Law On Partnerships: General Provisions

BUS ORG 1(PARTNERSHIPS, AGENCY AND TRUSTS) Pre-Bar Reviewer Edited by Sasha Go
Sources: ADMU bar ops 2005, de Leon, Lectures by Atty. Precious Pojas
5. The purpose or primary purpose must be to obtain profits and divide them among the
PARTNERSHIP, AGENCY AND TRUSTS parties.
TABLE OF CONTENTS RIGHTS OF A PARTNERSHIP:
1. It has a personality separate and distinct from the partners

PARTNERSHIP
2. It can acquire of posses property (share profits and losses)
3. It can incur obligations (has equal rights in management)
4. It can bring actions
General Provisions 5. It can be adjudged insolvent
Property Rights of a Partner
Obligations of the Partners with Regard to Third Persons
DELECTUS PERSONARUM/ DELECTUS PERSONAE  “CHOICE OF PERSONS”
Dissolution and Winding Up
Limited Partnership
 The right to choose with whom a person wishes to associate himself
with is the foundation/essence of a partnership
 The consent of all partners must be taken for a partner to associate himself with
AGENCY
another
 Mutual trust must exist (fiduciary nature)
 There is subjective novation when there is a change in the parties to a contract
Nature, Form and Kinds of Agency because their consent is necessary to bind them
Obligations of the Agent
Obligations of the Principal
Pascual vs. CA: There must be clear intent to form a partnership. There is no implication of a
Modes of Extinguishment of Agency
partnership relationship between co-owners or co-possessors.
TRUSTS Ona vs CA: From the moment of partition of a co-owned property and when heirs allowed their
shares to be held in common with the intent of making profits, an unregistered partnership is
formed.
General provisions
Express Trusts Obillos vs CA: 3 sisters brought 4 pcs of property which they leased and derived rentals
Implied Trusts therefrom. This is not an unregistered partnership. Sharing of gross returns does not imply such
relationship. There must be clear intent.
LAW ON PARTNERSHIPS
GENERAL PROVISIONS Partnership vs Co-ownership vs Corporation

Partnership Co-ownership Corporation
Article 1767. By the contract of partnership two or more persons bind themselves to By contract by agreement
Creation By Law By law
contribute money, property, or industry to a common fund, with the intention of of parties
dividing the profits among themselves. Personality separate and Personality separate
Judicial
distinct from that of each None and distinct from that
personality
Two or more persons may also form a partnership for the exercise of a profession. (1665a) partner of each incorporator
Enjoyment of a thing
Purpose Realization of profits Depends on AoI
 PARTNERSHIP  a contract wherein two or more persons bind themselves to contribute or right
money, property, or industry to a common fund, with the intention of dividing the profits 50 years max
Duration/ Term of
among themselves. No limitation 10 years max extendible to not more
existence
than 50 years
ESSENTIAL FEATURES SH has right to
Disposal/ Partner may not dispose
Co-owner may freely transfer his shares
Transferability of of his interest without
1. There must be a valid contract do so without consent of
interest consent from all partners
2. There must be legal capacity to enter into a contract other SH
3. There must be mutual contribution of money, property or industry to a common fund. Power to act with Each partner is an agent Co-owner cannot Management is vested
4. The object must be lawful 3rd persons of the partnership (unless represent the co- with the Board of
Ateneo de Davao University, College of Law: June 2008 1

stipulated otherwise) ownership Directors  Inventory must be made and signed by the parties and attached to the public
Does not necessarily instrument otherwise, it will be void (Torres vs. CA)
Effect of death Dissolution No dissolution
dissolve 2. Capital of three thousand pesos or more, in money or property
Any time by the will of
Can only be dissolved  Shall appear in a public instrument,
Any time by the will of any
Dissolution any or all of the co-with the consent of  Recorded and registered in the SEC.
or all of the partners
owners the State
Minimum of  A contract of partnership is void, whenever immovable property is contributed
# of incorporators Minimum of 2 persons Minimum of 2 persons
52incorporators thereto, if an inventory of said property is not made, signed by the parties, and
From the date of the attached to the public instrument.
Commencement issuance of the  Any immovable property or an interest therein may be acquired in the partnership
From the moment of
of juridical None certificate of name. Title so acquired can be conveyed only in the partnership name.
execution of the contract
personality incorporation by the  Associations and societies, whose articles are kept secret among the members,
SEC and wherein any one of the members may contract in his own name with third
 Corporations cannot become partners in a partnership BUT law allows entering in JOINT persons, shall have no juridical personality, and shall be governed by the
VENTURES. provisions relating to co-ownership.
 The partnership has a juridical personality separate and distinct from that of each of the
partners CLASSIFICATIONS OF PARTNERSHIPS
IN DETERMINING WHETHER A PARTNERSHIP EXISTS, THESE RULES SHALL APPLY: I. As to the extent of the subject matter /object
(1) Except as provided by article 1825, persons who are not partners as to each other a. UNIVERSAL PARTNERSHIP - all the present property or to all the profits
are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such-co- i. PARTNERSHIP OF ALL PRESENT PROPERTY constitutes:
owners or co-possessors do or do not share any profits made by the use of the 1. All which the partners contribute all the property which
property; actually belongs to them to a common fund, with the intention
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the of dividing the same among themselves
persons sharing them have a joint or common right or interest in any property from which the 2. Profits which they may acquire therewith. (property which the
returns are derived; partners may acquire subsequently by inheritance, legacy, or
(4) The receipt by a person of a share of the profits of a business is prima facie donation cannot be included in such stipulation, except the
evidence that he is a partner in the business, BUT NO SUCH INFERENCE SHALL BE fruits thereof.)
DRAWN IF SUCH PROFITS WERE RECEIVED IN PAYMENT: ii. UNIVERSAL PARTNERSHIP OF PROFITS comprises all that the
a. As a debt by installments or otherwise; partners may acquire by their industry or work during the existence of
b. As wages of an employee or rent to a landlord; the partnership.
c. As an annuity to a widow or representative of a deceased partner;
d. As interest on a loan, though the amount of payment vary with the profits of the
 Articles of universal partnership, entered into without specification of its
business;
nature, only constitute a universal partnership of profits
e. As the consideration for the sale of a goodwill of a business or other property by
 Persons who are prohibited from giving each other any donation or
installments or otherwise.
advantage cannot enter into universal partnership
EFFECTS OF UNLAWFUL PARTNERSHIP
Who are not allowed to donate?
1. Contract is void ab initio
a. Husband and wife, during the marriage, cannot give donations to
2. Profits shall be confiscated in favor of the State
each other
3. Instruments or tools and the proceeds of the crime will be forfeited
b. donations made between persons in a state of adultery or
4. Contributions of partners shall not be confiscated unless it falls under #3
concubinage are void
c. Those made between persons found guilty of the same criminal
FORM OF A PARTNERSHIP CONTRACT
offense, in consideration thereof;
d. Those made to a public officer or his wife, descendants and
 GENERAL RULE: may be constituted in any form ascendants, by reason of his office.
 EXCEPT:
1. Where IMMOVABLE PROPERTY OR REAL RIGHTS are contributed b. PARTICULAR PARTNERSHIP - has for its object determinate things, their
 public instrument shall be necessary. use or fruits, or a specific undertaking, or the exercise of a profession
or vocation.

 A continuation of the business by the partners or such of them as habitually acted therein
II. As regards the liability of the partners during the term, without any settlement or liquidation of the partnership affairs, is prima facie
evidence of a continuation of the partnership.
a. General – liable pro-rata and subsidiarily
b. Limited - Formed by 2 or more persona having as members one of more Obligations of the Partners Among Themselves
general partners and one or more limited partners, the latter not being
personally liable for the obligations of the partnership I. Obligations with respect to contribution of their property:
1. Becomes debtor of the partnership for whatever he may have promised to contribute
III. As to duration thereto.
2. Bound for warranty in case of eviction with regard to specific and determinate things
a. PARTNERSHIP AT WILL – no time specified; may be terminated anytime which he may have contributed to the partnership.
b. PARTNERSHIP WITH A FIXED TERM – term is agreed upon 3. Liable for the fruits from the time they should have been delivered, without the need
of any demand.
IV. As to legality of its existence 4. Preserve the property with the diligence of a good father of a family pending delivery
5. Indemnify partnership for any damage caused to it by the retention or delay in its
a. DE JURE – complied with all legal requirements contribution
b. DE FACTO – failed to comply When the capital or a part thereof which a partner is bound to contribute
consists of goods, their appraisal
V. As to purpose 1. Must be made in the manner prescribed in the contract of partnership,
2. In the absence of stipulation, it shall be made by experts chosen by the
a. COMMERCIAL/TRADING PARTNERSHIP – for business transcations partners, and
b. PROFESSIONAL/ NON-TRADING PARTNERSHIP – in the exercise of a profession 3. According to current prices, the subsequent changes thereof being for
account of the partnership.
KINDS OF PARTNERS:
(1) CAPITALIST – contributes money or property EFFECT OF FAILURE TO CONTRIBUTE THE PROPERTY PROMISED:
(2) INDUSTRIAL – contributes only his industry
(3) GENERAL – liability to 3rd persons extends to his separate property 1. Becomes a debtor FOR THE INTEREST AND DAMAGES from the time he
(4) LIMITED - liability to 3rd persons is limited to his capital contributions should have complied with his obligation.
(5) MANAGING – manages the affairs of the partnership 2. Remedy of other partners: SPECIFIC PERFORMANCE + DAMAGES
(6) LIQUIDATING – takes charge of winding up upon dissolution
(7) PARTNERS IN ESTOPPEL – not really a partner but is liable as a partner to protect innocent II. Obligations with respect to contributions of money and money is converted to
3rd persons personal use
(8) CONTINUING- continues the partnership after its dissolution by reason of admission of a
new partner, retirement, expulsion, or death of one of the partners 1. Liable to contribute on the date fixed the amount he promised to contribute
(9) SURVIVING – remains after partnership is dissolved by death of any of the partners 2. Reimbursement for money he may have taken for personal use
(10) SUBPARTNER – not a member of the partnership who contracts with a partner with 3. Legal interest
reference to the latter’s share in the partnership 4. Indemnification for damages
(11) OSTENSIBLE – one who is active and is known to the public as a partner
(12) SECRET – active but not known to the public as a partner PROHIBITON AGAINST ENGAGING IN BUSINESS
(13) SILENT – not active although he may be known to the public as a partner
(14) DORMANT – does not take an active part and is not known to the public as a partner INDUSTRIAL PARTNER CAPITALIST PARTNER
 Cannot engage in business  Cannot engage in
OBLIGATIONS OF THE PARTNERS for himself, unless the business of the same
partnership expressly kind for his own account
 A partnership begins from the moment of the execution of the contract, unless it is otherwise permits him to do so unless there is a
stipulated. stipulation to the
 When a partnership for a fixed term or particular undertaking is continued after the Consequences: (1789) contrary
termination of such term or particular undertaking without any express agreement, the rights 1. Capitalist partners may
and duties of the partners remain the same as they were at such termination, so far as is exclude him from the firm Consequences: (1808)
consistent with a partnership at will. or 1. Shall bring to the
2. Capitalist partners may common funds any
avail themselves of the profits accruing to him
benefits which he may from his transactions,

have obtained from the 2. Shall personally bear all cannot be kept without deteriorating, or if
business the losses they were contributed to be sold
3. With a right to file an 3. May be ousted from the Risk shall be borne by the partnership; in such
The things brought and appraised in the
action for damages in partnership case the claim shall be limited to the value at
inventory
either case. which they were appraised
Things contributed to be sold Risk shall be borne by the partnership
Ownership transferred to the partnership Risk shall be borne by the partnership
III. Obligations with respect to contributions to partnership capital
1. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to RULES FOR DISTRIBUTION OF PROFITS AND LOSSES:
the capital of the partnership.
2. In case of an imminent loss of the business of the partnership, any partner who refuses to PROFITS LOSSES
contribute an additional share to the capital, except an industrial partner, to save the
venture, shall he obliged to sell his interest to the other partners With agreement According to agreement According to agreement
REQUISITES FOR A PARTNER TO BE OBLIGED TO CONTRIBUTE ADDITIONAL CAPITAL: 1. Capitalist  in proportion to 1. Sharing of profits is stipulated 
1. Imminent loss his capital apply this sharing
2. Majority of the partners agree that additional contribution would save the business 2. Industrial  not fixed; must 2. Sharing of profits is not stipulated
Without
3. Capitalist partner is financially able but refuses to contribute agreement be the amount which is  losses based on capital
4. No agreement to the contrary considered just and contribution
equitable under the 3. Purely industrial partner is not
IV. Obligations of managing partners who collects debt from a person owed to him in circumstances liable for losses
his own name and owing the partnership
 The partnership shall be responsible to every partner for the amounts he may have
1. The sum thus collected shall be applied to the two credits in proportion to their disbursed on behalf of the partnership and for the corresponding interest, from the time
amounts, even though he may have given a receipt for his own credit only; the expense are made; it shall also answer to each partner for the obligations he may
2. But should he have given it for the account of the partnership credit, the amount have contracted in good faith in the interest of the partnership business, and for risks in
shall be fully applied to the latter. consequence of its management.
 If the partners have agreed to intrust to a third person the designation of the share of
REQUISITES: each one in the profits and losses, such designation may be impugned only when it is
1. There are 2 debts, one owing to the collector and one owing to the partnership manifestly inequitable.
2. Both are demandable  In no case may a partner
3. Collector manages or is authorized to manage the partnership 1. who has begun to execute the decision of the third person, or
2. who has not impugned the same within a period of three months from the time he
V. Obligations of a partner receives share of partnership credit (A partner who has had knowledge thereof, complain of such decision.
received, in whole or in part, his share of a partnership credit, when the other partners have  Designation of losses and profits cannot be intrusted to one of the partners.
not collected theirs)
 A stipulation which excludes one or more partners from any share in the
1. Obliged, if the debtor should thereafter become insolvent, to bring to the
profits or losses is void.
partnership capital what he received even though he may have given receipt for
his share only
RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT :
 Every partner is responsible to the partnership for damages suffered by it through his
May execute:
fault, and he cannot compensate them with the profits and benefits which he may have
The partner who has  All acts of administration
earned for the partnership by his industry. However, the courts may equitably lessen this
been appointed manager despite the opposition of
responsibility if through the partner's extraordinary efforts in other activities of the
in the articles of his partners, Controlling interest shall be
partnership, unusual profits have been realized.
partnership  Unless he should act in necessary for such revocation
The vote of the partners bad faith; and of power.
BEARING THE RISK OF LOSS BY THING CONTRIBUTED
representing the  His power is irrevocable
without just or lawful
The risk of specific and determinate cause.
things, which are not fungible, only their Risk shall be borne by the partner who owns
A power granted after
use and fruits may be for the common them. Revocable any time for any
the partnership has been
benefit contributed to the partnership cause
constituted
If the things contribute are fungible, or Risk shall be borne by the partnership
Two or more partners Each one may separately If any of them should oppose

have been intrusted with execute all acts of the acts of the others, the  Equal right to posses but he has no right to possess such property for any other purpose
the management of the administration, decision of the majority shall without the consent of his partners;
partnership without prevail.  Non-assignable except in connection with the assignment of rights of all the partners in the
specification of their same property;
respective duties, or In case of a tie, the matter  Limited to the share of what remains after partnership debts have been paid
without a stipulation that shall be decided by the  Not subject to attachment or execution, except on a claim against the partnership
one of them shall not act partners owning the  Not subject to legal support under article 291.
without the consent of all controlling interest.
the others,  A partner's interest in the partnership is his share of the profits and surplus.
Absence or disability of any
Stipulated that none of
The concurrence of all shall be one of them cannot be alleged,  Profits  net income for a given period (returns less expenses)
the managing partners
necessary for the validity of unless there is imminent  Surplus  excess of assets over liabilities
shall act without the
the acts, danger of grave or irreparable
consent of the others
injury to the partnership. OBLIGATIONS OF PARTNERS WITH REGARD TO 3RD PERSONS
(1) All the partners shall be
considered agents  Every partnership shall operate under a firm name. Those who, not being
But if the refusal of consent by
(2) Unanimous consent members of the partnership, include their names in the firm name, shall be
the other partners is
Manner of management required in making any subject to the liability of a partner. (1815)
manifestly prejudicial to the
has not been agreed important alteration in  All partners, including industrial ones, shall be liable pro rata with all their
interest of the partnership, the
upon the immovable property property and after all the partnership assets have been exhausted, for the
court's intervention may be
of the partnership, even contracts which may be entered into in the name and for the account of the
sought.
if it may be useful to the partnership, under its signature and by a person authorized to act for the
partnership partnership. However, any partner may enter into a separate obligation to
perform a partnership contract. (1816)
 CONTRACT OF SUBPARTNERSHIP  one formed between a member of a partnership and a  Any stipulation against the liability laid down in the preceding article shall be
3rd person for a division of profits coming to him from the partnership (DISTINCT FROM void, except as among the partners. (1817)
PRINICIPAL PARTNERSHIP)  Every partner is an agent of the partnership
OTHER RIGHTS OF PARTNERS:  Except when authorized by the other partners or unless they have
abandoned the business, one or more but less than all the partners have no
1. Every partner may associate another person with him in his share, but the associate shall authority to:
not be admitted into the partnership without the consent of all the other partners, even if a. Assign the partnership property in trust for creditors or on the assignee's
the partner having an associate should be a manager. promise to pay the debts of the partnership;
2. Every partner shall at any reasonable hour have access to and may inspect and copy any b. Dispose of the good-will of the business;
of The partnership books c. Do any other act which would make it impossible to carry on the ordinary
3. Right to a formal account as to partnership affairs if: business of a partnership;
a. If he is wrongfully excluded from the partnership business or possession of its d. Confess a judgment;
property by his co-partners; e. Enter into a compromise concerning a partnership claim or liability;
b. If the right exists under the terms of any agreement; f. Submit a partnership claim or liability to arbitration;
c. As provided by article 1807; g. Renounce a claim of the partnership.
d. Whenever other circumstances render it just and reasonable. h. No act of a partner in contravention of a restriction on authority shall bind the
4. True and full information of all things affecting the partnership (1807) partnership to persons having knowledge of the restriction.
5. Account to the partnership as a fiduciary
 An admission or representation made by any partner concerning
PROPERTY RIGHTS OF A PARTNER partnership affairs within the scope of his authority in accordance with this Title is
evidence against the partnership.
 Notice to any partner of any matter relating to partnership affairs
The property rights of a partner are:
operates as notice to the partnership except in case of fraud
1. His rights in specific partnership property;
1. knowledge of the partner acting in the particular matter, acquired while a
2. His interest in the partnership; and
partner
3. His right to participate in the management
2. knowledge of the partner acting in the particular matter, then present to his
Nature of rights in SPECIFIC partnership property:
mind

3. knowledge of any other partner who reasonably could and should have 2. Knowledge of the buyer or seller’s lack of authority
partnership
communicated it to the acting partner, operate as notice to or knowledge of the
partnership Title to real property is in
 Partners are liable solidarily with the partnership for everything the name of one or more or
chargeable to the partnership under articles 1822 and 1823. all the partners, or in a Only passes the EQUITABLE INTEREST
third person in trust for the
POWER OF PARTNER AS AGENT partnership
GR: Every partner is an agent and Where the title to real
may execute acts with binding property is in the name of Conveys TITLE to such property
Acts for carrying on the usual way of business of the
effect all the partners
partnership
E: 3rd person has knowledge of lack
of authority  Where, by any wrongful act or omission of any partner acting in the ordinary course of the
1. Acts outside the usual way of carrying on the No act of a partner in contravention business of the partnership or with the authority of his co-partners, loss or injury is caused to
business of a restriction on authority shall any person, not being a partner in the partnership, or any penalty is incurred, the partnership
2. Acts of strict dominion and ownership bind the partnership to persons is liable to the same extent as the partner so acting or omitting to act.
3. Assign the partnership property in trust for having knowledge of the restriction.  The partnership is bound to make good the loss:
creditors or on the assignee's promise to pay the 1. Where one partner acting within the scope of his apparent authority receives
debts of the partnership; money or property of a third person and misapplies it; and
4. Dispose of the good-will of the business; 2. Where the partnership in the course of its business receives money or property
5. Do any other act which would make it impossible of a third person and the money or property so received is misapplied by any
to carry on the ordinary business of a partnership; partner while it is in the custody of the partnership.
6. Confess a judgment;
7. Enter into a compromise concerning a partnership  PARTNER BY ESTOPPEL  a person (not a partner) will be liable as a partner if by words or
claim or liability; conduct
8. Submit a partnership claim or liability to 1. DIRECTLY represents himself as partner, or
arbitration; 2. INDIRECTLY represents himself by consenting to another representing him
9. Renounce a claim of the partnership to anyone, as a partner in an existing partnership
Restricted acts Partnership is not liable to 3rd
persons who have knowledge of the Article 1825. When a person, by words spoken or written or by conduct, represents
restrictions himself, or consents to another representing him to anyone, as a partner in an
existing partnership or with one or more persons not actual partners, he is liable
EFFECTS OF CONVEYANCE OF REAL PROPERTY BELONGING TO PARTNERSHIP (1819) to any such persons to whom such representation has been made, who has, on
the faith of such representation, given credit to the actual or apparent partnership,
Any partner may convey TITLE to such property by a
and if he has made such representation or consented to its being made in a public
conveyance executed in the partnership name
manner he is liable to such person, whether the representation has or has not
Where title to real property been made or communicated to such person so giving credit by or with the
But the partnership may recover such property:
is in the partnership name knowledge of the apparent partner making the representation or consenting to its
1. Conveyance was not in the usual way of business
being made:
2. Knowledge of the buyer or seller’s lack of authority
REQUISITES:
Only passes the EQUITABLE INTEREST provided the act is one
within the authority of the partner under the provisions of the
Title to real property in the 1. Defendant represented himself as partner/ represented by others as such and not denied
first paragraph of article 1818.
name of the partnership; by defendant
conveyance by a partner in 2. Plaintiff relied on the representation
But the partnership may recover such property:
his own name 3. Statement of defendant is not refuted
1. Conveyance was not in the usual way of business
2. Knowledge of the buyer or seller’s lack of authority
LIABILITIES OF PARTNERS IN ESTOPPEL
Title to real property is in The partners in whose name the title stands may convey TITLE
the name of one or more to such property, All partners consented to the representation Partnership is liable
but not all the partners and
the record does not But the partnership may recover such property
disclose the right of the 1. Conveyance was not in the usual way of business

No existing partnership directions, accounts and inquiries which the debtor partner might have made, or which
All those represented consented Person who represented himself and all those the circumstances of the case may require.
Not all partners in existing partnership who consented are liable jointly (pro-rata)  The interest charged may be redeemed at any time before foreclosure, or in
consented case of a sale being directed by the court, may be purchased without thereby
No existing partnership causing a dissolution:
Not all those represented consented Person who represented himself and all those
None of the partners in existing partnership who consented are liable separately (1) With separate property, by any one or more of the partners; or
consented (2) With partnership property, by any one or more of the partners with the
consent of all the partners whose interests are not so charged or sold.
Article 1826. A person admitted as a partner into an existing partnership is liable for all the RESPONSIBILITY OF PARTNERSHIP TO PARTNERS
obligations of the partnership arising before his admission as though he had been a partner when
such obligations were incurred, except that this liability shall be satisfied only out of partnership
1. Refund the amounts disbursed by partners in behalf of the partnership + interest (1796)
property, unless there is a stipulation to the contrary.
2. Answer for obligations made in good faith by partners (1822-24)
3. Demand an accounting
Article 1827. The creditors of the partnership shall be preferred to those of each partner as
regards the partnership property. Without prejudice to this right, the private creditors of each
partner may ask the attachment and public sale of the share of the latter in the partnership
DISSOLUTION AND WINDING UP
assets.
RIGHTS OF AN ASSIGNEE: (1813)  DISSOLUTION  The dissolution of a partnership is the change in the relation of the partners
caused by any partner ceasing to be associated in the carrying on as distinguished from the
A conveyance by a partner of his whole interest does not of itself dissolve the partnership, or, as winding up of the business. (1828)
against the other partners in the absence of agreement, entitle the assignee, during the o No new transactions are allowed after dissolution
continuance of the partnership,
 to interfere in the management or administration of the partnership business or affairs,  WINDING UP  process of settling the business or partnership affairs after dissolution
or
 to require any information or account of partnership transactions, or  On dissolution the partnership is not terminated, but continues until the winding up of
 to inspect the partnership books; partnership affairs is completed.
WHAT ARE HIS RIGHTS IN CASE OF DISSOLUTION?  TERMINATION  that point in time when partnership affairs are completely wound up and
1. Receive in accordance with his contract the profits to which the assigning finally settled (this signifies the end of partnership life)
partner would otherwise be entitled.
2. In case of fraud in the management of the partnership, the assignee may avail CAUSES OF DISSOLUTION (1830)
himself of the usual remedies.
3. Entitled to receive his assignor's interest and (1) Without violation of the agreement between the partners:
4. May require an account from the date only of the last account agreed to by all (a) By the termination of the definite term or particular undertaking in the
the partners. agreement;
(b) By the express will of any partner, in good faith, when no definite term or
particular is specified;
(c) By the express will of all the partners who have not assigned their interests
or suffered them to be charged for their separate debts, either before or
after the termination of any specified term or particular undertaking;
REMEDIES OF A JUDGMENT CREDITOR: (1814) (d) By the expulsion of any partner from the business in accordance with a
power conferred by the agreement between the partners;
Without prejudice to the preferred rights of partnership creditors, on due application to a
competent court by any judgment creditor of a partner: (2) In contravention of the agreement between partners, where the circumstances do
not permit a dissolution under any other provision of this article, by the express will of
 The court may charge the interest of the debtor partner with payment of the any partner at any time;
unsatisfied amount of such judgment debt with interest thereon; (CHARGING ORDER)
 May then or later appoint a receiver of his share of the profits, and of any other money (3) By any event which makes it unlawful for the business of the partnership to be
due or to fall due to him in respect of the partnership, and make all other orders, carried on or for the members to carry it on in partnership;

(4) When a specific thing which a partner had promised to contribute to the partnership,
perishes before the delivery;; 2. Where the dissolution is caused by the ACT, DEATH OR INSOLVENCY of a partner:
General Rule: Each partner is liable to his co-partners for his share of any
(5) By the death of any partner; liability created by any partner acting for the partnership as if the partnership
had not been dissolved
(6) By the insolvency of any partner or of the partnership; Exceptions:
(1) The dissolution being by act of any partner, the partner acting for the
(7) By the civil interdiction of any partner; partnership had knowledge of the dissolution; or
(2) The dissolution being by the death or insolvency of a partner, the
(8) By decree of court partner acting for the partnership had knowledge or notice of
the death or insolvency.
DISSOLUTION BY A COURT DECREE (Art. 1831)
 WITH RESPECT TO PERSONS NOT PARTNERS (1834)
I. On application by or for a partner the court shall decree a dissolution whenever:
When Partner Can Bind Partnership Even After Dissolution
(1) INSANITY: A partner has been declared insane in any judicial proceeding or is
shown to be of unsound mind; (1) By any act appropriate for winding up partnership affairs or completing transactions
(2) INCAPACITY: A partner becomes in any other way incapable of performing his unfinished at dissolution;
part of the partnership contract; (2) By any transaction which would bind the partnership if dissolution had not
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on taken place, provided the other party to the transaction:
of the business;
(4) WILLFUL/PERSISTENT BREACH OF AGREEMENT: A partner willfully or persistently commits (a) Had extended credit to the partnership prior to dissolution and had no
a breach of the partnership agreement, or otherwise so conducts himself in matters knowledge or notice of the dissolution; or
relating to the partnership business that it is not reasonably practicable to carry on the (b) Though he had not so extended credit, had nevertheless known of the
business in partnership with him; partnership prior to dissolution, and, having no knowledge or notice of
(5) BUSINESS LOSSES: The business of the partnership can only be carried on at a loss; dissolution, the fact of dissolution had not been advertised in a
(6) Other circumstances render dissolution equitable. newspaper of general circulation in the place (or in each place if more
than one) at which the partnership business was regularly carried on.
II. On the application of the purchaser of a partner's interest under Article 1813 or 1814:
The liability of a partner under the first paragraph, No. 2 (By any transaction which would bind the
(1) After the termination of the specified term or particular undertaking; partnership if dissolution had not taken place, provided the other party to the transaction), shall be
(2) At any time if the partnership was a partnership at will when the interest was assigned or satisfied out of partnership assets alone when such partner had been prior to dissolution:
when the charging order was issued.
(1) Unknown as a partner to the person with whom the contract is made; and
EFFECTS OF DISSOLUTION (1832) (2) So far unknown and inactive in partnership affairs that the business reputation of the
partnership could not be said to have been in any degree due to his connection with it.
 GR: dissolution terminates all authority of any partner to act for the partnership
 Except: So far as may be necessary to wind up partnership affairs or to complete transactions THE PARTNERSHIP IS IN NO CASE BOUND BY ANY ACT OF A PARTNER AFTER
begun but not then finished DISSOLUTION:
(1) With respect to the partners: (1) Where the partnership is dissolved because it is unlawful to carry on the
(a) When the dissolution is not by the act, insolvency or death of a partner; business, unless the act is appropriate for winding up partnership affairs; or
or (2) Where the partner has become insolvent; or
(b) When the dissolution is by such act, insolvency or death of a partner, in (3) Where the partner has no authority to wind up partnership affairs;
cases where article 1833 so requires; Except by a transaction with one who:
(2) With respect to persons not partners, as declared in article 1834. (a) Had extended credit to the partnership prior to dissolution and had no
knowledge or notice of his want of authority; or
QUALIFICATIONS: (b) Had not extended credit to the partnership prior to dissolution, and, having no
knowledge or notice of his want of authority, the fact of his want of authority has
 WITH RESPECT TO THE PARTNERS (1833) not been advertised in the manner provided for advertising the fact of
dissolution in the first paragraph, No. 2 (b) (Though he had not so extended
1. If dissolution is not caused by the ACT, DEATH OR INSOLVENCY of a partner, the authority credit, had nevertheless known of the partnership prior to dissolution, and,
of partners to bind the partnership contract is immediately terminated having no knowledge or notice of dissolution, the fact of dissolution had not been

advertised in a newspaper of general circulation in the place (or in each place if A. As To Partner Who Has Not Caused Dissolution Wrongfully
more than one) at which the partnership business was regularly carried on).
Each partner who has not caused dissolution wrongfully shall have:
Nothing in this article shall affect the liability under Article 1825 of any person who, after
dissolution, represents himself or consents to another representing him as a partner in a 1. Apply the partnership property applied to discharge its liabilities, and
partnership engaged in carrying business. 2. Apply the surplus applied to pay in cash the net amount owing to the respective partners.
3. The right to damages
4. Right to continue the business during the agreed term
DISCHARGE THE EXISTING LIABILITY (1835) 5. Possess the partnership property if business is continued.
 GR: The dissolution of the partnership does not of itself discharge the existing liability of any B. As To Partner Who Has Caused Dissolution Wrongfully
partner.
 Exceptions: A partner is discharged from any existing liability upon dissolution of the (1) A partner who has caused the dissolution wrongfully shall have:
partnership by an agreement to that effect between:
1. Himself, (a) If the business is not continued by others - apply partnership property to
2. The partnership creditor and discharge liabilities of partnership and receive in cash his share of surplus less
3. The person or partnership continuing the business; damages caused by the wrongful dissolution.
and such agreement may be inferred from the course of dealing between the creditor having (b) If the business is continued by others- have the value of his interest in the
knowledge of the dissolution and the person or partnership continuing the business. partnership, less any damage caused to his co-partners by the dissolution,
ascertained and paid to him in cash, or the payment secured by a bond
 The individual property of a deceased partner shall be liable for all obligations approved by the court, and to be released from all existing liabilities of the
of the partnership incurred while he was a partner, but subject to the prior partnership; but in ascertaining the value of the partner's interest the value of
payment of his separate debts. the good-will of the business shall not be considered.
 The partners who have not wrongfully dissolved the partnership or the
legal representative of the last surviving partner, not insolvent, has the RIGHTS OF INJURED PARTY WHEN PARTNERSHIP CONTRACT IS RESCINDED ON THE
right to wind up the partnership affairs, PROVIDED, however, that any GROUND OF THE FRAUD OR MISREPRESENTATION
partner, his legal representative or his assignee, upon cause shown,
may obtain winding up by the court. The party entitled to rescind is, without prejudice to any other right, is entitled:
(1) To a lien on, or right of retention of, the surplus of the partnership property
TESTATE ESTATE OF LAZARO MOTA vs. SALVADOR SERRA [Feb 14, 1925]: The dissolution after satisfying the partnership liabilities;
of a firm does not relieve any of its members from liability for existing obligations, although it does (2) To stand, after all liabilities to third persons have been satisfied, in the place of
save them from new obligations to which they have not expressly or impliedly assented, and any the creditors of the partnership for any payments made by him in respect of
of them may be discharged from old obligations by novation or other form of release. It is often the partnership liabilities; and
said that a partnership continues, even after dissolution, for the purpose of winding up its affairs. (3) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership.
RIGHTS OF PARTNER WHEN DISSOLUTION IS NOT IN CONTRAVENTION OF AN

SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS (1839)
AGREEMENT:
RULES SUBJECT TO ANY AGREEMENT TO THE CONTRARY:
1. Apply the partnership property applied to discharge its liabilities, and
Assets of the Partnership
2. Apply the surplus applied to pay in cash the net amount owing to the respective partners.
(1) The ASSETS OF THE PARTNERSHIP are:
(a) The partnership property,
E: But if dissolution is caused by expulsion of a partner, bona fide under the partnership
(b) The contributions of the partners necessary for the payment of all the liabilities
agreement and if the expelled partner is discharged from all partnership liabilities, either by
payment or agreement under the second paragraph of Article 1835, he shall receive in cash only
Order of Application
the net amount due him from the partnership.
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
RIGHTS WHEN DISSOLUTION CAUSED BY CONTRAVENTION OF AGREEMENT

 The assets shall be applied in the order of their declaration in No. 1 to the satisfaction of
the liabilities.
 The partners shall contribute, the amount necessary to satisfy the liabilities.  LIMITED PARTNERSHIP  is one formed by two or more persons under the provisions of the
 An assignee for the benefit of creditors or any person appointed by the court shall have following article, having as members one or more general partners and one or more limited
the right to enforce the contributions specified in the preceding number. partners. The limited partners as such shall not be bound by the obligations of the
 Any partner or his legal representative shall have the right to enforce the partnership. (1843)
contributions to the extent of the amount which he has paid in excess of his share of
the liability. Characteristics:
 The individual property of a deceased partner shall be liable for the contributions. 1. Formed by compliance with statutory requirements
 When partnership property and the individual properties of the partners are in possession 2. One or more general partners control the business
of a court for distribution, partnership creditors shall have priority on partnership property 3. One or more general partners contribute to the capital and share in the profits but:
and separate creditors on individual property, saving the rights of lien or secured a. They do not Participate in the management of the business and
creditors. b. Are not personally liable for partnership obligations beyond their capital
contributions
(3) Where a partner has become insolvent or his estate is insolvent, the claims 4. May ask for the return of their capital contributions under conditions prescribed by law
against his separate property shall rank in the following order: 5. Partnership debts are paid out of the common fi\und and the individual properties of
(a) Those owing to separate creditors; general partners
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution. DIFFERENCES BETWEEN A GENERAL AND LIMITED PARTNERSHIP
GENERAL LIMITED
WHEN BUSINESS OF THE DISSOLVED PARTNERSHIP IS CONTINUED Personally liable for partnership Liability extend only to his capital
Liability
obligations contributions
When creditors of the dissolved partnership are also creditors of the person or When the manner of mgt is not
partnership continuing the business: agreed upon, all general partners
Management No participation in mgt
have equal rights in the mgt of the
(1) if the business is continued without liquidation of the partnership affairs; business
(2) Creditors have an equitable lien on the consideration paid to the retiring or Contributes cash, property or Contributes cash and property only
deceased partner by the purchaser when the retiring or deceased partner sold his Contribution
industry and NOT industry
interest without final settlement to creditors; Party in Proper party to proceedings against
(3) Rights of retiring/ deceased partner: Not the Proper party
proceedings partnership
a. Have the value of the interest ascertained as of the date of dissolution Assignment of Interest not assignable without
b. Receive as ordinary creditor the value of his share in the dissolved partnership with Interest is freely assignable
interest consent of partners
interest/profits attributable to use of his right at his option
Firm Name Name MAY appear in the firm name Name must appear in the firm name
Other business Prohibited from engaging in business No prohibition
 The right to an account of his interest shall accrue to any partner, or
Retirement, Death, Insolvency,
his legal representative as against the winding up partners or the
insanity, civil interdiction of GP
surviving partners or the person or partnership continuing the Rights will just be transferred to the
dissolves partnership unless the
business, at the date of dissolution, in the absence of any agreement to Effect of legal representatives
business is continued by the
the contrary. Retirement,
remaining general partners:
Death, Estate of a deceased limited partner
PERSONA AUTHORIZED TO WIND UP: Insolvency, shall be liable for all his liabilities as
(1) Under a right so to do stated in
1. Partners designated by agreement insanity a limited partner.
the certificate, or
2. If no agreement, all partners who have not wrongfully dissolved the partnership
(2) With the consent of all members.
3. Legal representative of the last surviving partner
STATUTORY REQUIREMENTS TO FORM A LIMITED PARTNERSHIP (Substantial Compliance

required)
(1) Sign and swear to a certificate, which shall state -
LIMITED PARTNERSHIP (a) The name of the partnership, adding thereto the word "Limited";

(b) The character of the business;
(c) The location of the principal place of business; (1) Do any act in contravention of the certificate;
(d) The name and place of residence of each member, general and limited partners being (2) Do any act which would make it impossible to carry on the ordinary business of
respectively designated; the partnership;
(e) The term for which the partnership is to exist; (3) Confess a judgment against the partnership;
(f) The amount of cash and a description of and the agreed value of the other property (4) Possess partnership property, or assign their rights in specific partnership
contributed by each limited partner; property, for other than a partnership purpose;
(g) The additional contributions, if any, to be made by each limited partner and the times at (5) Admit a person as a general partner;
which or events on the happening of which they shall be made; (6) Admit a person as a limited partner, unless the right so to do is given in the
(h) The time, if agreed upon, when the contribution of each limited partner is to be returned; certificate;
(i) The share of the profits or the other compensation by way of income which each limited (7) Continue the business with partnership property on the death, retirement,
partner shall receive by reason of his contribution; insanity, civil interdiction or insolvency of a general partner, unless the right so
(j) The right, if given, of a limited partner to substitute an assignee as contributor in his to do is given in the certificate.
place, and the terms and conditions of the substitution;
(k) The right, if given, of the partners to admit additional limited partners; SPECIFIC RIGHTS OFA LIMITED PARTNER (1851)
(l) The right, if given, of one or more of the limited partners to priority over other limited
partners, as to contributions or as to compensation by way of income, and the nature of Same rights as a general partner to:
such priority; (1) Have the partnership books kept at the principal place of business
(m) The right, if given, of the remaining general partner or partners to continue the business (2) At a reasonable hour to inspect and copy any of them;
on the death, retirement, civil interdiction, insanity or insolvency of a general partner; and (3) Have on demand true and full information of all things affecting the partnership,
(n) The right, if given, of a limited partner to demand and receive property other than cash in (4) Formal account of partnership affairs whenever circumstances render it just and
return for his contribution. reasonable; and
(5) Have dissolution and winding up by decree of court.
(2) File for record the certificate in the Office of the SEC. (6) Right to receive a share of the profits or other compensation by way of income, and
(7) To the return of his contribution when the partnership assets are in excess of its liabilities.
 A limited partnership is formed if there has been SUBSTANTIAL COMPLIANCE in GOOD
FAITH with the foregoing requirements. REQUISITES FOR RETURN OF CONTRIBUTION:
 A limited partner shall not become liable as a general partner unless, in addition to the a. All liabilities of partnership have been paid or if not, assets are at least sufficient to cover
exercise of his rights and powers as a limited partner, he takes part in the control of the them
business. b. Consent of all members have been obtained
c. Certificate is cancelled or amended as to set forth withdrawal or reduction of contribution
Art. 1849. After the formation of a lifted partnership, additional limited partners may be admitted
upon filing an amendment to the original certificate in accordance with the requirements of Article  A person who has contributed to the capital of a business erroneously believing that he has
1865. become a limited partner, is not, a general partner with the person or in the partnership
carrying on the business, or bound by the obligations of such person or partnership, provided
REQTS FOR LIMITED PARTNERS’ SURNAME TO APPEAR IN FIRM NAME: (1846) that on ascertaining the mistake he promptly renounces his interest in the profits of the
(1) It is also the surname of a general partner, or business, or other compensation by way of income.
(2) Prior to the time when the limited partner became such, the business has been carried on
under a name in which his surname appeared. GP AND LP AT THE SAME TIME?
 A limited partner whose surname appears in a partnership name contrary to the provisions of  A person may be a GP and an LP in the same partnership at the same time, provided that this
the first paragraph is liable as a general partner to partnership creditors who extend credit fact shall be stated in the certificate.
to the partnership without actual knowledge that he is not a general partner.  A person who is a GP and an LP, shall have all the rights and powers and be subject to all the
restrictions of a general partner; except that, in respect to his contribution, he shall have the
EFFECTS OF FALSE STATEMENT IN THE CERTIFICATE(1847) rights against the other members which he would have had if he were not also a general
 One who suffers loss by reliance on such statement may hold liable any party to the partner.
certificate who knew the statement to be false:
(1) At the time he signed the certificate, or OTHER RIGHTS OF AN LP: (1854)
(2) Subsequently, but within a sufficient time before the statement was relied upon to enable  May loan money to and transact other business with the partnership, and, unless he is also a
him to cancel or amend the certificate, or to file a petition for its cancellation or general partner, receive on account of resulting claims against the partnership, with general
amendment as provided in Article 1865. creditors, a pro rata share of the assets.
 No limited partner shall in respect to any such claim:
General Rule: A general partners’ acts do not require consent from the LP’s.
Exceptions: WHEN GP NEEDS WRIITEN CONSENT FROM LP: (1) Receive or hold as collateral security and partnership property, or

(2) Receive from a general partner or the partnership any payment, conveyance, or release
from liability if at the time the assets of the partnership are not sufficient to discharge A LIMITED PARTNER'S INTEREST IS ASSIGNABLE (1859)
partnership liabilities to persons not claiming as general or limited partners.  An assignee may become a substituted limited partner.
The receiving of collateral security, or payment, conveyance, or release in violation of the
foregoing provisions is a fraud on the creditors of the partnership.
PRIORITY OVER OTHER LIMITED PARTNERS
Where there are several limited partners The members may agree that one or more of the limited  SUBSTITUTED LIMITED PARTNER is a person admitted to all the rights of a limited
partners shall have a priority over other limited partners as to: partner who has died or has assigned his interest in a partnership.
a. the return of their contributions,  Has all the rights and powers, and is subject to all the restrictions and liabilities of his
b. as to their compensation by way of income, or assignor, except those liabilities of which he was ignorant at the time he became a limited
c. as to any other matter. partner and which could not be ascertained from the certificate.
If such an agreement is made it shall be stated in the certificate, and in the absence of such a  Does not release the assignor from liability to the partnership under Articles 1847 and 1848.
statement all the limited partners shall stand upon equal footing.
REQUISITES FOR AN ASSIGNEE TO BECOME A SUBSTITUTED LIMITED PARTNER:
1. All the members consent thereto or if the assignor, being thereunto empowered by the
Limited partner may rightfully demand the return of his contribution: certificate, gives the assignee that right.
2. Certificate is appropriately amended in accordance with Article 1865.
1. On the dissolution of a partnership; or 3. Amended certificate is registered with the SEC
2. When the date specified in the certificate for its return has arrived, or
3. After he has six months' notice in writing to all other members, if no time is specified in LIMITATIONS OF AN ASSIGNEE WHO DOES NOT BECOME A SUBSTITUTED LIMITED
the certificate, either for the return of the contribution or for the dissolution of the PARTNER:
partnership.  No right to require any information or
 A limited partner, irrespective of the nature of his contribution, has only the right
 No right to account of the partnership transactions or
to demand and receive cash in return for his contribution.
 No right to to inspect the partnership books;
LP MAY HAVE THE PARTNERSHIP DISSOLVED AND ITS AFFAIRS WOUND UP WHEN:  Only entitled to receive the share of the profits or other compensation by way of income, or
1. He rightfully but unsuccessfully demands the return of his contribution, or  The return of his contribution, to which his assignor would otherwise be entitled.
2. The other liabilities of the partnership have not been paid, or the partnership property is
insufficient for their payment, and the limited partner would otherwise be entitled to the PREFERENCE OF CREDITS: DISSOLUTION PF LIMITED PARTNERSHIPS (1863)
return of his contribution.
1) Those to creditors, in the order of priority as provided by law, except those to
LIABILITIES OF LP (1858) limited partners on account of their contributions, and to general partners;
A limited partner is liable to the partnership: 2) Those to limited partners in respect to their share of the profits and other
1. difference between his contribution actually made and that stated in the certificate as compensation by way of income on their contributions;
having been made; and 3) Those to limited partners in respect to the capital of their contributions;
2. unpaid contribution which he agreed in the certificate to make in the future at the time 4) Those to general partners other than for capital and profits;
and on the conditions stated in the certificate. 5) Those to general partners in respect to profits;
6) Those to general partners in respect to capital.
A limited partner holds as trustee for the partnership:  The certificate shall be cancelled when the partnership is dissolved or all limited partners
1. Specific property stated in the certificate as contributed by him, but which was not cease to be such.
contributed or which has been wrongfully returned, and
2. Money or other property wrongfully paid or conveyed to him on account of his A CERTIFICATE SHALL BE AMENDED WHEN:
contribution. (1) Change in the name of the partnership or in the amount or character of the contribution
of any limited partner;
 The liabilities of a limited partner can be waived or compromised only by the consent of (2) A person is substituted as a limited partner;
all members; but a waiver or compromise shall not affect the right of a creditor of a (3) An additional limited partner is admitted;
partnership. (4) A person is admitted as a general partner;
 When a contributor has rightfully received the return of the capital of his contribution, (5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil
he is liable to the partnership for any sum, not in excess of such return with interest, interdiction and the business is continued under Article 1860;
necessary to discharge its liabilities to all creditors who extended credit or whose (6) Change in the character of the business of the partnership;
claims arose before such return. (7) False or erroneous statement in the certificate;

(8) Change in the time as stated in the certificate for the dissolution of the partnership or for Insofar as 3rd persons are concerned, it is enough that the principal is capacitated; but insofar as
the return of a contribution; his obligations to his principal are concerned, the agent must be able to bind himself.
(9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no
time having been specified in the certificate, or Essential Elements of Agency:
(10) The members desire to make a change in any other statement in the certificate in order 1.) Consent, express or implied;
that it shall accurately represent the agreement among them. 2.) Object of the contract is the execution of a juridical act in relation to 3 rd
persons;
3.) The agent acts as a representative and not for himself;
4.) The agent acts within the scope of his authority.
AGENCY Delegated Acts
General Rule: Anything that can be done by the principal
NATURE, FORM AND KINDS OF AGENCY
Exceptions:
Acts that cannot be done through an agent:
 AGENCY  By the contract of agency a person binds himself to render some service or to do 11.) Personal acts: if personal performance is regulated by law or public policy or agreement;
something in representation or on behalf of another, with the consent or authority of the 22.) Criminal or illegal acts: attempt to delegate another authority to do an act which, if done
latter. (1868) by the principal would be illegal, is void.
 Agency: A relationship which implies a power in an agent to contract with a 3 rd
person on behalf of a principal. Nature of Relation between Principal and Agent:
 Fiduciary, based on trust and confidence.
Kind of Contract: It is a preparatory contract. It is a contract entered not for its own end but to  Agents cannot do acts contrary to the principal’s interest. Why? Once there is recognition
be able to enter into other contracts. of the agency, he will be in estoppel.
Characteristics: Agency vs. Partnership
11.) Consensual: perfected by mere consent;
22.) Nominate: it has its own name;
Agency Partnership
33.) Principal: does not depend on another contract for its existence and validity;
44.) Preparatory: entered into as a means to an end; Control by the principal Applicable Not applicable
55.) Unilateral/Bilateral: Binds only the principal if agents Partner binds co-partners and
Liability of Agent
a.) Unilateral: if contract is gratuitous, it creates obligations for only one of the acts within his authority himself
parties, i.e. agent.
b.) Bilateral: if for compensation, it gives rise to reciprocal rights and obligs. No sharing except as to agent’s Profits shared by co-partner in
Sharing of profits
compensation agreed proportions
Basis: Representation. Common feature: Fiduciary trust
The acts of the agent on behalf of the principal within the scope of his authority produce the same
legal and binding effects as if the principal personally did them. Agency v. Lease of Work or Service
Distinguishing Features: Agency Lease of Work/Service

11.) Representative character; and
Basis is representation. Basis is employment
22.) Derivative authority.
Agent exercises discretionary powers. Lessor only performs ministerial functions.
Purpose: To extend the personality of the principal through the facility of the agent. 3 persons are involved: principal, agent & 3rd Only 2 persons involved: lessor and lessee
person.
Parties: Commercial or business transactions. Matters of mere manual or mechanical
11.) Principal; and execution.
22.) Agent.
Agency v. Guardianship
Who can be principal?
The principal may be a natural person or a juridical person. He must be capacitated. The rule is if a Agency Guardianship
person is capacitated to act for himself or in his own right, he can act through an agent. Agent represents a capacitated person. Guardian represents an incapacitated person.
Must the agent have capacity?

b.) Special: comprises one or more specific transactions.
Agent appointed by principal and can be Guardian appointed by court and stands in loco 44.) As to Authority conferred:
removed by him. parentis. a.) Couched in general terms: deemed to comprise only acts of administration.
b.) Couched in specific terms: authorizes only the performance of a specific act/s.
Guardian not subject to directions of ward but 55.) As to Nature and effects:
Agent subject to directions of principal. a.) Representative: agent acts in name and representation of principal.
must act for his benefit.
b.) Simple/Commission: agent acts in his own name but for the account of the
principal.
Agent can make principal personally Guardian has no power to impose personal
liable. liability on his ward.
Can agency be presumed?

Agency to Sell v. Sale  General Rule: NO, because the relationship between the principal and agent must exist as
a fact.
Agency to sell Sale  Exceptions:
Agent receives the goods as the goods of 1. When agency arises by operation of law; or,
Buyer receives the goods as owner.
the principal. 2. Agency is presumed to prevent unjust enrichment.
Agent delivers proceeds of the sale. Buyer pays the price.
Agent can return object in case he is Art. 1870. Acceptance by the agent may also be express, or implied from his acts which
Generally, buyer cannot return the object sold.
unable to sell to a 3rd person. carry out the agency, or from his silence or inaction according to the circumstances.
Agent in dealing with the thing received
Buyer can deal with the thing as he pleases,
is bound to act accdg to the instructions Form of Acceptance by Agent:
being the owner.
of his principal  General Rule: NO formal requirements. Agent’s authority may be ORAL or WRITTEN, it
may be in PUBLIC or PRIVATE WRITINGS.
Agent v. Independent Contractor  Exception: when the law requires a specific form (e.g. sale of real property or any interest
therein by an agent.)
Agent Independent Contractor
Represents the principal. Employed by employer. Art. 1871. Between persons who are present, the acceptance of the agency may also be
Acts under the control and instructions of implied if the principal delivers his power of attorney to the agent and the latter
Acts according to his own method. receives it without any objection.
the principal
Principal liable for torts committed by agent Employer not liable for torts committed by Art. 1872. Between persons who are absent, the acceptance of the agency cannot be
w/in scope of authority. independent contractor. 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;
Art. 1869. Agency must be express, or implied from the acts of the principal, from his 2.) When the principal entrusts to him by letter or telegram a power of attorney with
silence or lack of action, or his failure to repudiate the agency, knowing that another respect to the business in which he is habitually engaged as an agent, and he did
person is acting on his behalf without authority. not reply to the letter or telegram.
Agency may be oral, unless the law requires a specific form. Form of Acceptance by Agent:
1) Express - when it is oral or written;
Classifications of Agency: 2) Implied - when it can be inferred from the acts of the agent which carry out the agency,
11.) As to Manner of Creation: or from his silence or inaction according to the circumstances.
a.) Express: actually authorized, either orally or in writing. a. Between 2 persons who are present - acceptance is deemed implied when
b.) Implied: implied from acts of principal, from his silence or lack of action or his the agent receives a power of attorney from the principal himself personally
failure to repudiate the agency knowing that another person is acting on his without objection. (Is this presumption conclusive? NO, it can be rebutted by
behalf without authority. contrary proof.)
22.) As to Character: b. Between persons who are absent – acceptance not deemed implied from the
a.) Gratuitous: agent receives no compensation for his services. silence of the agent
b.) Onerous: agent does receive compensation.
33.) As to Extent of business covered:  Power of attorney: An instrument in writing by which one person, as principal, appoints
a.) General: comprises all the business of the principal. another as his agent and confers upon him the authority to perform certain specified acts

or kinds of acts on behalf of the principal. Its primary purpose is to evidence the authority a.) As to Agent – One who knows that another is acting as his agent and fails to
of the agent to 3rd parties w/ whom the agent deals. repudiate his acts, or accept the benefits of them, will be estopped to deny the
agency as against such other.
 Construction of power of Attorney: Strictly Construed and Strictly Pursued. b.) As to sub-agent – To estop the principal from denying his liability to a 3rd
 The instrument will be held to grant only those powers which are specified, and the agent person, he must have known or be charged with knowledge of the fact of the
may neither go beyond nor deviate from the power of Attorney. The only exception is transmission and the terms of the agreement between the agent and sub-agent.
when strict construction will destroy the very purpose of the power. c.) As to 3rd persons – One who knows that another is acting as his agent or
permitted another to appear as his agent, to the injury of 3 rd persons who have
dealt with the apparent agent as such in good faith and in the exercise of
reasonable prudence, is estopped to deny the agency.
Meaning of “present” 43.) Estoppel of 3rd Persons – A 3rd person, having dealt with one as an agent may be
Not limited to face-to-face encounters. Two persons conversing on the phone are also considered estopped to deny the agency as against the principal, agent or 3 rd persons in interest.
as both “present”. 54.) Estoppel of the govt – The govt is neither estopped by the mistake or error on the part
of its agents. But it may be estopped through affirmative acts of its officers acting within
Between persons who are absent, the acceptance of the agency cannot be implied from the scope of their authority.
the silence of the agent, except: 6
1.) When the principal transmits his power of attorney to the agent, who receives it Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
without any objection; the authority of the latter shall be in writing; otherwise, the sale shall be void.
2.) When the principal entrusts to him by letter or telegram a power of attorney with  A letter is sufficient [Jimenez v. Rabot].
respect to the business in which he is habitually engaged as an agent, and he did
not reply to the letter or telegram.
Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the
contrary.
Way of Giving Notice to Agent and its Effects:
1.) Special information: the person appointed as agent is considered such with respect to  Broker: One who in behalf of others, and for compensation or fee, negotiate
the person to whom it was given. contracts relative to property. He is the negotiator between the parties, never
2.) Public advertisement: Agent is considered such with regard to any person. acting in his own name, but in the name of those who employ him. He is strictly
a middleman and for some purposes, the agent of both parties.
 Revocation – An agency is revoked in the same manner as it was given.
When is a broker entitled to compensation?
 General rule: Special information needs special  A broker is entitled to commission whenever he rings to his principal a party who is
information of revocation. ready, capacitated, able and willing to take the property, and enter into a valid
 Exception: if you can prove that the 3rd person read contract upon the terms named by the principal, although the particulars may be
the notice in the newspaper. arranged and the matter negotiated and completed between the principal and the
purchaser directly. A broker is never entitled to commission for unsuccessful
efforts (Law of Proximate Cause): he must be the proximate or determining
Art. 1873. If a person specially informs another or states by public advertisement that
cause as to the consummation of the sale.
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
Does the law allow double agency?
special information, and in the latter case with regard to any person.
 General Rule: NO. Such agency is disapproved by law for being against public policy and
sound morality.
The power shall continue to be in full force until the notice is rescinded in the same
 Exception: Where the agent acted with full knowledge and free consent of the principals.
manner in which it was given.
In case the agent assumes a double agency, what is his right to compensation?
Agency by Estoppel: There is really no agency at all, but the alleged agent seemed to have 1.) If with knowledge of both principals – recovery can be had from both.
apparent or ostensible, although no real authority to represent another. 2.) If without knowledge of both – agent can recover from neither.
1 3.) If with knowledge of only one – as to the principal who knew of that fact and as to the
21.) Estoppel of Agent – One professing to act as agent for another may be estopped to agent, they are in pari delicto and the courts shall leave them as they were, the contract
deny his agency both as against his asserted principal and the 3 rd persons interested in between them being void as against public policy and good morals.
the transaction in which he is engaged.
32.) Estoppel of Principal –
Art. 1876. An agency is either general or special.
The former comprises all the business of the principal. The latter, one or more specific
transactions.

execute such acts as he may consider appropriate, or even though the agency should
Classification of Agents: authorize a general or unlimited management.
11.) Universal agent: One employed to do all acts that the principal may personally do, and Examples of acts of mere administration:
which the principal can lawfully delegate to another the power of doing.
2 1.) To sue for collection of debts;
12.) General agent: One employed to transact all the business of his principal, or all business 2.) To employ workers or servants and employees needed for the conduct of business;
of a particular kind or in a particular place, or in other words, to do all acts connected with 3.) To engage counsel to preserve the ownership and possession of the principal’s property;
a particular trade, business, or employment. 4.) To lease real property to another person for 1 year or less, provided the lease is not
2 registered;
33.) Special/Particular agent: One authorized to act in one or more specific transactions, or 5.) To make customary gifts for charity or to employees in the business managed by the agent
to do one or more specific acts, or to act upon a particular occasion. e.g.: 6.) To borrow money if it be urgent and indispensable for the preservation of the things under
administration.
a.) Attorney at law: One whose business is to represent clients in legal
proceedings. How are contracts of agency construed?
b.) Auctioneer: One whose business is to sell property for others to the highest
bidder at a public sale. Contracts of agency as well as general powers of attorney must be interpreted in accordance with
c.) Broker: One whose business is to act as intermediary between 2 other parties. the language used by the parties. The real intention of the parties is primarily determined from the
d.) Factor: One whose business is to receive and sell goods for a commission, being language used and gathered from the whole instrument. In case of doubt, resort must be had to
entrusted with the possession of the goods involved in the transaction. the situation, surroundings and relations of the parties. The intention of the parties must be
 Attorney-in-fact: One who is given authority by his principal to do a particular act not of a sustained rather than defeated. So if the contract be open to 2 constructions, one of which would
legal character. In strict legal sense: An agent having a special authority created by deed. uphold the intention while the other would overthrow it, the former is to be chosen.
General Agent v. Special Agent [SNETI]  MEMORIZE THIS! [PNC-WIGLLS-PG-CARS]
As to… General agent Special agent
Art. 1878. Special powers of attorney are necessary in the following cases:
Only one or more specific acts in
1.) To make such payments as are not usually considered as acts of administration;
Scope of All acts connected w/ the pursuance of particular instructions or w/
2.) To effect novations which put an end to obligations already in existence at the time
business in which he is engaged. restrictions necessarily implied from the
the agency was constituted;
act to be done.
3.) To compromise, to submit questions to arbitration, to renounce the right to appeal
from a judgment, to waive objections to the venue of an action or to abandon a
Nature of Single transaction or a series of prescription already acquired;
Series a transactions involving a
service transactions not involving continuity of 4.) To waive any obligation gratuitously;
continuity of service.
authorized service. 5.) To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
By an act within the scope of his
Extent to which Cannot in a manner beyond or outside 6.) To make gifts, except customary ones for charity or those made to employees in
authority although it may be
agent may bind the specific acts w/c he is authorized to the business managed by the agent;
contrary to his special
principal perform. 7.) To loan or borrow money, unless the latter act be urgent and indispensable for the
instructions.
preservation of the things which are under administration;
Apparent authority does not 8.) To lease any real property to another person for more than one year;
Termination effective as to 3rd party 9.) To bind the principal to render some service without compensation;
Termination of terminate by mere revocation of
unless agency was for purpose of 10.)To bind the principal in a contract of partnership;
authority authority w/o notice to 3rd
contracting w/ that 3rd party. 11.)To obligate the principal as a guarantor or surety;
parties.
12.)To create or convey real rights over immovable property;
Construction of 13.)To accept or repudiate an inheritance;
Strictly construed. Limits the authority of
instructions of Merely advisory. 14.)To ratify or recognize obligations contracted before the agency;
agent.
principal 15.)Any other act of strict dominion.
1
Art. 1877. An agency couched in general terms comprises only acts of administration, Scope of General Authority to Purchase
even if the principal should state that he withholds no power or that the agent may Where an agent’s power to purchase is general and unrestricted, he has implied authority to do
whatever is usual and necessary in the exercise of such power. He may:

1.) Determine the usual and necessary details of the contract, What happens if the agent is specifically authorized to submit to arbitration?
2.) Agree upon the price,  Then the arbitration award binds the principal, provided, of course, that the agent acted within
3.) Modify or rescind the contract of purchase, the scope of his authority.
4.) Accept delivery for his principal,
5.) Give directions for the delivery of the property purchased, and Art. 1881. The agent must act within the scope of his authority. He may do such acts as
6.) May borrow money to pay for the care and preservation of the property purchased. may be conducive to the accomplishment of the purpose of the agency.
But he has no special power to  Authority: The power of the agent to affect the legal relations of the principal
7.) Settle a contest between the principal and a 3rd person regarding the ownership of by acts done in accordance with the principal’s manifestation of consent to him.
goods purchased, or The authority of the agent is the very essence – sine qua non – of the principal and agent
8.) Agree to an account stated, or relationship. This authority, unless it is otherwise agreed, includes only the authority to
9.) Do anything not usual or necessary to the exercise of such authority. act for the benefit of the principal, and the source of the authority is the principal and
never the agent.
Scope of Special Authority to Purchase
Kinds of Authority:
Where the agency is a special one, or is restricted to purchases upon certain terms and conditions, 1.) Actual: when it is actually granted, and it may be express or implied. It results
the agent has no authority to from what the principal indicates to the agent.
11.) Purchase upon different terms and conditions from those authorized, or 2.) Express: when it is directly conferred by words.
22.) Modify or rescind a contract of purchase made by the principal. 3.) Implied: when it is incidental to the transaction or reasonably necessary to
accomplish the purpose of the agency, and therefore, the principal is deemed to
Art. 1879. A special power to sell excludes the power to mortgage; and a special power have actually intended the agent to possess.
to mortgage does not include the power to sell. 4.) Apparent or Ostensible: when it is conferred by words, conduct or even by the
silence of the principal which causes a 3rd person reasonably to believe that a
The following are included in a Power to Sell: particular person, who may or may not be the principal’s agent, has actual
The power to: authority to act for the principal. Ostensible authority is another name for
11.) Find a purchaser or to sell directly; authority by estoppel.
22.) Deliver the property; 5.) General: when it refers to all the business of the principal.
33.) Make the usual representation and warranty; 6.) Special: when it is limited only to one or more specific transactions.
44.) Execute the necessary transfer documents; 7.) By necessity or by operation of law: when it is demanded by virtue of the
55.) Fix the terms of the sale unless there be set conditions stipulated by the principal; existence of an emergency; it terminates when the emergency has passed.
66.) Sell only for cash;
77.) Receive the price unless he was authorized only to solicit orders. Requisites for Principal to be Bound by Act of Agent:
1
Powers not included in a Power to Mortgage 21.) The agent must act in behalf of the principal;
1.) Sell; 32.) The agent must act within the scope of his authority.
2.) Execute a 2nd mortgage;
3.) Mortgage for the agent’s personal benefit or for the benefit of any 3 rd person, unless the When is a principal not bound by the act of his agent?
contrary has been clearly indicated.  When the agent acts without or beyond the scope of his authority; or
 When the agent acts within the scope of his authority but in his own name except when
Does the principal have the power to revoke a contract giving an agent exclusive the transaction involves things belonging to the principal.
authority to sell?
 YES. But he may not have the right to use such power if he has agreed not to exercise such Authority? Whose behalf? Status of contract
power during a certain period. In case he fails to comply with this obligation-not-to-do, he will With authority Principal’s Valid
be liable for damages.
With authority Own Depends. [1883]
Without Principal’s Unenforceable
Art. 1880. A special power to compromise does not authorize submission to arbitration.
Without Own Valid
 Rationale: A principal may authorize his agent to compromise because of absolute confidence
in the latter’s judgment and discretion to protect the former’s rights and obtain for him the Who to sue?
best bargain in the transaction. If the transaction would be left in the hands of an arbitrator,  In case the agent acts in the name of the principal and within his scope of authority, you
said arbitrator may not enjoy the trust of the principal. must name the principal as the defendant.
Note: The authority to look for buyers does not carry with it the authority to sell.

Art. 1882. The limits of the agent’s authority shall not be considered exceeded should it 1.) To act with the utmost good faith and loyalty for the furtherance and
have been performed in a manner more advantageous to the principal than that advancement of the interests of the principal.
specified by him. 2.) To obey the principal’s instructions.
3.) To exercise reasonable care.
What happens if the agent exceeds his authority but he performs the agency in a manner more
advantageous to the principal? Specific Obligations:
1.) To carry out the agency he has accepted.
 It will be as if he did not exceed the limits of his authority since he must do such acts as may 2.) To answer for damages which through his non-performance the principal may suffer.
be conducive to the accomplishment of the purpose of the agency. 3.) To finish the business already begun on the death of the principal should delay entail
 Test: Would the principal enter into this transaction? danger.
4.) To observe the diligence of a good father or a family in the custody and preservation of
the goods forwarded to him by the owner in case he declines an agency, until an agent is
Art. 1883. If an agent acts in his own name, the principal has no right of action against
appointed.
the persons with whom the agent contracted; neither have such persons against the
5.) To advance the necessary funds should there be a stipulation to do so.
principal.
6.) To act in accordance with the instructions of the principal, and in default thereof, to do all
In such case the agent is the one directly bound in favor of the person with whom he
that a good father of a family would do.
has contracted, as if the transaction were his own, except when the contract involves
7.) Not to carry out the agency if its execution would manifestly result in loss or damage to
things belonging to the principal.
the principal.
8.) To answer for damages if there be a conflict between his interests and those of the
The provisions of this article shall be understood to be without prejudice to the actions
principal, he should prefer his own.
between the principal and agent.
9.) Not to loan to himself if he has been authorized to lend money at interest.
Kinds of Principals: 10.) Not to render an account of his transactions and to deliver to the principal whatever he
may have received by virtue of the agency.
1.) Disclosed: if at the time of the transaction contracted by the agent, the other party 11.) To be responsible in certain cases for the act of the substitute appointed by him.
thereto has known that the agent is acting for a principal and has known the principal’s 12.) To pay interest on funds he has applied to his own use.
identity.
2.) Partially disclosed: if the other party knows or has reason to know that the agent is or
Art. 1885. In case a person declines an agency, he is bound to observe the diligence of
may be acting for a principal but is unaware of the principal’s identity. The partially
a good father of a family in the custody and preservation of the goods forwarded to him
disclosed principal may enforce against the 3rd person the contract of the agent like any
by the owner until the latter should appoint an agent. The owner shall as soon as
disclosed principal. Similarly, the 3rd person has a right of action against the principal.
practicable either appoint an agent or take charge of the goods.
3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a
principal.
What is the rule if a person declines agency?
 General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead  He is bound to observe the diligence of a good father of a family in the custody and
acts in his own name, the agent is the one directly liable to the person with whom he had preservation of the goods forwarded to him by the owner.
contracted as if the transaction were his own.
 Exception: If the contract involves something belonging to the principal. Duty of Owner in case an Agency is Declined:
 He must act as soon as possible by appointing an agent or by taking charge of the goods.
Remedy of the Principal if this situation arises:
 He can demand from the agent damages for his failure to comply with the agency. Art. 1886. Should there be a stipulation that the agent shall advance the necessary
Remedy of the 3rd person with whom the agent contracted in case the obligation is not funds, he shall be bound to do so except when the principal is insolvent.
complied with:
 If the case falls under the general rule, he can sue the agent.  The parties stipulate that the agent shall advance the necessary funds.
 But when the contract involves things belonging to the principal, he can sue the principal. But
if it cannot be determined w/o litigation who is liable, he can sue both.
OBLIGATIONS OF THE AGENT
What is the obligation then of the agent?
Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable  GR: He is bound to furnish such funds.
for the damages which, through his non-performance, the principal may suffer.  Except: When the principal is insolvent. This exception is based on the principal’s obligation to
He must also finish the business already begun on the death of the principal, should reimburse the agent.
delay entail any danger.
Art. 1887. In the execution of the agency, the agent shall act in accordance with the
General Obligations of an Agent to his Principal: 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.  Note: This provision applies to both onerous and gratuitous transactions. The law
does not distinguish so neither should we.
 Instructions: Private directions which the principal may give the agent in regard  Rationale: An agent occupies a fiduciary position and therefore is bound to exercise
to the manner of performing his duties as such agent. loyalty, obedience, and diligence with respect to the interest of the principal.
Authority v. Instructions If the agent follows the principal’s instructions yet his acts still result in damage to 3 rd persons, who
is liable?
Authority Instructions  General rule: The agent is NOT liable.
 Except: if before acting that way, it is obvious that the act will result to damage,
Direct the manner of transacting the
Sum total of powers committed or then the agent is liable.
authorized business and contemplates
permitted to the agent by the
only a private rule of guidance to the
principal. Art. 1890. If the agent has been empowered to borrow money, he may himself be the
agent.
lender at the current rate of interest. If he has been authorized to lend money at
Relates to the subject with which the Refers to the manner or mode of his interest, he cannot borrow it without the consent of the principal.
agent is empowered to deal or the action with respect to matters which in  Rationale: The agent can lend money to the principal using the agent’s own funds at the
kinds of business or transactions their substance are within the scope of current rate of interest and NOT at a higher interest rate because the agent is supposed to
upon which he is powered to act. permitted action. act for the principal’s benefit.
Limitations of authority are operative Without significance as against those  If the agent is authorized to lend the principal’s money, with interest, to 3 rd persons, the
as against those who have or are dealing with the agent with neither agent can’t be the borrower without the consent of the principal because the agent may not
charged with knowledge of them. knowledge nor notice of them. be a good borrower or he may be insolvent or he may not be a good risk. There is a danger
here that the interest of the principal would be jeopardized.
Contemplated to be made known to Not expected to be made known to those
 This would also seem to be the case if the agent is authorized to lend money w/o interest
the 3rd person dealing w/ the agent. w/ whom the agent deals.
because of the same reason.
 Instructions pertain to the principal and agent Art. 1891. Every agent is bound to render an account of his transactions and to deliver
 Authority pertains to the agent and 3rd persons. to the principal whatever he may have received by virtue of the agency, even though it
may not be owing to the principal.
Exceptions to the rule that the agent must not depart from the instructions of the Every stipulation exempting the agent from the obligation to render an account shall be
principal: [SAI] void.
A departure may be justified by:
1.) A sudden emergency;  Rationale: Contrary to public policy as it would encourage fraud. It is in the nature of a
2.) If the instructions are ambiguous; or waiver of an action for future fraud w/c is void.
3.) If the departure is so insubstantial that it does not affect the result and the principal  If the agent fails to deliver and instead converts or appropriates for his own use the
suffers no damage thereby. money or property belonging to his principal, with what can he be charged? ESTAFA.
When the Agent has a right to disobey the principal’s instructions: Art. 1892. The agent may appoint a substitute if the principal has not prohibited him
1.) When the instruction calls for the performance of illegal acts; or from doing so; but he shall be responsible for the acts of the substitute:
2.) Where he is privileged to do so to protect his security/interest in the subject matter of the 1.) When he was not given the power to appoint one;
agency. 2.) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent.
Art. 1888. An agent shall not carry out an agency if its execution would manifestly
result in loss or damage to the principal. All acts of the substitute appointed against the prohibition of the principal shall be void.
 Rationale: The duty of the agent who is merely an extension of the personality of the  Sub-agent: A person to whom the agent delegates, as his agent, the
principal is to render service for the benefit of the principal and not to act to his performance of an act for the principal which the agent has been empowered to
detriment. Furthermore, the agent must exercise due diligence in carrying out the perform through his representative.
agency.
Relation among the principal, agent and sub-agent
Art. 1889. The agent shall be liable for damages if, its execution would manifestly  In reality, the sub-agent is a stranger to the principal who originally gave life to the
result in loss or damage to the principal. agency. But if the agent is authorized to appoint a sub-agent, the relation of principal and

agent exists between the principal and the sub-agent. That is, the sub-agent may be the
agent of the principal if he is in actual control of the business and the principal knows of What happens if the fellow agent acted beyond the scope of his authority?
his appointment or knows that his appointment is necessary. Consequently, any act done  Then the innocent agent cannot be liable at all to the principal even if solidarity had been
by the sub-agent in behalf of the principal is deemed an act of the principal; so neither agreed upon.
agent nor sub-agent may be held personally liable as long as they act within the scope of
their authority. 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
When can an agent appoint a sub-agent? the agency.
So long as there’s no prohibition. However, he shall be responsible for all the sub-agent’s acts. Art. 1897. The agent who acts as such is not personally liable to the party with whom
4 Instances where a Sub-agent is appointed and the Effects of each: he contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers.
Instance Effect
No prohibition Agent responsible for all the acts of sub- Principal  Agent 3rd Party (wrong party to complain if the principal doesn’t complain of the
agent. agent’s acts)
Prohibition Sub-agent’s acts are VOID as to the principal.
 General rule: “an agent who acts as such is not personally liable to the party with whom
he contracts.”
Authority to appoint but not Agent liable for acts of sub-agent if the sub-  Reason for general rule: Because an agent who acts as such within the scope of his
designated by principal agent is notoriously incompetent or insolvent. authority represents the principal so that his contract is really the principal’s.
 Exceptions:
1.) When the agent binds himself; or
2.) When he exceeds the limits of his authority without giving the third
Authority to appoint and Agent is released from any liability from the party sufficient notice of his powers.
designated by principal acts of the sub-agent
Reasons for exceptions:
1.) When the agent expressly binds himself, he thereby obligates himself personally and by
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal his own act.
may furthermore bring an action against the substitute with respect to the obligations 2.) When the agent exceeds his authority, he really acts without authority and therefore, the
which the latter has contracted under the substitution. contract is unenforceable against the principal. The agent becomes personally liable
because y his wrong or omission, he deprives the 3rd party with whom he contracts of any
When can the principal sue the substitute? remedy against the principal.
 Under the premises given in the previous provision, the principal can sue both the agent
and the substitute. 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
Art. 1894. The responsibility of two or more agents, even though they have been with whom the agent contracted is aware of the limits of the powers granted by the
appointed simultaneously, is not solidary, if solidarity has not been expressly principal. In this case, however, the agent is liable if he undertook to secure the
stipulated. principal’s ratification.
Art. 1899. If a duly authorized agent acts in accordance with the orders of the principal,
 If solidarity is not stipulated, what is the liability to 2 or more agents? JOINT. the latter cannot set up the ignorance of the agent as to circumstances whereof he
 Each is liable only for proportionate part of debt. himself was, or ought to have been aware.
This article refers to the liability of the principal towards 3 rd persons.
Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the
non-fulfillment of the agency, and for the fault or negligence of his fellow agents, What happens if the principal appoints an agent who is ignorant?
except in the latter case when the fellow agents acted beyond the scope of their  Then the fault is the principal’s alone. Equity demands that the principal should be bound by
authority. the acts of the agent if the latter acts within the scope of his authority and in accordance with
the instructions of the former.
If solidarity has been agreed upon, each of the agents becomes solidarily liable for:
1.) The non-fulfillment of the agency; or Art. 1900. So far as third persons are concerned, an act is deemed to have been
2.) The fault or negligence of the fellow agent provided the latter acted within the performed within the scope of the agent’s authority, is such act is within the terms of
scope of his authority. the power of attorney, as written, even if the agent has in fact exceeded the limits of
But the innocent agent has a right later on to recover from the guilty or negligent agent. his authority according to an understanding between the principal and the agent.

i.) Where the principal and the agent reside in the same community, the
Requisite for article to apply: AUTHORITY TO AGENT MUST BE IN WRITING. usage is definite and well-known, and the agent has no notice that he
is to act to the contrary;
“Scope of agent’s authority” includes: ii.) Where the agent is authorized to deal in a particular place or in a
 Not only the actual authorization conferred upon the agent by the principal, but also that particular market exchange.
which has apparently or impliedly been delegated to him. 43.) By necessity – the existence of an emergency or other unusual conditions may operate
to invest in an agent authority to meet the emergency, provided:
To hold the principal liable, a 3rd person dealing with an agent must: a.) Emergency really exists;
Discover upon his peril not only the fact of agency but the nature and extent of authority of the b.) Agent is unable to communicate w/ the principal;
agent. He is put on inquiry. He must also act with ordinary prudence and reasonable diligence. c.) Agent’s enlarged authority is exercised for the principal’s protection; and
d.) The means adopted are reasonable under the circumstances.
Fundamental principles when inquiring whether authority exists: 54.) By certain doctrines –
11.) The law indulges in no bare presumptions that an agency exists, it must be proved and 1a.) Apparent authority
presumed from facts; 2b.) Liability by estoppel;
22.) The agent cannot establish his own authority, either by his representations or by 3c.) Ratification.
assuming to exercise it; 65.) By the ejusdem generis rule – such that where in an instrument of any kind, an
33.) An authority cannot be established by mere rumor or general reputation; enumeration of specific matters is followed by a general phrase is held to be limited in
44.) A general authority is not an unlimited one; and scope by the specific matters.
55.) Every authority must find its ultimate source in some act or omission of the principal.
Responsibility of principal when agent acts w/ improper motives:
 In case the fact of agency or the extent of the authority of the agent is controverted, the  General rule: Motive of agent in entering into a K w/ a 3rd person is immaterial.
burden of proof is on: The 3rd person to establish the fact of agency or the extent  Exceptions:
of authority of the agent. 1.) Where the 3rd person knew that the agent was acting for his benefit, in w/c case, the
principal is not liable to the 3rd person; and
Does the 3rd person have to inquire further if the power of attorney is written? 2.) Where the owner is seeking recovery of personal property of w/c he has been
unlawfully deprived.
 No. He is not required to inquire further than the terms of the written power of attorney.
Principal’s responsibility for an agent’s misrepresentation:
If there is a secret mutual understanding between the principal and the agent, and such is not 1.) Within the scope of the agent’s authority – Principal is subject to liability for lass caused to
expressed in the written power of attorney, does the 3rd person have to inquire? another by the 3rd persons reliance upon a deceitful representation of an agent in the
course of his employment if:
 No. As far as he is concerned, an act of the agent within the terms of the power of a. Representation is authorized;
attorney as written, is within the scope of the agent’s apparent authority notwithstanding b. Within the implied authority of the agent to make for the principal; or
that the agent may have exceeded the limits of his actual authority according to a secret c. Apparently authorized.
understanding between him and the principal. In such a case, the principal is estopped 2.) Beyond the scope of the agent’s authority – General rule: Principal is not bound.
from claiming that the agent exceeded his authority. 3.) Exception: when the principal takes advantage of a K made under the false
misrepresentation of his agent.
Ways by which the agent’s authority may be broadened or restricted: [I’m-UNDEr] 4.) For the agent’s own benefit – Principal is liable (motive of agent immaterial).
1
21.) By implication – agent’s authority extends not only to express requests, but also to Art. 1901. A third person cannot set up the fact that the agent has exceeded his
those acts and transactions incidental thereto. It embraces all the necessary and powers, if the principal has ratified, or has signified his willingness to ratify the agent’s
appropriate means to accomplish the desired end. acts.
32.) By usage and custom –
1a.) An agent’s authority may not be enlarged through usage and custom in the Effect of ratification by the principal:
following cases: Where it is sought to…  Ratification of a contract gives it the same effect as if the principal had originally
i.) Vary the terms of an express authorization; authorized it.
ii.) Dispense with a legal requirement enacted for the principal’s benefit; Who must ratify the contract?
iii.) Change a rule of law or dispense with a formality required by law;  Only the principal. But there must be knowledge on the part of the principal of the things
iv.) Vary an essential quality of the agency relationship. he is going to ratify.
2b.) General rule: principal must have notice of the alleged custom, before the When can the 3rd person repudiate the contract?
agent’s acts, in accordance therewith, may bind the principal. Exceptions:  Before actual ratification by the principal, or before the principal has signified his
willingness to ratify the agent’s acts.
Effect of the principal receiving the benefits of the transaction:

 He is deemed to have ratified it. A principal may not accept the benefits of a transaction  Make a written statement of the damage and deterioration if the goods received by him
and at the same time repudiate its burdens. do not agree w/ the description in the consignment.
Art. 1902. A third person with whom the agent wishes to contract on behalf of the Agent v. Depositary:
principal may require the presentation of the power of attorney, or the instructions as Agent Depositary
regards the agency. Private or secret orders and instructions of the principal do not Cannot commingle goods of the same Can commingle goods of the same
prejudice third persons who have relied upon the power of attorney or instructions kind. kind.
shown them.
Art. 1904. The commission agent who handles goods of the same kind and mark, which
Duty of a 3rd person who deals w/ an agent: belong to different owners, shall distinguish them by countermarks, and designate the
 3rd person deals w/ an agent at his peril. He is bound to inquire as to the extent of the agent’s merchandise respectively belonging to each principal.
authority, and this is especially true where the act of the agent is of an unusual nature.
Ignorance of the agent’s authority is no excuse. It is his duty to require the agent to produce Purpose of this provision:
his power of attorney to ascertain the scope of his authority. He may also ask for the  Prevent any possible confusion or deception.
instructions of the principal. Art. 1904 gives the general rule. Exceptions:
Do secret orders or private instructions prejudice 3rd persons? 11.) By custom;
 No, he cannot be prejudiced by any secret understanding between the principal and the 22.) Collecting banks.
agent. Such secret orders cannot be invoked as against 3 rd parties if the agent had apparent
authority. Art. 1905. The commission agent cannot, without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment
Art. 1903. The commission agent shall be responsible for the goods received by him in in cash, but the commission agent shall be entitled to any interest or benefit, which
the terms and conditions and as described in the consignment, unless upon receiving may result from such sale.
them he should make a written statement of the damage and deterioration suffered by
the same. Rule given in this article:
 Commission agent can sell on credit only with the express or implied consent of the
 Commission agent: One whose business is to receive and sell goods for a principal.
commission and who is entrusted by the principal with the possession of goods
to be sold, and usually selling in his own name. Right of the principal in case the commission agent sold goods on credit without
authority: [CR]
Ordinary agent v. Commission agent: 2 alternatives:
Ordinary agent Commission agent 1.) He may require payment in cash, in w/c case, any interest or benefit from the sale on
Acts for and behalf of his principal. May act in his own name or in that of his principal. credit shall belong to the agent since the principal cannot be allowed to enrich himself at
Need not have possession of the goods the agent’s expense; or
Must be in possession. 2.) He may ratify the sale on credit, in w/c case it will have all the risks and advantages to
of his principal.
him.
Commission agent v. Broker:
Commission agent Broker Art. 1906. Should the commission agent, with authority of the principal, sell on credit,
Has a relation to principal, buyers or No relation w/ the thing w/c he purchases or sells. he shall so inform the principal, with a statement of the names of the buyers. Should he
sellers, and the property itself. Merely a go-between. fail to do so, the sale shall be deemed to have been made for cash insofar as the
principal is concerned.
Liability of commission agent as to goods received:
 If the commission agent received goods consigned to him, he is responsible for any Obligation of the commission agent where a sale on credit was authorized:
damage or deterioration suffered by the same in the terms and conditions and as  An authorized sale on credit shall be deemed to have been on a cash basis insofar as the
described in the consignment. principal is concerned if the agent fails to inform the principal of such sale on credit with a
statement of the names of the buyers.
Presumption established in this article:  Reason for this article: Prevent the agent from stating that the same was on credit when
 Damage in the merchandise were suffered while in the possession and custody of the in fact it was made for cash.
agent.
Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary
commission, another called a guarantee commission, he shall bear the risk of collection
What the commission agent must do to avoid liability:

and shall pay the principal the proceeds of the sale on the same terms agreed upon  Usually in the contract creating the agency.
with the purchaser.
Principal obligations of the principal to the agent in the absence of such agreement:
 Guarantee commission: One where, in consideration of an increased
commission, the commission agent guarantees to the principal the payment of 1.) To comply with all the obligations which the agent may have contracted in his name and
debts arising through his agency. within the scope of his authority;
2.) To advance should the agent so request sums necessary for the execution of the agency;
 Purpose of guarantee commission: To compensate the agent for the risks he will have to 3.) To reimburse the agent for all advances made by him provided the agent is free from fault;
bear in the collection of the credit due to the principal. 4.) To indemnify the agent for all the damages which the execution of the agency may have
 Nature of liability of guarantee commission agent: Liable to principal if the buyer fails to caused the latter without fault or negligence on his part; and
pay or is incapable of paying. But he is not primarily the debtor. On the contrary, the 5.) To pay the agent the compensation agreed upon or the reasonable value of the latter’s
principal may sue the buyers in his own name. In such a case, the agent amounts to no services.
more than a guaranty. Liability is a contingent pecuniary liability.
Liability of the principal to 3rd persons:
Can the agent with a guarantee commission put up the defense of insolvency of the  Where the relation of agency legally exists, the principal will be liable to 3 rd persons for all
debtor? acts committed by the agent in his behalf in the course and within the actual or apparent
 No. an agent receiving a guarantee commission cannot put up the defense that the debtor-3 rd scope of his authority, and this is not altered y the fact that the agent may also be liable,
person possesses no property since this is precisely the risk the commission agent assumes. nor by the fact that some of the acts are to the principal’s advantage while others are to
his disadvantage.
Art. 1908. The commission agent who does not collect the credits of his principal at the
time when they become due and demandable shall be liable for damages, unless he Liability of the principal for mismanagement of the business by the agent:
proves that he exercised due diligence for that purpose.  Mismanagement of the business of the principal by the agent does not relieve said
principal from the responsibility that he had contracted to 3 rd persons. But where the
agent’s acts bind the principal, the latter may seek recourse against the agent.
Obligation of the commission agent under this article:
 The commission agent who has made an authorized sale on credit must collect the credits due
Liability of principal for a tort committed by the agent:
the principal at the time they become due and demandable. If he fails to do so, he shall be
liable for damages unless he can show that the credit could not be collected notwithstanding  The principal is civilly liable to 3rd persons for torts of an agent committed at the
the exercise of due diligence on his part. In such a case, the principal’s remedy is to proceed principal’s direction or I the course and within the scope of the agent’s employment. The
against the debtor. principal cannot escape liability whether the tort is committed willfully or negligently so
Does this article apply to a case where there is a guarantee commission? long as the tort is committed by the agent while performing his duties in furtherance of
 No, because the agent already assumed the risks of collection by accepting the guarantee the principal’s business. Nor is it a defense that the act which caused the tort was
commission. unknown to him or even that it was in disobedience to his instructions.
Meaning of ratification in 2nd paragraph:
Art. 1909. The agent is responsible not only for fraud, but also for negligence, which
 Ratification is the adoption or affirmance by a person of a prior act which did
shall be judged with more or less rigor by the courts, according to whether the agency
not bind him, but which was done or professed to be done on his account, thus
was or was not for a compensation.
giving effect to the act as if originally authorized. The doctrine applies to the
 Is the agent liable for fraud? Yes, in all cases. ratification of the act of an agent in excess of his authority of the act of one who purports
 For negligence? Yes, but this shall be adjudged with rigor by the courts. to be an agent but who is really not. It may be implied from the acceptance of benefits by
the principal under a contract entered in his name. The authority created by ratification is
Why does the court have to take into consideration whether the agency was gratuitous or for subsequent but it is equivalent to prior authority.
compensation?
 In order to fix the liability of the agent for negligence only (not fraud). Conditions to ratification: [ICK-PEC]
1.) Intent to ratify;
Obligations of the Principal 2.) Principal must have capacity & power to ratify;
3.) He must have had knowledge of material facts;
Art. 1910. The principal must comply with all the obligations which the agent may have 4.) The act must be done in behalf of the principal;
contracted within the scope of his authority. 5.) Principal must ratify acts in its entirety;
6.) The act must be capable of ratification.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly. Effects of ratification with respect to the agent:
1) Relieves the agent from liability to the 3rd party to the unauthorized transaction; and
Where can the specific obligations and duties of the principal to the agent be found?

2) To his principal for acting without authority; and
3) He may recover compensation due for performing the act which has been ratified. Art. 1912. The principal must advance to the agent, should the latter so request, the
sums necessary for the execution of the agency.
Effects of ratification with respect to the principal: Should the agent have advanced them, the principal must reimburse him therefor, even
if the business or undertaking was not successful, provided the agent is free from all
1.) He assumes responsibility for the unauthorized act, as fully as if the agent had acted fault.
under original authority; but The reimbursement shall include interest on the sums advanced, from the day on which
2.) He is not liable for acts outside the authority approved by his ratification. the advance was made.
Effects of ratification with respect to 3rd persons: Should the principal reimburse the agent for advances made by the latter even if the
1.) 3rd person is bound by ratification to the same extent as he would have been bound if the agency was unsuccessful?
ratified act had been authorized in the 1st instance; and  It depends. Yes, if the agent is free from fault. No, if the agent was with fault.
2.) He cannot raise the question of the agent’s authority to do the ratified act.
Is a broker always entitled to a commission?
Must ratification be communicated to the agent or to the 3rd party?
 A broker is entitled to a commission if the sale is effected, but not if there is no perfected
 No. To be effective, ratification need not be communicated or made known to the agent transaction.
or the 3rd party. The act or conduct of the principal rather than his communication is the
key. But before ratification, the 3rd party is free to revoke the unauthorized contract.
Art. 1913. The principal must also indemnify the agent for all the damages which the
executive of the agency may have caused the latter, without fault or negligence on his
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily part.
liable with the agent if the former allowed the latter to act as though he had full
powers.
Basis for the above rule: Equity. Since the principal receives the benefits of the agency, and has a
right to demand damages from the agent should the latter not perform the agency, he should
 Estoppel: precludes a person from denying or asserting anything contrary to answer for the damages resulting from the execution thereof without fault or negligence on the
that which has been established as the truth by his own deed or part of the agent.
representation, either express or implied.
Art. 1914. The agent may retain in pledge the tings which are the object of the agency
Ratification v. Estoppel
until the principal effects the reimbursement and pays the indemnity set forth in the
two preceding articles.
Ratification Estoppel
Rests on intention Rests on prejudice What happens when the principal fails to reimburse or indemnify the agent for
Affects the entire Affects only relevant parts of the transaction. expenses set forth in arts. 1912 and 1913?
transaction from the  The agent has the right to retain in pledge the things which are the object of the agency.
beginning
Substance is confirmation of Substance is the principal’s inducement to another to In case the agent sells the goods for more than his claim, is he entitled to the excess?
a unauthorized act or act to his prejudice. No.
conduct after it has been
done. What is the nature of the agent’s right of lien?
 Specific or particular. It is not general in the sense that it gives the agent a right to retain
Apparent authority v. Authority by estoppel the goods for claims disconnected with the agency.
Apparent authority Authority by estoppel Art. 1915. If two or more persons have appointed an agent for a common transaction or
That which though not actually Arises in cases where the principal, by his negligence, undertaking, they shall be solidarily liable to the agent for all the consequences of the
granted, the principal knowingly permits his agent to exercise powers not granted to him, agency.
permits the agent to exercise or holds even though the principal may have no notice or
him out as possessing. knowledge of the conduct of the agent. Requisites for application of this article: [2C 2]
1 1.) There are 2 or more principals;
2 2.) The principals have all concurred in the appointment of the same agent;
3 3.) The agent is appointed for a common transaction or undertaking.
Basis of article 1911:
 Principle of estoppel: Necessary for the protection of innocent 3 rd persons. Instance when Why is solidarity the rule?
solidarity is imposed by law.

Because of the common transaction. Thus, even if the agent was appointed separately, the rule 1 1.) To punish the agent, but when the principal has availed of the benefits, he is deemed
should apply in the interest of justice. to have impliedly ratified the agent’s acts.
Art. 1916. When two persons contract with regard to the same thing, one of them with 2 2.) “Kasi, kasalanan niya, eh.”
the agent and the other with the principal, and the two contracts are incompatible with 3 3.) The agent is guilty of bad faith and lack of diligence;
each other, that of prior date shall be preferred, without prejudice to the provisions of 4 4.) An express stipulation which is not contrary to law, morals, good customs, public order
Article 1544. or public policy is binding between the parties.
May 2 persons contract with regard to the same thing, one with the agent and the
other with the principal? Yes.
 If this situation arises, which of the contracts will be preferred?
Modes of Extinguishment of Agency
 If the contracts are compatible, they will both be given effect. If they are incompatible,
then the contract of prior date shall be preferred.
Art. 1919. Agency is extinguished: [WR-DEAD]
Art. 1544: If the same thing should have been sold to different vendees, the ownership shall be 1.) By its revocation;
transferred to the person who may have 1st taken possession thereof in good faith if it should e 2.) By the withdrawal of the agent;
movable property. Should it be immovable property, the ownership shall belong to the person 3.) By the death, civil interdiction, insanity or insolvency of the principal or of the
acquiring it who in good faith 1st recorded it in the Registry of Property. Should there be no agent;
inscription, the ownership shall pertain to the person who in good faith was 1 st in possession; and 4.) By the dissolution of the firm or corporation which entrusted or accepted the
in the absence thereof, to the person who presents the oldest title, provided there is good faith. agency;
5.) By the accomplishment of the object or purpose of the agency;
6.) By the expiration of the period for which the agency was constituted.
Art. 1917. In the case referred to in the preceding article, if the agent has acted in
good faith, the principal shall be liable in damages to the third person whose contract
must be rejected. If the agent acted in bad faith, he alone shall be responsible. Meaning of Presumption of continuance of agency:
 When once shown to have existed, an agency relation will be presumed to have
Is the principal always liable for damages caused by a 3 rd person or is it the agent who continued in the absence of anything to show its termination.
is liable?
Who has the burden of proving the revocation/termination of agency?
 Whether the principal or the agent will be the one liable for damages to the 3 rd person
who has been prejudiced depends on whether the agent acted in bad faith or not. If the  The burden of proving a revocation or other termination of agency is on the party
agent acted in good faith and within the scope of his authority, the principal incurs asserting it.
liability. If the agent acted in bad faith, he alone shall be responsible to such person. Note: Even if the reason for extinguishing the agency is not true, the agent can’t insist on
reinstatement. The agent can only demand damages.
What is the extent of liability covered under this article? Damages.
Modes of extinguishing an agency, generally: [ASO]
What is good faith referred to in this article? 1 1.) Agreement;
2 2.) Subsequent acts of the parties which may be either:
 Good faith here means that the agent had no knowledge that the principal is dealing with
0 a.) By the act of both parties or by mutual consent;
a 3rd person.
1 b.) By the unilateral act of one of them.
Note: If the contract is one of sale, article 1544 governs and not arts. 1916 and 1917.
3 3.) By operation of law.
Art. 1918. The principal is not liable for the expenses incurred by the agent in the Modes of extinguishment, specifically: [WR-DEAD]
following cases: [F*CKS] 1.) Withdrawal of the agent;
1 1.) If the agent acted in contravention of the principal’s instructions, unless the 2.) Revocation;
latter should wish to avail himself of the benefits derived from the contract; 3.) Death, civil interdiction, insanity or insolvency of the principal or of the agent;
2 2.) When the expenses were due to the fault of the agent; 4.) Expiration of the period for which the agency was constituted;
3 3.) When the agent incurred them with knowledge that an unfavorable result 5.) Accomplishment of the object or purpose of the agency; and
would ensue, if the principal was not aware thereof; 6.) Dissolution of the firm/corp which entrusted or accepted the agency;
4 4.) When it was stipulated that the expenses would be borne by the agent, or
that the latter would be allowed only a certain sum. Necessary characteristics of the parties for the continuance of the agency: [PCS]
1 1.) Present;
Instances wherein the principal is not liable for expenses incurred by the agent? In the 2 2.) Capacitated;
instances enumerated under this article. 3 3.) Solvent.
Reasons why the principal is not liable for the agent’s expenses: Under…

Why is presence necessary?
 Because the general rule in art 1919 is that death of any of the parties extinguishes What happens if the subject matter of the agency is lost or destroyed?
agency. However in the case where you have several principals and/or several agents,  In the absence of any agreement by the parties to the contrary, the loss or destruction of
whether the death of one principal or of one agent terminates the agency would depend the subject matter of the agency terminates the agent’s authority to deal with reference
on the intention of the parties. Generally the death of one of several principals does not to it.
revoke the agent’s authority nor does the death of one of several agents put an end to Exceptions:
the agency. The intention of the parties controls. 1.) If it is possible to substitute other material for that which was destroyed
without substantial detriment to either party, or
3.) If the destroyed subject matter was not in fact essential to the contract; and
4.) A partial loss or destruction.
Why is capacity necessary?
 For instance, in the case of civil interdiction, it deprives the offender during the period of Are the modes of extinguishments of agency exclusive?
his sentence of the right to manage his property and dispose of such property by any act  No. Art. 1919 gives only those causes of extinction which are particular to agency. But
or any conveyance inter vivos. A person under civil interdiction hence, cannot validly give the list is not exclusive. The general rule actually is, an agency may be extinguished by
consent. Same is true for insane people. the modes of extinguishments of obligations in general whenever they are applicable,
like loss of the thing and novation (see art. 1231).
Why is solvency necessary?
 As by an act of insolvency, the principal loses control of the subject matter of the agency, Does war extinguish agency?
the authority of the agent to act for his principal ceases by operation of law upon an  During the existence of war, a contract of agency is inoperative if the agent or the
adjudication of the principal’s insolvency. On the other hand, the insolvency of the agent principal is an enemy alien. But since it is generally conceded that war suspends all
will ordinarily put an end to the agency, at least if it is in any way connected with the commercial intercourse between the residents of 2 belligerent states, the general rule is
agent’s business which has caused his failure. that agency is terminated, as a matter of law, upon the break of war.
General rule as to death of the principal or agent: Does legal impossibility terminate agency?
 By reason of the very nature of the relationship between the principal and the agent  Implied in every contract is the understanding that it shall be capable of being carried
(which is fiduciary – argh!), agency is distinguished ipso jure upon the death of the out legally at the time called for by the contract. An agency then terminates if a change
principal. in the law makes the purpose of the agency unlawful.
What happens if the principal’s authority terminates?
Exceptions:  A position which flows from a trust relationship whether directly or indirectly, terminates
1.) If the agency is coupled with an interest; as a matter of law with the destruction of the trust. Consequently, a sub-agent’s
2.) If the act of the agent was executed without the knowledge of the death of the principal authority terminates with the termination of the principal’s authority.
and the 3rd person who contracted w/ the agent acted in good faith.
In case of loss of the subject matter, does the principal incur any liability?
Why does dissolution of a firm or corp extinguish the agency?  It depends. If the loss was brought about by the principal as in the case where the
 Dissolution of a corp extinguishes its juridical existence. principal sells the subject matter to another party notwithstanding that an agency had
been constituted in reference to it, then he may be liable for damages for his wrongful
What happens when the object or the purpose of the agency is accomplished? terminating act. But if the subject matter is lost without the fault of the principal, no
 As between the parties, the principal and the agent, the fulfillment of the purpose for liability is assumed by him.
which the agency was created ipso facto terminates the agency.
Will a change of conditions affect the agency?
What happens when the term for which the agency was supposed to continue expires?  General rule: When there is a basic change in the circumstances surrounding the
 When an agency is created for a fixed period, the expiration of such period ends the transaction not contemplated by the parties which would reasonably lead the agent to
agency, even though the purpose for which the agency was created has not been believe that the principal would not desire him to act, authority of agent is terminated.
accomplished.
 Exceptions:
What happens if no time is specified? 1.) If the original circumstances are restored within a reasonable period of time, the
 The agency terminates at the end of a reasonable period of time. agent’s authority may be revived.
2.) Where the agent has reasonable doubts as to whether the principal would desire
Can the period be implied? Yes, from… him to act, his authority will not be terminated if he acts reasonably. (But when
1 1.) The terms of the agreement; in doubt, agent could contract principal for instructions if possible).
2 2.) Purpose of the agency; and
3 3.) The circumstances of the parties.

3.) Where the principal and agent are in close daily contact, the agent’s authority to
act will not terminate upon a change of circumstances if the agent knows the Kinds of Revocation:
principal is aware of the change and does not give him new instructions. 1 1.) Express; or
2 2.) Implied, e.g.:
CONFIDENTIAL INFORMATION a.) When the principal appoints a new agent for the same business or transaction,
or
It is difficult to determine whether information is confidential or not, because while the relation of b.) When the principal directly manages the business entrusted to the agent.
principal and agent is confidential, not all knowledge acquired by the agent is of a confidential
nature. Some clearly is of so general a nature that equity ought not attempt to restrict its Is notice of revocation to the agent necessary? Yes. A revocation without notice to the agent
subsequent use. will not render invalid an act done in pursuance of the authority.
Is express notice of revocation to the agent necessary?
Usually, what a court does is to determine 2 things:  As between the principal and the agent, express notice to the agent that the agency is
1 1.) Whether the knowledge or information is indeed confidential, and revoked is not always necessary. If the party to be notified actually knows, or has reason
2 2.) Whether its subsequent use ought to be prevented. to know, facts indicating that his authority has been terminated or suspended, there is
sufficient notice.
Principle behind enjoining an agent from using confidential information:
 There is in the contract of service subsisting between the principal and the agent an Is notice of revocation to 3rd persons necessary? Yes.
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 been subsisting to the What kind of notice should you give 3rd persons?
detriment of his former employer. 1 1.) As to former customers, actual notice must e given to them because they always
assume the continuance of the agency relationship.
Art. 1920. The principal may revoke the agency at will, and compel the agent to return 2 2.) As to other persons, notice by publication is enough.
the document evidencing the agency. Such revocation may be express or implied.
May the agent renounce the agency at will?
May an agency be terminated by a subsequent act of the principal? Yes, when he does so,  Yes, but subject to the contractual obligations owing the principal.
it’s called revocation.  Reason: The essence of the principal-agent relationship is the consent and willingness of
the agent to act for the principal. The law cannot compel the parties to continue an
May an agency be terminated by a subsequent act of the agent? Yes, it’s called agency if they do not want to do so. (The principal cannot even sue for affirmative
withdrawal or renunciation. specific performance because that would lead to involuntary servitude!)
Does it matter if the agency is gratuitous or with compensation when we speak of Form of renunciation:
revocation by the principal? No, art 1920 makes no distinction.  It is not always necessary for the agent to renounce the agency expressly. He can do so
impliedly, as for example…
Reasons: 1.) Where he has conducted himself in a manner incompatible with his
1.) Since the authority of the agent emanates from the principal, if the principal wishes to duties as agent; or
terminate the agency the law must enable him to do so. 2.) When he abandons the object of his agency and acts for himself in
2.) Confidence being the cardinal basis of the relation, it stands to reason that it should committing a fraud upon his principal; or
cease when such confidence disappears. 3.) When he files a complaint against the principal and adopts an
3.) The principal-agent relationship is consensual and personal in nature. No one can nor antagonistic attitude towards him.
should be forced to retain another as his agent against his will.
Does a violation of the instructions of the principal amount to a renunciation?
In case a principal does revoke an agency, is there any way by which the agent can hold  No. Mere fact that agent violates his instructions does not amount to renunciation, and
him liable for damages? Yes. For instance, although he may thus render himself liable to the principal, he does not cease to become
1.) If the agency was constituted for a fixed period, the principal shall be liable in damages an agent.
occasioned by the wrongful discharge of the agent before the expiration of the period
fixed. Art. 1921. If the agency has been entrusted for the purpose of contracting with
2.) If the agent can prove that the principal acted in bad faith by revoking the agency in specified persons, its revocation shall not prejudice the latter if they were not given
order to avoid payment of commission about to be earned, the principal can be held liable notice thereof.
for damages.
What is the effect of revocation in relation to 3rd persons if the agent was authorized to
Reason for requiring agent to return the document evidencing the agency: To prevent contract with specified persons?
the agent from making use of the power of attorney and thus avoid liability to 3 rd persons who may
subsequently deal with the agent on the faith of the instrument.

 If the agency is created for the purpose of contracting with specified persons, its Effect of direct management of the business by the principal himself:
revocation will not prejudice such 3 rd persons until notice thereof is given them. The  Generally, it revokes the agency because there would no longer be any basis for the
reason for this is obvious. Since 3 rd persons have been made to believe by the principal representation previously conferred.
that the agent is authorized to deal with them, they have a right to presume that the  Exception: when the only desire of the principal in doing so is for him and the agent to
representation continues to exist in the absence of notification by the principal. But of manage the business together.
course, notice is not required if the 3rd persons already know of the revocation.
Art. 1925. When two or more principals have granted a power of attorney for a common
Art. 1922. If the agent had general powers, revocation of the agency does not prejudice transaction, any one of them may revoke the same without the consent of the others.
third persons who acted in good faith and without knowledge of the revocation. Notice
of the revocation in a newspaper of general circulation is a sufficient warning to third Rationale: Since the appointment of an agent by 2 or more principals for a common transaction or
persons. undertaking makes them solidarily liable to the agent for all consequences of the agency, then
each one of the principals should be granted the right to revoke the power of attorney even
Effect of revocation in relation to 3 rd persons if the agent was authorized to contract without the consent of the others. Remember that in a solidary obligation, the act of one is the act
with the public in general: of all.
 In case the agent has general powers, innocent 3 rd parties dealing with the agent will not
e prejudiced by the revocation before they had knowledge thereof. In this case, however, Art. 1926. A general power of attorney is revoked by a special one granted to another
the fact that the revocation was advertised in a newspaper of general circulation would agent, as regards the special matter involved in the latter.
be sufficient to 3rd persons for publication constitutes notice upon everybody and this is
true whether or not such 3rd persons have read the newspaper concerned. How many agents are involved in this article?
Notice required in art. 1921 v. that in art. 1922:  2, one to whom a general power is previously granted. Another to whom a special power
is given. (Note that this can also apply if a special power is subsequently given to the
Art. 1921 Art. 1922 same agent.)
 Must be personal.  May be personal.
 Revocation must be known to 3rd  Even if 3rd person doesn’t know, as long as Effect of the issuance of a special power as regards the general power:
person informed of the there is publication in a newspaper of general  The general power is impliedly revoked as to matters covered by the special power
appointment. circulation. because a special power naturally prevails over a general power.
 General rule: Special information needs special information of revocation. Art. 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it
 Except: If you can prove that the 3rd person read the notice in the newspaper. is the means of fulfilling 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.
Art. 1923. The appointment of a new agent for the same business or transaction
revokes the previous agency from the day on which notice thereof was given to the
former agent, without prejudice to the provisions of the two preceding articles. General rule: Principal may revoke an agency at will since the essence of agency is the agent’s
duty of obedience to the principal.
Exceptions: [BF=Partner]
What does this article mean?
1.) When a bilateral contract depends on the agency;
1.) There is implied revocation of the previous agency when the principal appoints a new
2.) When the agency is the means of fulfilling an obligation already contracted;
agent for the same business or transaction if there is incompatibility. But the revocation
3.) When a partner is appointed as manager of a partnership in the contract of partnership
does not become effective as between the principal and the agent unless it is in some
and his removal from the management is unjustifiable.
way communicated to the latter. Again, the rights of 3 rd persons who acted in good faith
and without knowledge of the revocation will not be prejudiced thereby.
Can an agency, coupled with an interest, be terminated by the sole will of the principal?
2.) There is no implied revocation where the appointment of another agent is not
No.
incompatible with the continuation of like authority in the 1 st agent, or if the 1st agent is
not given notice of the appointment of the new agent.
Requisite for agency to be irrevocable for being coupled with a interest:
Art. 1924. The agency is revoked if the principal directly manages the business Interest of the agent must be in the subject matter of the power conferred and not merely an
entrusted to the agent, dealing directly with third persons. interest in the exercise of the power.
What does the above article provide? Instances of an agency coupled with an interest:
 It provides for another case of implied revocation.

1.) When the agent has parted with value or incurred liability at the principal’s request, and 1 1.) The withdrawal is based on the impossibility of continuing the agency without grave
he is looking to the exercise of the power as the means of reimbursement or indemnity. detriment to himself; or
2.) When the interest in the thing concerning which the power is to be exercised arises from 2 2.) Fortuitous event.
an assignment, pledge or lien created by the principal with the agent being given the
power to deal with the thing in order to make the assignment, pledge or lien effectual. What happens when the agent sues the principal?
 Equivalent to withdrawal of the agent.
If the contract of agency stipulates that such will be irrevocable, is such terminology
controlling in all cases? Art. 1929. The agent, even if he should withdraw from the agency for a valid reason,
must continue to act until the principal has had reasonable opportunity to take the
No. Whether an interest will make an agency irrevocable exists in a particular case is to be necessary steps to meet the situation.
determined from the entire agreement between the parties and from the facts and circumstances.
The terminology is not controlling. Even if an agency is made in terms irrevocable, the fact will not
prevent its revocation by the principal when the agency is not in fact coupled with an interest.
Obligation of agent after withdrawal:
If an agency is coupled with an interest, does this mean that the principal can never
 Even when withdrawal is for a valid reason, he must continue to act until the principal has
ever revoke it?
had reasonable opportunity to take the necessary steps like the appointment of a new
agent to remedy the situation caused by the withdrawal. This is to prevent damage or
No. You can still revoke in extreme situations, e.g.:
prejudice to the principal.
1.) Irrevocability can never be used as a shield for the perpetration of acts in ad faith, breach
of confidence or betrayal of trust. The law will never permit the agent to commit frauds
against the principal. Art. 1930. The agency shall remain in full force and effect even after the death of the
2.) When the interest is already terminated. principal, if it has been 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.
Why is it said that agencies coupled with interest are not true agents?
 Because persons with proprietary interests in the subject matter of their agency are not true If the agent dies, his heirs should tell the principal. However, if the principal dies, the principal’s
agents at all. One of the hallmarks of the agency relation is the control of the principal over heirs have no obligation to tell the agent.
the acts of the agent and over the subject matter of the agency. An agency coupled with an General rule: Agency is terminated instantly by the death of the principal.
interest removes that control. Rationale: Agency, being based on representation, there is no one to e represented where the
principal is already dead.
Art. 1928. The agent may withdraw from the agency by giving due notice to the
Exceptions:
principal. If the latter suffer any damage by reason of the withdrawal, the agent must
1.) If the agency has been constituted in the common interest of the principal and the agent;
indemnify him therefor, unless the agent should base his withdrawal upon the
and
impossibility of continuing the performance of the agency without grave detriment to
2.) If the agency has been constituted in the interest of a 3 rd person who has accepted the
himself.
stipulation in his favor.
Does the agent have a right to renounce or withdraw from the agency at any time?
Art. 1931. Anything done by the agent, without knowledge of the death of the principal
 Yes. Even without the consent of the principal. But, in the latter case, he may be
or of any other cause which extinguishes the agency, is valid and shall be fully effective
subject to liability for breach of contract or for tort.
with respect to third persons who may have contracted with him in good faith.
Basis: Constitutional prohibition against involuntary servitude.
What does this article provide?
Obligation of agent if he withdraws from agency without just cause:  It provides that the death of the principal or any other like cause, extinguishes the
1 1.) Notify principal (even if w/ just cause); and agency. But in the same way that revocation of the agency does not prejudice 3 rd persons
2 2.) Indemnify the principal should the latter suffer any damage by reason of such who have dealt with the agent in good faith without notice of revocation, such 3 rd persons
withdrawal. are also protected where it is not shown that the agent had knowledge of the termination
of the agency because of the death of the principal or any other like cause which
Reason for indemnity: To answer for losses and damages occasioned by the non-fulfillment of extinguishes the agency.
his obligation as agent.
Does this article only require the agent to be in good faith? No, both agent and 3rd person
Is the agent liable for indemnity if the withdrawal was for just cause? No. Agent cannot must be.
be held liable if the agent withdraws for a valid reason as when:

Art. 1932. If the agent dies, his heirs must notify the principal thereof, and in the d. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no
meantime adopt such measures as the circumstances may demand in the interest of onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no
the latter. proof to the contrary. (1446)
In case of death of agent, what must the heirs do?

1.) Notify the principal to enable the latter reasonable opportunity to take such steps as may IMPLIED TRUSTS
be necessary to meet the situation; and
2.) Adopt such measures as the circumstances may demand in the interest of the principal.  IMPLIED TRUSTS  Those which, without being express, are deducible from the nature of
the transaction as matters of intent, or which are superinduced on the transaction by
Can the heirs continue the agency? operation of law, as matters of equity, independently of the particular intention of the parties.
 General rule: No, since an agency calls for personal services on the part of the agent.  An implied trust may be proved by oral evidence.
Exceptions:
1 1.) Agency by operation of law, or a presumed or tacit agency;  The enumeration of implied trust does not exclude others established by the
2 2.) Agency is coupled with an interest in the subject matter of the agency. general law of trust, but the limitation laid down in Article 1442 shall be
applicable.
Types:
TRUSTS 1. Resulting  A resulting trust is a trust raised by implication of law and presumed always
to have been contemplated by the parties, the intention of which is found in the nature of
GENERAL PROVISIONS the transaction, but not expressed in the deed or instrument of conveyance
2. Constructive  a constructive trust is one not created by words either expressly or
 TRUSTOR  A person who establishes a trust impliedly, but by construction of equity in order to satisfy the demands of justice.
 TRUSTEE  one in whom confidence is reposed as regards property for the benefit of another
person TRUST FUND DOCTRINE  considers this subscribed capital as a trust fund for the payment of
 BENEFICIARY  and the person for whose benefit the trust has been created the debts of the corporation, to which the creditors may look for satisfaction. Until the liquidation
of the corporation, no part of the subscribed capital may be returned or released to the
TYPES OF TRUST: stockholder (except in the redemption of redeemable shares) without violating this principle.
1. Express trusts - created by the intention of the trustor or of the parties. Thus, dividends must never impair the subscribed capital; subscription commitments cannot be
2. Implied trusts - come into being by operation of law condoned or remitted; nor can the corporation buy its own shares using the subscribed capital as
the consideration therefor. (NTC vs CA, July 28, 1999, 311 SCRA 508.)
EXPRESS TRUSTS
WHEN IS THERE IMPLIED TRUST?
ELEMENTS:
1. Competent trustor and trustee There is an implied trust:
2. Ascertainable trust res
3. Sufficiently certain beneficiaries (1) Art. 1448. When property is sold, and the legal estate is granted to one party but
the price is paid by another for the purpose of having the beneficial interest of the
Nature: property. The former is the trustee, while the latter is the beneficiary. (RESULTING)
E: However, if the person to whom the title is conveyed is a child, legitimate or
a. No express trusts concerning an immovable or any interest therein may be proved by illegitimate, of the one paying the price of the sale, no trust is implied by law, it being
parol evidence. (1443) disputably presumed that there is a gift in favor of the child.
 Must be in writing
 Statute of frauds is applicable  PURCHASE MONEY RESULTING TRUST The trust is created in order to
 To affect 3rd persons, it must be in a public instrument and registered in the effectuate what the law presumes to have been the intention of the parties in the
Registry of Property circumstances that the person to whom the land was conveyed holds it as trustee for
b. No particular words are required for the creation of an express trust, it being sufficient the person who supplied the purchase money. (Rebuttable by proof of contrary
that a trust is clearly intended. (1444); No Specific form required. The only requirement intention)
is the direct and positive act of the trustor.
c. No trust shall fail because the trustee appointed declines the designation, unless the To give rise to a purchase money resulting trust, it is essential that there
contrary should appear in the instrument constituting the trust. (1445); Acceptance be:
generally necessary BUT such is not necessary for the validity of the trust. Why? The 1. an actual payment of money, property or services, or an equivalent, constituting
court may appoint a trustee in his place. valuable consideration;

2. and such consideration must be furnished by the alleged beneficiary of a Proof of trust regarding Cannot be proved by oral May be proved by oral
resulting trust. immovables evidence evidence
No express repudiation is
CLEAN HANDS DOCTRINE  Will not allow the creation or the use of a juridical Express repudiation is required
 required unless there is
relation such as a trust to subvert, directly or indirectly, the law. "He who comes to Repudiation of trust for laches or acquisitive
concealment of the fact that
court in demand of equity, must come with clean hands." prescription to apply
gave rise to the trust
MAY AN IMPLIED TRUST BECOME AN EXPRESS TRUST?

(2) Art. 1449. When a donation is made to a person but it appears that although the  Yes! If the trustee recognizes the right of the property owner to his property
legal estate is transmitted to the donee, he nevertheless is either to have no
beneficial interest or only a part thereof. (RESULTING) CAN A TRUSTEE ACQUIRE THE PROPERTY ENTRUSTED TO HIM BY PRESCRIPTION?
 GR: NO!
(3) Art. 1450. If the price of a sale of property is loaned or paid by one person for the  Exception: He repudiates the trust
benefit of another and the conveyance is made to the lender or payor to secure
the payment of the debt, a trust arises by operation of law in favor of the person to REQUISITES OF REPUDIATION:
whom the money is loaned or for whom its is paid. The latter may redeem the property 1. Open/ unequivocal acts of repudiation amounting to an ouster of the beneficiary
and compel a conveyance thereof to him. (CONSTRUCTIVE) 2. Positive acts of repudiation
3. Clear and convincing evidence
(4) Art. 1451. When land passes by succession to any person and he causes the legal title to 4. Period fixed by law has prescribed
be put in the name of another, a trust is established by implication of law for the benefit
of the true owner. (RESULTING) PRESCRIPTION
(NOT APPLICABLE TO EXPRESS TRUSTS AND RESULTING TRUSTS<if not repudiated>)
(5) Art. 1452. If two or more persons agree to purchase property and by common consent the
legal title is taken in the name of one of them for the benefit of all, a trust is created by
 In short, applicable only in constructive trusts and repudiated resulting trusts!
force of law in favor of the others in proportion to the interest of each. (RESULTING)
Period:
(6) Art. 1453. When property is conveyed to a person in reliance upon his declared intention
1. 10 years if not in possession
to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of
2. Imprescriptible if in possession
the person whose benefit is contemplated. (RESULTING)
When period begins to run:
(7) Art. 1454. If an absolute conveyance of property is made in order to secure the
1. From the moment the trust is created OR
performance of an obligation of the grantor toward the grantee, a trust by virtue of law is
2. From the moment of registration (constructive)
established. If the fulfillment of the obligation is offered by the grantor when it becomes
due, he may demand the reconveyance of the property to him. (CONSTRUCTIVE)
LACHES
(8) Art. 1455. When any trustee, guardian or other person holding a fiduciary relationship
uses trust funds for the purchase of property and causes the conveyance to be made to  LACHES the failure or neglect for an unreasonable or unexplained length of time to do
him or to a third person, a trust is established by operation of law in favor of the person to that which by exercising due diligence, could or should have been done earlier warranting
whom the funds belong. (RESULTING) a presumption that he has abandoned his right or declined to assert it.
(9) Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by  Express trusts: applies from the time the trustee openly denies or repudiates the trust
force of law, considered a trustee of an implied trust for the benefit of the person from and the beneficiary is notified thereof, or is otherwise plainly put on guard against the
whom the property comes. (CONSTRUCTIVE) trustee
 Implied Trusts  express repudiation is not required unless the trustee fraudulently and
successfully conceals that fact
Express Trust Implied Trust
(1) Created by operation of law

Created by intention of the
(2) Deducible from the nature
As to its creation parties through direct and
of the transaction or
positive acts
(3) Imposed by law

Law On Partnerships: General Provisions

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Law On Partnerships: General Provisions

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BUS ORG 1(PARTNERSHIPS, AGENCY AND TRUSTS) Pre-Bar Reviewer Edited by Sasha Go

TABLE OF CONTENTS RIGHTS OF A PARTNERSHIP:

1. It has a personality separate and distinct from the partners

GENERAL PROVISIONS Partnership vs Co-ownership vs Corporation

Ateneo de Davao University, College of Law: June 2008 1

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RIGHTS OF PARTNER WHEN DISSOLUTION IS NOT IN CONTRAVENTION OF AN

Ateneo de Davao University, College of Law: June 2008 9

STATUTORY REQUIREMENTS TO FORM A LIMITED PARTNERSHIP (Substantial Compliance

(1) Sign and swear to a certificate, which shall state -

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PRIORITY OVER OTHER LIMITED PARTNERS

Ateneo de Davao University, College of Law: June 2008 12

Distinguishing Features: Agency Lease of Work/Service

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Can agency be presumed?

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In case of death of agent, what must the heirs do?

Ateneo de Davao University, College of Law: June 2008 30

MAY AN IMPLIED TRUST BECOME AN EXPRESS TRUST?

(1) Created by operation of law

Ateneo de Davao University, College of Law: June 2008 31

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