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ACCTG 606 - LAW ON AGENCY

MULITPLE CHOICE - Encircle the letter corresponding c. A is still considered as agent of P and therefore
to the correct answer. entitled to a commission even if it is B who sells
1. Principal appoints B as his agent to sell his land. the land.
Which is correct? d. Both A and B are not recognized as P’s valid
a. A’s authority is oral and B sells the land in agent.
writing. 10. Two principals appointing one agent for the same
b. A’s authority is written and B sells the land in act of agency will be
a public instrument. a. Jointly liable
c. A’s authority is written and B sells the land b. Solidary liable
orally. c. Individually liable
d. A’s authority is oral and B sells the land orally. d. None of the above
2. Agent B becomes directly liable to Principal A if 11. Commission granted by principal to commission
a. B appoints a substitute or sub-agent without agent to assume risk of collection.
authority. a. Extraordinary commission
b. If the substitute acts negligently although b. Collection commission
authorized. c. Del Credere commission
c. If authorized, A gets a substitute who is d. Extra commission
notoriously incompetent or insolvent. 12. Agents A and B were appointed simultaneously and
d. All of the above. both agreed to bound solidarily. If both failed to
e. None of the above. carry out the Agency, whom can the principal hold
3. Ely appointed Glory as her agent to sell Ely’s car liable?
for P200,000. Glory sold Ely’s car to Pacita for a. Both A and B will be liable individually.
P200,000 in Glory’s name. After delivery, Pacita b. Principal can sue either A or B for non-
found hidden defects in Ely’s car. Whom can Pacita fulfillment of the agency.
sue - Ely or Glory? c. Only A if he acted beyond the scope of his
a. Under the principle of “caveat emptor”, Pacita authority.
bears the loss or defects. d. None of the above.
b. Pacita can sue Glory because Glory acted in 13. If principal fails to reimburse the agent for the
her own name in the sale. latter’s advances and indemnify the agent for his
c. Pacita can sue Ely because the car belongs to damages,
Ely. a. The agent may sue the principal for recovery of
d. Neither Ely nor Glory can Pacita sue because his expenses and damages.
the sale is already perfected. b. The agency may keep the object of the agency
4. The 3rd party appointed either by the Principal or as a legal pledge.
the Agent to assist out in carrying the agency is c. The agent may appropriate for his own the
known as: object of the agency.
a. The Co- Principal d. None of the above.
b. Co- Agent 14. Agent A sold P’s car to X for only P80,000 against
c. Sub- Agent or Substitute P’s instructions to sell the car for P100,000.
d. Assistant’s Agent However, A turned over to P the P80,000 paid by X
5. The Agent’s authority couched in general terms and P accepted the money.
means the Agent can only perform: a. The sale by A to X is deemed valid and binding
a. Acts of administration on P because P is deemed to have ratified by
b. Acts of dominion or ownership accepting the P80,000.
c. Both acts of administration and Dominion b. The sale between A and X is not binding on P
d. None of the above because A acted beyond his authority.
6. Principal P authorized agent A to sell his land for c. X can enforce his contract of sale of P’s car to
P100,000 cash and A was entitled into a 10% A only.
commission. A sold the land for P150,000 cash. d. P can deject the sale between A and X as A
How much must A remit to P? acted beyond his authority.
a. P90,000 15. Paterno telephoned Angel and authorized him to
b. P150,000 sell Paterno’s land for P100,000 cash. Angel was
c. P140,000 able to sell Paterno’s land to Xavier for P100,000
d. P100,000 cash.
7. Principal P authorized agent A to lend out his own a. Xavier cannot hold Paterno liable if the latter
money with 10% Int. p.a. refuses to sell his land.
a. A can borrow P’s money for his own use b. Angel will be liable to Xavier if Paterno refuses
without P’s consent. to sell his land.
b. A can borrow P’s money with P’s consent. c. The contract of sale between Angel and Xavier
c. A is not allowed to borrow P’s money for his is not valid because it was oral.
own use. d. The authority of Paterno to Angel must be in
d. None of the above. writing because it involves real property.
8. One of the following is not a mode of e. Both a and b
extinguishment of Agency. Which is it? f. Both c and d
a. Revocation by Principal 16. B wrote S, his sister, to sell parcel of his land. The
b. Withdrawal by Agent land was purchased by X, but S did not forward
c. Accomplishment of the Agency the money to B. B now wants to recover the parcel
d. When Agency is coupled with Principal’s or of land.
Agent’s, or both interest. a. B cannot recover because the sale is valid.
9. P appointed B as his new agent to sell his land, b. B can recover because the sale between X and
without first notifying his first agent A that he is S is void.
being replaced. c. B can recover only if B can return the money
a. B alone gets the commission if he sell’s P’s paid by X to S.
land. d. None of the above
b. B’s appointment as new agent without P 17. P appointed A as his agent to borrow P10,000 from
notifying A is void. C. A borrowed P10, 000 and acted on his name.
Upon maturity, who is liable?
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ACCTG 606 - LAW ON AGENCY
a. A only b. The substitution is valid but the agent is the
b. P only only one liable for the acts of the sub- agent.
c. Both A and P c. Both agent and the sub-agent are liable to the
d. Contract is void principal for the acts of the sub-agent under
18. P, the owner of a piece of residential land orally the valid substitution.
authorized A to sell the land for P500.00 with 5% d. The substitution is valid but the substitute is
commission. Today, A sold the land to C. One day the only one liable for his own acts.
later, P sold the same land to D. assuming that e. None of the above.
both buyers are in good faith, who is the lawful 27. In three of the following, a special power of attorney
owner? is required, EXCEPT
a. C, being the first buyer a. To obligate the principal as guarantor.
b. C, because A was given authority by P b. To effect novations which put an end to
c. B, because the sale made by A to C is voidable obligation already contracted before the
d. D, because the sale between A and C is void. agency.
19. Three of the following requires a special power of c. To borrow money not necessary for the
attorney, which is the exception. preservation of the property under
a. Accept inheritance administration.
b. To waive obligation gratuitously d. To lease real property to another person for one
c. To bind the principal in a contract of year.
partnership 28. In agency, an agent represents
d. None of the above a. A person who is capacitated
20. P authorized A, 16 year old to sell his car to B. A b. A person who is incapacitated
sold the car to B for P100,000. One week after, c. Heirs and creditors of the estate of the debtor
because the floating rate of peso, prices of car went d. Judicial court
up. P now wanted to disavow the sale, claiming that e. None of the above
A, his agent was a minor and therefore the contract 29. Without P’s authority, A, an agent, sold P’s car to X
is voidable and no liability is attached in the in P’s behalf. The contract is
contract. a. Unauthorized
a. Both A and P are jointly liable to B. b. Unenforceable
b. Only A is liable because he executed the agency c. Subject to ratification
knowing for himself that he is a minor. d. All of the above
c. P and A are liable to B 30. An agent with general powers of administration
d. None of the above given to him by the principal in writing, desirous of
21. Three of the following questions are modes of improving the financial condition of his principal,
extinguishing an agency, which is the exception? two parcel of rice field, one for less than the price
a. Insanity of the principal or agent. appearing in the inventory prepared by the
b. Death of the principal but the agency is for the principal, and the other for double the price that
interest of the principal and agent. appeared in the said inventory.
c. Accomplishment of agency a. The sale for double the price appearing in the
d. Dissolution of the firm or corporation which inventory is binding upon the principal.
entrusted or accepted the agency. b. The two contracts cannot be enforced against
22. If an agent contracts in the name of his principal, the principal.
exceeding the scope of his authority, what would be c. The sale for less than the price appearing in the
the status and effect of the contract? inventory is binding upon the principal.
a. Unenforceable d. Both contracts are binding upon the principal.
b. Void e. None of the above.
c. Voidable 31. Which of the following statements is true?
d. Valid a. If the principal appoints an agent in writing
e. None of the above with respect to the sale of a piece of land and
23. A commission agent: the latter sold it to a buyer orally, the contract
a. Has the option to act in his own name. between the agent and the buyer is void.
b. Generally, cannot sell on credit. b. A contract of agency is generally gratuitous.
c. May be an agente del credere if he receives c. To lease personal property to another person
guaranty commission. for more than one year does not require a
d. All of the above special power of attorney.
24. Without P’s authority, S sold P’s car to B in P’s d. The insolvency of the principal but not the
behalf agent shall extinguish the agency.
a. The transaction entered by S is unauthorized 32. A guarantee commission agent
therefore unenforceable. a. Bears the risk of collection on the same terms
b. The right of B is only against S as a rule. agreed upon with the purchaser.
c. The contract can be ratified, hence it is b. Is liable to the principal even if the buyer is
considered as valid contract. really insolvent.
d. All of the above c. Is liable for damages if he will not collect the
25. The agent has no implied authority in three of the credit on time.
following. Which is the exception? d. Is entitled to another commission aside from
a. If he is authorized to collect a debt from a ordinary commission.
debtor, he has no authority to release the e. All of the above.
guarantor of a debtor. 33. Agency may be created by
b. If he is authorized to collect a debt, he is not a. Appointment
authorized to receive partial payment. b. Ratification
c. But he has got implied authority to endorse the c. Estoppel
check he received as partial payment. d. Necessity
d. None of the above e. All of the above
26. An agent without any express authority from the 34. P appointed A as his special agent to sell a specific
principal appointed a sub- agent to help him carry land for P10,000. P sends A his papers of
out the agency. appointment including a letter addressed to X
a. The substitution is void. notifying the latter of the appointment of A as his
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ACCTG 606 - LAW ON AGENCY
agent. Ten days after, P revoked the agency and own name. After delivery, X inspected the car and
published it in a newspaper of general circulation. she found hidden defects in the car. Can X file an
X did not read the newspaper publication, but has action against P even when A acted in her own
got actual knowledge of the revocation. Later, A and name?
X transacted business. Is the act of A binding a. No, under “caveat emptor” let the buyers
against P? beware.
a. Yes, because a and X are in good faith. b. Yes, because the contract is involving property
b. No, X having knowledge of the revocation is belonging to the principal.
considered in bad faith. c. No, because A acting in her own name not of
c. Yes, because X was not given a special notice the principal.
of revocation. d. No, because the contract of sale is already
d. Yes, the appointment of A is special perfected.
information, the revocation must also be by 42. P appointed orally as his agent to sell his car for
special revocation. P10, 000. A sold the car to X acted in his (A’s) name.
35. A appoints B as his agent to sell his land, which of If upon delivery, the car has hidden defects, is P
the following is valid? liable?
a. The authority of B is in writing but B mortgages a. No, because the contract is unenforceable, it is
it also in writing. orally entered into.
b. The authority of B from A is by way of letter and b. Yes, because the thing belongs to the principal.
B sells the land to C in writing. c. No, because the agent acted in his name.
c. The authority of B is oral and B sells the land d. None of the above.
to C for P50, 000 in a written contract of sale. 43. P appointed A as his agent orally to sell his parcel
d. The authority of B is in writing but the sale of of land for P10, 000. Five days after, A sold B the
the land in writing was made beyond the period parcel of land for P8, 000 by means of public
expressly set forth by A. instrument executed between A and B. what is the
36. The “power to sell” includes three of the following. effect and the status of sale between A and B?
Which is the exception? a. The sale is valid because it was executed in a
a. The power to execute the necessary transfer public instrument.
documents. b. The sale is unenforceable because the agent
b. The power to sell on credit. acted beyond the scope of his authority for
c. The power to receive the price, unless he was selling the land for less than the price
authorized to solicit orders only. instructed.
d. The power to fix the place, time, and mode of c. The sale is void because the appointment of the
delivery. agent is oral.
37. If P pleads X to believe that A is his (P’s) agent, as d. The sale can be ratified although the
a matter of fact such is not true, A acts on such appointment of A is oral, because the sale by A
misrepresentation, there is to C is in a public instrument.
a. An implied agency 44. A special power to sell includes the power to
b. An agency by estoppel a. Mortgage
c. An agency by necessity b. Barter
d. An express agency by words spoken c. Sell on credit
38. M company wrote a circular letter to its customers d. None of the above
introducing a certain A as its duly authorized 45. Bears risk of collecting from the buyer the price of
agent. X, a customer, dealt or transacted business the sale.
with A. later, A’s authority was revoked and was a. Commission agent
published in a newspaper of general circulation. b. Delegacion
Notwithstanding his knowledge of such revocation, c. Quasi- tradition
X continues to transact business with M through d. Agente del credere
A. Is M Company still liable for the agent act after e. None of the above
even revocation? 46. P appointed A as his agent with general powers on
a. Yes, because the revocation was not given in January 1. The next day, X transacted business
the same way the power was granted. with A. On January 5, P revoked the agency and
b. No more, because the third person (X) is in bad published in a newspaper of general circulation.
faith. After five days, X consummated another
c. No more, because the transaction that will be transaction with A. Is the act of A binding against
entered after revocation will be void. P?
d. None of the above. a. Yes, because X is in good faith.
39. Considered “mere acts of administration”, which an b. No, because the agency is considered revoked
agent is authorized to do if given an agency and its publication is a sufficient warning.
couched in “general term”. Which of the following c. No, because the power is general, there must
is the exception? also be a special power.
a. To sue for the collection of debts and to engage d. Yes, because there was no special notice sent
services of a counsel to preserve the ownership to X.
and possession of the principal’s property. 47. It is a contract where in a person binds himself to
b. To give customary gifts for charity or to render special service or to do something in behalf
employees in the business managed by the of another with consent of the latter.
agent. a. Contract of piece of work
c. Unregistered lease of real property to another b. Contract of service
person for one year. c. Contract of agency
d. None of the above. d. Contract of exchange
40. An implied agency may be created by 48. Agency is extinguished by any of the following
a. Ratification causes, EXCEPT
b. Lack of action by the principal a. By its revocation
c. Silence of the principal b. By withdrawal of the agent
d. All of the above. c. By the death of the agent or of the principal
41. P appointed A to sell the former’s car for P200,000. d. None of the above
A sold the car to X for P200, 000 but A acted in her
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ACCTG 606 - LAW ON AGENCY
49. The principal is not liable for the expenses incurred 57. On day 1, A appointed B as his agent covered by a
by the agent. general power to lease his car to Z for eight months.
a. If the agent acted in contravention of the On the day 2, A appointed C as his agent covered
principal’s instruction. by a special power to lease the same car to S for 4
b. Expenses were due to the fault of the agent. months. On day 3, A directly transacted business
c. Agent incurred them knowing that an with S leasing the car for two months. Which is
unfavorable result would ensue and the correctly?
principal was not aware thereof. a. The appointment of A is valid because it is
d. All of the above covered by a general power
50. P delivered to A P10,000 piece of Cebu fabricated b. The appointment of C is valid because it is
shell craft jewelry for the purpose of selling them at covered by special power
P1.00 each. Out of the proceeds of the expected c. The appointment of B and C are considered
sale, A is to receive a 10% commission. After three revoked because the principal directly
days, however, A sold all the items at P1.50 each to transacted with S
B, but on 30-day credit. Under the situation d. The appointment of B is valid because it has
a. A must pay P10,000 immediately. got a prior date
b. A cannot be compelled to pay at all. 58. Not a fundamental obligations of the agent
c. A must pay P15,000 immediately. a. Sacrifice his interest and give it to the principal
d. A must pay P15, 000 immediately and ap10, if there is a conflict
000 after 60 days. b. To render an accounting of the transaction
e. A must pay P10, 000 after collection from B. c. Should not carry out the agency even if that the
51. P appointed A as his agent to sell his specific car in instruction, if he knew it would result in a loss
cash for P10,000 with 10% commission. A using or damage to the principal
persuasive skill was able to sell it for P15,000 on d. Can be the borrower if he is authorized to land
credit. After the sale but before payment of the 59. A appointed B as his agent to sell his car for
buyer. P250,000. B sold the car to C for P250,000 but B
a. A must give P10,000 only. acted in his own name. After delivery, C inspected
b. A must give P10, 000 minus the commission. the car and she found hidden defects in the car. Is
c. A must give P15, 000 minus the commission. A, as principal, liable to C even if B acted in his own
d. A must give P15, 000 and in turn is to give A name
P5, 000 as a commission. a. No, applying “caveat emptor” or let the buyer
52. Today, P appointed A1 as his agent covered by beware
general power to lease his car to X for 6 months. b. Yes, because this is a contract involving
The next day, P appointed A2 with special power to property belonging to the principal
lease the same car to X for 5 months. On the third c. No, because the contract of sale is between B
day, P directly transacted business with X leasing and C
the car for two months. What is the effect of agency d. No, because B acted in his name, not of the
between the parties? principal
a. The appointment of A1 is valid because it has 60. To improve the financial condition of his principal,
got a prior date. an agent with general powers of administration
b. The appointment of A2 is the one that is valid given to him by the principal, an agent with general
because it is covered by a special power. powers of administration given to him by the
c. The agency of A1 and A2 are considered principal in writing, sold two parcels of land, one
revoked because the principal directly for lease than the price appearing in the inventory
transacted with X. prepared by the principal and the other for double
d. None of the above. the price that appeared in the aforesaid inventory
53. A passenger bus while in motion collided with a. Both contracts cannot be enforced against the
another bus. X, the conductor of the bus was bodily principal
injured. D, the driver, although not authorized, b. Both contracts are binding upon the principal
engaged the services of a physician in the name of c. The sale for double the price appearing in the
the company. In here, there is an inventory is binding upon the principal
a. Implied agency d. The sale for less than the price appearing in
b. Agency by estoppel the inventory is binding upon the principal
c. Agency by necessity 61. Not a mode of extinguishing an agency
d. None of the above a. Accomplishment of agency
54. In agency, the agent represents b. Death of the principal, and the agency is for the
a. A person who is capacitated interest of the principal and agent
b. A person who is incapacitated c. Insanity of the principal or agent
c. Heir and creditors or the estate d. Dissolution of the firm or corporation which
d. The judicial court entrusted or accepted the agency
55. A appointed B as his agent to sell his specific car 62. Bear the risk of collecting from the buyer the price
for P 300,000 with 10% commission. A, with his of the sale
skills was able to sell the car for P 300,000. – a. Commission agent
320K b. Delegation
a. B must give to A P 320,000 c. Del credere agent
b. B must give to A P 300,000 d. Ex promission
c. B must give to A P 300,000 minus the 10% 63. It is a contract wherein a person binds himself to
commission render some services in representation or on behalf
d. B must give to A P 320,000 minus the 10% of another, with the consent or authority of the
commission latter
56. If an agent enters into a contract in the name of his a. Agency
principal, exceeding the scope of his authority, the b. Contract of service
contract is c. Contract of piece work
a. Voidable d. None of these
b. Unenforceable 64. Agency can be revoked
c. Rescissible a. When a bilateral contract depends upon it
d. Void
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ACCTG 606 - LAW ON AGENCY
b. If it is the means of fulfilling an obligation 21. In agency, the agent represents an incapacitated person.
already contracted 22. When a sale of a piece of land is made through an agent, his
c. If a partner is appointed managing partner in authority must be in writing otherwise, the sale is
unenforceable.
the articles of partnership and his removal is
23. When two or more principals have granted a power of attorney
unjustifiable for a common transaction, any one of them may revoke the
d. When the principal directly manages the same without the consent of others.
business entrusted to the agent 24. Anything done by the agent, without knowledge of the death
of the principal or of any other cause which extinguishes the
TRUE OR FALSE agency, is valid and shall be fully and effective with respect to
third persons who may have contracted with him in good faith.
1. In agency, there is fiduciary relation between two persons 25. To make customary gifts for charity, the authority of the agent
because it is based on utmost trust and confidence. must be a special power of attorney.
2. If the agent it incapacitated, the contract between him and the 26. If the agent acted in the name of the principal, but without
third person is binding against the principal, provided the authority, the contract is unenforceable subject to ratification.
principal is capacitated. 27. In agency, the “authority” given to agent is a mandate ; while
3. The general rule is that a guardian cannot purchase the “power” refers to the extent of the mandate
property of a person under guardianship. However, he may do 28. The agent if authorized to borrow money can be the lender,
so at a public auction when done through his agent. but generally he cannot be the borrower if he is authorized to
4. To lease real property to another person, the authority of the lend.
agent must be in a special power of attorney, if the lease is for 29. The responsibility of two or more agents, even though they
one year. have been appointed simultaneously, is not solidary, if
5. A commission agent is an agent having the option of acting in solidary has not been expressly stipulated.
his own name or in that of his principal. If solidarity has been agreed upon, each of the agents is
6. The limits of the agent’s authority shall not be considered responsible for the non-fulfillment of the agency, and for the
exceeded should it have been performed in a manner more fault or negligence as his fellow agents, except in the latter
advantageous to the principal that specified by him. case when the fellow agent acted beyond the scope of their
7. The principal may revoke the agency at will, and compel the authority.
agent to return the document evidencing the agency. Such 30. Should the commission agent receive on a sale, in addition to
revocation may be express or implied. the ordinary commission, another called a guarantee
8. If a person specially informs another or states by public commission, shall bear the risk of collection and shall pay the
advertisement that he has given a power of attorney to a third principal the proceeds of the sale on the terms agreed upon
person, the latter thereby becomes a duly authorized agent, in with the purchaser.
the former case with respect to the person who received the
special information, and in the latter case with regard to any 31. When a sale of a piece of land or any interest therein through
person. The power shall continue to be in full force until the an agent, the authority of the latter shall be in a public
notice is rescinded in the same manner in which it was given. instrument, otherwise the sale shall be void.
9. If the agent is prohibited from appointing a sub- agent, any 32. Agency is presumed to be without compensation values there
act executed by the latter is unenforceable on the part of the is proof to the contrary.
principal. 33. A special power to sell includes the power of mortgage and a
10. The agency shall remain in full force and effect even after the special power to mortgage includes the power sell.
death of the principal, if it has been constituted in the common 34. Should there be a stipulation that the agent shall advances
interest of the latter and of the agent, or in the interest of a the necessary funds, he shall be a bound to do so even when
third person who has accepted the stipulation in his favor. the principal is insolvent
11. An agency couched in general terms comprises only acts of 35. If the agent has been empowered to borrow money he may
administration, even if the principal should state that he himself be the lender at the current rate of interest and if he
withholds no power or that the agent may excuse such acts as has been authorized to land money at interest, he can borrow
he may consider appropriate, or even though the agency it.
should authorize a general and unlimited management. 36. Every agent is bound to render an account of his transactions
12. The agent is called upon to sacrifice his interest and give it to and to deliver to the principal whatever he may have received
the principal if there is a conflict of interest. by virtue of the agency even though it may not be owing to the
13. The agent is responsible for the acts of his sub-agent, if the principal
agent was not given the power to appoint one and he is not 37. The responsibility of two or more agents who have been
also prohibited from appointing one. appointed simultaneously is solidarity.
14. If the agent dies, the heirs must notify the principal 38. When two or more principals have more granted a power of
immediately, and must continue the objective of the agency attorney for a common transaction, any one of them may
until it is accomplished or until the principal appoints a new revoke the same provided it is with the consent of the others.
agent. 39. The limits of agent’s authority shall be considered exceeded
15. If the principal directly manages the business entrusted to the even if it have been performed in a manner more advantageous
agent, there is implies revocation of the agency. to the principal than that specified by him
16. In agency, there is a meeting of minds between the parties, 40. If the agent acts in his own name, he is directly bound as if
expressly or impliedly; while in negotiorum gestio, there is no the transaction were his own and that the contract shall not
meeting of minds between the two persons because the be valid between the principal and the third party.
relation is created by operation of law. 41. In the execution of the agency, the agent shall is bound to
17. If an agent acts in his own name, the principal has no right of observe the diligence of a father of a good family.
action against the persons with whom the agent has 42. In case a person declines an agency, he is bound to observe
constructed; neither have such persons against the principal. the diligence of a father of a good family in the custody and
In such case, the agent is the one directly bound in favor of preservation of the goods forwarded to him by the owner until
the persons with whom he has constructed; as if the the latter should appoint an agent.
transactions were his own, except when the contract involves 43. If the agent contracts in the name of the principal and the does
things belonging to the principal. not ratify the contract, the contract shall be void if the party
18. Every agent is bound to render an account of his transaction with whom the agency contracted is aware of the limits of the
and to deliver to the principal whatever he may have received powers granted by the principal.
by virtue of the agency, even though it may not be owning to 44. A third person cannot set up the fact that the agent has
the principal. exceeded his powers, if the principal has ratified, or has
19. If the agency has been entrusted for the purpose of contracting signified his willingness to ratify the agent’s acts.
with specified persons, its revocation shall not prejudice the 45. Every stipulation exempting the agent from the obligation to
latter, if they were not given notice thereof. render an account shall be void.
20. An agency cannot be revoked if a bilateral contract depends
upon it, or if it is the means of fulfillment an obligation already
contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal
from the management is unjustifiable.