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AGENCY SPLITTING HAIRS

Under a crop loan agreement wherein the creditor is authorized to sell the planterdebtors crops and credit the planter-debtor with the proceeds of the sale, there is
no contract of agency (Soriano vs. Compaoa General, 18 SCRA 999).
A union that entered into a stevedoring Contract with the shipping company cannot
be regarded as an agent of the company since an agent cannot represent two
conflicting interests (Allied Free Workers Union vs. Compaia Maritima, 19 SCRA
258)
Article 1871 commentary: This article presumes the acceptance of the agency; but
such presumption is only prima facie, and may be defeated by proof to the contrary
(Tolentino, citing 6 Salvat 199).
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Spouses as between themselves, can enter into a contract of agency (Tolentino,
citing De Buen: Colin & Capitant 884).
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Some acts not delegable to an agent: entering into a contract of marriage, making a
will, presence of the accused in a criminal case.
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Compare 1871 and 1872, cf Tolentino 401. Understand 1872 (1) more!
THE REQUIREMENT OF HABITUAL ENGAGEMENT IN AN IMPLIED
ACCEPTANCE BY AN AGENT OF HIS APPOINTMENT BY LETTER OR TELEGRAM
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.
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Art. 1873. If a person specially informs another or states by public advertisement
that he has given a power of attorney to a third person, the latter thereby becomes
a duly authorized 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.

The power shall continue to be in full force until the notice is rescinded in the same
manner in which it was given.
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Note that in General Agency , notice to third persons is required to terminate


apparent authority, while no such notice is required in Special Agency, since
third parties are required to inquire as to authority (UP Law Reviewer).

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Sale of piece of land or any interest therein through an agent whose authority is not
in writing is void (1874)
Sale of piece of land or any interest therein through an agent whose authority is in
writing is valid (1874)
Sale of building or any interest therein through an agent is valid, regardless of the
form of authority (not covered by 1874)
1874 the authority of the agent must be in writing for the sale of the principals
LAND to be valid and enforceable; failing this, the sale is VOID
1403 (2)(e) the agreement for sale of REAL PROPERTY entered into, whether by
the agent or the seller himself, must be in writing, to be enforceable; failing this, the
agreement is UNENFORCEABLE
1358 - ???!?!?!?
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Efficient and Procuring Cause Principle - For Commission
1. Agent quite succeeded in bringing the minds of buyer and seller together;
and
2. Authority has not expired (Rocha vs. Pratts, 43 Phil. 397)
Its not enough that he found a buyer, but one who will actually buy on Ps terms
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CLARIFICATION:
Art. 1877. 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 execute such acts as he may consider appropriate, or even though
the agency should authorize a general and unlimited management.
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A General Power permits the agent to do all acts for which the law does not
require a special power (Tolentino 405 citing 6 Llerana 137).

A Special Power may be included in a GPA, either by giving authority for all acts of
a particular character or by specifying therein the act or transaction for which the
special power is needed (Tolentino 406, citing 6 Llerana 139).
The requirement of special power of attorney in Article 1878 refers to the nature of
the authorization, not to its form. Even if a document is titled as a general power of
attorney, the requirement of a special power of attorney is met if there is a clear
mandate from the principal specifically authorizing the performance of the act [UP
Law Reviewer, citing Bravo-Guerrero v. Bravo (2005)].

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Lack of SPA is only for the convenience of
Kinds of Agency under 18781. General comprises all the business of the P
2. Special comprises one or more specific transactions
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Power to sell must be understood as for cash, and not for credit, unless the latter is
expressly authorized. (6 Llerena 144-145)q
If the sale is for cash the agent is also considered as authorized to receive the price.
(Ibid.)
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EXCEPTION
General Rule: Art. 1879 . A special power to sell excludes the power to mortgage;
and a special power to mortgage does not include the power to sell.
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If the power to raise a sum of money for which purpose the agent is
authorized to sell a particular real property, or to avail himself of any other
means, the agent is considered as empowered to mortgage the property. In
this case, the real object of the agency is to raise the sum of money, and the
sale is merely one of the means indicted for attaining that object (Tolentino,
citing 6 Llerena 145).
Note: This is a A special power to mortgage does not include the power to
contract loans for the principal (PNB v. Sta. Maria, 29 SCRA 303).

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Authority to borrow money does not give the agent the legal right to sign his
principals name in a promissory note to answer for the agents pre-existing debt.
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What is a Commission Agent?
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A Commission Agent is not prohibited to sell at a price higher than that fixed
by the Principal; but are so prohibited to sell at a price lower.

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Art. 1882. 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.
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Refers to an advantage that can be obtained without modifying the


conditions, the form or object of the agency. Thus, if an agent is empowered
to sell for cash, and he sells on credit at a higher price, he cannot allege the
advantage of the higher price to escape liability to the principal if the latter
demands that the cash be paid by him.

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EXCEPTION:
Art. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such
persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom
he has contracted, as if the transaction were his own, except when the contract
involves things belonging to the principal.
The provisions of this article shall be understood to be without prejudice to the
actions between the principal and agent.
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In a contract of carriage, where even if the driver is acting in his own name,
the principal is bound (Tolentino 411 citing 1 Von Tuhr, Obligaciones, pp. 251253)
In cases where the third party is in doubt as to who should be responsible to
him under a contract by an agent involving property of a principal, he may
sue both the principal and the agent.
Similarly, where an agent who acts in his own name entered into a contract
involving the property of the principal, the principal may nonetheless sue the
person with whom the agent dealt with. (Tolentino 414 citing Beaumont Vs.
Prieto, 41 Phil 670)

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Coupled with Interest vis--vis Art. 1875. Agency shall be presumed to be for a
compensation unless there is proof to the contrary.
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OBLIGATIONS OF THE AGENT


EXCEPTION: Art. 1886. Should there be a stipulation that the agent shall advance
the necessary funds, he shall be bound to do so except when the principal is
insolvent.
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Instructions
Art. 1887. In the execution of the agency, the agent shall act in accordance with the
instructions of the principal.
In default thereof, he shall do all that a good father of a family would do, as required
by the nature of the business.
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Instructions means or orders carrying out the agency; to be interpreted in


accordance with presumed will of Principal and usage of trade.
While instructions form part of the agency, they only bind Principal and
Agent, not Third Persons.
In General Agency, Notice to third persons is required (UP Law Reviewer).

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EMPHASIS:

Art. 1890. If the agent has been empowered to borrow money, he may himself be
the lender at the current rate of interest. If he has been authorized to lend money at
interest, he cannot borrow it without the consent of the principal.
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Note that if the agent in 1890 wants to borrow with interest, he has to get the
consent of the principal. If he wants to lend to the principal, consent of the
latter is not necessary but he can only lend at the current interest rate.

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Art. 1891. 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,
even though it may not be owing to the principal. Xxx
EMPHASIS:
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An agent who takes a secret profit in the nature of a bonus, gratuity or


personal benefit from the vendee, without revealing the same to his principal,
the vendor, is guilty of a breach of his loyalty to the principal and FORFEITS
HIS RIGHT TO COLLECT THE COMMISSION from his principal, even if the
principal does not suffer any injury by reason of such breach of fidelity,
or that he obtained better results or that the agency is a gratuitous
one, or that usage or custom allows it; because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual damage. By taking
such profit or bonus or gift or propina from the vendee, the agent thereby
assumes a position wholly inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as his commission is
concerned, as if no agency had existed. The fact that the principal may have
been benefited by the valuable services of the said agent does not exculpate
the agent who has only himself to blame for such a result by reason of his
treachery or perfidy. (Domingo vs. Domingo, G.R. No. L-30573
October 29,
1971)
Obligation of the Agent to render an account is transmissible to his heirs
(Tolentino 417 citing Valverde 623).
Right of Principal to an accounting is likewise transmissible to his heirs via his
estates administrator or executor (Tolentino citing Ramos vs. Caoibes, 50 Off.
Gaz. 1032).

EXCEPTIONS:
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If the debtor, by mistake, pays to the agent more than what is owing to the
principal, such agent may keep the excess because he is the one against
whom an action may be brought by the payer to recover the excess amount
paid (Tolentino 416 citing 6 Llerena 172)
Agent is relieved from the obligation to return to the principal things received
from the latter but are lost by unforeseeable events without the concurrent

fault on the agents part (Austria vs. Court of Appeals, G.R. No. L-29640 June
10, 1971).
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SUBSTITUTES
Art. 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be
void. (1721)
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the
principal may furthermore bring an action against the substitute with respect to the
obligations which the latter has contracted under the substitution. (1722a)

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JOINT AGENCY
Art. 1894. The responsibility of two or more agents, even though they have been
appointed simultaneously, is not solidary, if solidarity has not been expressly
stipulated.
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Each agent is responsible for his own acts or omissions to the principal. If the
agency is not performed due to the omission of one agent, then he alone
bears the entire responsibility for the injury caused (Tolentino 417 citing 6
Llerena 186).
Joint Agents act collectively as a single unit. Each and everyone must make
the same declaration to the same person, or ratify the declaration already
made by the first agent.
However, notice to one is notice to all (Tolentino 418 citing Perez, Gonzalez &
Alguer).

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SOLIDARY AGENCY
Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for
the non-fulfillment of agency, and for the fault or negligence of his fellow agents,

except in the latter case when the fellow agents acted beyond the scope of their
authority.
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Each Solidary Agent acts independently, and can bind the principal without
the intervention of the others (Tolentino 419 citing Perez, Gonzalez & Alguer)
Consent of one not required to validate acts of other Solidary Agents, unless
it was so intended by the Principal (Tolentino 419, citing Mun. Council of Iloilo
vs. Evangelista, 55 Phil. 290).
Tolentino: The present article really governs a joint agency where the agents
cat collectively as a unit in relation to third persons, but where it is stipulated
that they shall be solidarily liable to the principal. It cannot govern a solidary
agency in the true sense, in which each agent is absolutely independent of
the other. In other words, both article 1894 and the present one apply to a
joint or collective agency, but are limited to the liability of the agents to the
principal. The relations of the agents to third persons are governed by other
principles (p. 419)
The act of one agent in excess of his authority does not hold other agents
liable, but does not relieve the latter of their obligation to discharge the
agency (mine: they need to go on). Neither does such ultra vires act of one
deprive the principal of the guaranty arising from the stipulated solidarity
(Tolentino 420 citing 6 Llerena 183).

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Art. 1896. The 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
extinguishment of the agency.
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If the agent applied agency funds for his own use, he is liable for interest
o From the day he applied it so
o NOT from the time he collected it, if it were a collection.
He is also liable for interest on funds which he failed to return from the day of
extinguishment of the agency.

Effect of Unauthorized Acts


VOID:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.
Art. 1891, par. 2. Every stipulation exempting the agent from the obligation to
render an account shall be void.
Art. 1892, par. 3. All acts of the substitute appointed against the prohibition of the
principal shall be void.

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope
of his authority, and the principal does not ratify the contract, it shall be void if the
party with whom the agent contracted is aware of the limits of the powers granted
by the principal. In this case, however, the agent is liable if he undertook to secure
the principal's ratification.

VOIDABLE When agent acts in excess of his authority, the contract is voidable at
the instant of the Principal (Tolentino 409 citing Zayco vs. Sierra, 49 Phil. 985).

UNENFORCEABLE (Tolentino 409)