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08 OCT.

2016 -- AGENCY
(c) When Estopped – Art. 1911
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers.
Estoppel – a bar which precludes a person from denying or asserting anything contrary to that which has been established as
the truth by his own deed or representation either express or implied.
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RATIFICATION
Rests on intention, express or implied, regardless of
prejudice to another.

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The party is bound because he intended to be.

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Retroactive and makes the agent’s unauthorized act
good from the beginning – i.e. it affects the entire
transaction from the beginning.

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The substance of ratification is confirmation of the
unauthorized act or contract after it has been done
or made.

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ESTOPPEL
Rests on prejudice rather than intention
The party is bound notwithstanding the absence of
such intension because the other party will be
prejudiced and defrauded by his conduct, unless the
law treats him as legally bound
Affects only the relevant parts of the transaction
and from that time only when estoppel maybe said
to be spelled out.
The substance of estoppel is the principal’s
inducement to another to act to his prejudice.

*So far as the rights of third persons are concerned, however, the distinctions are of little importance because the principal is bound by
the acts of the agent whether the conduct of the principal constitutes ratification or whether it constitutes estoppel.
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Art. 1911 is based on the principle of estoppel and it is necessary for the protection of innocent third persons. It is an
instance when solidarity is imposed by law.

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Both the principal and the agent may be considered as joint tortfeasors whose liability is solidary.

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The third person with whom the agent dealt may sue either the agent or the principal alone, or both. The agent should
be exempt from liability if he acted in good faith.

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APPARENT AUTHORITY
That which though not actually granted, the
principal knowingly permits the agent to exercise or
holds him out as possessing.

Not founded in negligence of the principal, but in
the conscious permission of acts beyond the powers
granted.

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AUTHORITY BY ESTOPPEL
Arises in those cases where the principal, by his
culpable negligence, permits his agent to exercise
powers not granted to him, even though the
principal may have no notice or knowledge of the
conduct of the agent.
Based in the negligence of the principal in failing
properly to supervise the affairs of the agent,
allowing him to exercise powers not granted to him,
and so justifies others in believing he possesses the
requisite authority

*The doctrine of powers by estoppel can apply only in those cases in which a third party acted to his detriment in reliance upon the
appearance of authority the principal has held the agent out as having.

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IMPLIED AGENCY
There is an actual agency.
Principal alone is liable.

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AGENCY BY ESTOPPEL
Authority of agent is not real (apparent only).
If estoppel is caused by the principal, he is liable to
any
third
person
who
relied
on
the

Keppel (2) Liability of the Principal (a) Solidary Liability – Arts. neither have such persons against the principal.AGENCY - misrepresentation. It cannot be denied that here the principal failed to adopt the needed measures to prevent misrepresentation. CASES: Ramirez vs. . 1883. But the parties may negate this solidarity responsibility by express agreement. even when the appointments were made by the principals in separate acts. however. Orientalist Co. Principals have all agreed in the appointment of the same agent. he should be exempted from liability. the rule should apply in the interest of justice - Requisites for solidary liability: o o o - Two (2) or more principals. The solidarity arises from the common interest of the principals and not from the act of constituting the agency. CASE: De Castro vs.e. - The liability of the principals is solidary for all the consequences of the agency – i. 1915 Art. Even when the agent has exceeded his authority. Thus. 2016 -. each principal may be sued by the agent for the entire amount due and not just for his proportionate share. - Liability of Principal Because of Estoppel: The principal may be said to be in estoppel and therefore innocent third persons should not be prejudiced. Ocfemia Cuison vs. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. that this Article is unjust for if the agent is considered innocent and acting within the scope of his authority. except when the contract involves things belonging to the principal. If an agent acts in his own name. then only the agent is liable. provided that they are for the same transaction. o o I. 1911. If estoppel is caused by the agent. If two or more persons have appointed an agent for a common transaction or undertaking they shall be solidarily liable to the agent for all the consequences of the agency.08 OCT. Agent is appointed for a common transaction or undertaking. even if the agent has been appointed separately. the principal has no right of action against the persons with whom the agent has contracted. - Solidarity is the rule under this Article because of the common transaction. & Fernandez Rural bank of Milaor vs.E. “Common transaction” – if it is one as to which the interests of the principals are in accord and in harmony. Art. - Solidary Liability: This is an instance when solidarity is imposed by law. It would seem. as if the transaction were his own. 1883 Art. 1911. the agent is the one directly bound in favor of the person with whom he has contracted. 1915. In such case. CA Country Bankers vs. CA (b) Things Belonging to the Principal – Art. the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.

e. Agudelo B. 1912. - Applies only when the agent has. Should the agent have advanced them. but also against the agent. OBLIGATIONS OF THE PRINCIPAL TO AGENTS (1) Advance/Reimburse – Arts. This is so because the reimbursement and interest spoken of in this Article do not refer to compensation or commission. provided the agent is free from fault. but not if there is no perfected transaction . from the day on which the advance was made. advance to the agent upon his request the sums necessary for the execution of the agency. the purchaser takes title to the merchandise and the principal cannot maintain an action against him for the recovery of the merchandise or for damages. been authorized by the principal to enter into the particular transaction. the principal must reimburse him therefor. the sums necessary for the execution of the agency. The principal must advance to the agent. The reimbursement shall include interest on the sums advanced. instead of contracting for and in behalf of the principal. - Failure of the agency through no fault of the agent must be borne solely by the principal. Remedy for third persons: He has the right of action not only against the principal.AGENCY - The exception to the rule that an agent acting in his own name does not bind the principal is when the contract involves things belonging to the principal. 2016 -. o - Where the merchandise is purchased from an agent with undisclosed principal and without knowledge on the part of the purchaser that the vendor is merely an agent. 1918 Art. acts in his own name. - Remedy of principal: The exception is without prejudice to the principal’s right to demand from the agent damages for his failure to comply with the agency. - Exception is necessary for the protection of third persons against possible collusion between the agent and principal. but the agent. CASES: Gold Star Mining vs. i. - Even if the agency be gratuitous. but can only proceed against the agent. when the rights and obligations which are the subject-matter of the litigation cannot be legally and juridically determined without hearing both of them. the agent will not be liable for the damage which. - The law provides that the obligation to reimburse the agent cannot be defeated by the act that “the business or undertaking was not successful” provided the agent is free from all fault. hence. in fact. this Article will also apply. It is unfair to hold this failure against an innocent agent. the principal may suffer. In such case. even if the business or undertaking was not successful. through his nonperformance. 1912. the agent will still be entitled to reimbursement and interest.08 OCT. should the latter so request. the contract is considered as entered into between the principal and the third person. - In case the agent advanced the sums for the execution of the agency. - The principal is under the obligation to provide the means with which to execute the agency. o If the principal fails to comply with his obligations. the said advances must be reimbursed by the principal with interest from the day the advance was made. Lim-Jimena PNB vs. - A broker is entitled to a commission if the sale is effected.

Caltex (Phils. good customs. and the reason for the law would cease. public order.. Northern Theatrical Enterprises Africa.) Inc. al. Since the principal receives the benefits of the agency. 1913 Art. or that the latter would be allowed only a certain sum. i. al. The principal is not liable for the expenses incurred by the agent in the following cases: (1) If the agent acted in contravention of the principal’s instructions. Rights of Third Parties – Art. - Rule in Art. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney. unless the latter should wish to avail himself of the benefits derived from the contract. (3) Compensate – Art. or the instructions as regards the agency. 1875. otherwise the Article cannot apply. 4. – to punish the agent. no promise to indemnify will be implied for losses or damages caused by the independent and unexpected wrongful acts of third persons for which the principal is in no way responsible. or public policy is binding between parties. 2. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. Thus. 1875 Art. and this is especially true where the act of the agent is of an unusual nature. 1913. - Naturally. this Article can be made use of only if the agency exists. The principal must also indemnify the agent for all the damages which the execution of the agency may have caused the latter. (2) Indemnify – Art. 1902. (3) When the agent incurred them with knowledge that an unfavorable result would ensue. if the principal was not aware thereof.e. – self-evident o Par. - As a rule.08 OCT. morals. 2016 -. he should answer for the damages resulting from the execution thereof without fault or negligence on the part of the agent. CASES: Dela Cruz vs. Reasons: o Par. et. 3. 1918. and which he does not know to be wrong. 1. 1902 Art. . Reason for this exception. et. 1913 is based on equity. without fault or negligence on his part. RIGHTS AND OBLIGATIONS OF THIRD PARTIES A. - Where the agent is called upon by the principal to do an act which is not manifestly legal. unless there is proof to the contrary. o Par.AGENCY Art. he is bound to inquire as to the extent of the agent’s authority. – the agent is guilty of bad faith and lack of diligence o Par. - When the principal is not liable for expenses incurred by the agent. the acceptance of benefits is implied ratification. – an express stipulation which is not contrary to law. vs.. a third person deals with the agent at his peril. Agency is presumed to be for compensation. In such a case. the law implies a promise on the part of the principal to indemnify the agent for such losses and damages as flowing directly and immediately from the execution of the agency. (4) When it was stipulated that the expenses would be borne by the agent. - The liability of the principal for damage is limited only to that which the execution of the agency has caused the agent. the supposed agent is not acting in behalf of a true principal. (2) When the expenses were due to the fault of the agent.

it being obligatory only on the principal who created the agency). The principal may revoke the agency at will. In the case of a partner appointed manager in the contract of partnership and his removal from the management is unjustifiable. CA Dizon vs. the irrevocability of a power of attorney cannot affect one who is not a party thereto. Rodriguez BA Finance vs. 2016 -. at his mere option.Ignorance of the agent’s authority is no excuse. it is the duty of third persons to require the agent to produce his power of attorney to ascertain the scope of his authority. Revocation – Arts. Even if the period fixed has not yet expired. the principal can still revoke. for breach of contract. He may also ask for the instructions of the principal.08 OCT. - o o The principal may revoke the agency at will—at any time. revocation at will is proper whether the agency is gratuitous or with compensation. 1925 Art. o When the principal is obliged not to revoke. i.AGENCY . - - Reasons for the rule: o Authority of the agent emanates from or depends on the will of the principal. CA Bacaltos Coal Mines vs. . - Third persons are not bound and cannot be affected by the private or secret orders and instructions of the principal in the same way that he cannot be prejudiced by any understanding between the principal and agent.e. 1927:    When a bilateral contract depends on the agency. Revocation at will is proper: Even if the agency is onerous. o Principal-agent relationship is consensual and personal in nature and no one can be forced to retain another as his agent against his will. When the agency is the means of fulfilling an obligation already contracted. CA EXTINGUISHMENT OF AGENCY A. it stands to reason that it should cease when such confidence disappears. but interest in the subject matter of the power).) . but he can be held liable for damages. o Cases under Art.As the law makes no distinction. When the agency cannot be revoked at the principal’s will: o When it is “coupled with an interest” (interest possessed by the agent not in the proceeds arising from the exercise of the power. it is enough that the principal should wish to withdraw the authority or terminate the agency o Confidence being the cardinal basis of the relation. and compel the agent to return the document evidencing the agency. (Here. Such revocation may be express or implied. 1920. 1920. B. o When there has been a waiver by the principal (however. such secret orders or instructions cannot be invoked against third parties if the agent has apparent authority. with or without reason—since an agency relationship is voluntary. Obligations of Third Parties CASES: Keeler Electric vs.

The purpose is to prevent the agent from making use of the power of attorney and thus avoid liability to third persons who may subsequently deal with the agent on the faith of the instrument. CASES: Dialosa vs.AGENCY o When the revocation is done in bad faith. the agent cannot get damages because the principal is merely exercising a right. while notice by publication is sufficient as to other persons. 1925.  When the principal directly manages the business entrusted to the agent - Notice of revocation: o To agent – Express notice to the agent that the agency is revoked is not always necessary. Brimo . the principal can still revoke. - Kinds of revocation: o Express o Implied:  When the principal appoints a new agent for the same business or transaction. Panoyas Macondray & Co. vs. CA Buason vs. 2016 -..) - The principal can compel the agent to return the document evidencing the agency. Inc. Any one of the principals is granted under this Article the right to revoke the power of attorney without the consent of others. Sellner Danon vs. moreover. but innocent third parties should not be prejudiced. any one of them may revoke the same without the consent of the others. A revocation without notice to the agent will not render invalid an act done in pursuance of the authority. Art.08 OCT. - GENERAL RULE: When revocation is proper. provided there is incompatibility. - The power to revoke under this Article is a consequence of the solidary liability of co-principals. the innocent agent can be entitled to damages from him. o To third persons – Actual notice must be brought home to former customers. (Here. When two or more principals have granted a power of attorney for a common transaction.