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AGENCY, TRUST, AND

PARTNERSHIP 1
WWW
September 14, 2016

Moreno‟s beauty, of course you should be able to


Classification of Contracts of Agency
resuscitate her.
1. As to CREATION
2) Solutio Indebiti
a. It is express when the granting of authority is either oral or
 If you rode a taxi and paid P50, but the driver gave you a
in writing.
change of P450. What will you do?
b. It is implied when by reason of the principal‟s silence,
There is solution indebiti. You not only have the authority,
inaction and failure to repudiate the acts of a person,
but also the obligation to return. You need not ask if you
even though he knows that such person is acting as an
have the authority to return the excess, otherwise, there
agent for and in his behalf.
would be unjust enrichment.
If by acts of the principal BY IMPLICATION:
Although creation may be implied, it does not necessarily mean that the
i. through his lack of action/inaction or his silence,
agent has already agreed. The acceptance of the agent is necessary. It
and
may be made expressly or impliedly.
ii. through his failure in repudiating, knowing that the
agent acted without authority (in effect tolerating
There is implied acceptance when both persons are present: when
the actions of the agent)
principal gave his authority and the agent accepted without any
objection.
We said that as to creation, agency could be implied. Can it therefore be
presumed?
When both persons are absent: it cannot be said that there was implied
 The contract of agency cannot be presumed.
acceptance by the agent except:
 There is no presumed agency even if implied because there must
1) When the principal gave his authority and there is a notice of
always be a basis in the granting of authority. There must be an
acceptance and the agent did not object.
intention to grant. Basis is needed to determine whether or not
2) Through telegram/ letter with respect to the business that he is
that authority has been granted.
regularly engaged in and he did not reply to that letter/ telegram.
When we say implied, what are we referring to?
If your boyfriend texts you, “Raisa, can we meet at Starbucks tonight?”
 Generally, agency is not presumed. Agency must exist as a fact.
Won‟t you believe it because it‟s just a text message? Don‟t you believe
There should be acts done by the agent for the account of his
me? You will! And if your boyfriend is not there when you went, will you tell
principal. There must be an intention from the principal granting
your boyfriend “nag text2 ta, ikaw may wala nganhi” Will you get mad?
an authority to the agent in order for him to act in behalf of the
Yes! “Sigeg kaboang dinha ako ning gi save, it came from your number” It
principal.
is now an accepted mode of communication and all you have to do is to
preserve or save that message.
Existence of authority in the contract of agency must be specified - the
extent, the nature. Unless these are clear, we cannot presume agency.
How is an appointment of an agent done?
 Appointment of an agent can be done expressly or impliedly.
By Operation of Law:
 Expressly, when the principal grants the authority to the agent by
Although not presumed, agency could still exist even if there was no
writing or orally.
actual authority. How?
 Impliedly, when the principal grants the authority.
1) Authority by necessity
Special Forms of Appointments: advertisement and special notice
 If Moreno faints, almost at the brink of death, what should
If appointment is done by publication, the revocation of such authority
be done? You have the authority to help her. With
should also be done through publication.

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AGENCY, TRUST, AND
PARTNERSHIP 2
WWW
September 14, 2016

2. As to CHARACTER
 If it is done by special notice to the agent, the manner of
a. It is gratuitous when the service rendered by the agent is
revocation should also be a special notice to the agent.
without compensation at all or there is no expectation of
compensation.
If done by special notices or information, who are bound by that
b. It is with compensation or onerous if the service of the
appointment?
agent is compensated.
 The parties receiving that appointment
When is it gratuitous or onerous?
However, if the appointment is done by advertisement?
 It is onerous agency if the principal gives compensation to the
 Any person who knew of that advertisement will be bound by it.
agent. It is gratuitous when there is no expectation of
compensation
This is done specially in appointments of agents which are corporations or
 If it is not indicated whether or not it is gratuitous or onerous, the
business entities. If appointed as an agent of a foreign corporation, that
agency is presumed to be with compensation or onerous.
foreign company will come out with a publication in newspapers of
general circulation. That‟s an important announcement. It is an indication
Why do you think it is presumed?
that somebody has been appointed as an agent, and therefore, any act
 Because in agency, there are specific acts that the agent does for
done by the agent will be binding on that appointing principal.
the principal. They must be compensated.
 Meaning, nothing is free. Presumption is that nothing is free. When
It is an acknowledgement that the public may now deal with the agent
you are required to do something, it is for a fee, unless of course
and any transaction entered into by that agent will be acknowledged,
there was an agreement on something else.
honoured, and duly entertained by the principal.
It is always for compensation. You were authorized to sell the land of
If it‟s a big insurance company in United Kingdom, for example, appointing
Mejica and this authority was in writing. You were looking for buyers.
somebody in Cebu as their general agent, the Cebu Community may now
However, after two years, you were unable to find a buyer. Despite all the
feel comfortable dealing with you. That‟s an important publication
efforts, woke up 5 o‟clock in the morning, came home twelve o‟clock
because it involves credibility and confidence, and that‟s the point, the
midnight, woke up again at 5… but despite your efforts you were unable
message being said. With that confidence in the community, where the
to sell. Can you demand from Mejica?
publication is done, you feel comfortable dealing with someone whose
 No! There is a presumption that a contract of agency is for
name you have read on the papers and now his agent. It Is better than
compensation, however, the presumption is only prima facie. It
dealing with someone you really don‟t know and heard of and suddenly
can be proved otherwise
comes and enters into a transaction. „Giilad tingali ko ani kinsa kaha ni‟
 For example, they entered into a contract of agency and the
you ask for credentials; you ask for specific appointments; you even ask
money involved may not be for payment of services rendered by
for a background. Once published, at least you would feel secure that the
the general agent. So it can be proved otherwise that the services
appointment of the agent is valid and binding.
performed by the agent are for compensation.
General rule: consensual; Exceptions
Although the presumption is that it is for compensation or onerous, this
 In the case of a sale of a real property, the authority of the agent
presumption only applies if the agent is successful. However, if you are
there must be in writing.
able to sell, and Mejica refuses because you never agreed on
 Not only sale or conveyance, but also mortgage
compensation, what can you say?
 If it is a sale of land, it should be in writing. Otherwise, the
 I can say that even if we did not agree on compensation, you will
transaction is void. If void, it cannot be ratified.
have to pay me because the presumption is that the agency is
onerous.

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AGENCY, TRUST, AND
PARTNERSHIP 3
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September 14, 2016

3) To compromise, to submit questions to arbitration, to renounce the


If you were not able to sell, but Sibay instead was able to sell, can Sibay
right to appeal from a judgment, to waive objections to the venue
now demand for compensation? How about you, can you ask Mejica for
of an action or to abandon a prescription already acquired;
compensation?
4) To waive any obligation gratuitously;
 Only Sibay can demand for compensation. It was through her
5) To enter into any contract by which the ownership of an
efforts that the property was sold.
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
3. As to EXTENT of agency/business
6) To make gifts, except customary ones for charity or those made to
a. It is general when it involves all the business of the
employees in the business managed by the agent;
principal.
7) To loan or borrow money, unless the latter act be urgent and
b. It is special when it is limited only to a specific business or
indispensable for the preservation of the things which are under
one or more acts or transactions.
administration;
8) To lease any real property to another person for more than one
4. As to AUTHORTY CONFERRED
year;
a. It is couched in general terms when it only includes
9) To bind the principal to render some service without
administration of the business or properties of the
compensation;
principal.
10) To bind the principal in a contract of partnership;
11) To obligate the principal as a guarantor or surety;
As an agent, you were authorized to look after all the
12) To create or convey real rights over immovable property;
properties of the principal in Cebu City, with full power to
13) To accept or repudiate an inheritance;
administer and manage all these properties, and to
14) To ratify or recognize obligations contracted before the agency;
decide whatever you think is necessary to be done with
15) Any other act of strict dominion.
respect to these properties.
These acts require an SPA because they involve transfer of ownership. The
The scope of authority is limited to acts of administration.
SPA should contain the scope of the authority of the agent and the acts
An agency couched in general terms comprises only acts
which he is empowered to execute.
of administration even if the principal should state that he
withholds no power or that the agent may execute such
You were empowered by the principal to pay for a certain property in
acts as he may consider appropriate, or even though the
Cebu City. After making the payment, you brought the property to the
agency should authorize a general and unlimited
principal. The principal said, “I never authorized you to buy! I only
management. (Art. 1877)
authorized you to pay. Look at this SPA, where does it state that I
authorized you to buy?”
Can the agent now sell?
 It would result to absurdity.
 No. This requires a Special Power of Attorney, as it is an act of strict
dominion, and the agency is only couched in general terms.
Exactly! Absurd. Gi-authorize na pabayad unya di nako paliton ang akong
 If it is couched in specific terms, it can authorize the execution of
gibayran? Absurd! Of course, authority to pay includes authority to buy.
specific acts.
Now you said "I will make Robillos my agent. Robillos, I now authorize you to
Powers of attorney-in-fact, or a holder of a Special Power of Attorney (SPA)
borrow. Go to the bank and borrow P10, 000." So, he borrowed P10, 000.
(Art. 1878)
He saw and remembered that you, as the principal, had an outstanding
1) To make such payments as are not usually considered as acts of
account with VECO and because he was just near VECO, he went to
administration;
VECO and paid your electric bills. He gave P7, 500. You said "Where is the
2) To effect novations which put an end to obligations already in
P2, 500?" He said "I paid your VECO bills." Will you say thank you?
existence at the time the agency was constituted;
 No. Authority to borrow does not include the authority to spend.

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AGENCY, TRUST, AND
PARTNERSHIP 4
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September 14, 2016

No authority could ever exist unless it is expressly given; otherwise, can the
agent act in behalf of the principal?
When he went to the bank, the bank told Robillos, "Ok, this is the authority
 Generally, the agent cannot act in behalf of the principal without
given by Angot, but we need a collateral." And so Robillos said "Anyway, I
authority. Moreover, even if he was given authority, but the agent
have the registration certificate of her car.” Will you accept the mortgage
exceeded his authority, his act will not bind the principal unless it is
of Angot's car just to secure payment of this P10, 000?" The mortgage was
more advantageous to the principal.
accepted. Can it be questioned?
 Yes. Authority to borrow does not include authority to mortgage.
b. It is couched in specific terms if it involves specific
transactions or acts.
Compromise does not include arbitration
You were allowed by Regalado to sell her parcel of land for P10, 000,000.
Instead of selling for P10, 000,000, you went to the bank. "Bank, I have the
property of my principal, can I borrow P10, 000,000 and offer this property
as collateral?" The bank accepted. You went home and went to
Regalado. "Kat, you should be happy. How much do you need Kat?
P10,000,000? Here is the P10, 000,000 and the property is still yours because
I did not sell, I only mortgaged."
 Authority to sell does not include authority to mortgage.

General rule: Strictly in accordance with the authority given


Exception: If it is more advantageous to the principal

Outright sale of property vs. mortgage (wherein ownership of the property


is retained)
 Mortgaging is not necessarily more advantageous. There is risk in
mortgaging property because if the property will be foreclosed, it
will be sold in a public auction and the principal can be held liable
for the deficiency if the property is sold for a lesser value.
Therefore, the agent exceeded his authority when he mortgaged
the property when he was only authorized to sell.

Other types of authority


1) Authority be necessity – Even if there is no express authority given,
because of the necessity under the circumstances, you have the
authority to perform necessary acts
2) Agency by estoppel – When 3rd persons already relied on the
representation of the principal in representing that such person is
an agent. So he cannot later on repudiate the agency
3) Implied authority – Example: Authority to buy is implied from the
authority to pay

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