1. Who are the two parties to a contract of agency? Define each.

There are two parties involved in a contract of agency, namely (1) Principal and (2) Agent. The
principal is the one that is represented by the agent and it is where the agent has his authority
from. In the contract of agency, the principal is the party that is primarily concerned. The next
one is the agency who acts represents and acts on behalf of the principal.

2. Must there always be a meeting of minds to have an effective contract of agency?

What is/are the exceptions?

Consent is one of the essential elements in a contract of agency. Its absence will make the
contract defective. Thus, meeting of minds between the two parties should be observed because
the acts of the agent on behalf of the principal within its scope of authority will bind the latter as
if it was personally done by him. However, there is an exception if the agency relationship was
done by estoppel. For example, the acts of an employer who led a third party to transact to its
employee will hold him liable even though they don’t have contract in the first place.

3. What are the TWO distinguishing features of a contract of agency? How would you
define/explain these features and to which party do they respectively apply?

The two distinguishing features of a contract of agency are (1) representative character and (2)
derivative authority. Both of these features are applied to Agency. From what I can understand in
these two, the ‘representative character’ is the ability of the agency to represent its principal. The
‘derivative authority’ on the other hand seems to talk about the power of the authority given by
the principal to have the same legal effect as if it was personally executed by the latter.

4. What is the general rule in the forms of agency? The exception?

As a general rule, there is no formal requirement governing in appointing an agent. It means that
the agent’s authority may be in oral or written, it could also be in public or private writing. The
exception however is that an authority of the agent must be in writing when a sale of a piece
of land or any interest therein is made, otherwise the sale is void.

5. Will an agent be liable if, without his knowledge, the principal turns out to be
underage? Explain briefly.

The agent is merely an extended personality of the principal. Thus if the agent enter into a
contract in behalf of his principal, such contract entered is voidable. It is in a provision that
incapacitated person can never enter into a contract.
 6. What is agency by estoppel?

It is where a principal represented himself to the agent and allowed the latter to assume the
authority.

7. What are the duties of an agent towards his principal?

There are specific obligations of agents towards his principal. Some of them are as follows; the
agent is bound to observe the diligence of a good father of a family and to be responsible for
fraud or negligence. In short, to act from the powers that granted to him by his principal. Thus,
the agent should act within the scope of his authority binding the principal.

8. What are the duties of a principal towards his agent?

Article 1910 states that the principal has the duty to comply with all the obligations which the
agent may have contracted within the scope of his authority. Also, the principal have some
obligations towards his agent. These are to advance to the sum necessary if the agent requests
and pay the agent for the compensation agreed, if the compensation is not specified, the principal
should give a reasonable value of the agent’s services.

9. Distinguish implied agency vs. agency by estoppel.

In an implied agency, there is an actual agency contract while the other has no contract of agency
at all. In an agency by estoppel, there is only one party who acts as either the principal or the
agent which although not real, represents himself. Implies agency is merely a lack of action of
the principal to refuse him to be represented by the agency.

10. Who is a commission agent? 

Article 1903 defines commission agent as responsible for receiving and sell goods for a
commission in his name. The agent’s possession of goods distinguishes him from the other
ordinary agents.

11. What are the responsibilities of a commission agent?

The responsibility of a commission agent includes receiving goods consigned to him,

distinguishing merchandise respectively if the agent is handling the same goods with different
owners, and the duty to not commingle his personal property.
 12. How is a contract of agency revoked?

Article 1920 states that the contract of agency may be revoked by the principal at will. It may be
done expressly- made orally or in writing and impliedly.

13. Define "pledge".

From what I can understand, Pledge can also be termed as security. It is used to secure
repayment for some debt or obligation. The book defines pledge as a contract in which the debtor
delivers to the creditor or a third person a movable or document evidencing incorporeal rights for
securing the fulfillment of a principal obligation, it includes understanding that once the
obligation is fulfilled, the thing delivered shall be return including all its fruits and accessions.

14. What are the characteristics of a pledge?

Characteristics of pledge are (1) a real contract because it is perfected by the delivery of a
‘thing’, (2) an accessory contract because it cannot stand on its own, (3) a unilateral contract
because it creates an obligation only of the contracting parties, and (4) a subsidiary contract
because the obligation will not arise until its fulfillment.

15. What are the obligations and rights of the pledgee?

The pledgee has its obligations and rights. Its obligations include taking care of the thing pledged
with the diligence of a good father of a family, being liable for the loss or deterioration of the
thing pledged unless it is due to fortuitous event, not to deposit the thing pledged with a third
person unless unauthorized, not to use the thing pledged except when he is authorized or the use
of the thing is necessary for its preservation, and to deliver to the pledgor the thing after paying
his claim from what he has collected on a credit that was pledged which has become due before
it is redeemed.

On the other hand, rights of the pledgee are as listed follows; to keep the thing pledged until the
debt is paid, to demand reimbursement of the expenses made for the preservation of the thing
pledged, to bring necessary actions to recover it from the owner or defend it against third
persons, to use the thing pledged if he is authorized or when it is necessary for the preservation
of the thing.
 16. What are the obligation and rights of the pledgor?

The pledgor also has its rights and obligations. His rights include alienating the pledged thing
with the consent of the pledgee, to ask that the thing pledged be judicially or extra-judicially
deposited if it is used without authority or for the purpose other than for its preservation. other
than for its preservation, to continue to be the owner of the thing pledged unless it its
expropriated, to ask for the return of the thing pledged after he has paid the debt and its interests,
with expenses in a proper case, and to demand return of the thing pledged, upon offering another
thing in pledge, provided the latter is of the same kind and quality, this right must comply with
the requisite of the provision in Article 2107 where there must be a reasonable ground to fear the
destruction of impairment of the thing pledged without the fault on the part of the pledgee.

Pledgor’s obligations on the other hand are to pay the debt and its interest when they are due and
to pay damages that the pledgee may have suffer by reason of the flaws of the thing pledged, if
he was aware of the thing pledged flaws but did not advice the pledgee.

17. How is a contract of pledge extinguished?

Pledge may be extinguished directly or indirectly. Directly is where the thing pledged is returned
to the pledgor or owner, renunciation or abandonment in ‘writing’ by the pledgee of the pledge,
sale of the thing pledged- public auction or through notary public, and appropriation of the thing
pledged.

Indirectly, it will be extinguished when the principal obligation is fulfilled since the pledge is
merely an accessory contract.

18. As a general rule, is a contract of pledge restricted to the object pledged? If no, what
does it include?

The thing pledged covers the (1) the thing pledged itself, (2) the fruits, interest earned or
produced etc., unless there is a stipulation to exclude them, (3) the offspring, when the thing is an
animal, unless, there’s also a stipulation to exclude them.

19. When can a creditor use the object of pledge?

When he is authorized to use the thing pledged and when it is necessary for the preservation of
the same thing.

20. Who owns the object pledged upon the formation of the contract?

The thing pledge is possessed by pledgee or of a third person upon the formation of the contract
by agreement
 21. What is "pactum commissorium" and is it allowed?

It where the thing pledged is automatically became the property of the pledgee for the non-
fulfillment of the obligation. However, it is expressly prohibited under Article 2088 of the Civil
Code.

22. What are the elements of pactum commisorium?

The elements of pactum commisoriun are; (1) that there should be a pledge or mortgage wherein
a property is pledged or mortgaged by way of security for the payment of the principal
obligation; (2) that there should be a stipulation for an automatic appropriation by the creditor of
the thing pledged or mortgaged in the event of non-fulfillment of the principal obligation within
the contracted period.