Civil Law Reviewer: Law on Agency

LAW ON AGENCY

1 | P a g e Β и κ т о р

LAW ON AGENCY Casis Reviewer

LAW ON AGENCY

2 | D E F I N I T I O N Β и κ т о р

DEFINITION

I. Definition 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. [1868]

II. Essential elements [Rallos v Felix Go Chan]

a. consent, express or implied, of the parties to establish the relationship b. object is the execution of a juridical act in relation to a third person c. the agent acts as a representative and not for himself d. the agent acts within the scope of his authority

III. Characteristics

a. Consensual b. Nominate c. Principal d. Preparatory e. Unilateral (if gratuitous); Bilateral (if for compensation) f. Representative g. Fiduciary

IV. NOTE

a. The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. That the authorization given contained the phrase “for & in behalf” did not establish an agency. [Victorias Milling v CA]

b. In an agent-principal relationship, the personality of the principal is extended thru the facility of the agent. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. [Orient Air v CA]

c. The basis of agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there must be an intention to accept such appointment and act on it, and in the absence of such intent, there is generally no agency. [Dominion Insurance Corp. v CA]

Comment [vsf1]: Note “agency by operation of law”

LAW ON AGENCY

3 | D I S T I N G U I S H E D F R O M O T H E R C O N T R A C T S Β и κ т о р

DISTINGUISHED FROM OTHER CONTRACTS

Determination of Nature of Contract 1. To determine the nature of a contract courts are not bound to rely

upon the name or title given it by the contracting parties, but the way the contracting parties do or perform their respective obligations stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter. [Shell Co. v Firemen’s Ins]

2. As a general rule the essence of a contract determines what law should apply to the relation between the parties and not what the parties prefer to call the relationship. However, only the acts of the contracting parties, subsequent to and in connection with the execution of the contract, must be considered for the purpose of interpreting the same. [American Rubber Company v CIR]

3. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. [Quiroga v Parsons Hardware]

I. Partnership a. An agent acts not for himself, but for his principal; a partner can act

for himself, for his firm, and for his partners

b. A joint venture, including a partnership, presupposes generally a parity of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributes & where each party exercises equal rights in the conduct of the business. [Sevilla v CA]

II. Lease of services [Nielson & Co., v Lepanto] a. In both agency and lease of services one of the parties binds himself to

render some service to the other party.

b. Basis: Agency, however, is distinguished from lease of services in that the basis of agency is representation, while in the lease of services the basis employment. The lessor of services does not represent his employer, while the agent represents his principal.

c. Purpose: Agency is a preparatory contract, as agency does not stop with the agency because the purpose is to enter into other contracts.

Comment [vsf2]: 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. [1767]

Comment [vsf3]: see De Leon

Comment [vsf4]: 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. [1644]

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d. Authorized Acts: The most characteristic feature of an agency relationship is the power to bring about business relations between his principal and third persons. The agent is destined to execute juridical acts (creation, modification or extinction of relations with third parties). Lease of services contemplate only material acts.

III. Independent Contractor [Control, Subagents, Binding Power, Negligence] a. Control: The IC is authorized to do the work according to his own

method, without being subject to the other party’s control, except insofar as the result of the work is concerned. The agent acts under the control of principal.

b. Subagents: The employees of the contractor are not the employees of the employer of the contractor. Agents of the agent can be controlled by the principal

c. Binding Power: Ordinarily, the independent contractor cannot bind

the employer by tort. An agent can bind the principal

d. Negligence: Negligence of the IC is generally not imputable to his employer. Negligence of the agent is imputable to his principal

IV. Sale a. Agency to Sell v Sale

1. Ownership of goods: Agent receives the goods as the goods of the principal; Buyer receives the goods as owner

2. Payment: Agent delivers proceeds of the sale to the principal; Buyer pays the price

3. Return: Agent can return object in case he is unable to sell to a third person; generally, buyer cannot return the object sold.

4. Discretion: Agent in dealing with thing received is bound to act according to the instructions of his principal; Buyer can deal with the thing as he pleases, being the owner.

b. Agency to Buy v Sale

1. Ownership of goods: The agent acquires ownership in behalf of the principal; the buyer acquires ownership for himself.

2. Changes in price: Any change in the price should be borne by the principal; Buyer cannot adjust the price already agreed upon.

Comment [vsf5]: By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. [1458]

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3. Payment: The agent delivers the price to the principal; the buyer pays the price.

V. Brokerage a. Codal Provisions

1. 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. [1903]

2. 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. [1904]

3. 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. [1905]

4. 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. [1906]

5. 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. [1907]

6. 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 proves that he exercised due diligence for that purpose. [1908]

b. Commission Agent v Broker [Pacific Commercial Co. v Yatco] 1. A commission agent is one engaged in the purchase and

sale for a principal of personal property, which for this purpose, has to be placed in his possession and at his disposal. He has a relation not only to with his principal,

LAW ON AGENCY


and the buyers or sellers, but also with the property which constitutes the object of the transaction.

2. A broker, upon the other hand, maintains no relation with the thing which he purchases or sells. He is supposed to be merely a go-between, an intermediary between the seller and the buyer. As such, he does not have either the custody of or the possession of the thing that he disposes of. His only function is, therefore, to bring the parties to the transaction.

VI. Negotiorum Gestio a. Essential Requisites [2144]

1. no meeting of the minds 2. taking charge of another’s business or property 3. the property or business must have been abandoned or

neglected (otherwise, the rules on unauthorized contracts would apply)

4. the officious manager must not have been expressly or implicitly authorized (otherwise the rules on agency will apply)

5. the officious manager must have voluntarily taken charge.

b. Diligence Required of Officious Manager [2145] 1. The officious manager shall perform his duties with all the

diligence of a good father of a family.

2. He shall 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.

c. Agency v Negotiorum Gestio 1. Consent: In agency, there is a contract caused by a meeting

of the minds, expressly or impliedly; Negotiorum Gestio is a quasi-contract, there having been no meeting of the minds.

2. Control: Agent is controlled by the principal; the officious manager follows his judgment and the presumed will of the owner

Comment [vsf6]: 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. [2144]

LAW ON AGENCY

7 | C L A S S I F I C A T I O N Β и κ т о р

CLASSIFICATION

I. Express or Implied

a. Agency may be express, or implied from: 1. the acts of the principal; 2. his silence or lack of action; or 3. his failure to repudiate the agency

knowing that another person is acting on his behalf without authority[1869]

b. Acceptance by the agent may be express, or implied [1870]: 1. from his acts which carry out the agency; or 2. from his silence or inaction according to the circumstances

c. Implied acceptance of the agency between persons who are present:

[1871] if the principal delivers his power of attorney to the agent and the latter receiver it without objection

d. Acceptance of the agency between persons who are absent: [1871] 1. GR: Acceptance cannot be implied from the silence of the

agent 2. X:

i. when the principal transmits his POA to the agent, who receives it without any objection

ii. when the principal entrusts to him by letter or telegram a POA with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter

e. 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. [1873]

f. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, 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. [Keeler v Rodriguez]

LAW ON AGENCY


II. Oral or Written a. Agency may be oral, unless the law requires a specific form. [1869(2)]

b. 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. [1874]

c. Where the owner of real property desires to confer upon an attorney in fact authority to sell the same, it is necessary that the same be in writing; but it is not necessary that the property to be sold should be precisely described. It is sufficient if the authority is so expressed as to determine without doubt the limits of the agent’s authority. [Jimenez v Rabot]

III. Onerous or Gratuitous

Agency is presumed to be for compensation, unless there is proof to the contrary. [1875]

IV. General or Special

a. A general agency comprises all the business of the principal; a special agency comprises on or more specific transactions [1876]

b. Universal v General v Special 1. Universal Agent—one employed to do all acts that the

principal may personally do, and which he can lawfully delegate to another the power of doing.

2. General Agent—one employed to transact all the business of the principal, or all the business of a particular kind or in a particular place, or in other words to all acts, connected with a particular trade, business or employment.

3. Special or Particular Agent—one authorized to act in or more

specific transactions, or to do one or more specific acts, or to act upon a particular occasion.

c. General and Special Agent Distinguished [SEC2T] 1. Scope of Authority

i. G: Usually authorized to do all acts connected with the business or employment in which he is engaged

ii. S: Authorized to do only acts in pursuance of particular instructions or with restrictions necessarily implied from the acts to be done.

LAW ON AGENCY


2. Extent by which agent may bind principal i. A: Binds his principal by an act within the scope of

authority although it may be contrary to his special instructions

ii. S: Cannot bind his principal in a manner beyond or outside the specific acts which he is authorized to perform on behalf of his principal

3. Continuity i. G: Conducts a series of transactions involving a

continuity of service ii. S: Usually involves a single transaction or a series of

transactions not involving continuity

4. Construction of Instructions of Principal i. G: Statement of principal with respect to the agent’s

authority would ordinarily be regarded as advisory only

ii. S: Authority of the agent must be strictly pursued

5. Termination of Authority i. G: Apparent authority does not terminate by the mere

revocation of his authority without notice to the third party

ii. S: Mere revocation is effective to terminate the authority as to third persons because the third person has a duty to inquire

V. Couched in General Terms or Special Power of Attorney

a. An agency couched in general terms comprises only acts of administration, even if [1877]

1. the principal states that he withholds no power; or 2. he states that the agent may execute such acts as he may

consider appropriate; or 3. the agency should authorize a general and unlimited

management.

b. Special power if attorney are necessary in the following cases [1878]: [PNC; WIG; LLB’ PORIRS]

1. to make such Payments as are not usually considered 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;

LAW ON AGENCY


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.

c. A special power to sell excludes the power to mortgage; and a special

power to mortgage does not include the power to sell. [1879]

d. A special power to compromise does not authorize submission to arbitration. [1880]

NOTE:

e. The right to commence action for collection of debts owing to principal is not an incident of strict ownership, which must be conferred upon express terms. [Germann & Co v Donaldson]

f. The power to legally compel the payment of debts owing to the principal is an express grant of the right to bring suit for the collection of such debts. [Germann & Co v Donaldson]

g. Unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying the agency into effect. [Macke v Camps].

h. A power of attorney “to loan and borrow money” and to mortgage the principal’s property does not carry with it or imply that that the agent has a legal right to make the principal liable for the personal debts of the agent. [BPI v De Coster]

LAW ON AGENCY


i. It is neither accurate not correct to conclude that the absence of SPA (where one is required by law) renders the contract entered into by virtue of said SPA void. The contract is merely unenforceable. [Dungo v Lopena, citing 1403(1)]

j. The grantor of a SPA to mortgage is liable only to the extent that the property authorized by him to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by the grantee of the power but the grantor cannot be held personally liable for the payment of such obligations, in the absence of any ratification or other similar act that would estop the grantor. [PNB v Sta. Maria]

k. 1878 refers to the nature of the authorization, not to its form. Even if a document is titled as a general power of attorney, the requirement of special power of attorney is met is there is a clear mandate from the principal specifically authorizing the performance of the act [Bravo-Guerrero v Bravo]

VI. Agency by Estoppel a. 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. [1900]

b. 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. [1901]

c. 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. [1902]

d. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. [1910]

e. 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. [1911]

f. A banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting

Comment [vsf7]: 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 power

Comment [vsf8]: The scope of the agent’s authority is what appears in the written terms of the power of attorney. While third persons are bound to inquire into the extent or scope of the agent’s power of attorney. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latter’s authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent by the principal to his agent outside of the written power of attorney. [Siredy Enterprises v CA]

LAW ON AGENCY


within the general scope of his authority even though the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person for his own ultimate benefit. [Prudential Bank v CA]

g. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent—if he does not make such inquiry, he is chargeable with knowledge of the agent’s authority and his ignorance of that authority will not be any excuse; the principal may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency. [Manila Memorial Park Cemetery v Linsangan]

LAW ON AGENCY

13 | A G E N C Y B Y O P E R A T I O N O F L A W Β и κ т о р

AGENCY BY OPERATION OF LAW

I. 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. [1881]

II. 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. [1882]

III. The agent must finish the business already begun on the death of the principal, should delay entail any danger. [1884(2)]

IV. 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. [1885]

V. 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. [1929]

VI. 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. [1930]

VII. 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. [1931]

VIII. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. [1932]

LAW ON AGENCY

14 | O B L I G A T I O N S O F T H E A G E N T Β и κ т о р

OBLIGATIONS OF THE AGENT

I. Act within scope of authority

a. 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. [1881]

b. 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. [1887]

c. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. [1899]

d. 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. [1900]

e. 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. [1901]

f. 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. [1902]

g. Acts of an agent beyond his limited powers are null; three qualifications whereby the principal is held bound: [Strong v Gutierrez-Repide]

1. where his acts have contributed to deceive a person in good faith

2. where the limitations upon the power created by him could not have been known by a third person

3. where he has placed in the hands of the agent instruments signed by him in blank.

h. Where similar acts have been approved by the directors as a matter of general practice, custom and policy, the general manager may bind the company without formal authorization of the board of directors.

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In varying language, existence of such authority is established by proof of the course of business, the usages and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. [Board of Liquidators v Kalaw]

i. Ratification by a corporation of an unauthorized act or contract by its officers or others relates back to the time of the act or contract ratified and is equivalent to original authority. [Board of Liquidators v Kalaw]

II. Carry out or not a. 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. [1884]

b. 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. [1929]

c. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. [1888]

d. When an agent in executing the orders and commissions of his principal carries out the instructions he has received from his principal, and does not appear to have exceeded his authority or to have acted with negligence, deceit or fraud, he cannot be held responsible for the failure of his principal to accomplish the object of the agency. [Gutierrez Hermanos v Oria Hermanos & Co]

III. Act with diligence

a. 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. [1885]

b. 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. [1887]

c. 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. [1909]

Comment [vsf9]: Where the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in Nacoco’s behalf without prior board approval, and the board itself, by its acts and thru acquiescence, practically laid aside the by-law requirement of prior approval, the contracts of the general manager, under the given circumstances, are valid corporate acts.

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IV. Advance funds— a. Should there be a stipulation that the agent shall advance the

necessary funds, he shall be bound to do so except when the principal is insolvent. [1886]

b. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency.xxx [1912]

V. Prefer interest of principal over personal interest

a. 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. [1889]

b. 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. [1916]

c. 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. [1917]

d. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; [1491(2)]

e. A person who acts as a go-between or middleman between the vendor and the vendee, bringing them together to make the contract themselves, without any power or discretion whatsoever which he could abuse to his advantage and to the owner’s prejudice, is not an agent within the meaning of 1491. The ban in 1491 connotes the idea of trust and confidence; and so, where the relationship does not involve considerations of good faith and integrity, the prohibition should not, and does not apply. To come under the prohibition, the agent must be in a fiduciary relation with his agent. [G. Araneta v De Paterno and Vidal]

VI. Render Account/Deliver a. 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.

Comment [vsf10]: 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.

Comment [vsf11]: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

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Every stipulation exempting the agent from the obligation to render an account shall be void [1891]

b. The agent has an absolute obligation to make a full disclosure or

complete account to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. [Domingo v Domingo]

c. An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal is guilty of breach of his loyalty to the latter and forfeits his right to collect the commission that may be due him, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. [Domingo v Domingo]

d. The duty embodied in 1891 does not apply if the agent or broker acted

only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. [Domingo v Domingo]

VII. Be Solidarily or Personally Liable a. The responsibility of two or more agents, even though they have been

appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. [1894]

b. 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 fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority. [1895]

c. 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. [1897]

d. 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. [1898]

Comment [vsf12]: Take note of Manila Memorial v Linsangan: Third person chargeable with knowledge of agent’s authority if he does not inquire as to the limits of the agent’s power.

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e. The following contracts are unenforceable, unless they are ratified: 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; [1403(1)]

f. 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. [1883]

g. An agent who obligates his principal to deliver a specific property to a third party may not thereafter, to the prejudice of such third party, appropriate and apply the same property or its proceeds, to the payment of debts owing by the principal to the agent; and the circumstance that the principal assents to such application of the property does not alter the case. [National Bank v Welch]

h. An agent who [without authority] or without a principal is himself

regarded as the principal, possessed of all the rights and subject to all the liabilities of a principal; a person acting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for such contracts into or for acts performed as such agent. [Vda. De Salvatierra v Garlitos]

VIII. Pay Interest— 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. [1898]

IX. Special Obligations of Commission Agents a. 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. [1903]

b. 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. [1904]

Comment [vsf13]: The rule in 1403 that a contract entered into by an agent beyond his authority is unenforceable does not apply where the contract is being enforced as to damages against the agent itself for doing what it did without authority. 1403 refers to the unenforceability of the contract against the principal. It is being enforced against the agent because 1897 implies that the agent who acts in excess of authority is personally liable to the party with whom he contracted. And that rule is complemented by 1898 which provides that “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. [Napocor v Natl Merchandising Corp]

Comment [vsf14]: The contract does not fall under this exception if the object of the contract is one of service; even if equipment owned by the principal were used. [Go v CA]

Comment [vsf15]: In which case, the contract must be considered as entered into between the principal and the third person. [Sy-Juco and Viardo v Sy-Juco]

LAW ON AGENCY


c. 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. [1905]

d. 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. [1906]

e. 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. [1907]

f. 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 proves that he exercised due diligence for that purpose. [1908]

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20 | R I G H T S O F T H E A G E N T Β и κ т о р

RIGHTS OF THE AGENT

I. Do acts conducive a. 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. [1881]

b. 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. [1882]

II. Act in own name a. 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. [1883]

b. Although, according to [1883], when the agent acts in his own name

he is not personally liable to the person with whom he enters into a contract when things belonging to the principal are the object thereof, yet such third person has a right of action not only against the principal but also against the agent, when the rights and obligations which are the subject matter of the litigation cannot be legally and juridically determined without hearing both of them. In such case, the agent being a necessary party to the full and complete determination of the case which originated from his act should be included in the case as defendant. [Beaumont v Prieto]

c. For the principal to be bound by the act of an agent who contracted in his [agent’s] own name, it is not sufficient that the contract involved things belonging to the principal. The agent should also have acted within his scope of authority. [National Bank v Agudelo, 1933; Rural Bank of Bombon v CA, 1992] Hence:

1. If agent acts within the scope of his authority, & i. in principal’s behalf—principal is bound; agent not

personally liable, unless he expressly binds himself ii. in agent’s own name—apply 1883

2. If agent acts beyond the scope of his authority, &



Comment [vsf18]: A necessary party is one who is not indispensable but who ought to be joined as a party if complete relief is to be accorded as to those already parties, or for a complete determination or settlement of the claim subject of the action. [§8, R3]

Comment [vsf19]: The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. [1910(1)]

Comment [vsf20]: 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. [1897]

LAW ON AGENCY


i. in principal’s behalf—unauthorized and unenforceable against the principal [Napocor v Natl Merchandising Corp], but may be ratified; agent personally liable if he exceeded his authority without giving such party sufficient notice of his powers. [1897]

ii. in agent’s own name—principal not bound; agent personally liable [1883], even if contract involves property belonging to the principal [National Bank v Agudelo].

d. Requirement in National Bank v Agudelo not followed in Gold Star Mining v Lim-Jimena [1968] where the court held that the principal has a cause of action against the third party because the contract involved his [principal] property, without taking into account that the agent exceeded his authority in entering into such contract.

e. As a consequence of the principal being bound by contracts entered into by his agent, even if said contracts were in the latter’s name, when such contracts involve his [principal property], then it follows that he can also demand the enforcement of his rights arising from said contracts. [NFA v IAC]

III. Lend Money [1890]

a. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest.

b. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal.

IV. Appoint Substitute a. 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. [1892]

b. The legal maxim potestas delgata non delegare potest; a power once delegated cannot be re-delegated, while applied primarily in political law to the exercise of legislative power, is a principal of agency. For another, a re-delegation of the agency would be detrimental to the principal as the second agent has no privity of contract with the former. [Baltazar v Ombudsman, 2006]

Comment [vsf21]: The following contracts are unenforceable, unless they are ratified: 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; [1403(1)]

Comment [vsf22]: 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. [1898]

Comment [vsf23]: As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. [1910(2)]

Comment [vsf24]: Query: what if he has been

authorized to lend money without interest.

Comment [vsf25]: Not necessarily true because 1893 grants the principal the right to sue the substitute.

LAW ON AGENCY


c. What is allowed in 1892 is the appointment of a substitute and not a

delegation of the agency. [Baltazar v Ombudsman, 2006]

d. The differentiation in Baltazar v Ombudsman was not applied in Escueta v Lim [2007], where the court upheld a sale entered into by a party appointed by the agent as his [agent’s] agent in behalf of the agent’s principal

V. Retain in pledge objects of agency

a. 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. [1914]

b. 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. [1912]

c. 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. [1913]

Comment [vsf26]: The liability of the principal for damages is limited only to that which the execution of the agency has caused the agent. Thus, no promise to indemnify will be implied for losses or damages caused by the independent and unexpected wrongful acts of third persons for which the principal is no way responsible. [Mechem in De Leon]

LAW ON AGENCY

23 | O B L I G A T I O N S O F T H E P R I N C I P A L Β и κ т о р

OBLIGATIONS OF THE PRINCIPAL

I. Comply with obligations a. The principal must comply with all the obligations which the agent

may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. [1910]

b. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. [1393]

c. Ratification cannot be inferred from acts that a principal has a right to do independently of the unauthorized act of the agent. For an act of the principal to be considered as an implied ratification of an unauthorized act of an agent, such act must be inconsistent with any other hypothesis than that he approved and intended to adopt what had been done in his name. [Woodchild Holdings v RECCI]

d. Conditions for ratification 1. Principal must have capacity and power to ratify 2. Principal must have had knowledge of material facts 3. Principal must ratify the acts in its entirety 4. Act must be capable of ratification 5. Act must be done in behalf of the principal

e. If writing is required to grant an authority to do a particular act,

ratification of that act must also be in writing. [Woodchild Holdings v RECCI]

II. Be Solidarily Liable a. 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. [1911]

b. 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. [1915]

Comment [vsf27]: The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. [1216]

LAW ON AGENCY


III. Advance/Reimburse a. 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. [1912]

b. The principal is not liable for the expenses incurred by the agent in

the following cases [1918] [CFKS]: 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.

c. Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. [1236(2)]

IV. Indemnify— 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. [1913]

V. Compensate

a. Agency is presumed to be for a compensation, unless there is proof to the contrary. [1875]

b. Since the broker’s only job is to bring together the parties to a transaction, it follows that if the broker does not succeed in bringing the mind of the purchaser and the vendor to an agreement with reference to the terms of a sale, he is not entitled to a commission. [Rocha v Prats]

c. When a party is not the efficient procuring cause in bringing about a sale, he is not entitled to the stipulated broker’s commission. [Inland Realty v CA]


LAW ON AGENCY


d. However, for the purpose of equity, an agent who is not the efficient procuring cause is nonetheless entitled to his commission, where he, notwithstanding the expiration of his commission, nonetheless took diligent steps to bring back together the parties, such that a sale was consummated. [Prats v CA]

e. If the principal breaks off from negotiations with a buyer brought by the agent in order to deliberately deal later with the buyer personally, this is evident bad faith. In such case, justice demands compensation for the agent. [Infante v Cunanan]

LAW ON AGENCY

26 | E X T I N G U I S H M E N T Β и κ т о р

EXTINGUISHMENT [EDWARD]

I. Expiration of the period for which it was constituted—

When the agency was created for a specific period of time, and the period has expired, it is automatically terminated.

II. Death, Civil Interdiction, Insanity, Insolvency

a. GR: Death extinguishes agency

b. X: i. Agency has been constituted in the common interest of the

principal and of the agent or in the interest of a 3rd person who has accepted the stipulation in his favor. [1930]

ii. 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 fully effective with respect to 3rd persons who may have contracted with him in good faith. [1931]

iii. Agent must finish business already begun on the death of the principal, should delay entail any danger. [1884]

III. Withdrawal of the Agent a. GR: Agent may withdraw from the agency by giving due notice to the

principal [1928]

b. BUT: i. If the principal 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 performance of the agency without grave detriment to himself. [1928]

ii. 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. [1929]

IV. Accomplishment of the object or purpose of the agency

V. Revocation a. GR: 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. [1920]

LAW ON AGENCY


i. Express/Implied 1. Express— principal clearly and directly makes a

cancellation of the authority of the agent in writing or orally

2. Implied/By Operation of Law � 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 2 preceding articles [1923]

� The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. [1924]

� A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter [1926]

ii. Revocation in case of solidary principals [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 others.

b. X: i. An agency cannot be revoked [1927]

1. if a bilateral contract depends upon it; or 2. if it is the means of fulfilling an obligation already

contracted; or 3. if a partner is appointed manager of a partnership in

the contract of partnership and his removal from the management is unjustifiable.

NOTE:

ii. Powers of attorney falling under 1927 cannot be revoked at the pleasure of the principal, but may be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal. [Coleongco v Claparols]

iii. A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. [Del Rosario v Abad]

iv. If there is a period stipulated in the agency contract, the agent may still revoke the agent’s authority at will; but principal will be liable for damages. [Dialosa v CA]

Comment [vsf29]: 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. [1921]

Comment [vsf30]: 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. [1922]

LAW ON AGENCY


VI. Dissolution of the firm or corporation which entrusted or accepted the agency

LAW ON AGENCY SYNTHESIZED


LAW ON AGENCY SYNTHESIZED BUKTOP


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AGENT ACTING WITHIN THE SCOPE OF AUTHORITY

1. When he is performing acts which are conducive to the

accomplishment of the purpose of the agency [1881]

2. If the agency has been performed in a manner more advantageous to the principal than that specified by him [1882]

3. If in the execution of the agency, he shall act in accordance with the instructions of the principal. [1887]

4. If he lends money to the agency at the current rate of interest, in case

he has been empowered to borrow money. [1890]

5. 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. [1900]

6. 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. [1901]

7. Where similar acts have been approved by the directors as a matter of general practice, custom and policy, the general manager may bind the company without formal authorization of the board of directors. In varying language, existence of such authority is established by proof of the course of business, the usages and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. [Board of Liquidators v Kalaw]

Comment [vsf31]: 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.

Comment [vsf33]: Unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying the agency into effect. [Macke v Camps]

Comment [vsf32]: The power to legally compel the payment of debts owing to the principal is an express grant of the right to bring suit for the collection of such debts. [Germann & Co v Donaldson]

Comment [vsf34]: 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.

Comment [vsf35]: Note 1900

Comment [vsf36]: If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal.

Comment [vsf37]: The scope of the agent’s authority is what appears in the written terms of the power of attorney. While third persons are bound to inquire into the extent or scope of the agent’s power of attorney. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latter’s authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent by the principal to his agent outside of the written power of attorney. [Siredy Enterprises v CA]

Comment [vsf38]: Where the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in Nacoco’s behalf without prior board approval, and the board itself, by its acts and thru acquiescence, practically laid aside the by-law requirement of prior approval, the contracts of the general manager, under the given circumstances, are valid corporate acts.


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AGENT ACTING BEYOND THE SCOPE OF HIS AUTHORITY

1. When he acts contrary to his power of attorney as written [1900, 1902]

2. When the agency is couched in general terms & the agent performs

acts of strict ownership; even if [1877] a. the principal states that he withholds no power; or b. he states that the agent may execute such acts as he may

consider appropriate; or c. the agency should authorize a general and unlimited

management.

3. When he performs any act listed in 1878 without a special power of attorney. [1878] [PNC; WIG; LLB’ PORIRS]

a. to make such Payments as are not usually considered acts of administration

b. to effect Novations which put an end to obligations already in existence at the time the agency was constituted.

c. 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;

d. to Waive any obligation gratuitously; e. to enter into any contract by which the ownership of an

Immovable is transmitted or acquired either gratuitously or for a valuable consideration;

f. to make Gifts, except customary ones for charity or those made to employees in the business managed by the agent;

g. to Loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;

h. to Lease any real property to another person for more than one year;

i. to Bind the principal to render some service without compensation;

j. to bind the principal in a contract of Partnership; k. to Obligate the principal as a guarantor or surety; l. to create or convey Real rights over immovable property; m. to accept or repudiate an Inheritance; n. to Ratify or recognize obligations contracted before the

agency; o. any other act of Strict dominion.

Comment [vsf39]: 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.

Comment [vsf40]: 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.

Comment [vsf41]: An agency couched in general terms comprises only acts of administration, 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.

Comment [vsf42]: The right to commence action for collection of debts owing to principal is not an incident of strict ownership, which must be conferred upon express terms. [Germann & Co v Donaldson]

Comment [vsf43]: 1878 refers to the nature of the authorization, not to its form. Even if a document is titled as a general power of attorney, the requirement of special power of attorney is met is there is a clear mandate from the principal specifically authorizing the performance of the act [Bravo-Guerrero v Bravo]


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4. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. [1879]

5. A special power to compromise does not authorize submission to arbitration. [1880]

6. A power of attorney “to loan and borrow money” and to mortgage the principal’s property does not carry with it or imply that that the agent has a legal right to make the principal liable for the personal debts of the agent. [BPI v De Coster]

7. When the execution of the agency would manifestly result in loss or damage to the principal. [1888]

8. When the agent has been authorized to lend money at interest & he borrows without consent from the principal [1890]

Comment [vsf44]: An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal.

Comment [vsf45]: If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal.


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IF AGENT ACTS WITHIN THE SCOPE OF HIS AUTHORITY

1. 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. [1897]

2. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. [1899]

3. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. [1910]

4. 1883 a. If the agent acts in his own name, the agent is directly bound

to the person with whom he contracted as of the transaction were his own; except if the contract involves things belonging to the principal.

b. In the first instance, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.


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IF AGENT ACTS BEYOND THE SCOPE OF HIS AUTHORITY

1. Contract unenforceable against the principal

a. Those entered into the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers are unenforceable, unless ratified. [1403(1)]

b. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. [1910]

c. It is neither accurate not correct to conclude that the absence of SPA (where one is required by law) renders the contract entered into by virtue of said SPA void. The contract is merely unenforceable. [Dungo v Lopena, citing 1403(1)]

2. Agent personally liable under the contract a. The agent is personally liable to the party with whom he

contracts if he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. [1897]

b. 1898 i. agent contracts in the name of the principal; ii. he exceeds the scope of the his authority;

iii. the principal does not ratify the contract; iv. the party with whom the agent contracted is aware of

the limits of the powers granted by the principal; & v. the agent undertook to secure the principal’s

ratification c. An agent who exceeds his authority is personally liable for

damages to third persons he may have contracted with [NAPOCOR v Natl Merchandising Corp]

d. An agent who [without authority] or without a principal is

himself regarded as the principal, possessed of all the rights and subject to all the liabilities of a principal; a person acting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for such contracts into or for acts performed as such agent. [Vda. De Salvatierra v Garlitos]

3. The principal is solidarily liable with the agent who has exceeded his

authority if the former allowed the latter to act as though he had full power. [1911]

4. Agent may not be held responsible for the fault or negligence of his co-agents, even if solidarity has been agreed upon. [1895]

Comment [vsf46]: The rule in 1403 that a contract entered into by an agent beyond his authority is unenforceable does not apply where the contract is being enforced as to damages against the agent itself for doing what it did without authority. 1403 refers to the unenforceability of the contract against the principal. It is being enforced against the agent because 1897 implies that the agent who acts in excess of authority is personally liable to the party with whom he contracted. And that rule is complemented by 1898 which provides that “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.

Comment [vsf47]: 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 fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority.


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VOID CONTRACTS ENTERED INTO BY AGENT

1. Void or inexistent contracts [1409]

2. Sale of a piece of land or any interest therein & the authority of the agent is not in writing [1874]

3. Acts of the substitute appointed against the prohibition of the

principal [1892]

4. 1898 a. agent contracts in the name of the principal; b. he exceeds the scope of the his authority; c. the principal does not ratify the contract; d. the party with whom the agent contracted is aware of the

limits of the powers granted by the principal; & e. the agent did not undertake to secure the principal’s

ratification

CONTRACTS UNENFORCEABLE AGAINST PRINCIPAL

1. Agent has no authority or acted beyond the scope of his authority

a. Those entered into the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers are unenforceable, unless ratified. [1403(1)]

b. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. [1910]

c. It is neither accurate not correct to conclude that the absence of SPA (where one is required by law) renders the contract entered into by virtue of said SPA void. The contract is merely unenforceable. [Dungo v Lopena, citing 1403(1)]

2. When the agent acts in his own name, persons with whom the agent

has contracted have no right of action against the principal, except when the contract involves things belonging to the principal. [1883]

3. Unenforceable contracts [1403]

Comment [vsf48]: 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.




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AGENT PERSONALLY LIABLE UNDER THE CONTRACT

1. When an agent acts in his own name, he is directly bound to the

person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. [1883]

2. The agent is personally liable to the party with whom he contracts if he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. [1897]

3. 1898 a. agent contracts in the name of the principal; b. he exceeds the scope of the his authority; c. the principal does not ratify the contract; d. the party with whom the agent contracted is aware of the

limits of the powers granted by the principal; & e. the agent undertook to secure the principal’s ratification

4. An agent who exceeds his authority is personally liable for damages

to third persons he may have contracted with [NAPOCOR v Natl Merchandising Corp]

5. An agent who [without authority] or without a principal is himself regarded as the principal, possessed of all the rights and subject to all the liabilities of a principal; a person acting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for such contracts into or for acts performed as such agent. [Vda. De Salvatierra v Garlitos]

6. 1916, 1917 a. When two persons contract with regard to the same thing, one

of them with the agent and the other with the principal b. the two contracts are incompatible with each other c. the agent acted in bad faith d. he alone shall be responsible

Comment [vsf51]: 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.

Comment [vsf52]: 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.

Comment [vsf53]: The rule in 1403 that a contract entered into by an agent beyond his authority is unenforceable does not apply where the contract is being enforced as to damages against the agent itself for doing what it did without authority. 1403 refers to the unenforceability of the contract against the principal. It is being enforced against the agent because 1897 implies that the agent who acts in excess of authority is personally liable to the party with whom he contracted. And that rule is complemented by 1898 which provides that “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.

Comment [vsf54]: When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and , that of prior date shall be preferred, without prejudice to the provisions of Article 1544. [1916]

Comment [vsf55]: In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable for damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. [1917]


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PRINCIPAL LIABLE UNDER THE CONTRACT

1. 1910

a. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority

b. The principal is must comply with all the obligations which the agent may have contracted beyond the scope of his authority but were ratified expressly or tacitly by the principal.

2. When an agent acts in his own name, but the contract involves things belonging to the principal, the contract must be considered as entered into between the principal and the third person. [1883, Sy-Juco and Viardo v Sy-Juco]

3. The principal is solidarily liable with the agent who has exceeded his authority if the former allowed the latter to act as though he had full power. [1911]

4. 1916, 1917

a. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal

b. the two contracts are incompatible with each other c. the agent acted in good faith d. the principal shall be liable for damages to the third person

whose contract must be rejected

Comment [vsf56]: Although, according to [1883], when the agent acts in his own name he is not personally liable to the person with whom he enters into a contract when things belonging to the principal are the object thereof, yet such third person has a right of action not only against the principal but also against the agent, when the rights and obligations which are the subject matter of the litigation cannot be legally and juridically determined without hearing both of them. In such case, the agent being a necessary party to the full and complete determination of the case which originated from his act should be included in the case as defendant. [Beaumont v Prieto]

Comment [vsf57]: For the principal to be bound by the act of an agent who contracted in his [agent’s] own name, it is not sufficient that the contract involved things belonging to the principal. The agent should also have acted within his scope of authority. [National Bank v Agudelo, 1933; Rural Bank of Bombon v CA, 1992]

Comment [vsf58]: When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and , that of prior date shall be preferred, without prejudice to the provisions of Article 1544. [1916]

Comment [vsf59]: In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable for damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. [1917]


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AGENT LIABLE TO PRINCIPAL

1. Agent is liable for the damages which, thru his non-performance, the

principal may suffer. [1884]

2. 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. [1889]

3. 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 fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority. [1895]

4. 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. [1896]

5. 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. [1905]

6. 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. [1906]

7. 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. [1907]

8. 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 proves that he exercised due diligence for that purpose. [1908]

9. 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. [1909]

10. The agent must indemnify the principal for any damage that the principal may suffer by reason of the withdrawal of the agent; unless

Comment [vsf60]: 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.


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the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. [1928]

Comment [vsf61]: 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.


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PRINCIPAL LIABLE TO AGENT

1. Should the agent have advanced sums necessary for the execution of

the agency, 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. [1912]

2. 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. [1913]

3. 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. [1915]

4. Compensation

a. Agency is presumed to be for a compensation, unless there is proof to the contrary. [1875]

b. Since the broker’s only job is to bring together the parties to a transaction, it follows that if the broker does not succeed in bringing the mind of the purchaser and the vendor to an agreement with reference to the terms of a sale, he is not entitled to a commission. [Rocha v Prats]

c. When a party is not the efficient procuring cause in bringing about a sale, he is not entitled to the stipulated broker’s commission. [Inland Realty v CA]

d. However, for the purpose of equity, an agent who is not the efficient procuring cause is nonetheless entitled to his commission, where he, notwithstanding the expiration of his commission, nonetheless took diligent steps to bring back together the parties, such that a sale was consummated. [Prats v CA]

e. If the principal breaks off from negotiations with a buyer brought by the agent in order to deliberately deal later with the buyer personally, this is evident bad faith. In such case, justice demands compensation for the agent. [Infante v Cunanan]

5. Where the agency contract stipulates a period, the principal shall be liable to the agent for damages should he revoke the agency before the expiration of such period. [Diolosa v CA]

Comment [vsf62]: 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. [1912]


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Civil Law Reviewer: Law on Agency

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