25560700 AGENCY Reviewer

8/6/2019 25560700 AGENCY Reviewer

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Annie, Eds, Jam, Anj F., Kae, Lou, Chi, Pa

I. INTRODUCTION

A. How is agency definedArt. 1868. By the contract of agency a person binds himself to render

some service or to do something in representation or on behalf ofanother, with the consent or authority of the latter.

RALLOS V. FELIX GO CHAN

Sisters authorized their brother to SELL their undivided shares in a

parcel of land. One of the sisters DIED. Subsequently the brother sold

the parcel of land. Administrator went to court and prayed that the

sale be declared unenforceable.

Ratio:

- Theres a relationship of Agency when 1 party called the principal(mandante) authorized another called the agent (mandatario) for

and in his behalf with transactions to third persons.

- The essential elements of agency (CORA):1. Consent, express or implied2. Object is the execution of a juridical act in favor of third

persons

3. Agent acts as a Representative

4. Agent acts within the scope of his Authority.

- Agency is basically 1, personal 2. representative, and 3.derivative in nature. The authority of the agent to act emanates

from the powers granted to him by his principal; his act is the act

of the principal if done within the scope of authority

- Qui facit per alium facit per se, meaning, He who actsthrough another acts for himself. By the very nature of the

relationship between the agent and the principal, agency is

extinguished by death of the principal or the agent.

De Leon:Characteristics of a contract of agency

1. Consensual2. Principal3. Nominate4. Unilateral (if gratuitous); bilateral (if for a compensation)5. Preparatory

1. ConsentArt. 1868. By the contract of agency a person binds himself to render

some service or to do something in representation or on behalf of

another, with the consent or authority of the latter.

ORIENT AIR SERVICES V CABy virtue of a General Sales Agency Agreement, American airlines

authorized Orient Air Services as its exclusive general agent within the

Philippines. Orient Air failed to promptly remit net proceeds of sales.

As a result American Air terminated the agreement. RTC and CA

ordered reinstatement of Orient as a general sales agent of American

Air in the Philippines.

1Under Professor Dio (2nd Sem, AU 2009-2010). By Annie, Eds,

Jam, Anj F, Kae, Lou, Chi, Pat (Batch 2012). Compiled by Eds.

Ratio: The PURPOSE of agency is to EXTEND the personality of the

principal through the facility of the agent. The agent by legal fiction

becomes the principal authorized to perform all acts which the latter

would have him do. Such a relationship can only be effected with the

CONSENT or AUTHORITY of the principal which CANNOT, in any

way, be COMPELLED by any law or any court.

UY V CA

Uy and Roxas were agents to sell 8 parcels land. The property was

offered to NHA. NHA Board approved the acquisition but thereafter

cancelled the acquisition of 3 parcels of land. Agents filed a case

against NHA to recover their unearned income. CA ruled that as

agents they were not real parties in interest, hence it is indispensable

that the lot owners be included as party plaintiffs.

Ratio: Agents do something or render some service in representation

or on behalf of the principal. The rendering of service does not make

them parties to a contract. A contract may be violated only by the

parties thereto as against each other.

Art. 1869. Agency may be express, or implied from the acts of the

principal, from his silence or lack of action, or his failure to repudiate

the agency, knowing that another person is acting on his behalf

without authority.Agency may be oral, unless the law requires a specific form. (1710a)

CONSENT may be

1. Expresso Through words or deeds

2. Impliedo Action: acts of principalo Inaction (knowledge is important here):

(1) silence/lack of action

(2) failure to repudiate actions done on his behalf and

without authority

o E.g.a. Payment of commission of agentb. Receipt of benefits (every time its receivedwithout objection, its implied consent and

ratification)

MACKE V CAMPS

Macke and Chandler sold to one Ricardo Flores, managing agent of

Washington Caf, various goods which were only partially paid

pending the return of his principal (Camps). Principal refused to pay

on the ground that Flores was not his agent. Written contract shows

that defendant was sub lessee of a property with Flores as managing

agent of the caf

Ratio: Authority to buy such reasonable quantities of supplies as

might from time to time be necessary in carrying on the business

may be fairly presumed that such agent is clothed with a generalauthority, especially in view of the fact that the principal appears to

have left the agent in charge during more or less prolonged periods of

absence.

PRUDENTIAL BANK V CA

Aurora Cruz invested 200k in CB bills with Prudential. Upon maturity,

she renewed the investment and was requested to sign a Withdrawal

Slip, allegedly a new requirement of the bank. After some time, she

sought to withdraw her 200k but she was informed that the

investment appeared to have been withdrawn. It appears that the

banks employee Quimbo perpetuated the fraud and caused the

withdrawal of the amount. Bank ignored repeated follow-ups of Cruz.


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She then filed a complaint for breach of contract. TC = for plaintiff, CA

affirmed.

Ratio: A bank is liable for the wrongful acts of its officers done in the

interest of the bank or in the course of dealings of the officers in their

representative capacity but not for acts outside the scope of their

authority. The bank is still liable to innocent third persons where the

representation is made in the course of business by an agent acting

within the general scope of his authority even though the agent is

secretly abusing his/her authority and attempting to perpetuate

fraud upon his principal or some other person for his ultimate

benefit.

LINTONJUA V ETERNIT

90% of ECs stocks were owned by ESAC, with Glanville as President

and Delsaux as Regional Director. ESAC in 1986 instructed Adams,

member of ESAC Board of Directors, to dispose the 8 parcels of land

without written authority from EC. Adams engaged the services of

Lauro Marquez as broker, who in turn offered it to Litonjua. EC

cancelled the sale of 8 parcels of land to Litonjua siblings due to the

end of political instability. Litonjua filed a complaint for specific

performance and damages against EC. TC = EC, CA affirmed.

Ratio: Requisites of agency by estoppel:1. Principal manifested a representation of the agentsauthority / knowingly allowed agent to assume such

authority

2. Third person in Good Faith relied upon such representation3. 3rd person has changed its position to its detriment.

Art. 1870. Acceptance by the agent may also be express, or implied

from his acts which carry out the agency, or from his silence or

inaction according to the circumstances. (n)

* ACCEPTANCE signifies the AGENTS CONSENT to establish the

relationship of agency

* Implied acceptance of agency by agent: silence when the principal

delivers the POA without objection.

Art. 1871. Between persons who are present, the acceptance of the

agency may also be implied if the principal delivers his power of

attorney to the agent and the latter receives it without any objection.

(n)

* Principal personally delivers POA.

* What is the duty of the agent? To read the POA . So theres

presumption that agents can read.

* When do you know someone is present? When you can physically

sense each other.

Art. 1872. Between persons who are absent, the acceptance of the

agency cannot be 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;

(2) When the principal entrusts to him by letter or telegram a powerof attorney with respect to the business in which he is habitually

engaged as an agent, and he did not reply to the letter or

telegram. (n)

*Principal only transmits POA

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 with whom the agent

contracted is aware of the limits of the powers granted by the

principal. In this case, however, the agent is liable if he undertook to

secure the principal's ratification. (n)

Art. 1901. A third person cannot set up the fact that the agent has

exceeded his powers, if the principal has ratified, or has signified his

willingness to ratify the agent's acts. (n)

* Only the principal can ratify* A principal can ratify a transaction by receiving the benefits thereof,

in accord with the principle that the principal may not accept the

benefits of a transaction and repudiate its burdens.

Cf. Macke v Camps

Art. 1910. The principal must comply with all the obligations which

the agent may have contracted within the scope of his authority.

* The duties and liabilities of the principal are primarily based upon

the contract and the validity of the contract between them.

Art. 1317. No one may contract in the name of another without being

authorized by the latter, or unless he has by law a right to representhim.

A contract entered into in the name of another by one who has no

authority or legal representation, or who has acted beyond his

powers, shall be unenforceable, unless it is ratified, expressly or

impliedly, by the person on whose behalf it has been executed, before

it is revoked by the other contracting party. (1259a)

Art. 1403. The following contracts are unenforceable, unless they are

ratified:

(1) Those entered into in the name of another person by

one who has been given no authority or legal

representation, or who has acted beyond his powers;

2. Object* Sir Dio: What may be the object of a contract of agency?

GENERALLY: every juridical act may be the object of agency

EXCEPTION (remember this, because you wont hear it from others)

1. If it will result to crime, torts or any illegal act2. If it requires exercise of discretion3. If it requires personal performance by the principal

3. Considerationrt. 1875. Agency is presumed to be for a compensation, unless there is

proof to the contrary. (n)

* Sir Dio: Do not confuse COMPENSATION with CONSIDERATION.

Consideration is essential to the validity of the contract of agency,

compensation is not.

B. Who are the parties to the contract of agency(1) Principal - person represented(2) Agent - who acts for and represent another(3) Third party - the party to whom the business is transacted


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PRINCIPAL AGENT 3RD

PERSON

Relative weight of interests. In case of conflict, between

- AGENT and 3rd Person, resolve in favor of 3rd person- AGENT and PRINCIPAL, resolve in favor of principalThere are at least two contracts involved:

(1) Contract of agency(2) Commercial transaction cause of first oneC. Must the parties be capacitated

Principal

- must be capacitated.- capacity of the agent depends on the capacity of the principalAgent

- does not have to possess full capacity in so far as third personsare concerned but in so far as his obligation to his principal is

concerned, the agent must be competent to bind himself.

II. WHAT IS THE FORM OF THE

CONTRACT OF AGENCY?

Art. 1869. Agency may be express, or implied from the acts of the



without authority.

Agency may be oral, unless the law requires a specific form. (1710a)

Art. 1874. When a sale of a piece of land or any interest therein is

through an agent, the authority of the latter shall be in writing;

otherwise, the sale shall be void. (n)

ANGELES V PNR

Principal authorized through a letter explicitly stating that the agent

was his lawful representative to withdraw PNRs scrap/unserviceable

rails. Agent already paid PNR, but was unable to withdraw the scrap

materials/unserviceable rails.

Ratio: Power of Attorney in the absence of statute, no form or

method of execution is required. A letter is sufficient to constitute a

power of attorney

JIMENEZ V RABOT

Principal wrote to his sister requesting that the latter sell any of his

parcels of land located in Pangasinan

Ratio: Power of attorney to convey such property, even though in the

form of a private document will operate with effect. The written

authorization need not contain the particular description of the

property which the agent is permitted to sell.

CITY LITE REALTY CORPORATION V CA

Broker was the one who negotiated and agreed to sell the property.

Ratio: A written authority to find a buyer is different from a written

authority to sell.

COSMIC LUMBER V CA

Principal authorized agent to enter into a compromise agreement. In

the compromise agreement, agent agreed to sell the property to the

3rd party

Ratio: The authority granted is explicit and exclusionary. The power

to enter into a compromise agreement does not include the power to

sell.

SAN JUAN STRUCTURAL STEEL V CA

A corporate treasurer by herself without any authorization from the

board of directors sold a parcel of land owned by the corporation.

Ratio: The general principles of agency govern the relations between

a corporation and its officers subject to:

1. articles of incorporation2. by laws3. relevant provisions of law4. board resolution5. powers that may be implied or incidental to the

power intentionally conferred upon the officer,

powers added by custom and usage

DE LOS REYES V CA

A verbal agreement between principal and agent involving a sale ofland registered in the name of principals deceased father.

Ratio: A void contract under 1874 can be ratified.

AF REALTY V DIESELMAN

Quick Facts: A member of the board of directors authorized a broker

to sell a parcel of land owned by the company.

Ratio: A void contract CANNOT be ratified by clear mandate in 1409

(7) of the civil code.

III. WHO HAS THE OBLIGATION TO

DETERMINE EXISTENCE ANDSCOPE OF AGENCY?

KEELER ELECTRIC CO. V. RODRIGUEZ

- Keeler sold to Rodriquez an electric plant, to be shipped fromManila to Iloilo. Rodriquez paid to Montelibano, who claimed to be

Keelers agent. SC: Montelibano not Keelers agent.

- Mechem on Agency Sec. 743: Fundamental principles:1.The law indulges no bare presumptions that an agency exists. It

must be proved/presumed from facts.

2.The A cannot establish his own authority either by hisrepresentations or his assuming to exercise it.

3.An authority cannot be established by mere rumor orgenerational reputation.4.Every general authority is not an unlimited one.

5.Every authority must find its ultimate sources in someact/omission from the P.

- Persons dealing with an assumed agency, are bound at their peril, ifthey would hold the P to ascertain not only the fact of the agency

but the nature and extent of the authority and in case either is

controverted, the burden of proof is upon them to establish it.

- Against the A, the TP has the oblign to determine existence andscope of agency. It is entirely within TPs power to satisfy himself

that the A has the authority he assumed to exercise, or to decline

to enter into relations with him. TP must also act with ordinary

prudence and reasonable diligence, if he knows or has good reason


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to believe that the A is exceeding his authority, he cant claim

protection.

- Notes:1.Every authoritys ultimate source is Ps act/omission2.TP dealing with assumed A are bound to:

a.Verify fact of agencyb.Verify nature and extentc.In case any is controverted by P, A must prove agency

YU ENG CHO V. PAN AMERICAN

Tokyo-SanFrancisco wasnt confirmed yet plaintiffs pushed

through with the flight. Business agreement didnt push through.

Damages sought from PanAm, TWSI, and Tagunicar was a

broker/independent travel agent who represented herself as

agent of TWSI.

Against the A, the TP has oblign to determine the existence and

scope of agency, and is bound at his peril, having the burden to

ascertain not only the fact of agency, but also the nature and

extent of the authority granted.

To prove fact of agency, it should not be from admission of agent

but must be traced from act/omission from principal

IV. HOW IS AGENCY DISTINGUISHED FROM

OTHER CONTRACTS/RELATIONSHIPS?

A. Master-servantArt. 1689. Household service shall always be reasonably

compensated. Any stipulation that household service is without

compensation shall be void. Such compensation shall be in addition to

the house helper's lodging, food, and medical attendance.

Art. 1690. The head of the family shall furnish, free of charge, to the

house helper, suitable and sanitary quarters as well as adequate food

and medical attendance.

Art. 1691. If the house helper is under the age of eighteen years, thehead of the family shall give an opportunity to the house helper for at

least elementary education. The cost of such education shall be a part

of the house helper's compensation, unless there is a stipulation to

the contrary.

Art. 1692. No contract for household service shall last for more than

two years. However, such contract may be renewed from year to

year.

Art. 1693. The house helper's clothes shall be subject to stipulation.

However, any contract for household service shall be void if thereby

the house helper cannot afford to acquire suitable clothing.

Art. 1694. The head of the family shall treat the house helper in a justand humane manner. In no case shall physical violence be used upon

the house helper.

Art. 1695. House helper shall not be required to work more than ten

hours a day. Every house helper shall be allowed four days' vacation

each month, with pay.

Art. 1696. In case of death of the house helper, the head of the family

shall bear the funeral expenses if the house helper has no relatives in

the place where the head of the family lives, with sufficient means

therefor.

Art. 1697. If the period for household service is fixed neither the head

of the family nor the house helper may terminate the contract before

the expiration of the term, except for a just cause. If the house helper

is unjustly dismissed, he shall be paid the compensation already

earned plus that for fifteen days by way of indemnity. If the house

helper leaves without justifiable reason, he shall forfeit any salary due

him and unpaid, for not exceeding fifteen days.

Art. 1698. If the duration of the household service is not determined

either by stipulation or by the nature of the service, the head of the

family or the house helper may give notice to put an end to the

service relation, according to the following rules:

(1) If the compensation is paid by the day, notice may be given on any

day that the service shall end at the close of the following day;

(2) If the compensation is paid by the week, notice may be given, at

the latest on the first business day of the week, that the service shall

be terminated at the end of the seventh day from the beginning of

the week;

(3) If the compensation is paid by the month, notice may be given, at

the latest, on the fifth day of the month, that the service shall cease

at the end of the month.

Art. 1699. Upon the extinguishment of the service relation, the house

helper may demand from the head of the family a written statementon the nature and duration of the service and the efficiency and

conduct of the house helper.

B. Employee-employeeArt. 1700. The relations between capital and labor are not merely

contractual. They are so impressed with public interest that labor

contracts must yield to the common good. Therefore, such contracts

are subject to the special laws on labor unions, collective bargaining,

strikes and lockouts, closed shop, wages, working conditions, hours of

labor and similar subjects.

Diff. from agency: representation

C. Lease of serviceArt. 1644. In the lease of work or service, one of the parties binds

himself to execute a piece of work or to render to the other some

service for a price certain, but the relation of principal and agent does

not exist between them.

Diff. from agency: representation, fiduciary relp

D. Independent contractorArt. 1713. By the contract for a piece of work the contractor binds

himself to execute a piece of work for the employer, in considerationof a certain price or compensation. The contractor may either employ

only his labor or skill, or also furnish the material.

Diff. from agency: limited control

E. TrustArt. 1440. A person who establishes a trust is called the trustor; one

in whom confidence is reposed as regards property for the benefit of

another person is known as the trustee; and the person for whose

benefit the trust has been created is referred to as the beneficiary.


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Incident fiduciary relp; no representation; a property relp; control;

objective: preservation of thing

Diff. from agency: also has control (P can terminate anytime); but

objective: juridical act

F. SaleArt. 1458. By the contract of sale one of the contracting parties

obligates himself to transfer the ownership and to deliver adeterminate thing, and the other to pay therefor a price certain in

money or its equivalent.

A contract of sale may be absolute or conditional.

Diff. from agency: representation; A never acquires ownership

G. PartnershipArt. 1767. By the contract of partnership two or more persons bind

themselves to contribute money, property, or industry to a common

fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of

a profession.

Mutual agency; distribution of profits

Diff. from agency: no sharing of losses, no contribution to a

common fund

H. Negotiorum gestio/quasi-contractArt. 2144. Whoever voluntarily takes charge of the agency or

management of the business or property of another, without any

power from the latter, is obliged to continue the same until the

termination of the affair and its incidents, or to require the person

concerned to substitute him, if the owner is in a position to do so.

This juridical relation does not arise in either of these instances:

(1) When the property or business is not neglected or abandoned;(2) If in fact the manager has been tacitly authorized by the owner.

In the first case, the provisions of Articles 1317, 1403, No. 1, and

1404 regarding unauthorized contracts shall govern.

In the second case, the rules on agency in Title X of this Book shall be

applicable. (1888a)

Art. 2145. The officious manager shall perform his duties with all the

diligence of a good father of a family, and pay the damages which

through his fault or negligence may be suffered by the owner of the

property or business under management.

The courts may, however, increase or moderate the indemnity

according to the circumstances of each case.

Quasi-contract due to acts executed by manager ; officious: actingout of desire to help another; agent for a limited value; objective:

preserve/administer business/property; implied agency

Diff. from agency: also has representation; but consent is needed;

objective: representation/execution of juridical act

I. Judicial administratorCourt-appointed, bond required, relationship

Diff. from agency: also has representation; but no bond

J. BrokerBrings parties together; may be agent; can represent both parties if

authorized by both; no relation to the thing; compensation:

commission upon consummation of contract

2 test (City Lite):

1.Must be the efficient procuring cause2.Should have obtained a ready, able, willing buyer

SEVILLA V. CA

Plaintiff was branch manager of TWC, but was really its agent andnot its employee nor partner

Tests for determination of er-ee relp:

1. Right of control test: where the person for whom the servicesare performed reserves the right to control not only the end to

be achieved but means to be used in reaching such end

2. Existing economic conditions prevailing between parties It was an agency with plaintiff as agent, who solicited fares in

behalf of TWC, and received commission. And since there was

mutual interest of both A and P, the agency here cannot be

revoked at will by the P. A entitled to damages.

SHELL V. FIREMENS INSURANCE CO.

Car fell from hydraulic lifter at carwash; plaintiff sued Shell for

sum of money on negligence. Shell claimed the personresponsible was an independent contractor, hence, Shell not

liable. Person was really an agent. Since he was found negligent,

Shell found liable.

As the act of the A or his employees acting within the scope of

his authority is the act of the P, breach of the undertaking by A is

one for which P is responsible.

DELA CRUZ V. NORTHERN THEATRICAL ENTERPRISES

Guard sues employer for recovery of expenses incurred in his

homicide cases. SC denied, because he wasnt hired to represent

defendant in its dealings with third persons; he was an employee

hired to perform specific duty.

NIELSON & CO. V. LEPANTO CONSOLIDATEDMining operations suspended during the Japanese occupation and

resumed a little later after the war, mgt contract unilaterally

terminated by Lepanto

AGENCY LEASE OF SERVICES

One of the parties binds himself to render some service to the other party

Based on representation Based on employment

Agent is destined to execute juridical

acts (creation, modification, or

extinction of relations with third parties)

Contemplates only material

(non-juridical) acts

The management contract is a lease of service and not a contract of

agency. Neilsons principal undertaking or operating the mine and

mill wasnt executing juridical acts for Lepanto , to create, modify,

or extinguish business relations between Lepanto and third

persons. Neilson was not an agent as interpreted in the law ofagency, but an only an agent only in the sense of performing

material acts for an employer, for compensation.

Neilsons incidental capacity as purchasing agent of supplies and

enter into contracts regarding the sale of mineral, but Neilson

couldnt make any purchase or sell minerals without prior approval

of Lepanto; hence, these are not considered juridical acts either,

but just acting only as an intermediary.

QUIROGA V. PARSONS HARDWARE

Parsons agreed with Quiroga for exclusive sale of Quiroga beds.

Quiroga claims Parsons was his agent.


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SC: it was a sale, not an agency, because Quiroga supplies the beds,

and Parsons pays their price; if he were an A, hed have to deliver

price to Quiroga for the beds sold, and return unsold beds, which

isnt the case here. The words commission on sales simply means

discount on the price. The word agency only meant Parsons was

the only one who could sell Quiroga beds in Visayas.

GONZALO PUYAT & SONS V. ARCO AMUSEMENT CO.

Discounted price of sound equipment not disclosed; Arco seeks

reimbursement. SC denied.Whatever unforeseen events mightve taken place unfavorable to

Arco, Gonzalo, vendors agent, might still legally hold Arco for the

fixed price. This is incompatible to the claimed agency, because in

agency, A is exempted from all liability in discharge of his

commission provided that A acts within scope of authority and P

must indemnify A for all damages which A may incur in carrying out

the agency without As fault. Besides, it is out of the ordinary for

one to be the A of both the vendor and the vendee.

LIM V. PEOPLE

Tobacco, estafa, receipt letter

Since Lim was a businesswoman and took efforts collecting tobacco

leaves from Ayrosos house, more likely acting as A. There was no

transfer of ownership and the agreement clearly considered Lim asan A with obligation to return any unsold tobacco.

PACIFIC COMMERCIAL V. YATCO

Sugar, commission merchant, broker, tax, ex-ship

Commission merchant: engaged in purchase/sale for another of

personal property, which, for this purpose, is placed in his

possession and at his disposal. Relationship not only with P, but

also to property.

Broker: no relation to the thing; merely intermediary; doesnt

acquire possession over the property.

KER V. LINGAD

Rubber products distributor, commercial broker

National Internal Revenue Code: commercial broker: sellmerchandise for other persons or bring buyers and sellers

together; includes commission merchants.

Essence of sale: transfer of title for a price paid; transferee is in

the position of an owner, not merely an agent who accounts for

the proceeds of a resale.

Essence of agency to sell: delivery to an agent, not as his

property, but as the property of the principal, who remains the

owner and has the right to control sales, fix price and terms,

demand and receive the proceeds less the As commission upon

the sales.

HAHN V. CA

BMW distributor found by SC as agent of BMW

Agent: receives commission upon successful conclusion of a sale; P

exercises control over A (as BMW has over Hahn).

Broker: earns merely by bringing buyer and seller together, even if

no sale is eventually made.


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Art. 1903. The commission agent shall be responsible for the goods

received by him in the terms and conditions and as described in the

consignment, unless upon receiving them he should make a written

statement of the damage and deterioration suffered by the same. (n)

Art. 1904. The commission agent who handles goods of the same kind

and mark, which belong to different owners, shall distinguish them by

countermarks, and designate the merchandise respectively belonging

to each principal. (n)

Art. 1905. The commission agent cannot, without the express or

implied consent of the principal, sell on credit. Should he do so, theprincipal may demand from him payment in cash, but the commission

agent shall be entitled to any interest or benefit, which may result

from such sale. (n)

Art. 1906. Should the commission agent, with authority of the

principal, sell on credit, he shall so inform the principal, with a

statement of the names of the buyers. Should he fail to do so, the sale

shall be deemed to have been made for cash insofar as the principal is

concerned. (n)

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 and shall pay the principal the

proceeds of the sale on the same terms agreed upon with the

purchaser. (n)

Art. 1908. The commission agent who does not collect the credits ofhis principal at the time when they become due and demandable shall

be liable for damages, unless he proves that he exercised due

diligence for that purpose. (n)

VI. WHAT ARE THE CLASSIFICATION OF

AGENCY CONTRACTS?

A. Express agency; implied agencyB. Agency by estoppel; no consent

Art. 1900. So far as third persons are concerned, an act is deemed to

have been performed within the scope of the agent's authority, if

such act is within the terms of the power of attorney, as written, evenif the agent has in fact exceeded the limits of his authority according

to an understanding between the principal and the agent. (n)

Art. 1911. Even when the agent has exceeded his authority, the

principal is solidarily liable with the agent if the former allowed the

latter to act as though he had full powers. (n)

Art. 1921. If the agency has been entrusted for the purpose of

contracting with specified persons, its revocation shall not prejudice

the latter if they were not given notice thereof. (1734)

Art. 1922. If the agent had general powers, revocation of the agency

does not prejudice third persons who acted in good faith and without

knowledge of the revocation. Notice of the revocation in a newspaperof general circulation is a sufficient warning to third persons. (n)

C. Agency by operation of lawArt. 1869. Agency may be express, or implied from the acts of the



without authority.

Agency may be oral, unless the law requires a specific form. (1710a)

Art. 1884. The agent is bound by his acceptance to carry out the

agency, and is liable for the damages which, through his non-

performance, the principal may suffer.He must also finish the business already begun on the death of the

principal, should delay entail any danger. (1718)

Art. 1930. The agency shall remain in full force and effect even after

the death of the 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. (n)

Art. 1931. Anything done by the agent, without knowledge of the

death of the principal or of any other cause which extinguishes the

agency, is valid and shall be fully effective with respect to third

persons who may have contracted with him in good faith. (1738)

D. Universal, general and specialArt. 1876. An agency is either general or special.

The former comprises all the business of the principal. The latter, one

or more specific transactions. (1712)

E. Durable agencyArt. 1930. The agency shall remain in full force and effect even after

the death of the 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. (n)

Is this valid:

1. Your agency shall survive my death for 5 years?o Valid in the US

2. Living will i.e. permanent state of unconsciousness (coma)given to agents and caregivers?

o Hypothetically yes, as long as he is capacitated attime of making condition

SIASAT VS. IAC

(Sale of flags to DepEd)

Kinds of Agents

1. Universal agent one who is authorized to do all acts for hisprincipal which can lawfully be delegated to an agent

2. General agent one authorized to do all acts pertaining to abusiness of a certain kind or at a particular place, or all acts

pertaining to a business of a particular class or series

3. Special agent one authorized to do some particular act or actupon some particular occasion. He acts usually in accordance

with specific instructions

DOMINION INSURANCE CORPORATION VS. CA

(Special vs. general agency)

A perusal of the Special Power of Attorney would show that

Dominion and Guevarra intended to enter into a principal-agent

relationship and, despite the use of the word special, the contents

reveal that what was really constituted was a general agency.

o Arts. 1876 and 1877 state that a general agency is one whichcomprises all the business of the principal but, couched in

general terms, it is limited only to acts of administration.

o A general power permits the power to do all acts for which thelaw does not require a special power , such as those acts


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enumerated in the Special Power of Attorney.

However, the payment of claims is not an act of administration and

Art. 1878 includes such payment in its enumeration of instances

when a special power of attorney is required, besides the

abovementioned document.

F. Couched in general terms; couched in specific terms

Art. 1877. An agency couched in general terms comprises only acts ofadministration, even if the principal should state that he withholds no

power or that the agent may execute such acts as he may consider

appropriate, or even though the agency should authorize a general

and unlimited management. (n)

Art. 1878. Special powers of attorney are necessary in the following

cases:

(1) To make such payments as are not usually considered as acts of

administration;

(2) To effect novations which put an end to obligations already in

existence at the time the agency was constituted;

(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 prescription already acquired;(4) To waive any obligation gratuitously;

(5) To enter into any contract by which the ownership of an

immovable is transmitted or acquired either gratuitously or for a

valuable consideration;

(6) To make gifts, except customary ones for charity or those made to

employees in the business managed by the agent;

(7) To loan or borrow money, unless the latter act be urgent and

indispensable for the preservation of the things which are under

administration;

(8) To lease any real property to another person for more than one

year;

(9) To bind the principal to render some service without

compensation;

(10) To bind the principal in a contract of partnership;(11) To obligate the principal as a guarantor or surety;

(12) To create or convey real rights over immovable property;

(13) To accept or repudiate an inheritance;

(14) To ratify or recognize obligations contracted before the agency;

(15) Any other act of strict dominion. (n)

Art. 1879. A special power to sell excludes the power to mortgage;

and a special power to mortgage does not include the power to sell.

(n)

Art. 1880. A special power to compromise does not authorize

submission to arbitration. (1713a)

1. MortgagePNB VS. STA. MARIA

[6 brothers and sisters executed PA in favor of Maximo Sta. Maria;

power to mortgage does not include power to loan]

Disinclination of courts to enlarge an authority granted beyond

the powers expressly given and those incidentally flowing

therefrom as being usual or reasonably necessary and proper for

the performance of such express powers.

The authority granted by defendants-appellants (except

Valeriana) unto their brother, Maximo, was merely to mortgage

the property jointly owned by them, not to contract for any loans

in their names and behalf. Maximo alone, with Valeriana who

authorized him to borrow money, must answer for them; other

defendants-appellants' only liability is that the real estate

authorized by them to be mortgaged would be subject to

foreclosure and sale to respond for the obligations contracted by

Maximo. But they cannot be held personally liable.

BPI VS. DE COSTER

[Wife was in Paris when husband mortgaged her property]

It is very apparent from the face of the instrument that the

whole purpose and intent of the power of attorney was to

empower and authorize the husband to look after and protect

the interest of his wife. There is no provision authorizing him to

sign anything or to do anything which would make his wife

liable as a surety of a pre-existing debt. It is fundamental rule of

construction that in an instrument that defines and specifies

powers and duties, such would be limited and confined to

those which are specified and defined and that all other powers

and duties are excluded. Hence, it follows that since the

husband was not authorized then the note in question is void for

want of power to execute it.

The mortgage is also void. The mortgaged property is owned byGabriela and since the note is void as to her, then it follows tha

the mortgage is also void for want of power to execute it.

2. Loan / borrowHODGES VS. SALAS

[Applied proceeds of mortgage to personal debt]

The provision cannot be interpreted as also authorizing Yulo to

dispose of the money as he pleases, particularly when it does

not appear that such was the intention of the principals.

And in applying part of the funds to pay his personal obligations,

he exceeded his authority.

The agent was obliged to turn over the money to the principalsor, at least, place it at their disposal

3. SellSTRONG V GUTIERREZ REPIDE

[Agent Jones, capital stocks, sale, general agent]

Jones did not have the authority to sell in behalf of Mrs Strong.

Strong was a general agent, which according to Art. 1713 (Old

Civil Code): An agency stated in general terms only includes acts

of administration. In order to compromise, alienate mortgage,

or to execute any other act of strict ownership an express

mandate is required.

There are only three instances whereby the principal is heldbound by the third partys assumption of the authority of the

agent:

(1) Where his acts have contributed to deceive a third person ingood faith;

(2) Where the limitations upon the power created by him could nothave been known by a third person; and

(3) Where he has placed in the hands of the agent instrumentssigned in blank.

KATIGBAK VS. TAI CHING CO

(Letters indicating acknowledgment of agency)


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While it is true that a power of attorney not recorded in the registry

of deeds is ineffective in order that an agent may validly perform acts

in the name of the principal, it does, however, bind the principal to

acknowledge acts performed by his attorney-in-fact regarding said

property. The record contains many indications that Tecsi was aware

of the sale (letters complaining of the demands of Gabino to send him

rents of the land, promises to send, remittance) and these were a

tacit acknowledgement that he occupied the land no longer as an

owner but only as a lessee.

4. LeaseVDA. DE CHUA VS. IAC

[General agent executed lease contract for 5years]

Where the lease contract entered into by an agent is for more than

one year, the agent must be armed with a special power of attorney.

5. CompromiseDUNGO VS. LOPENA

[Attorney entered into compromise agreement]

The client, on becoming aware of the compromise and thejudgment thereon, fails to repudiate promptly the action of his

attorney, he will not afterwards be heard to contest its validity.

It is neither accurate nor correct to conclude that the absence of

an SOA where one is required by law renders the contract void. It

is merely unenforceable (1403[1] CC).

VICENTE VS. GERALDEZ

[Placer lease contract, cement, mining, VP of company refused to sign

compromise agreement]

1. Special powers of attorney are necessary to compromise and torenounce the right to appeal from a judgment. Attorneys cannot

compromise their clients litigation. It is not disputed that the

lawyers of Hi Cement had not submitted to the Court any writtenauthority from their client to enter into a compromise.

2. Juridical persons may compromise only in the form and with therequisites which may be necessary to alienate their property. As

a general rule an officer or agent of the corporation has no

power to compromise or settle a claim by or against the

corporation, except to the extent that such power is given to him

either expressly or by reasonable implication from the

circumstances.

3. To ratify the unauthorized contract of an agent and make itbinding on the corporation, it must be shown that the governing

body or officer authorized to ratify had full and complete

knowledge of all the material facts connected with the

transaction to which it relates. Ratification must be by the officer

or governing body having authority to make such contract, andmust be with full knowledge.

6. Other acts of strict dominionINSULAR DRUG VS. NATIONAL BANK

[Former salesman had anomalous transactions, committed suicide]

Foerster had implied authority to indorse all checks made out in the

name of the Insular Drug Co., Inc., has even less force. Not only did

the bank permit Foerster to indorse checks and then place them to his

personal account, but it went farther and permitted Foerster's wife

and clerk to indorse the checks. The right of an agent to indorse

commercial paper is a very responsible power and will not be lightly

inferred. A salesman with authority to collect money belonging to his

principal does not have the implied authority to indorse checks

received in payment. Any person taking checks made payable to a

corporation, which can act only by agent does so at his peril, and must

same by the consequences if the agent who indorses the same is

without authority.

VII. WHAT ARE THE OBLIGATIONS AND

LIABILITIES OF AGENTS TOTHEIR PRINCIPALS?

A. Act within scope of authorityArt. 1879. A special power to sell excludes the power to mortgage;

and a special power to mortgage does not include the power to sell.

(n)

Reason for 1879

o Power to sell payment of priceo Power to mortgage purpose as collateral

Art. 1880. A special power to compromise does not authorizesubmission to arbitration. (1713a)

Compromise avoid litigation by making reciprocal/mutual

concessions

Why power to arbitrate & power to compromise different?

Because power to compromise requires another SPA

Can General Agent appoint Principal as agent of another?

YES, but only if for a compensation 1878 (9) SPA needed

of w/o compensation

Art. 1881. The agent must act within the scope of his authority. He

may do such acts as may be conducive to the accomplishment of the

purpose of the agency. (1714a)

1st

sentence states duty & limitation

2nd

sentence qualifies limitation = conducive to the

accomplishment of the purpose of the agency

Art. 1882. The limits of the agent's authority shall not be considered

exceeded should it have been performed in a manner more

advantageous to the principal than that specified by him. (1715)

Discusses manner of performance of the agent

If more advantageous

Principal controlling actions of agent

Ex. P instructs A to sell in MM only; but A can offer to sell

anywhere outside MM like in internet (e-bay)

Instructions words said/written by P to A to guide latter

simultaneous w/ or after delivery of written PoA; can refer

to oral instructions

Are instructions part of PoA?

o Yes if general agencyo No between A & P; scope of authority includes

written in PoA instructions

Art. 1887. In the execution of the agency, the agent shall act in

accordance with the instructions of the principal.


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In default thereof, he shall do all that a good father of a family would

do, as required by the nature of the business. (1719)

B. Carry out the agencyArt. 1884. The agent is bound by his acceptance to carry out the

agency, and is liable for the damages which, through his non-

performance, the principal may suffer.

He must also finish the business already begun on the death of theprincipal, should delay entail any danger. (1718)

Notes:

Acceptance agent signifies consent to agency; bound by

his acceptance

Agent not required to perform acts 8 hrs/day

Art. 1928. The agent may withdraw from the agency by giving due

notice to the principal. If the latter should suffer any damage by

reason of the withdrawal, the agent must indemnify him therefor,

unless the agent should base his withdrawal upon the impossibility of

continuing the performance of the agency without grave detriment to

himself. (1736a)

To withdraw with due notice to P

Withdrawal by terms of the contract

Repudiation breach of contract

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 necessary steps to meet the

situation. (1737a)

Reasonable time & manner depends on circumstances

Sufficient time ex. To return things to P

C. Not to carry out the agencyArt. 1888. An agent shall not carry out an agency if its execution

would manifestly result in loss or damage to the principal. (n)

D. LoyaltyArt. 1889. The agent shall be liable for damages if, there being a

conflict between his interests and those of the principal, he should

prefer his own. (n)

* Damages if conflict of interest

Art. 1890. If the agent has been empowered to borrow money, he

may himself be the lender at the current rate of interest. If he hasbeen authorized to lend money at interest, he cannot borrow it

without the consent of the principal. (n)

Art. 1491. The following persons cannot acquire by purchase, even at

a public or judicial auction, either in person or through the mediation

of another:

(1) The guardian, the property of the person or persons who may be

under his guardianship;

(2) Agents, the property whose administration or sale may have been

entrusted to them, unless the consent of the principal has been given;

* Agent relative limitation only

o Valid if w/ consent(3) Executors and administrators, the property of the estate under

administration;

(4) Public officers and employees, the property of the State or of any

subdivision thereof, or of any government-owned or controlled

corporation, or institution, the administration of which has been

intrusted to them; this provision shall apply to judges andgovernment experts who, in any manner whatsoever, take part in the

sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and

inferior courts, and other officers and employees connected with the

administration of justice, the property and rights in litigation or levied

upon an execution before the court within whose jurisdiction or

territory they exercise their respective functions; this prohibition

includes the act of acquiring by assignment and shall apply to lawyers,

with respect to the property and rights which may be the object of

any litigation in which they may take part by virtue of their

profession.

Lawyers relative prohibition; only w/ respect to theproperty under litigation

Generally, agent has interest in property of P =

compensation

Principal has interest on subject = interest

(6) Any others specially disqualified by law. (1459a)

AUSTRIA V CA

Pendant w/ diamonds worth 4.5K; consignment of goods for sale; on

her way home 2 men snatched her purse w/ pendant inside; Maria

didnt pay robbery extinguished her obligation. SC: prior conviction

not necessary; fortuitous event = focus on events not on agents

PNB V MANILA SURETYP279K delivered by PNB to ATACO, guaranteed by Manila Surety

under trust receipt up to P50K. ATACO assigned rt. to collect from

BPW(public works); Bank ceased to collect. SC: bank negligent in

stopping collection, exonerated surety. Irrevocable agency by

stipulation of the parties. Principal cant revoke agency

E. DiligenceArt. 1885. In case a person declines an agency, he is bound to observe

the diligence of a good father of a family in the custody and

preservation of the goods forwarded to him by the owner until the

latter should appoint an agent or take charge of the goods. (n)

Art. 1887. In the execution of the agency, the agent shall act in

accordance with the 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. (1719)

Art. 1909. The agent is responsible not only for fraud, but also for

negligence, which shall be judged with more or less rigor by the

courts, according to whether the agency was or was not for a

compensation. (1726)

* Agent liable for fraud & negligence; to whom? PRINCIPAL


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F. Account/deliverArt. 1891. Every agent is bound to render an account of his

transactions and to deliver to the principal whatever he may have

received by virtue of the agency, even though it may not be owing to

the principal.

Every stipulation exempting the agent from the obligation to render

an account shall be void. (1720a)

Render an account of his transactions & deliver

o Even though it may not be owing to the PAgent may contract w/ other persons but the moment he

receives something not from the P, he must turn it over for

the P

DOMINGO V DOMINGO

Exclusive agency to sell; 1K earnest money and 1k gift/propina to

Oscar; Highest loyalty required= utmost good faith; absolute

obligation to make full disclosure = 1891.

Sir: no duty when 1) broker & 2) plus disclosed & no obligation

G. Solidary liabilityArt. 1894. The responsibility of two or more agents, even though they

have been appointed simultaneously, is not solidary, if solidarity has

not been expressly stipulated. (1723)

Art. 1895. If solidarity has been agreed upon, each of the agents is

responsible for the non-fulfillment of agency, and for the fault or

negligence of his fellow agents, except in the latter case when the

fellow agents acted beyond the scope of their authority. (n)

Joint agency (and) - 2 or more agency acting together

Solidary agency (and/or) there are 2 or more agents &

theyre required to act independently

SEVERINO V SEVERINO

Fabiola wants to be recognized as sole heir of Melecio & take land

from Guillermo; SC: defendant is agent of Melecio; def is estopped

from owning/asserting adverse title to the subject of agency.

Encargado = administrator to preserve property;

H. Pay interestArt. 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 the agency. (1724a)

Exception to the general rule that interest only accrues after

demand. Demand is not necessary for interest to apply.2 kinds of interests here

o For misappropriationapplied to his own useo For monies left with him after accomplishment of

agencystill owes afterextinguishment

I. Fraud; negligenceArt. 1909. The agent is responsible not only for fraud, but also for

negligence, which shall be judged with more or less rigor by the

courts, according to whether the agency was or was not for a

compensation. (1726)

J. Specific obligations of commission agentsArt. 1903. The commission agent shall be responsible for the goods

received by him in the terms and conditions and as described in the

consignment, unless upon receiving them he should make a written

statement of the damage and deterioration suffered by the same. (n)

Art. 1904. The commission agent who handles goods of the same kind

and mark, which belong to different owners, shall distinguish them bycountermarks, and designate the merchandise respectively belonging

to each principal. (n)

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 in cash, but the commission

agent shall be entitled to any interest or benefit, which may result

from such sale. (n)

Art. 1906. Should the commission agent, with authority of the

principal, sell on credit, he shall so inform the principal, with a

statement of the names of the buyers. Should he fail to do so, the sale

shall be deemed to have been made for cash insofar as the principal is

concerned. (n)

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 and shall pay the principal the

proceeds of the sale on the same terms agreed upon with the

purchaser. (n)

Art. 1908. The commission agent who does not collect the credits of

his principal at the time when they become due and demandable shal

be liable for damages, unless he proves that he exercised due

diligence for that purpose. (n)

GREEN VALLEY POULTRY V IAC

Sale v Agency; non-exclusive distributor; nature is one of agency;looked like a sale because of 1) discounts & 2) payment due 60 days

MUNICIPAL COUNCIL OF ILOILO V EVANGELISTA

Claim of MC as alleged assignee of rights of Atty. Soriano by virtue of

a judgment as payment of professional services rendered by him to

widow and co-heirs

VIII. RESPONSIBILITY FOR

ACTS OF SUBSTITUTES

Art. 1892. The agent may appoint a substitute if the principal has not

prohibited him from doing so; but he shall be responsible for the acts

of the substitute:(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the

person, and the person appointed was notoriously incompetent or

insolvent.

All acts of the substitute appointed against the prohibition of the

principal shall be void. (1721)

Substitute agent appointed by original agent to do same

things originally mandated/tasked by the Principal on behalf

of the P


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Sub-agent agent appointed by original agent to do same

thing but on behalf of the agent

Can agent appoint his own agent? YES you are a principal

for your own self

General Rule: Agent may appoint substitute

Problem w/ substitution:

o No recourse against agent; better not to designatea substitute agent

o Purpose to give flexibility to agent; to becontinuous agency

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding

article, the principal may furthermore bring an action against the

substitute with respect to the obligations which the latter has

contracted under the substitution. (1722a)

Joint liability

DEL ROSARIO V LA BADENIA

Extensive selling campaign; Aragon as Gen Agent in Albay; Aragon

hired spouses Del Rosario as manager of central agency in Legaspi;

according to Aragons book =it was sps account; Spouses were agents;

broad power of Aragon; no evidence that they acted beyond limit

INTERNATIONAL FILMS V LYRIC FILM

IFC leased Monte Carlo madness film; verbal agreement re: sub -

agency and keeping the film in vault; new agent Joseph agreed to sub-

agency; vault burned down; SC: defendant not obliged to fulfill more

than whats mandated; no mandate to insure against fire

IX. WHAT ARE THE OBLIGATIONS AND

LIABILITIES OF AGENTS TO 3RD PARTIES?

A. Agent acting within scope of authority

Art. 1883. If an agent acts in his own name, the principal has no right

of action against the persons with whom the agent has contracted;neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person

with whom he has contracted, as if the transaction were his own,

except when the contract involves things belonging to the principal.

The provisions of this article shall be understood to be without

prejudice to the actions between the principal and agent. (1717)

Art. 1897. The agent who acts as such is not personally liable to the

party with whom he contracts, unless he expressly binds himself or

exceeds the limits of his authority without giving such party sufficient

notice of his powers. (1725)

Art. 1899. If a duly authorized agent acts in accordance with the

orders of the principal, the latter cannot set up the ignorance of theagent as to circumstances whereof he himself was, or ought to have

been, aware. (n)

B. Agent acting outside of authority 1897, 1898, 1911

Art. 1897. The agent who acts as such is not personally liable to the

party with whom he contracts, unless he expressly binds himself or

exceeds the limits of his authority without giving such party sufficient

notice of his powers. (1725)

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 with whom the agent

contracted is aware of the limits of the powers granted by the

principal. In this case, however, the agent is liable if he undertook to

secure the principal's ratification. (n)




1. With notice to third partiesArt. 1901. A third person cannot set up the fact that the agent has

exceeded his powers, if the principal has ratified, or has signified his

willingness to ratify the agent's acts. (n)

2. Without notice to third partiesPHILIPPINE NATIONAL BANK VS. AGUDELO

When an agent negotiates a loan in his personal capacity and

executes a promissory note under his own signature without express

authority from his principal, giving as security therefore real estatebelonging to the latter, also in his own name and not in the name and

representation of the said principal, the obligation so contracted by

him is personal and does not bind the principal.

PHIL PRODUCTS CO. V PRIMATERIA SOCIETE ANONYME POUR LE

COMMERCE EXTERIUR: PRIMATERA (PHIL). INC.

With regard to Art 1897 of the CCwhich provides that the agent who

acts as such is not personally liable to the party with whom he

contracts, unless he expressly binds himself or exceeds the limits of

his authority without giving such party sufficient notice of his

powers, the court held that there is no proof that the agents

exceeded the limits of their authority. In fact, the principal

(Primateria Zurich) who should have raised the point, never raisedit. It did not deny liability on the ground of excess of authority. In

addition, the article does not hold that in cases of excess of

authority, both the agent and its principal are liable. Since, a

judgement was already given against the Primateria Zurich for the

whole amount, and PPC did not appeal from such judgment then Art

1897 would not apply.

NATIONAL POWER CORP. VS. NATIONAL MERCHANDISING CORP.

- NPC was unaware of the limitations on the powers granted by the

New York firm to Namerco.

- The New York corporation in its letter said: We hereby certify that

National Merchandising Corporation . . . are our exclusive

representatives in the Philippines.- Namerco never disclosed to the NPC the cabled or written

instructions of its principal.

NATIONAL BANK V. WELCH, FAIRCHILD & CO.

[Benito Juarez ship]

True, an agent who acts for a revealed principal in the making of a

contract does not become personally bound to the other party in the

sense that an action can ordinarily be maintained upon such contract

directly against agent. Yet that rule doesnt apply here. One who has

intervened in the making of a contract in the character of agent cant


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be permitted to intercept and appropriate the thing which is the

principal is bound to deliver, and thereby make performance by the

principal impossible. The agent must be precluded from doing any

positive act that could prevent performance on the part of his

principal. This much is what ordinary good faith requires.

TUASON VS. OROZCO

A debt thus incurred by the agent is binding directly upon the

principal, provided the former acted, as in the present case,

within the scope of his authority.

The fact that the agent has also bound himself to pay the debt

does not relieve from liability the principal for whose benefit the

debt was incurred. The individual liability of the agent

constitutes a further security and does not affect the liability of

the principal.

CERVANTES vs. CA

Plaintiff knew that a written request to the legal counsel was

necessary for extension, he cannot use what the PAL agents did

to his advantage

Citing Art. 1898 of the Civil Code, the acts of an agent beyond the

scope of his authority do not bind the principal, unless the latter

ratifies the same expressly or impliedlyWhen the third person knows that the agent was acting beyond

the scope of his power or authority, the principal cannot be

held liable for the acts of the agent

C. Agent acting in his own name; exception 1883


of action against the persons with whom the agent has contracted;

neither have such persons against the principal.




The provisions of this article shall be understood to be withoutprejudice to the actions between the principal and agent. (1717)

SMITH, BELL & CO. v SOTELO MATTI

Manila Oil doesnt seem to have taken part in the contracts. Mr

Vicente Sotelo signed the contracts in his individual capacity and

under his own name. If Mr Vicente Sotelo was agent, he is still liable

since he entered the contract under his own name, and did not

represent that he was under commission to represent Manila Oil (Art.

1717 of the Old Civil Code, Art. 1883 in the NCC). The Code of

Commerce holds Mr Vicente Sotelo since he transacted the business

under his own name, and therefore directly liable. Intervenor has no

right of action, so the Court in its disposition only directed the

acceptance and payment of the ordered goods under Mr Vicente

Sotelos name, without prejudice to actions he could invoke against

his principal.

RURAL BANK OF BOMBON VS. CA

SY-JUCO v SY-JUCO

The effects of agency must be sought: Art 1717 (when an agent

acts in his own name, principal has no right of action against

person with whom agent has contracted EXCEPT cases involving

things belonging to the principal

Effects of this rule:

Agent is bound to the principal although he does notassume the character of such agent and appears acting in

his own name.

Agents apparent representation yields to the principalstrue representation and that, in reality and in effect, the

contract must be considered as entered into between the

principal and the third person and consequently, if the

obligations belong to the former [principal], to him alone

must also belong the rights arising from the contract.

NFA VS. IAC

GOLD STAR MINING CO., INC. v MARTA LIM-JIMENA

Pursuant to Article 1883 Jimena may sue Gold Star because

Lincallo, in transferring the mining claims to Gold Star (without

disclosing that Jimena was a co-owner although Gold Star had

knowledge of this fact as shown by the proofs) acted as Jimena's

agent with respect to Jimena's share of the claims

X. WHAT ARE THE OBLIGATIONS AND

LIABILITIES OF PRINCIPALS TO AGENTS?

A. Advance/reimburse 1912, 1914, 1918Art. 1912. The principal must advance to the agent, should the latter

so request, the sums necessary for the execution of the agency.

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 fault.

The reimbursement shall include interest on the sums advanced, from

the day on which the advance was made. (1728)

Art. 1914. The agent may retain in pledge the things which are the

object of the agency until the principal effects the reimbursement and

pays the indemnity set forth in the two preceding articles. (1730)

Art. 1918. The principal is not liable for the expenses incurred by the

agent in the following cases:

(1) If the agent acted in contravention of the principal's instructions,

unless the latter should wish to avail himself of the benefits derived

from the contract;

(2) When the expenses were due to the fault of the agent;(3) When the agent incurred them with knowledge that an

unfavorable result would ensue, if the principal was not aware

thereof;

(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. (n)

B. Indemnify 1913Dela Cruz v. No. Theatrical case of the special guard

Art. 1913. The principal must also indemnify the agent for all the

damages which the execution of the agency may have caused the

latter, without fault or negligence on his part. (1729)


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C. Solidary liability 1915Art. 1915. If two or more persons have appointed an agent for a

common transaction or undertaking, they shall be solidarily liable to

the agent for all the consequences of the agency. (1731)

D. Compensation 1875Art. 1875. Agency is presumed to be for a compensation, unless thereis proof to the contrary. (n)

E. Agents lien 1914Art. 1914. The agent may retain in pledge the things which are the

object of the agency until the principal effects the reimbursement and

pays the indemnity set forth in the two preceding articles. (1730)

MACONDRAY vs. SELLER

(Real estate broker, arbitrary 5pm deadline)

There is no valid revocation because at the time fixed by the manager

for the deadline and termination of negotiations, the broker had

already earned his commissions agreed upon, and could be deprived

thereof by the arbitrary action of the principal.

DANON vs. BRIM & CO.

(Factory; 5% commission if sale is consummated or if the broker finds

a purchaser ready, able and willing to buy)

Broker has not yet performed all acts under the contract to recover

commission because what he has accomplished is merely to find a

person who might have bought the factory. The company was willing

to go into negotiations, but was not yet ready to buy- no negotiations

yet, and no board resolution to authorize the purchase

ROCHA vs. PRATS

(Sale did not transpire due to disagreement on proviso on the need

for banking security)

The duty assumed by the broker is to bring the minds of the buyer

and seller to an agreement for a sale, and the price and the terms on

which it is to be made. Until all that is done, right to commission does

not accrue.

INLAND REALTY vs. CA

(Agent referred Stanford Microsystems as buyer, initial price too low;

sale was eventually consummated with Stanford about 1 year 5

months after cessation of agency)

Agent not entitled to commission because it was not the efficient

procuring cause in bringing about the sale. There was no participation

in the critical events leading to the sale negotiations, finalization of

terms and conditions, drafting of the deed, processing of documents,

etc.

INFANTE vs. CUNANAN

(Principal terminated agency after referral of a buyer, allegedly

because of change of mind, but subsequently transacted directly with

the proposed buyer)

Agents entitled to commission; the principal took advantage of the

services of the agents, and in bad faith, terminated the agency to

avoid payment of commission.

PRATS vs. CA

(Initial negotiations by principal with SSS, subsequent grant of

exclusive agency; after termination, sale is eventually consummated

between principal and SSS)

An agent who is not the efficient procuring cause in bringing about

the sale as his exclusive authority has expired is not entitled to

compensation. Exception, as a matter of equity, may be compensated

for the diligent steps taken to bring the parties together.

UNILAND RESOURCES vs. DBP

(Agent without authority, but introduced potential buyers

nonetheless; allegation of implied agency)

Implied agency does not apply because it has been clear that only

accredited brokers may look for a buyer. Relationship of agency is

founded on mutual consent. Applied Prats Case to award

compensation for efforts.

XI. WHAT ARE THE OBLIGATIONS OF

PRINCIPALS TO 3RD PARTIES?

A. Agent acting within the scope of his authority


of action against the persons with whom the agent has contracted;

neither have such persons against the principal.




The provisions of this article shall be understood to be without

prejudice to the actions between the principal and agent. (1717)

Art. 1910. The principal must comply with all the obligations which

the agent may have contracted within the scope of his authority.

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. (n)

B. Agent acting outside scope of his authority

Art. 1900. So far as third persons are concerned, an act is deemed to

have been performed within the scope of the agent's authority, if

such act is within the terms of the power of attorney, as written, even

if the agent has in fact exceeded the limits of his authority according

to an understanding between the principal and the agent. (n)




Art. 1916. When two persons contract with regard to the same thing,

one of them with the agent and the other with the principal, and the

two contracts are incompatible with each other, that of prior date

shall be preferred, without prejudice to the provisions of Article 1544

(n)

GONZALES vs. HABERES

(Misrepresentation in the deed of sale; vendor spouses) There is no

merit in the contention of the husband that misrepresentations of his

wife cannot be charged against him, because in negotiating for the

sale, he acted as agent and representative of his wife.


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Sale of land in Nueva Ecija where the entire area of which was

occupied by adverse claimants and the title disputed. The plaintiff

brought the action to recover the unpaid sum for the land.

Defendants defense is that plaintiff through false representation led

him to believe that the plaintiff is in possession of the land.

Ratio: Where the sale of land is effected on the strength of

misrepresentations of the agent of the vendor, the latter cannot

accept the benefit of such representations and at the same time deny

the responsibility for them.

XII. DUTY OF 3RD PARTIES

DEALING WITH AGENT

Art. 1902. A third person with whom the agent wishes to contract on

behalf of the principal may require the presentation of the power of

attorney, or the instructions as regards the agency. Private or secret

orders and instructions of the principal do not prejudice third persons

who have relied upon the power of attorney or instructions shown

them. (n)

Sir Dios discussion on the chain of duties

PRINCIPAL AGENT THIRD PARTIES

1 appoint an agent 2 disclose representation(if no disclosure: agentdeals in his name)

3 inquire- Ascertain the FACT andSCOPE of agency- How? Demand copy ofPOA andINSTRUCTIONS aswritten

4 carry out/performagency within scope of hisauthority (now 3P knowswhats within the scope ofagents authority)

5 comply with the terms oftransaction or obligation(his participationessentially ends here)

6 accounting of expense(less a. reimbursementsand b. indemnifications for

damages)7 if happy with thetransaction (agencyessential ends byaccomplishment of theobject)if not happy he either

ACCEPTS (e.g. issuanceof certification etc) orREPUDIATES (e.g.disown the transaction)

XIII. HOW IS AGENCY EXTINGUISHED?

A. Revocation; agency coupled with interest

Art. 1873. If a person specially informs another or states by public

advertisement that 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 special

information, and in the latter case with regard to any person.

The power shall continue to be in full force until the notice is

rescinded in the same manner in which it was given. (n)

Art. 1919. Agency is extinguished:

(1) By its revocation;

(2) By the withdrawal of the agent;

(3) By the death, civil interdiction, insanity or insolvency of the

principal or of the agent;(4) By the dissolution of the firm or corporation which entrusted or

accepted the 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. (1732a)

Art. 1920. The principal may revoke the agency at will, and compel

the agent to return the document evidencing the agency. Such

revocation may be express or implied. (1733a)

Art. 1921. If the agency has been entrusted for the purpose of

contracting with specified persons, its revocation shall not prejudice

the latter if they were not given notice thereof. (1734)

Art. 1922. If the agent had general powers, revocation of the agency

does not prejudice 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 persons. (n)

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 theprovisions of the two preceding articles. (1735a)

Art. 1924. The agency is revoked if the principal directly manages the

business entrusted to the agent, dealing directly with third persons.

(n)

Art. 1925. When two or more principals have granted a power of

attorney for a common transaction, any one of them may revoke the

same without the consent of the others. (n)

Art. 1926. A general power of attorney is revoked by a special one

granted to another agent, as regards the special matter involved in

the latter. (n)

Art. 1927. An agency cannot be revoked if a bilateral contract

depends upon it, or if it 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. (n)

BARRETTO VS. STA. MARIA

Sta. Maria, a resident of Spain and owner of La Insular Cigar &

Cigarettes factory. Barretto is the agent for the company in the

Philippines. He transacted with a Uy Yuan who bought company

products but later on became insolvent. Barretto wrote a letter to

Sta. Maria allegedly containing his resignation. Sta. Maria did not

replied only after 11 months and accepted Barrettos resignation and

replaced him with another agent.

Ratio: When the time during which the agent may hold his position is

indefinite or undetermined when no period has been fixed in his

commission and so long as the confidence reposed in him by the

principal exists. But as soon as this confidence disappears the

principal has a right to revoke the power he conferred upon the agent

especially when the latter has resigned his position for good reason.

Sta. Maria did not immediately reply because he was being cautious.

Even though a period is stipulated during which the agent or

employee is to hold his position in the service of the owner or head of

a mercantile establishment, yet the latter may, for any of the special


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reasons specified in the Art 300 of the Code of Commerce, dismissed

such agent or employee even before the termination of such period.

DIOLOSA VS. CA

Brokers authority was revoked because principal intend to reserve

the lots for the benefit of her grandchildren. NOTE: the case talked

about the RESCISSION of the contract of agency

Ratio: The authority to sell is not extinguished until all the lots have

been disposed of, as stated in the contract of agency. Since the

agreement is a valid contract, it can only be rescinded on the grounds

specified in Art 1381 to 1382 of the CC. (in short, those transactions

with lesions or there is economic disadvantage+ other contracts

declared by law to be rescissible).

NEW MANILA LUMBER COMPANY VS. RP

Two schools

Section 1 of Public Act No. 3688 Section one of Public Act No.

3688, entitled "An Act for the protection of persons furnishing

material and labor for the construction of public works", states

that a person entering into a contract with the Republic must

first execute a penal bond, with good and sufficient sureties,

with the additional obligation that such contractor or his or itssub-contractors shall promptly make payments to all persons

supplying him or them with labor and materials in the

prosecution of the work provided for in such contract; and any

person, company or corporation who has furnished labor or

materials in the construction or repair of any public building or

public work, and payment for which has not been made, shall

have the right to intervene and be made a party to any action

instituted by the Government

In the case at bar, it is not disputed that defendant Republic has

already instituted a suit against the contractor for the forfeiture

of the latter's bond posted to secure the faithful performance of

stipulations in the construction contract with regards to one of

the two school buildings. The contractor has a similar bond with

respect to the other school building. Pursuant to Act 3688,plaintiff's legal remedy is, not to bring suit against the

Government, there being no privity of contract between them,

but to intervene in the civil case above-mentioned as an unpaid

supplier of materials to the contractor, or file an action in the

name of the Republic against said contractor on the latter's other

bond.

At any rate, under the facts alleged in the complaint, the powers

of attorney in question made plaintiff the contractor's agent in

the collection of whatever amounts may be due the contractor

from the defendant. And since it is also alleged that, after the

execution of the powers of attorney, the contractor (principal)

demanded and collected from defendant the money the

collection of which he entrusted to plaintiff, the agency

apparently has already been revoked. (Articles 1920 and 1924CC) The point is made by plaintiff that the powers of attorney

executed by the contractor in its favor are irrevocable and are

coupled with interest. But even supposing that they are, still

their alleged irrevocability cannot affect defendant who is not a

party thereto. They are obligatory only on the principal who

executed the agency.

Plaintiff also cites Article 1729 of the new Civil Code, which

states that Those who put their labor upon or furnish materials

for a piece of work undertaken by the contractor have an action

against the owner up to the amount owing from the latter to the

contractor at the time the claim is made. . . . This article,

however, as expressly provided in its last paragraph, "is subject

to the provisions of special la

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