
No, he cannot "e pre0udiced "y any secret
understanding "etween the principal and the agent.
*uch secret orders cannot "e invo7ed as against $rd
parties if the agent had apparent authority.
?elen C. Arevalo 11
Art. 1A,$. 1he commission agent shall "e
responsi"le for the goods received "y him in the
terms and conditions and as descri"ed in the
consignment, unless upon receiving them he
should ma7e a written statement of the damage
and deterioration suffered "y the same.
Commission agent# /ne whose "usiness is to receive
and sell goods for a commission and who is entrusted "y
the principal with the possession of goods to "e sold,
and usually selling in his own name.
/rdinary agent v. Commission agent#
/rdinary agentCommission agent
Acts for and "ehalf of his:ay act in his own name
principal.or in that of his principal.
:ust "e in possession.Need not have possession
of the goods of his
principal.
Commission agent v. "ro7er#
Commission agent!ro7er
?as a relation to principal,No relation w8 the thing
"uyers or sellers, and thew8c he purchases or sells.
property itself.:erely a go@"etween.
5ia"ility of commission agent as to goods received#
%f the commission agent received goods consigned to
him, he is responsi"le for any damage or deterioration
suffered "y the same in the terms and conditions and as
descri"ed in the consignment.
3resumption esta"lished in this article#
=amage in the merchandise were suffered while in
the possession and custody of the agent.
6hat the commission agent must do to avoid lia"ility#
:a7e a written statement of the damage and
deterioration if the goods received "y him do not agree
w8 the description in the consignment.
Agent v. =epositary#
Agent
Cannot commingle goods
of the same 7ind.
=epositary
Can commingle goods of
the same 7ind.
Art. 1A,2. 1he commission agent who handles
goods of the same 7ind and mar7, which "elong to
different owners, shall distinguish them "y
countermar7s, and designate the merchandise
respectively "elonging to each principal.
3urpose of this provision#
3revent any possi"le confusion or deception.
Art. 1A,2 gives the general rule. '.ceptions#
1.- !y custom+
).- Collecting "an7s.
*ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
Art. 1A,;. 1he commission agent cannot,
without the e.press or implied consent of the
principal, sell on credit. *hould he do so, the
principal may demand from him payment in cash,
"ut the commission agent shall "e entitled to any
interest or "enefit, which may result from such
sale.
Rule given in this article#
Commission agent can sell on credit only with the
e.press or implied consent of the principal.
Right of the principal in case the commission agent sold
goods on credit without authority# JCRL
) alternatives#
1.- ?e may re4uire payment in cash, in w8c case,
any interest or "enefit from the sale on credit
shall "elong to the agent since the principal
cannot "e allowed to enrich himself at the
agentDs e.pense+ or
).- ?e may ratify the sale on credit, in w8c case it
will have all the ris7s and advantages to him.
Art. 1A,. *hould the commission agent, with
authority of the principal, sell on credit, he shall so
inform the principal, with a statement of the
names of the "uyers. *hould he fail to do so, the
sale shall "e deemed to have "een made for cash
insofar as the principal is concerned.
/"ligation of the commission agent where a sale on
credit was authoriCed#
An authoriCed sale on credit shall "e deemed to have
"een on a cash "asis 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
"uyers.
Reason for this article# 3revent the agent from stating
that the same was on credit when in fact it was made
for cash.
Art. 1A,F. *hould the commission agent receive
on a sale, in addition to the ordinary commission,
another called a guarantee commission, he shall
"ear the ris7 of collection and shall pay the
principal the proceeds of the sale on the same
terms agreed upon with the purchaser.
&uarantee commission# /ne where, in consideration of
an increased commission, the commission agent
guarantees to the principal the payment of de"ts arising
through his agency.
3urpose of guarantee commission# 1o compensate the
agent for the ris7s he will have to "ear in the collection
of the credit due to the principal.
Nature of lia"ility of guarantee commission agent#
5ia"le to principal if the "uyer fails to pay or is
incapa"le of paying. !ut he is not primarily the de"tor.
?elen C. Arevalo 1)
/n the contrary, the principal may sue the "uyers in his
own name. %n such a case, the agent amounts to no
more than a guaranty. 5ia"ility is a contingent pecuniary
lia"ility.
Can the agent with a guarantee commission put up the
defense of insolvency of the de"tor>
No. an agent receiving a guarantee commission
cannot put up the defense that the de"tor@$rd person
possesses no property since this is precisely the ris7 the
commission agent assumes.
Art. 1A,8. 1he commission agent who does not
collect the credits of his principal at the time when
they "ecome due and demanda"le shall "e lia"le
for damages, unless he proves that he e.ercised
due diligence for that purpose.
/"ligation of the commission agent under this article#
1he commission agent who has made an authoriCed
sale on credit must collect the credits due the principal
at the time they "ecome due and demanda"le. %f he fails
to do so, he shall "e lia"le for damages unless he can
show that the credit could not "e collected
notwithstanding the e.ercise of due diligence on his
part. %n such a case, the principalDs remedy is to proceed
against the de"tor.
=oes this article apply to a case where there is a
guarantee commission>
No, "ecause the agent already assumed the ris7s of
collection "y accepting the guarantee commission.
Art. 1A,A. 1he agent is responsi"le not only for
fraud, "ut also for negligence, which shall "e
0udged with more or less rigor "y the courts,
according to whether the agency was or was not
for a compensation.
%s the agent lia"le for fraud> (es, in all cases.
For negligence> (es, "ut this shall "e ad0udged with
rigor "y the courts.
6hy does the court have to ta7e into consideration
whether the agency was gratuitous or for compensation>
%n order to fi. the lia"ility of the agent for negligence
only Enot fraud-.
Chapter $. /"ligations of the 3rincipal
Art. 1A1,. 1he principal must comply with all
the o"ligations which the agent may have
contracted within the scope of his authority.
As for any o"ligation wherein the agent has
e.ceeded his power, the principal is not "ound
e.cept when he ratifies it e.pressly or tacitly.
*ection %%@=
Finals Reviewer
6here can the specific o"ligations and duties of the
principal to the agent "e found>
<sually in the contract creating the agency.
A&'NC(
)nd *em+ ),,$
ratification is su"se4uent "ut it is e4uivalent to prior
authority.
Conditions to ratification# J%CK@3'CL
1.- %ntent to ratify+
).- 3rincipal must have capacity 9 power to ratify+
$.- ?e must have had 7nowledge of material facts+
2.- 1he act must "e done in "ehalf of the principal+
;.- 3rincipal must ratify acts in its entirety+
.- 1he act must "e capa"le of ratification.
'ffects of ratification with respect to the agent#
1.- Relieves the agent from lia"ility to the $rd party
to the unauthoriCed transaction+ and
).- 1o his principal for acting without authority+ and
$.- ?e may recover compensation due for
performing the act which has "een ratified.
'ffects of ratification with respect to the principal#
1.- ?e assumes responsi"ility for the unauthoriCed
act, as fully as if the agent had acted under
original authority+ "ut
).- ?e is not lia"le for acts outside the authority
approved "y his ratification.
'ffects of ratification with respect to $rd persons#
1.- $rd person is "ound "y ratification to the same
e.tent as he would have "een "ound if the
ratified act had "een authoriCed in the 1st
instance+ and
).- ?e cannot raise the 4uestion of the agentDs
authority to do the ratified act.
:ust ratification "e communicated to the agent or to the
$rd party>
No. 1o "e effective, ratification need not "e
communicated or made 7nown to the agent or the $rd
party. 1he act or conduct of the principal rather than his
communication is the 7ey. !ut "efore ratification, the $rd
party is free to revo7e the unauthoriCed contract.
Art. 1A11. 'ven when the agent has e.ceeded
his authority, the principal is solidarily lia"le with
the agent if the former allowed the latter to act as
though he had full powers.
'stoppel# precludes a person from denying or asserting
anything contrary to that which has "een esta"lished as
the truth "y his own deed or representation, either
e.press or implied.
Ratification v. 'stoppel
Ratification
Rests on intention
Affects the entire
transaction from the
"eginning
*u"stance is confirmation
of a unauthoriCed act or
conduct after it has "een
done.
1$
3rincipal o"ligations of the principal to the agent in the
a"sence of such agreement#
1.- 1o comply with all the o"ligations which the
agent may have contracted in his name and
within the scope of his authority+
).- 1o advance should the agent so re4uest sums
necessary for the e.ecution of the agency+
$.- 1o reim"urse the agent for all advances made
"y him provided the agent is free from fault+
2.- 1o indemnify the agent for all the damages
which the e.ecution of the agency may have
caused the latter without fault or negligence on
his part+ and
;.- 1o pay the agent the compensation agreed upon
or the reasona"le value of the latterDs services.
5ia"ility of the principle to $rd persons#
6here the relation of agency legally e.ists, the
principal will "e lia"le to $rd persons for all acts
committed "y the agent in his "ehalf in the course and
within the actual or apparent scope of his authority, and
this is not altered y the fact that the agent may also "e
lia"le, nor "y the fact that some of the acts are to the
principalDs advantage while others are to his
disadvantage.
5ia"ility of the principal for mismanagement of the
"usiness "y the agent#
:ismanagement of the "usiness of the principal "y
the agent does not relieve said principal from the
responsi"ility that he had contracted to $rd persons. !ut
where the agentDs acts "ind the principal, the latter may
see7 recourse against the agent.
5ia"ility of principal for a tort committed "y the agent#
1he principal is civilly lia"le to $rd persons for torts of
an agent committed at the principalDs direction or % the
course and within the scope of the agentDs employment.
1he principal cannot escape lia"ility whether the tort is
committed willfully or negligently so long as the tort is
committed "y the agent while performing his duties in
furtherance of the principalDs "usiness. Nor is it a
defense that the act which caused the tort was un7nown
to him or even that it was in diso"edience to his
instructions.
:eaning of ratification in )nd paragraph#
Ratification is the adoption or affirmance "y a person
of a prior act which did not "ind him, "ut which was
done or professed to "e done on his account, thus giving
effect to the act as if originally authoriCed. 1he doctrine
applies to the ratification of the act of an agent in e.cess
of his authority of the act of one who purports to "e an
agent "ut who is really not. %t may "e implied from the
acceptance of "enefits "y the principal under a contract
entered in his name. 1he authority created "y
?elen C. Arevalo
'stoppel
Rests on pre0udice
Affects only relevant parts
of the transaction.
*u"stance is the principalDs
inducement to another to
act to his pre0udice.
*ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
Apparent authority v. Authority "y estoppel
Apparent authorityAuthority "y estoppel
Arises in cases where the1hat which though not
principal, "y hisactually granted, the
negligence, permits hisprincipal 7nowingly
agent to e.ercise powerspermits the agent to
not granted to him, evene.ercise or holds him out
though the principal mayas possessing.
have no notice or
7nowledge of the conduct
of the agent.
!asis of article 1A11#
3rinciple of estoppel. Necessary for the protection of
innocent $rd persons. %nstance when solidarity is
imposed "y law.
Art. 1A1). 1he principal must advance to the
agent, should the latter so re4uest, the sums
necessary for the e.ecution of the agency.
*hould the agent have advanced them, the
principal must reim"urse him therefor, even if the
"usiness or underta7ing was not successful,
provided the agent is free from all fault.
1he reim"ursement shall include interest on the
sums advanced, from the day on which the
advance was made.
*hould the principal reim"urse the agent for advances
made "y the latter even if the agency was unsuccessful>
%t depends. (es, if the agent is free from fault. No, if
the agent was with fault.
%s a "ro7er always entitled to a commission>
A "ro7er is entitled to a commission if the sale is
effected, "ut not if there is no perfected transaction.
Art. 1A1$. 1he principal must also indemnify the
agent for all the damages which the e.ecutive of
the agency may have caused the latter, without
fault or negligence on his part.
!asis for the a"ove rule# '4uity. *ince the principal
receives the "enefits of the agency, and has a right to
demand damages from the agent should the latter not
perform the agency, he should answer for the damages
resulting from the e.ecution thereof without fault or
negligence on the part of the agent.
Art. 1A12. 1he agent may retain in pledge the
tings which are the o"0ect of the agency until the
principal effects the reim"ursement and pays the
indemnity set forth in the two preceding articles.
6hat happens when the principal fails to reim"urse or
indemnify the agent for e.penses set forth in arts. 1A1)
and 1A1$>
1he agent has the right to retain in pledge the things
which are the o"0ect of the agency.
%n case the agent sells the goods for more than his
claim, is he entitled to the e.cess> No.
6hat is the nature of the agentDs right of lien>
*pecific or particular. %t is not general in the sense
that it gives the agent a right to retain the goods for
claims disconnected with the agency.
Art. 1A1;. %f two or more persons have
appointed an agent for a common transaction or
underta7ing, they shall "e solidarily lia"le to the
agent for all the conse4uences of the agency.
Re4uisites for application of this article# J)C)L
1.- 1here are ) or more principals+
).- 1he principals have all concurred in the
appointment of the same agent+
$.- 1he agent is appointed for a common
transaction or underta7ing.
6hy is solidarity the rule>
!ecause of the common transaction. 1hus, even if
the agent was appointed separately, the rule should
apply in the interest of 0ustice.
Art. 1A1. 6hen two persons contract with
regard to the same thing, one of them with the
agent and the other with the principal, and the
two contracts are incompati"le with each other,
that of prior date shall "e preferred, without
pre0udice to the provisions of Article 1;22.
:ay ) persons contract with regard to the same thing,
one with the agent and the other with the principal>
(es.
%f this situation arises, which of the contracts will "e
preferred>
%f the contracts are compati"le, they will "oth "e
given effect. %f they are incompati"le, then the contract
of prior date shall "e preferred.
Art. 1;22# %f the same thing should have "een sold to
different vendees, the ownership shall "e transferred to
the person who may have 1st ta7en possession thereof
in good faith if it should e mova"le property. *hould it
"e immova"le property, the ownership shall "elong to
the person ac4uiring it who in good faith 1st recorded it
in the Registry of 3roperty. *hould there "e no
inscription, the ownership shall pertain to the person
who in good faith was 1st in possession+ and in the
a"sence thereof, to the person who presents the oldest
title, provided there is good faith.
Art. 1A1F. %n the case referred to in the
preceding article, if the agent has acted in good
faith, the principal shall "e lia"le in damages to
the third person whose contract must "e re0ected.
%f the agent acted in "ad faith, he alone shall "e
responsi"le.
?elen C. Arevalo 12 *ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
).- !y the withdrawal of the agent+
$.- !y the death, civil interdiction, insanity or
insolvency of the principal or of the agent+
2.- !y the dissolution of the firm or corporation
which entrusted or accepted the agency+
;.- !y the accomplishment of the o"0ect or
purpose of the agency+
.- !y the e.piration of the period for which
the agency was constituted.
%s the principal always lia"le for damages caused "y a
$rd person or is it the agent who is lia"le>
6hether the principal or the agent will "e the one
lia"le for damages to the $rd person who has "een
pre0udiced depends on whether the agent acted in "ad
faith or not. %f the agent acted in good faith and within
the scope of his authority, the principal incurs lia"ility. %f
the agent acted in "ad faith, he alone shall "e
responsi"le to such person.
6hat is the e.tent of lia"ility covered under this article>
=amages.
6hat is good faith referred to in this article>
&ood faith here means that the agent had no
7nowledge that the principal is dealing with a $rd person.
Note# %f the contract is one of sale, article 1;22 governs
and not arts. 1A1 and 1A1F.
Art. 1A18. 1he principal is not lia"le for the
e.penses incurred "y the agent in the following
cases# JFOCK*L
1.- %f the agent acted in contravention of the
principalDs instructions, unless the latter
should wish to avail himself of the "enefits
derived from the contract+
).- 6hen the e.penses were due to the fault of
the agent+
$.- 6hen the agent incurred them with
7nowledge that an unfavora"le result would
ensue, if the principal was not aware thereof+
2.- 6hen it was stipulated that the e.penses
would "e "orne "y the agent, or that the latter
would "e allowed only a certain sum.
%nstances wherein the principal is not lia"le for e.penses
incurred "y the agent>
%n the instances enumerated under this article.
Reasons why the principal is not lia"le for the agentDs
e.penses# <nderB
1.- 1o punish the agent, "ut when the principal has
availed of the "enefits, he is deemed to have
impliedly ratified the agentDs acts.
).- GKasi, 7asalanan niya, eh.H
$.- 1he agent is guilty of "ad faith and lac7 of
diligence+
2.- An e.press stipulation which is not contrary to
law, morals, good customs, pu"lic order or
pu"lic policy is "inding "etween the parties.
:eaning of 3resumption of continuance of agency#
6hen once shown to have e.isted, an agency
relation will "e presumed to have continued in the
a"sence of anything to show its termination.
6ho has the "urden of proving the
revocation8termination of agency>
1he "urden of proving a revocation or other
termination of agency is on the party asserting it.
Note# 'ven if the reason for e.tinguishing the agency is
not true, the agent canDt insist on reinstatement. 1he
agent can only demand damages.
:odes of e.tinguishing an agency, generally# JA*/L
1.- Agreement+
).- *u"se4uent acts of the parties which may "e
either#
a.- !y the act of "oth parties or "y mutual
consent+
".- !y the unilateral act of one of them.
$.- !y operation of law.
:odes of e.tinguishment, specifically# J6R@='A=L
1.- 6ithdrawal of the agent+
).- Revocation+
$.- =eath, civil interdiction, insanity or insolvency of
the principal or of the agent+
2.- '.piration of the period for which the agency
was constituted+
;.- Accomplishment of the o"0ect or purpose of the
agency+ and
.- =issolution of the firm8corp which entrusted or
accepted the agency+
Necessary characteristics of the parties for the
continuance of the agency# J3C*L
1.- 3resent+
).- Capacitated+
$.- *olvent.
6hy is presence necessary>
!ecause the general rule in art 1A1A is that death of
any of the parties e.tinguishes agency. ?owever in the
case where you have several principals and8or several
agents, whether the death of one principal or of one
agent terminates the agency would depend on the
intention of the parties. &enerally the death of one of
several principals does not revo7e the agentDs authority
nor does the death of one of several agents put an end
to the agency. 1he intention of the parties controls.
1; *ection %%@=
Chapter 2. :odes of '.tinguishment of
Agency
Art. 1A1A. Agency is e.tinguished# J6R@='A=L
1.- !y its revocation+
?elen C. Arevalo
Finals Reviewer A&'NC(
)nd *em+ ),,$
6hy is capacity necessary>
For instance, in the case of civil interdiction, it
deprives the offender during the period of his sentence
of the right to manage his property and dispose of such
property "y any act or any conveyance inter vivos. A
person under civil interdiction hence, cannot validly give
consent. *ame is true for insane people.
6hy is solvency necessary>
As "y an act of insolvency, the principal loses control
of the su"0ect matter of the agency, the authority of the
agent to act for his principal ceases "y operation of law
upon an ad0udication of the principalDs insolvency. /n
the other hand, the insolvency of the agent will
ordinarily put an end to the agency, at least if it is in any
way connected with the agentDs "usiness which has
caused his failure.
&eneral rule as to death of the principal or agent#
!y reason of the very nature of the relationship
"etween the principal and the agent Ewhich is fiduciary I
arghP-, agency is distinguished ipso 0ure upon the death
of the principal.
'.ceptions#
1.- %f the agency is coupled with an interest+
).- %f the act of the agent was e.ecuted without the
7nowledge of the death of the principal and the
$rd person who contracted w8 the agent acted in
good faith.
6hy does dissolution of a firm or corp e.tinguish the
agency>
=issolution of a corp e.tinguishes its 0uridical
e.istence.
6hat happens when the o"0ect or the purpose of the
agency is accomplished>
As "etween the parties, the principal and the agent,
the fulfillment of the purpose for which the agency was
created ipso facto terminates the agency.
6hat happens when the term for which the agency was
supposed to continue e.pires>
6hen an agency is created for a fi.ed period, the
e.piration of such period ends the agency, even though
the purpose for which the agency was created has not
"een accomplished.
6hat happens if no time is specified>
1he agency terminates at the end of a reasona"le
period of time.
Can the period "e implied> (es, fromB
1.- 1he terms of the agreement+
).- 3urpose of the agency+ and
$.- 1he circumstances of the parties.
6hat happens if the su"0ect matter of the agency is lost
or destroyed>
?elen C. Arevalo 1
%n the a"sence of any agreement "y the parties to
the contrary, the loss or destruction of the su"0ect
matter of the agency terminates the agentDs authority to
deal with reference to it.
'.ceptions#
1.- %f it is possi"le to su"stitute other material for
that which was destroyed without su"stantial
detriment to either party, or
).- %f the destroyed su"0ect matter was not in fact
essential to the contract+ and
$.- A partial loss or destruction.
Are the modes of e.tinguishments of agency e.clusive>
No. Art. 1A1A gives only those causes of e.tinction
which are particular to agency. !ut the list is not
e.clusive. 1he general rule actually is, an agency may
"e e.tinguished "y the modes of e.tinguishments of
o"ligations in general whenever they are applica"le, li7e
loss of the thing and novation Esee art. 1)$1-.
=oes war e.tinguish agency>
=uring the e.istence of war, a contract of agency is
inoperative if the agent or the principal is an enemy
alien. !ut since it is generally conceded that war
suspends all commercial intercourse "etween the
residents of ) "elligerent states, the general rule is that
agency is terminated, as a matter of law, upon the
"rea7 of war.
=oes legal impossi"ility terminate agency>
%mplied in every contract is the understanding that it
shall "e capa"le of "eing carried out legally at the time
called for "y the contract. An agency then terminates if
a change in the law ma7es the purpose of the agency
unlawful.
6hat happens if the principalDs authority terminates>
A position which flows from a trust relationship
whether directly or indirectly, terminates as a matter of
law with the destruction of the trust. Conse4uently, a
su"@agentDs authority terminates with the termination of
the principalDs authority.
%n case of loss of the su"0ect matter, does the principal
incur any lia"ility>
%t depends. %f the loss was "rought a"out "y the
principal as in the case where the principal sells the
su"0ect matter to another party notwithstanding that an
agency had "een constituted in reference to it, then he
may "e lia"le for damages for his wrongful terminating
act. !ut if the su"0ect matter is lost without the fault of
the principal, no lia"ility is assumed "y him.
6ill a change of conditions affect the agency>
&eneral rule# 6hen there is a "asic change in the
circumstances surrounding the transaction not
contemplated "y the parties which would reasona"ly
lead the agent to "elieve that the principal would not
desire him to act, authority of agent is terminated.
'.ceptions#
*ection %%@=
Finals Reviewer A&'NC(
)nd *em+ ),,$
"e forced to retain another as his agent against
his will.
1.- %f the original circumstances are restored within
a reasona"le period of time, the agentDs
authority may "e revived.
).- 6here the agent has reasona"le dou"ts as to
whether the principal would desire him to act,
his authority will not "e terminated if he acts
reasona"ly. E!ut when in dou"t, agent could
contract principal for instructions if possi"le-.
$.- 6here the principal and agent are in close daily
contact, the agentDs authority to act will not
terminate upon a change of circumstances if the
agent 7nows the principal is aware of the change
and does not give him new instructions.
Confidential information
%t is difficult to determine whether information is
confidential or not, "ecause while the relation of
principal and agent is confidential, not all 7nowledge
ac4uired "y the agent is of a confidential nature. *ome
clearly is of so general a nature that e4uity ought not
attempt to restrict its su"se4uent use.
<sually, what a court does is to determine ) things#
1.- 6hether the 7nowledge or information is indeed
confidential, and
).- 6hether its su"se4uent use ought to "e
prevented.
3rinciple "ehind en0oining an agent from using
confidential information#
1here is in the contract of service su"sisting "etween
the principal and the agent an implied contract on the
part of the agent that he will not, after the service is
terminated, use information which he has gained while
the service has "een su"sisting to the detriment of his
former employer.
Art. 1A),. 1he principal may revo7e the agency
at will, and compel the agent to return the
document evidencing the agency. *uch revocation
may "e e.press or implied.
:ay an agency "e terminated "y a su"se4uent act of the
principal> (es, when he does so, itDs called revocation.
:ay an agency "e terminated "y a su"se4uent act of the
agent> (es, itDs called withdrawal or renunciation.
=oes it matter if the agency is gratuitous or with
compensation when we spea7 of revocation "y the
principal> No, art 1A), ma7es no distinction.
Reasons#
1.- *ince the authority of the agent emanates from
the principal, if the principal wishes to terminate
the agency the law must ena"le him to do so.
).- Confidence "eing the cardinal "asis of the
relation, it stands to reason that it should cease
when such confidence disappears.
$.- 1he principal@agent relationship is consensual
and personal in nature. No one can nor should
%n case a principal does revo7e an agency, is there any
way "y which the agent can hold him lia"le for
damages> (es. For instance,
1.- %f the agency was constituted for a fi.ed period,
the principal shall "e lia"le in damages
occasioned "y the wrongful discharge of the
agent "efore the e.piration of the period fi.ed.
).- %f the agent can prove that the principal acted in
"ad faith "y revo7ing the agency in order to
avoid payment of commission a"out to "e
earned, the principal can "e held lia"le for
damages.
Reason for re4uiring agent to return the document
evidencing the agency# 1o prevent the agent from
ma7ing use of the power of attorney and thus avoid
lia"ility to $rd persons who may su"se4uently deal with
the agent on the faith of the instrument.
Kinds of Revocation#
1.- '.press+ or
).- %mplied, e.g.#
a.- 6hen the principal appoints a new agent
for the same "usiness or transaction, or
".- 6hen the principal directly manages the
"usiness entrusted to the agent.
%s notice of revocation to the agent necessary> (es.
A revocation without notice to the agent will not render
invalid an act done in pursuance of the authority.
%s e.press notice of revocation to the agent necessary>
As "etween the principal and the agent, e.press
notice to the agent that the agency is revo7ed is not
always necessary. %f the party to "e notified actually
7nows, or has reason to 7now, facts indicating that his
authority has "een terminated or suspended, there is
sufficient notice.
%s notice of revocation to $rd persons necessary> (es.
6hat 7ind of notice should you give $rd persons>
1.- As to former customers, actual notice must e
given to them "ecause they always assume the
continuance of the agency relationship.
).- As to other persons, notice "y pu"lication is
enough.
:ay the agent renounce the agency at will>
(es, "ut su"0ect to the contractual o"ligations owing
the principal.
Reason# 1he essence of the principal@agent relationship
is the consent and willingness of the agent to act for the
principal. 1he law cannot compel the parties to continue
an agency if they do not want to do so. E1he principal
cannot even sue for affirmative specific performance
"ecause that would lead to involuntary servitudeP-
1F *ection %%@= ?elen C. Arevalo
Finals Reviewer A&'NC(
to $rd person informed of
the appointment.
)nd *em+ ),,$
7now, as long as there is
pu"lication in a newspaper
of general circulation.
Form of renunciation#
%t is not always necessary for the agent to renounce
the agency e.pressly. ?e can do so impliedly, as for
e.ampleB
1.- 6here he has conducted himself in a manner
incompati"le with his duties as agent+ or
).- 6hen he a"andons the o"0ect of his agency and
acts for himself in committing a fraud upon his
principal+ or
$.- 6hen he files a complaint against the principal
and adopts an antagonistic attitude towards him.
=oes a violation of the instructions of the principal
amount to a renunciation>
No. :ere fact that agent violates his instructions does
not amount to renunciation, and although he may thus
render himself lia"le to the principal, he does not cease
to "ecome an agent.
Art. 1A)1. %f the agency has "een entrusted for
the purpose of contracting with specified persons,
its revocation shall not pre0udice the latter if they
were not given notice thereof.
6hat is the effect of revocation in relation to $rd persons
if the agent was authoriCed to contract with specified
persons>
%f the agency is created for the purpose of
contracting with specified persons, its revocation will not
pre0udice such $rd persons until notice thereof is given
them. 1he reason for this is o"vious. *ince $rd persons
have "een made to "elieve "y the principal that the
agent is authoriCed to deal with them, they have a right
to presume that the representation continues to e.ist in
the a"sence of notification "y the principal. !ut of
course, notice is not re4uired if the $rd persons already
7now of the revocation.
Art. 1A)). %f the agent had general powers,
revocation of the agency does not pre0udice third
persons who acted in good faith and without
7nowledge of the revocation. Notice of the
revocation in a newspaper of general circulation is
a sufficient warning to third persons.
'ffect of revocation in relation to $rd persons if the agent
was authoriCed to contract with the pu"lic in general#
%n case the agent has general powers, innocent $rd
parties dealing with the agent will not e pre0udiced "y
the revocation "efore they had 7nowledge thereof. %n
this case, however, the fact that the revocation was
advertised in a newspaper of general circulation would
"e sufficient to $rd persons for pu"lication constitutes
notice upon every"ody and this is true whether or not
such $rd persons have read the newspaper concerned.
Notice re4uired in art. 1A)1 v. that in art. 1A))#
Art. 1A)1Art. 1A))
:ust "e personal.:ay "e personal.
Revocation must "e 7nown 'ven if $rd person doesnDt
?elen C. Arevalo 18
&eneral rule# *pecial information needs special
information of revocation.
'.cept# %f you can prove that the $rd person read the
notice in the newspaper.
Art. 1A)$. 1he appointment of a new agent for
the same "usiness or transaction revo7es the
previous agency from the day on which notice
thereof was given to the former agent, without
pre0udice to the provisions of the two preceding
articles.
6hat does this article mean>
1.- 1here is implied revocation of the previous
agency when the principal appoints a new agent
for the same "usiness or transaction if there is
incompati"ility. !ut the revocation does not
"ecome effective as "etween the principal and
the agent unless it is in some way
communicated to the latter. Again, the rights of
$rd persons who acted in good faith and without
7nowledge of the revocation will not "e
pre0udiced there"y.
).- 1here is no implied revocation where the
appointment of another agent is not
incompati"le with the continuation of li7e
authority in the 1st agent, or if the 1st agent is
not given notice of the appointment of the new
agent.
Art. 1A)2. 1he agency is revo7ed if the principal
directly manages the "usiness entrusted to the
agent, dealing directly with third persons.
6hat does the a"ove article provide>
%t provides for another case of implied revocation.
'ffect of direct management of the "usiness "y the
principal himself#
&enerally, it revo7es the agency "ecause there would
no longer "e any "asis for the representation previously
conferred.
'.ception# when the only desire of the principal in
doing so is for him and the agent to manage the
"usiness together.
Art. 1A);. 6hen two or more principals have
granted a power of attorney for a common
transaction, any one of them may revo7e the same
without the consent of the others.
Rationale# *ince the appointment of an agent "y ) or
more principals for a common transaction or underta7ing
ma7es them solidarily lia"le to the agent for all
conse4uences of the agency, then each one of the
principals should "e granted the right to revo7e the
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Finals Reviewer A&'NC(
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to deal with the thing in order to ma7e the
assignment, pledge or lien effectual.
power of attorney even without the consent of the
others. Remem"er that in a solidary o"ligation, the act
of one is the act of all.
Art. 1A). A general power of attorney is
revo7ed "y a special one granted to another agent,
as regards the special matter involved in the
latter.
?ow many agents are involved in this article>
), one to whom a general power is previously
granted. Another to whom a special power is given.
ENote that this can also apply if a special power is
su"se4uently given to the same agent.-
'ffect of the issuance of a special power as regards the
general power#
1he general power is impliedly revo7ed as to matters
covered "y the special power "ecause a special power
naturally prevails over a general power.
Art. 1A)F. An agency cannot "e revo7ed if a
"ilateral contract depends upon it, or if it is the
means of fulfilling an o"ligation already
contracted, or if a partner is appointed manager of
a partnership in the contract of partnership and
his removal from the management is un0ustifia"le.
&eneral rule# 3rincipal may revo7e an agency at will
since the essence of agency is the agentDs duty of
o"edience to the principal.
'.ceptions# J!FQ3artnerL
1.- 6hen a "ilateral contract depends on the
agency+
).- 6hen the agency is the means of fulfilling an
o"ligation already contracted+
$.- 6hen a partner is appointed as manager of a
partnership in the contract of partnership and
his removal from the management is
un0ustifia"le.
Can an agency, coupled with an interest, "e terminated
"y the sole will of the principal> No.
Re4uisite for agency to "e irrevoca"le for "eing coupled
with a interest#
%nterest of the agent must "e in the su"0ect matter of
the power conferred and not merely an interest in the
e.ercise of the power.
%nstances of an agency coupled with an interest#
1.- 6hen the agent has parted with value or
incurred lia"ility at the principalDs re4uest, and
he is loo7ing to the e.ercise of the power as the
means of reim"ursement or indemnity.
).- 6hen the interest in the thing concerning which
the power is to "e e.ercised arises from an
assignment, pledge or lien created "y the
principal with the agent "eing given the power
%f the contract of agency stipulates that such will "e
irrevoca"le, is such terminology controlling in all cases>
No. 6hether an interest will ma7e an agency
irrevoca"le e.ists in a particular case is to "e
determined from the entire agreement "etween the
parties and from the facts and circumstances. 1he
terminology is not controlling. 'ven if an agency is made
in terms irrevoca"le, the fact will not prevent its
revocation "y the principal when the agency is not in
fact coupled with an interest.
%f an agency is coupled with an interest, does this mean
that the principal can never ever revo7e it>
No. (ou can still revo7e in e.treme situations, e.g.#
1.- %rrevoca"ility can never "e used as a shield for
the perpetration of acts in ad faith, "reach of
confidence or "etrayal of trust. 1he law will
never permit the agent to commit frauds against
the principal.
).- 6hen the interest is already terminated.
6hy is it said that agencies coupled with interest are not
true agents>
!ecause persons with proprietary interests in the
su"0ect matter of their agency are not true agents at all.
/ne of the hallmar7s of the agency relation is the
control of the principal over the acts of the agent and
over the su"0ect matter of the agency. An agency
coupled with an interest removes that control.
Art. 1A)8. 1he agent may withdraw from the
agency "y giving due notice to the principal. %f the
latter suffer any damage "y reason of the
withdrawal, the agent must indemnify him
therefor, unless the agent should "ase his
withdrawal upon the impossi"ility of continuing
the performance of the agency without grave
detriment to himself.
=oes the agent have a right to renounce or withdraw
from the agency at any time>
(es. 'ven without the consent of the principal. !ut, in
the latter case, he may "e su"0ect to lia"ility for "reach
of contract or for tort.
!asis# Constitutional prohi"ition against involuntary
servitude.
/"ligation of agent if he withdraws from agency without
0ust cause#
1.- Notify principal Eeven if w8 0ust cause-+ and
).- %ndemnify the principal should the latter suffer
any damage "y reason of such withdrawal.
Reason for indemnity# 1o answer for losses and
damages occasioned "y the non@fulfillment of his
o"ligation as agent.
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%s the agent lia"le for indemnity if the withdrawal was
for 0ust cause> No. Agent cannot "e held lia"le if the
agent withdraws for a valid reason as when#
1.- 1he withdrawal is "ased on the impossi"ility of
continuing the agency without grave detriment
to himself+ or
).- Fortuitous event.
6hat happens when the agent sues the principal>
'4uivalent to withdrawal of the agent.
Art. 1A)A. 1he agent, even if he should
withdraw from the agency for a valid reason, must
continue to act until the principal has had
reasona"le opportunity to ta7e the necessary
steps to meet the situation.
/"ligation of agent after withdrawal#
'ven when withdrawal is for a valid reason, he must
continue to act until the principal has had reasona"le
opportunity to ta7e the necessary steps li7e the
appointment of a new agent to remedy the situation
caused "y the withdrawal. 1his is to prevent damage or
pre0udice to the principal.
Art. 1A$,. 1he agency shall remain in full force
and effect even after the death of the principal, if
it has "een constituted in the common interest of
the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in
his favor.
%f the agent dies, his heirs should tell the principal.
?owever, if the principal dies, the principalDs heirs have
no o"ligation to tell the agent.
&eneral rule# Agency is terminated instantly "y the
death of the principal.
Rationale# Agency, "eing "ased on representation, there
is no one to e represented where the principal is already
dead.
'.ceptions#
1.- %f the agency has "een constituted in the
common interest of the principal and the agent+
and
).- %f the agency has "een constituted in the
interest of a $rd person who has accepted the
stipulation in his favor.
Art. 1A$1. Anything done "y the agent, without
7nowledge of the death of the principal or of any
other cause which e.tinguishes the agency, is
valid and shall "e fully effective with respect to
third persons who may have contracted with him
in good faith.
6hat does this article provide>
%t provides that the death of the principal or any
other li7e cause, e.tinguishes the agency. !ut in the
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same way that revocation of the agency does not
pre0udice $rd persons who have dealt with the agent in
good faith without notice of revocation, such $rd persons
are also protected where it is not shown that the agent
had 7nowledge of the termination of the agency "ecause
of the death of the principal or any other li7e cause
which e.tinguishes the agency.
=oes this article only re4uire the agent to "e in good
faith> No, "oth agent and $rd person must "e.
Art. 1A$). %f the agent dies, his heirs must
notify the principal thereof, and in the meantime
adopt such measures as the circumstances may
demand in the interest of the latter.
%n case of death of agent, what must the heirs do>
1.- Notify the principal to ena"le the latter
reasona"le opportunity to ta7e such steps as
may "e necessary to meet the situation+ and
).- Adopt such measures as the circumstances may
demand in the interest of the principal.
Can the heirs continue the agency>
&eneral rule# No, since an agency calls for personal
services on the part of the agent.
'.ceptions#
1.- Agency "y operation of law, or a presumed or
tacit agency+
).- Agency is coupled with an interest in the su"0ect
matter of the agency.
&//= 5<CKP R
1his is for that small syndicate of people who name
themselves after a la"or caseP
% "asically 0ust typed up the reviewer minus the cases and
pro"lems. % donDt thin7 the pro"lems are all that important,
theyDre Atty. Suimson pro"lems not 'nrileDs. /ur case outline
differs from theirs a "it too. !esides, weDre all set with case
digests na, we 0ust have to find themP
1han. to that other group of people who name themselves
after Gan imaginary perfect placeH. *orry, % plagiariCed your
reviewer guys, "ut % wouldnDt have had to if you didnDt stamp
your huge seal right smac7 center of every pageP
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