The Law on Agency I. Introduction A. Definition Art. 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. (1709a) Agency: A relationship which implies a power in an agent to contract with a 3 person on behalf of a principal. Kind of Contract: It is a preparatory contract. It is a contract entered not for its own end but to be able to enter into other contracts. Characteristics: 1.) Consensual: perfected by mere consent; 2.) Nominate: it has its own name; 3.) Principal: does not depend on another contract for its existence and validity; 4.) Preparatory: entered into as a means to an end; 5.) Unilateral/Bilateral: a.) Unilateral: if contract is gratuitous, it creates obligations for only one of the parties, i.e. agent. b.) Bilateral: if for compensation, it gives rise to reciprocal rights and obligs. Basis: Representation. The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if the principal personally did them. Distinguishing Features: 1.) Representative character; and 2.) Derivative authority. Purpose: To extend the personality of the principal through the facility of the agent. Essential Elements of Agency: 1.) Consent, express or implied;
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2.) Object of the contract is the execution of a juridical act in relation to 3 persons; 3.) The agent acts as a representative and not for himself; 4.) The agent acts within the scope of his authority. Acts that cannot be done through an agent: 1.) Personal acts: if personal performance is required by law or public policy or agreement; 2.) Criminal or illegal acts: attempt to delegate another authority to do an act which, if done by the principal would be illegal, is void Nature of Relation between Principal and Agent: Fiduciary, based on trust and confidence Consent 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) 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) 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) Power of attorney: An instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the
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principal. Its primary purpose is to evidence the authority of the agent to 3 parties w/ whom the agent deals. Construction: A power of atty is strictly construed and strictly pursued. The instrument will be held to grant only those powers which are specified, and the agent may neither go beyond nor deviate from the power of atty. The only exception is when strict construction will destroy the very purpose of the power. Not limited to face-to-face encounters. 2 persons conversing on the phone are also considered as both present 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 power of 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) 2 Ways of Giving Notice of Agency 1.) By special information 2.) By public advertisement Effects:

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When can the 3 person repudiate the contract? Before actual ratification by the principal, or before the principal has signified his willingness to ratify the agents acts. Effect of the principal receiving the benefits of the transaction: He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens. Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. 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 represent him. 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; a. Express; ratification- actually authorized, either orally or in writing b. Implied; ratification- implied from acts of principal, from his silence or lack of action or his failure to repudiate the agency knowing that another person is acting on his behalf w/o authority 2. Object- execution of a juridical act in relation to 3rd persons 3. Consideration Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) Broker: One who in behalf of others, and for compensation or fee, negotiate contracts relative to property. He is the negotiator between the parties, never acting in his own name, but in the name of those who employ him. He is strictly a middleman and for some purposes, the agent of both parties. When is a broker entitled to compensation? A broker is entitled to commission whenever he brings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. A broker is never entitled to commission for unsuccessful efforts. Does the law allow double agency? Such agency is disapproved by law for being against public policy and sound morality. The exception is where the agent acted with full knowledge and free consent of the principals. In case the agent assumes a double agency, what is his right to compensation? 1.) If with knowledge of both principals recovery can be had from both. 2.) If without knowledge of both agent can recover from neither. 3.) If with knowledge of only one as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public policy and good morals. Parties to the contract of agency Principal- may be a natural person or a juridical person Agent Must the parties be capacitated? Principal must be capacitated. The rule is if a person is capacitated to act for himself or in his own right, he can act through an agent. Insofar as 3 persons are concerned, it is enough that the principal is capacitated; but insofar as his obligations to his principal are concerned, the agent must be able to bind himself.
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Except: if you can prove that the 3 person read the notice in the newspaper 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) Effect of ratification by the principal: Ratification of a contract gives it the same effect as if the principal had originally authorized it. Who must ratify the contract? Only the principal. But there must be knowledge on the part of the principal of the things he is going to ratify.
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1.) Special information: the person appointed as agent is considered such with respect to the person to whom it was given. 2.) Public advertisement: Agent is considered such with regard to any person. Revocation An agency is revoked in the same manner as it was given. General rule: Special information needs special information of revocation.
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Rallos v.Felix Go Chan Facts: Two sisters executed SPOA in favor of their brother Simeon to sell for and in their behalf a parcel of land. After one of the sisters died, Simeon sold the undivided shares of both sisters to Felix Go Chan. The administrator of the intestate estate of the deceased sister filed a complaint to have the sale declared unenforceable. Doctrine: Agencya contract whereby one party, called the principal (mandante), authorizes another, called the agent (mandatoria), to act for and in his behalf in transactions with third persons. Essential elements of agency: 1. Consent, express or implied, of the parties to establish the relationship; 2. Object is the execution of a juridical act in relation to a third person; 3. Agent acts as a representative and not for himself; and 4. Agent acts within the scope of his authority. Important feature of agency: representation based on consent (agent as an extension of the principal)

Orient Air Services v. CA Facts: American Air, as principal, and Orient Air, as agent, entered into a General Sales Agency Agreement. However, American Air terminated the agreement due to Orient Airs alleged failure to comply with its obligation to remit commissions. TC ruled in favor of Orient Air. American Air was ordered to reinstate Orient Air as its general sales agent. CA affirmed. Doctrine: Ordering American Air to reinstate Orient Air as its general sales agent for passenger transportation is in effect compelling American Air to extend its personality to Orient Air. This is violative of the principles and essence of agency. Agencya contract whereby 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. In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. Hence, 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 of the principal, which must not, in any way, be compelled by law or by any court.

Uy v. CA Facts: A series of Deeds of Absolute Sale covering 8 parcels of land were executed by NHA and agents authorized to sell said lands. However, only 5 were paid for by NHA because of a report that the other 3 are not suitable for development into a housing project. NHA offered P1.225M as danos perjuicios to the landowners. The agents filed a complaint for damages against NHA. RTC awarded damages to the agents but the CA reversed, holding that they were not the real parties-in-interest Doctrine: An agent of the seller is not a party to the contract of sale between his principal and the buyer. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest must, generally, be the parties to said contract. Two exceptions to this rule are heirs and assignees where the rights and obligations arising from the contract are transmissible by their nature, by stipulation, or by provision of law. Another exception is the beneficiary of a stipulation pour autrui. Macke v. Camps Prudential Bank v. CA Litonjua v. Eternit Corp Facts: A member of the Board of Directors engaged the services of a realtor/broker for the sale of 8 parcels of land, without any written authority. The Litonjuas offered to buy the properties. However, the General Manager through the Regional Director for Asia eventually decided not to sell. Doctrine: The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority from the corporation is void. Consent of both principal and agent is necessary to create an agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either in words or conduct between them. An agency may be express or implied from the act 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. Acceptance by the agent may be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. However, to create or convey real rights over immovable property, a SPOA is necessary. A real estate broker is one who negotiates the sale of real properties. His business is only to find a purchaser who is willing to buy the land upon terms fixed by the owner. An authority to find a purchaser of real property does not include an authority to sell

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What is the form of the contract of agency? 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) 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) A letter is sufficient A. Oral B. Written Angeles v. Phil. National Railways Jimenez v. Rabot City-lite v. CA Doctrine: Roy and/or Metro Drug was only to assist FP Holdings in looking for buyers and referring to them possible prospects whom they were supposed to endorse to FP Holdings. But the final evaluation, appraisal and acceptance of the transaction could be made only by FP Holdings. In other words, Roy and/or Metro Drug was only a contact person with no authority to conclude a sale of the property involved. For lack of a written authority to sell the property, the sale should be declared void. Cosmic Lumber v. CA San Juan Structural Steel v. CA Facts: SJSS entered into an agreement with Motorich for the transfer to it of a parcel of land. However, only the signature of the treasurer of Motorich appeared on the contract. The President and Chairman of Motorich did not sign anything. Doctrine: A corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that the authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred. As a general rule, the acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers exceed their authority, their actions cannot bind the corporation, unless it has ratified such acts or is estopped from disclaiming them. However, the absence of a written authorization to sell a parcel of land renders the sale void. Being inexistent from the beginning, such a contract cannot be ratified. Delos Reyes v. CA AF Realty v. Dieselman Freight Facts: A member of the Board of Dieselman issued a letter denominated as Authority to Sell Real Estate to a real estate broker. In turn, the real estate broker authorized Mimi to sell the same lot. Mimi found AF Realty, who expressed its intention to buy the lot. However, the president of Dieselman later terminated the offer to sell. Doctrine: Contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid authorization, the declarations of an individual relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the corporation. Considering that the member of the Board, the real estate broker and Mimi were not authorized by Dieselman, the supposed contract is void and cannot be ratified. Who has the obligation to determine existence and scope of agency? Keeler Electric Co. v. Rodriguez Facts: Keeler told Montelibano that he would be paid a 10% commission for any Matthews plant that he could sell. Montelibano was able to sell to Rodriguez. Without the knowledge of Keeler, Rodriguez paid the purchase price to Montelibano. Doctrine: Mechem on Agency: 1. The law indulges in no bare presumptions that an agency exists. 2. Agency must be proved or presumed from facts. 3. The agent cannot establish his own authority, either by his representations or by assuming to exercise it. 4. An authority cannot be established by mere rumor or general reputation. 5. Even a general authority is not an unlimited one. 6. Every authority must find its ultimate source in some act or omission of the principal. 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 it. Not only must the person dealing with the agent ascertain the existence of conditions, but he must also be able to trace the source of his reliance to some word or act of the principal himself if the latter is to be held responsible.

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Yu Eng Cho v. Pan American IV. Agency distinguished from other contracts/relationships A. Master-servant Art. 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, the head 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 just and 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 statement on the nature and duration of the service and the efficiency and conduct of the house helper. B. Employer-employee Art. 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. C. Lease of service Art. 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. (1544a) Agency Lease of service Basis is representation Basis is employment Agent has discretionary powers Only performs ministerial functions 3rd persons are involved Only 2 persons involved: lessor and lessee Commercial or business transactions Matters of mere manual or mechanical execution D. Independent contractor Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. (1588a) Agency Independent contractor Represents principal Employed by employer Acts under control and direction of principal Acts according to his own method Principal liable for tort committed by agent acting within Employer not liable for tort committed by IC scope of authority

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Trust Art. 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.

Sale Art. 1458. 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. (1445a) Agency Sale Agent receives goods as goods of principal Buyer receives goods as owner Agent delivers proceeds of sale Buyer pays price Agent can return object in case he failed to sell the same Generally, buyer cannot return the object sold to 3rd person Agent bound to act according to instructions of his Buyer can deal with the thing as he pleases, being the principal owner Partnership Art. 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. (1665a) Negotiorum gestio/quasi-contract Art. 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. (1889a) Judicial administrator Agency Guardianship Agent represents capacitated person Guardianship represents incapacitated person Agent appointed by principal and can be removed by him Guardian appointed by court and stands in loco parentis Agent subject to directions of principal Guardian not subject to direction of ward but must act for his benefit Agent can make principal personally liable Guardian has no power to impose personal liability on his ward Broker Agent Has a relation to principal, buyers or sellers, and the property itself. Broker No relation w/ the thing w/c he purchases or sells. Merely a go-between.

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Sevilla v. CA Facts: Sevilla, manager of Tourist World, bound herself solidarily liable with it for the prompt payment of monthly rental of its leased premises. When Tourist World received information that Sevilla was connected with a rival firm, it issued two resolutions, one of which abolished the office of the manager Doctrine: There was no existing employer-employee relationship because Sevilla was not subject to control by Tourist World. First, Sevilla bound herself in solidum as and for rental payments of the contract of lease covering Tourist Worlds office. Second, Sevilla relied on her own gifts and capabilities in running the business. Third, Sevilla was not in the companys payroll. When Sevilla agreed to man Tourist Worlds branch office, she did so pursuant to a contract of agency, the essence of which is that the agent renders services in representation or on behalf of another. Unlike simple grants of a POA, the agency established here cannot be revoked at will because it is coupled with an interest.

Shell v. Firemens Insurance Facts: A Plymouth car was brought to the Shell gas station for washing. While the car was on a hydraulic lifter for greasing, it fell to the ground from a height of 6 ft. The insurance company brought an action against Shell Doctrine: The operator of the Shell gas station was an agent of the company, not an independent contractor, as evidenced by the following facts: 1. He owed his position to the company and the latter could remove him or terminate his services at will; 2. Service station belonged to the company and bore its trade name and the operator sold only the products of the company; 3. The equipment used by the operator belonged to the company and were just loaned to the operator; 4. An employee of the company supervised the operator and conducted periodic inspection of the companys gas and service station; 5. The price of the products sold by the operator was fixed by the company; and 6. The receipts signed by the operator indicated that he was a mere agent. To determine the nature of a contract, courts rely upon the way the contracting parties do their respective obligations. Should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter. Dela Cruz v. Northern Theatrical Enterprises Nielson v. Lepanto Consolidated Facts: Nielson had agreed to explore, develop and operate the mining claims of Lepanto for a period of 5 years, renewable for another 5. Nielson also undertook to min ore as may be found in the mining claims and to market the metallic products recovered which may prove to be marketable, as well as to render for Lepanto other services specified in the contract. Doctrine: Agency Lease of Services Basis is representation Basis is employment Preparatory contract Juridical acts (creation, modification, extinction of relations w/ 3rd parties Non-juridical acts/ material acts Nielson was not acting as an agent of Lepanto, but as one who was performing material acts for an employer (i.e. operation and development of the mine).

Quiroga v. Parsons Hardware Facts: Quiroga granted Parsons Hardware the exclusive authority to sell Quiroga beds in the Visayas. However, Quiroga later on filed a complaint against Parsons Hardware for alleged violations of the contract. Doctrine: Under the contract between the parties, there was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. Commission on sales = discount on invoice price Agency = Parsons was the only one that could sell Quiroga beds in Visayas Gonzalo Puyat v. Arco Amusement Lim v. People Facts: Ayroso authorized Lim to sell 615 kgs. of her tobacco with the agreement that the proceeds will be given to Ayroso as soon as the tobacco was sold. However, out of the total value of P799.50, Lim paid Ayroso only P240. Doctrine: Lim is an agent of Ayroso based on the foregoing circumstances: 1. Lim asked Ayroso to be her agent in selling tobacco; 2. Lim admitted that there was an agreement that upon the sale of the tobacco she would be given something; and 3. Lim received the tobacco to be sold and the proceeds to be given to Ayroso as soon as it was sold, negating the transfer of ownership of goods to Lim. The agreement constituted Lim as an agent with the obligation to return the tobacco if the same was not sold. Pacific Commercial v. Yatco Ker v. Lingad Hahn v. CA Facts: Hahn executed a deed of assignment with SPOA in favor of BMW in exchange for the exclusive dealership of BMW cars and products. However, he was informed that BMW was arranging to grant such exclusive authority to CMC.

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Doctrine: Hahn and BMW entered into a contract of agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by brining the buyer and the seller together, even if no sale is eventually made. The fact that a person invested his own money to put service centers and showrooms does not necessarily prove that he is not an agent of a car manufacturer. Some classes of agents- see Mechem, Secs. 11-14; 76-77; 560-569 A. Attorneys-at-law- One whose business is to represent clients in legal proceeding B. Auctioneers- One whose business is to sell property for others to the highest bidder at a public sale. C. Brokers- One whose business is to act as intermediary between 2 other parties. D. Factors; commission merchants- One whose business is to receive and sell goods for a commission, being entrusted with the possession of the goods involved in the transaction 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) Commission agent: One whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold, and usually selling in his own name. Ordinary agent Commission agent Acts for and behalf of principal May act in his own name or in that of the principal Need not have possession of the goods of his principal Must be in possession Commission agent Broker Has a relation to principal, buyers or sellers, and the No relation with the thing which he purchases or sells. property itself Merely a go-between Liability of commission agent as to goods received: If the commission agent received goods consigned to him, he is responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment. Presumption established in this article: Damage in the merchandise were suffered while in the possession and custody of the agent. What the commission agent must do to avoid liability: Make a written statement of the damage and deterioration if the goods received by him do not agree w/ the description in the consignment. Agent Cannot commingle goods of the same kind Depositary Can commit goods of the same kind

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) Purpose of this provision: Prevent any possible confusion or deception. Art. 1904 gives the general rule. Exceptions: 1.) By custom; 2.) Collecting banks.

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) Rule given in this article: Commission agent can sell on credit only with the express or implied consent of the principal. Right of the principal in case the commission agent sold goods on credit without authority: [CR] 2 alternatives: 1.) He may require payment in cash, in w/c case, any interest or benefit from the sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agents expense; or 2.) He may ratify the sale on credit, in w/c case it will have all the risks and advantages to him. 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) Obligation of the commission agent where a sale on credit was authorized: An authorized sale on credit shall be deemed to have been on a cash basis insofar as the principal is concerned if the agent fails to inform the principal of such sale on credit with a statement of the names of the buyers. Reason for this article: Prevent the agent from stating that the same was on credit when in fact it was made for cash.

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) Guarantee commission: One where, in consideration of an increased commission, the commission agent guarantees to the principal the payment of debts arising through his agency. Purpose of guarantee commission: To compensate the agent for the risks he will have to bear in the collection of the credit due to the principal. Nature of liability of guarantee commission agent: Liable to principal if the buyer fails to pay or is incapable of paying. But he is not primarily the debtor On the contrary, the principal may sue the buyers in his own name. In such a case, the agent amounts to no more than a guaranty. Liability is a contingent pecuniary liability. Can the agent with a guarantee commission put up the defense of insolvency of the debtor? Art. 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for that purpose. (n) Obligation of the commission agent under this article: The commission agent who has made an authorized sale on credit must collect the credits due the principal at the time they become due and demandable. If he fails to do so, he shall be liable for damages unless he can show that the credit could not be collected notwithstanding the exercise of due diligence on his part. In such a case, the principals remedy is to proceed against the debtor. Does this article apply to a case where there is a guarantee commission? No, because the agent already assumed the risks of collection by accepting the guarantee commission. Classifications of agency contracts A. Express agency- actually authorized, either orally or in writing Implied agency- implied from acts of principal, from his silence or lack of action or his failure to repudiate the agency knowing that another person is acting on his behalf w/o authority. B. 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, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. (n) Requisite for article to apply: Authority to agent must be in writing. Scope of agents authority includes: Not only the actual authorization conferred upon the agent by the principal, but also that which has apparently or impliedly been delegated to him. To hold the principal liable, a 3 person dealing with an agent must: Discover upon his peril not only the fact of agency but the nature and extent of authority of the agent. He is put on inquiry. He must also act with ordinary prudence and reasonable diligence. Fundamental principles when inquiring whether authority exists: 1.) The law indulges in no bare presumptions that an agency exists, it must be proved and presumed from facts; 2.) The agent cannot establish his own authority, either by his representations or by assuming to exercise it; 3.) An authority cannot be established by mere rumor or general reputation; 4.) A general authority is not an unlimited one; and 5.) Every authority must find its ultimate source in some act or omission of the principal. In case the fact of agency or the extent of the authority of the agent is controverted, the burden of proof is on: The 3 person to establish the fact of agency or the extent of authority of the agent.
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No. an agent receiving a guarantee commission cannot put up the defense that the debtor-3 person possesses no property since this is precisely the risk the commission agent assumes.

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VI.

Does the 3 person have to inquire further if the power of attorney is written? No. He is not required to inquire further than the terms of the written power of attorney. If there is a secret mutual understanding between the principal and the agent, and such is not expressed in the written power of attorney, does the 3 person have to inquire? No. As far as he is concerned, an act of the agent within the terms of the power of attorney as written, is within the scope of the agents apparent authority notwithstanding that the agent may have exceeded the limits of his actual authority according to a secret understanding between him and the principal. In such a case, the principal is estopped from claiming that the agent exceeded his authority. Ways by which the agents authority may be broadened or restricted: [Im-UNDEr] 1.) By implication agents authority extends not only to express requests, but also to those acts and transactions incidental thereto. It embraces all the necessary and appropriate means to accomplish the desired end. 2.) By usage and custom

a.) An agents authority may not be enlarged through usage and custom in the following cases: Where it is sought to i.) Vary the terms of an express authorization; ii.) Dispense with a legal requirement enacted for the principals benefit; iii.) Change a rule of law or dispense with a formality required by law; iv.) Vary an essential quality of the agency relationship. b.) General rule: principal must have notice of the alleged custom, before the agents acts, in accordance therewith, may bind the principal. Exceptions: i.) Where the principal and the agent reside in the same community, the usage is definite and well-known, and the agent has no notice that he is to act to the contrary; ii.) Where the agent is authorized to deal in a particular place or in a particular market exchange. 4.) By necessity the existence of an emergency or other unusual conditions may operate to invest in an agent authority to meet the emergency, provided: a.) Emergency really exists; b.) Agent is unable to communicate w/ the principal; c.) Agents enlarged authority is exercised for the principals protection; and d.) The means adopted are reasonable under the circumstances. 5.) By certain doctrines a.) Apparent authority b.) Liability by estoppel; c.) Ratification. 6.) By the ejusdem generis rule such that where in an instrument of any kind, an enumeration of specific matters is followed by a general phrase is held to be limited in scope by the specific matters. Responsibility of principal when agent acts w/ improper motives: General rule: Motive of agent in entering into a K w/ a 3 person is immaterial. Exceptions:
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to the 3 person; and 2.) Where the owner is seeking recovery of personal property of w/c he has been unlawfully deprived. Principals responsibility for an agents misrepresentation: 1.) Within the scope of the agents authority
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1.) Where the 3 person knew that the agent was acting for his benefit, in w/c case, the principal is not liable

Principal is subject to liability for lass caused to another by the 3 persons reliance upon a deceitful representation of an agent in the course of his employment if a.) Representation is authorized; b.) Within the implied authority of the agent to make for the principal; or c.) Apparently authorized. 2.) Beyond the scope of the agents authority General rule: Principal is not bound. Exception: when the principal takes advantage of a K made under the false misrepresentation of his agent. 3.) For the agents own benefit Principal is liable (motive of agent immaterial). 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) Estoppel: precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied. Ratification Estoppel Rests on intention Rests on prejudice Affects entire transaction from the beginning Affects only relevant parts of transaction Substance is confirmation of unauthorized act or Substance is the principals inducement to another to conduct after it has been done act to his prejudice Apparent authority That which though not actually granted, the principal knowingly permits the agent to exercise or holds him out as possessing

Basis of article 1911:

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)

Principle of estoppel. Necessary for the protection of innocent 3 persons. Instance when solidarity is imposed by law.

Authority by estoppel Arises in cases where the principal, by his negligence, permits the agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent
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What is the effect of revocation in relation to 3 persons if the agent was authorized to contract with specified persons?
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If the agency is created for the purpose of contracting with specified persons, its revocation will not prejudice such 3

persons until notice thereof is given them. The reason for this is obvious. Since 3 persons have been made to believe by the principal that the agent is authorized to deal with them, they have a right to presume that the representation

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continues to exist in the absence of notification by the principal. But of course, notice is not required if the 3 persons already know of the revocation.

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) Effect of revocation in relation to 3 persons if the agent was authorized to contract with the public in general:
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In case the agent has general powers, innocent 3 parties dealing with the agent will not e prejudiced by the revocation before they had knowledge thereof. In this case, however, the fact that the revocation was advertised in a and this is true whether or not such 3 persons have read the newspaper concerned. Notice required: Art. 1921 Art. 1922 Must be personal May be personal Revocation must be known to 3rd person informed of Even if 3rd person doesnt know, as long as there is appointment publication in a newspaper of general circulation General rule: Special information needs special information of revocation.
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newspaper of general circulation would be sufficient to 3 persons for publication constitutes notice upon everybody

Except: If you can prove that the 3 person read the notice in the newspaper. Yun Kwan Byung v. Phil. Amusement Gambling Corp Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts Agency by estoppel- there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not real, authority to represent another C. Agency by operation of law 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)

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) If the agent dies, his heirs should tell the principal. However, if the principal dies, the principals heirs have no obligation to tell the agent. General rule: Agency is terminated instantly by the death of the principal. Rationale: Agency, being based on representation, there is no one to e represented where the principal is already dead. Exceptions: 1.) If the agency has been constituted in the common interest of the principal and the agent; and 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) What does this article provide? It provides that the death of the principal or any other like cause, extinguishes the agency. But in the same way that
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2.) If the agency has been constituted in the interest of a 3 person who has accepted the stipulation in his favor.

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revocation of the agency does not prejudice 3 persons who have dealt with the agent in good faith without notice of D. Does this article only require the agent to be in good faith? No, both agent and 3 person must be. Universal, general and special
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revocation, such 3 persons are also protected where it is not shown that the agent had knowledge of the termination of the agency because of the death of the principal or any other like cause which extinguishes the agency.

Durable agency 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) Siasat v. IAC Dominion Insurance v. CA

E.

Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions. (1712) Universal agent: One employed to do all acts that the principal may personally do, and which the principal can lawfully delegate to another the power of doing. General agent: One employed to transact all the business of his principal, or all business of a particular kind or in a particular place, or in other words, to do all acts connected with a particular trade, business, or employment. Special/Particular agent: One authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion: a.) Atty at law: One whose business is to represent clients in legal proceedings. b.) Auctioneer: One whose business is to sell property for others to the highest bidder at a public sale. c.) Broker: One whose business is to act as intermediary between 2 other parties. d.) Factor: One whose business is to receive and sell goods for a commission, being entrusted with the possession of the goods involved in the transaction. Attorney-in-fact: One who is given authority by his principal to do a particular act not of a legal character. In strict legal sense: An agent having a special authority created by deed. General Agent Special Agent Scope of authority All acts connected with the Only one or more specific acts in business in which he is engaged pursuance of particular instructions or with restrictions necessarily implied from the act to be done Nature of service authorized Series of transactions involving Single transaction or a series of continuity of service transactions not involving continuity of service Extent to which agent may bind By an act within the scope of his Cannot in a manner beyond or principal authority although it may be outside the specific acts which he is contrary to his special instructions authorized to perform Termination of authority Apparent authority does not Termination effective as to 3rd terminate by mere revocation of party unless agency was for the authority without notice to 3rd purpose of contracting with that 3rd parties party Construction of instructions of Merely advisory Strictly construed. Limits the principal authority of agent

F. Couched in general terms; courched in specific terms Art. 1877. 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. (n) Examples of acts of mere administration: 1.) To sue for collection of debts; 2.) To employ workers or servants and employees needed for the conduct of business; 3.) To engage counsel to preserve the ownership and possession of the principals property; 4.) To lease real property to another person for 1 year or less, provided the lease is not registered; 5.) To make customary gifts for charity or to employees in the business managed by the agent 6.) To borrow money if it be urgent and indispensable for the preservation of the things under administration.

How are contracts of agency construed? Contracts of agency as well as general powers of attorney must be interpreted in accordance with the language used by the parties. The real intention of the parties is primarily determined from the language used and gathered from the whole instrument. In case of doubt, resort must be had to the situation, surroundings and relations of the parties. The intention of the parties must be sustained rather than defeated. So if the contract be open to 2 constructions, one of which would uphold the intention while the other would overthrow it, the former is to be chosen. 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) Scope of General Authority to Purchase Where an agents power to purchase is general and unrestricted, he has implied authority to do whatever is usual and necessary in the exercise of such power. He may: 1.) Determine the usual and necessary details of the contract, 2.) agree upon the price, 3.) modify or rescind the contract of purchase, 4.) accept delivery for his principal, 5.) give directions for the delivery of the property purchased, and 6.) may borrow money to pay for the care and preservation of the property purchased. But he has no special power to 1.) Settle a contest between the principal and a 3 person regarding the ownership of goods purchased, or 2.) Agree to an account stated, or 3.) Do anything not usual or necessary to the exercise of such authority.
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Scope of Special Authority to Purchase Where the agency is a special one, or is restricted to purchases upon certain terms and conditions, the agent has no authority to 1.) Purchase upon different terms and conditions from those authorized, or 2.) Modify or rescind a contract of purchase made by the principal.

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) The ff are included in a Power to Sell: The power to: 1.) Find a purchaser or to sell directly; 2.) Deliver the property; 3.) Make the usual representation and warranty; 4.) Execute the necessary transfer documents; 5.) Fix the terms of the sale unless there be set conditions stipulated by the principal; 6.) Sell only for cash; 7.) Receive the price unless he was authorized only to solicit orders. The ff are not included in a Power to Mortgage The power to: 1.) Sell; 2.) Execute a 2 mortgage;
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3.) Mortgage for the agents personal benefit or for the benefit of any 3 person, unless the contrary has been clearly indicated. Does the principal have the power to revoke a contract giving an agent exclusive authority to sell? YES. But he may not have the right to use such power if he has agreed not to exercise such power during a certain period. In case he fails to comply with this obligation-not-to-do, he will be liable for damages. Art. 1880. A special power to compromise does not authorize submission to arbitration. (1713a) Rationale:

1. Mortgage Art. 1878 (12). Special powers of attorney are necessary in the following cases: To create or convey real rights over immovable property PNB v. Sta. Maria Sta. Maria obtained sugar crop loans on the strength of two SPOA executed by his siblings. He executed two chattel mortgages in his own name. The first SPOA, signed by 6 of them, authorized Sta. Maria to mortgage a parcel of land jointly owned by them. The second SPOA, signed by Valeriana only, authorized Sta. Maria to borrow money and mortgage any real estate owned by her. Where in an instrument powers and duties are specified and defined, all of such powers and duties are limited and confined to those which are specified and defined, and all other powers and duties are excluded. A special power of attorney to mortgage real estate is limited to such authority to mortgage and does not carry with it the authority to contract obligation, unless the contrary is shown. The grantor of a SPOA to mortgage a real estate is liable only to the extent that the real estate 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. However, he 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 from questioning or disowning such other obligations contracted by the grantee. Ratification by the grantor or estoppel consisting in benefiting from the loan must be expressly shown and proven during the trial in order to hold the grantor liable for the loans contracted by the grantee of the SPOA. Where a person expressly authorized another to mortgage and borrow money for and in his name, the liability of the two to the creditor is only joint, not solidary. There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. Why loans and mortgages are in different pars. in A. 1878: It is not unusual in family and business circles that one would allow his property or an undivided share in real estate to be mortgaged by another as security, either as an accommodation or for valuable consideration. Bank of PI v. De Coster The husband, acting as an agent of his wife, made a joint and several promissory note to cover his preexisting debt. Upon his failure to pay the debt, the bank filed an action against him. Under the POA, the husband had no authority for and on behalf of the wife to execute a joint and several note or to make her liable as an accommodation maker. The husband had power only to loan his wifes money and to borrow money for or on account of his wife as her agent. That does not imply that he had the legal right to make his wife liable as a surety for the preexisting debt of a third person. Where in an instrument powers and duties are specified and defined, all of such powers and duties are limited and confined to those which are specified and defined. All other powers and duties are excluded. This limitation is a notice to, and is binding upon, the person dealing with such agent. 2. Loan/borrow Art. 1878 (7). Special powers of attorney are necessary in the following cases: To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration Hodges v. Salas The Salas sisters executed an SPOA in favor of Yulo, their brother-in-law to enable him to obtain a loan and secure it with a mortgage on their property. However, the proceeds were not delivered to the Salas sisters but were instead applied to the payment of Yulos personal debts to the creditor. A special power of attorney authorizing the agent to obtain a loan and secure it with the principals real property cannot be interpreted as also authorizing the agent to dispose of the money as he pleased, particularly when it does not appear that such was the intention of the principals. The agent was obliged to turn over the money to the principals or, at least, place it at their disposal. There was also no ratification of the agents act of employing part of the loan to pay his personal debts. In the letter of the Salas sisters, they confined themselves to stating that they would notify their agent of the maturity of the obligation contracted by him. They said nothing about whether or not their agent was authorized to use the funds obtained by him in the payment of his personal obligations. 3. Sell Art. 1878(5) Special powers of attorney are necessary in the following cases: To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration Strong v. Gutierrez Katigbak v. Tai Hung Co.: The power is general and authorizes Gabino to sell any kind of realty belonging to the principal. The use of the subjunctive pertenezcan (might belong) and not the indicative pertenecen (belong), means that Po Tecsi meant not only the property he had at the time of the execution of the power, but also such as he might afterwards have during the time it was in force 4. Lease Art. 1878(8) Special powers of attorney are necessary in the following cases: To lease any real property to another person for more than one year

A principal may authorize his agent to compromise because of absolute confidence in the latters judgment and discretion to protect the formers rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal. What happens if the agent is specifically authorized to submit to arbitration? Then the arbitration award binds the principal, provided, of course, that the agent acted within the scope of his authority.

Chua v. IAC 5. Compromise Art. 1878(3) Special powers of attorney are necessary in the following cases: 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 Dungo v. Lopena Lopena instituted an action for foreclosure against Dungo and Gonzales. Before the case could be tried, the parties entered into a compromise agreement signed by Lopena and Gonzales for himself and Dungo. Dungos counsel of record was also present. Subsequently, the parties entered into a triparty agreement signed by Lopena, Gonzales and Dungo. Although the Civil Code expressly requires a SPOA in order than one may compromise an interest of another, it is incorrect to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. Hence, it is subject to ratification. The ratification of the compromise agreement was conclusively established by the tri-party agreement which referred itself to the court order approving the earlier compromise agreement. When it appears that the client, on becoming aware of the compromise and the judgment thereon, fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest its validity. Vicente v. Geraldez 6. Other acts of strict dominion Art. 1878(12) Special powers of attorney are necessary in the following cases: To create or convey real rights over immovable property Insular Drug Co. v. National Bank Foerster was a salesman and collector of Insular Drug. Instead of depositing the checks he collected to the credit of the drug company as instructed, he deposited the checks in his personal account. The bank did not know that Foerster was misappropriating the funds of his principal. 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 agents, does so at his peril and must abide by the consequences if the agent who indorses the same is without authority.

VII. Obligations and liabilities of agents to their principals A. Act within scope of authority 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) The ff are included in a Power to Sell: The power to: 1.) Find a purchaser or to sell directly; 2.) Deliver the property; 3.) Make the usual representation and warranty; 4.) Execute the necessary transfer documents; 5.) Fix the terms of the sale unless there be set conditions stipulated by the principal; 6.) Sell only for cash; 7.) Receive the price unless he was authorized only to solicit orders. The ff are not included in a Power to Mortgage The power to: 1.) Sell; 2.) Execute a 2 mortgage;
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3.) Mortgage for the agents personal benefit or for the benefit of any 3 person, unless the contrary has been clearly indicated. Does the principal have the power to revoke a contract giving an agent exclusive authority to sell? YES. But he may not have the right to use such power if he has agreed not to exercise such power during a certain period. In case he fails to comply with this obligation-not-to-do, he will be liable for damages. Art. 1880. A special power to compromise does not authorize submission to arbitration. (1713a) Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latters judgment and discretion to protect the formers rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal. What happens if the agent is specifically authorized to submit to arbitration? Then the arbitration award binds the principal, provided, of course, that the agent acted within the scope of his authority. 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) Authority: The power of the agent to affect the legal relations of the principal by acts done in accordance with the principals manifestation of consent to him. The authority of the agent is the very essence sine qua non of the principal and agent

relationship. This authority, unless it is otherwise agreed, includes only the authority to act for the benefit of the principal, and the source of the authority is the principal and never the agent. Kinds of Authority: 1.) Actual: when it is actually granted, and it may be express or implied. It results from what the principal indicates to the agent. 2.) Express: when it is directly conferred by words. 3.) Implied: when it is incidental to the transaction or reasonably necessary to accomplish the purpose of the agency, and therefore, the principal is deemed to have actually intended the agent to possess. 4.) Apparent or Ostensible: when it is conferred by words, conduct or even by the silence of the principal which causes a 3 person reasonably to believe that a particular person, who may or may not be the principals agent, has actual authority to act for the principal. Ostensible authority is another name for authority by estoppel. 5.) General: when it refers to all the business of the principal. 6.) Special: when it is limited only to one or more specific transactions. 7.) By necessity or by operation of law: when it is demanded by virtue of the existence of an emergency; it terminates when the emergency has passed. Requisites for Principal to be Bound by Act of Agent: 1.) The agent must act in behalf of the principal; 2.) The agent must act within the scope of his authority. When is a principal not bound by the act of his agent? When the agent acts without or beyond Whose behalf? Status of K the scope of his authority; or when the agent acts within the scope of his authority but in his own name except when the transaction involves things belonging to the principal. Authority? With authority Principals Valid With authority Own Depends. [1883] Without Principals Unenforceable Without Own Valid
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agent.

Authority v. Instructions Authority Sum total of powers committed or permitted to the agent by the principal.

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) What happens if the agent exceeds his authority but he performs the agency in a manner more advantageous to the principal? It will e as if he did not exceed the limits of his authority since he must do such acts as may be conducive to the accomplishment of the purpose of the agency. Test: Would the principal enter into this transaction? 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) Instructions: Private directions which the principal may give the agent in regard to the manner of performing his duties as such Instructions Direct the manner of transacting the authorized business and contemplates only a private rule of guidance to the agent.

Relates to the subject with which the agent is empowered to deal or the kinds of business or transactions upon which he is powered to act. Limitations of authority are operative as against those who have or are charged with knowledge of them.
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Refers to the manner or mode of his action with respect to matters which in their substance are within the scope of permitted action. Without significance as against those dealing with the agent with neither knowledge nor notice of them.

Contemplated to be made known to the 3 person dealing w/ the agent.

Not expected to be made known to those w/ whom the agent deals.

B.

1.) When the instruction calls for the performance of illegal acts; or 2.) Where he is privileged to do so to protect his security/interest in the subject matter of the agency.

Carry out the agency Art. 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his nonperformance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger. (1718) General Obligations of an Agent to his Principal: 1.) To act with the utmost good faith and loyalty for the furtherance and advancement of the interests of the principal.

tort.

2.) To obey the principals instructions. 3.) To exercise reasonable care. Specific Obligations: 1.) To carry out the agency he has accepted. 2.) To answer for damages which through his non-performance the principal may suffer. 3.) To finish the business already begun on the death of the principal should delay entail danger. 4.) To observe the diligence of a good father or a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed. 5.) To advance the necessary funds should there be a stipulation to do so. 6.) To act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do. 7.) Not to carry out the agency if its execution would manifestly result in loss or damage to the principal. 8.) To answer for damages if there be a conflict between his interests and those of the principal, he should prefer his own. 9.) Not to loan to himself if he has been authorized to lend money at interest. 10.) Not to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency. 11.) To be responsible in certain cases for the act of the substitute appointed by him. 12.) To pay interest on funds he has applied to his own use. 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) Does the agent have a right to renounce or withdraw from the agency at any time? Yes. Even without the consent of the principal. But, in the latter case, he may be subject to liability for breach of contract or for

C.

D.

Basis: Constitutional prohibition against involuntary servitude. Obligation of agent if he withdraws from agency without just cause: 1.) Notify principal (even if w/ just cause); and 2.) Indemnify the principal should the latter suffer any damage by reason of such withdrawal. Reason for indemnity: To answer for losses and damages occasioned by the non-fulfillment of his obligation as agent. Is the agent liable for indemnity if the withdrawal was for just cause? No. Agent cannot be held liable if the agent withdraws for a valid reason as when: 1.) The withdrawal is based on the impossibility of continuing the agency without grave detriment to himself; or 2.) Fortuitous event. What happens when the agent sues the principal? Equivalent to withdrawal of the agent. 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) Obligation of agent after withdrawal: Even when withdrawal is for a valid reason, he must continue to act until the principal has had reasonable opportunity to take the necessary steps like the appointment of a new agent to remedy the situation caused by the withdrawal. This is to prevent damage or prejudice to the principal. Not to carry out the agency Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n) Rationale: The duty of the agent who is merely an extension of the personality of the principal is to render service for the benefit of the principal and not to act to his detriment. Furthermore, the agent must exercise due diligence in carrying out the agency. Loyalty Art. 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) Note: This provision applies to both onerous and gratuitous transactions. The law does not distinguish so neither should we. Rationale: An agent occupies a fiduciary position and therefore is bound to exercise loyalty, obedience, and diligence with respect to the interest of the principal. If the agent follows the principals instructions yet his acts still result in damage to 3 persons, who is liable? General rule: The agent is NOT liable. Except: if before acting that way, it is obvious that the act will result to damage, then the agent is liable. 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 has been authorized to lend money at interest, he cannot borrow it without the consent of the principal. (n) Rationale: The agent can lend money to the principal using the agents own funds at the current rate of interest and NOT at a higher interest rate because the agent is supposed to act for the principals benefit.
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If the agent is authorized to lend the principals money, with interest, to 3 persons, the agent cant be the borrower without the consent of the principal because the agent may not be a good borrower or he may be insolvent or he may not be a good risk. There is a danger here that the interest of the principal would be jeopardized.

This would also seem to be the case if the agent is authorized to lend money w/o interest because of the same reason. 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; (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 and government 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. (6) Any others specially disqualified by law. (1459a) E. Diligence Art. 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) What is the rule if a person declines agency? In the event 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. Duty of Owner in case an Agency is Declined: He must act as soon as possible by appointing an agent or by taking charge of the goods. 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) Instructions: Private directions which the principal may give the agent in regard to the manner of performing his duties as such agent. Authority v. Instructions Authority Instructions Sum total of powers committed or Direct the manner of transacting the authorized business and contemplates permitted to the agent by the principal. only a private rule of guidance to the agent. Relates to the subject with which the agent is empowered to deal or the kinds of business or transactions upon which he is powered to act. Limitations of authority are operative as against those who have or are charged with knowledge of them. Contemplated to be made known to the 3 person dealing w/ the agent.
rd

Refers to the manner or mode of his action with respect to matters which in their substance are within the scope of permitted action. Without significance as against those dealing with the agent with neither knowledge nor notice of them. Not expected to be made known to those w/ whom the agent deals.

1.) When the instruction calls for the performance of illegal acts; or 2.) Where he is privileged to do so to protect his security/interest in the subject matter of the agency.

F.

G.

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) Is the agent liable for fraud? Yes, in all cases. For negligence? Yes, but this shall be adjudged with rigor by the courts. Why does the court have to take into consideration whether the agency was gratuitous or for compensation? In order to fix the liability of the agent for negligence only (not fraud). Account/deliver Art. 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) Rationale: Contrary to public policy as it would encourage fraud. It is in the nature of a waiver of an action for future fraud w/c is void. If the agent fails to deliver and instead converts or appropriates for his own use the money or property belonging to his principal, with what can he be charged? ESTAFA. Solidary liability

Art. 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) If solidarity is not stipulated, what is the liability to 2 or more agents? JOINT. Each is liable only for proportionate part of debt. 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 fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (n) What happens if solidarity has been agreed upon? Then each of the agents becomes solidarily liable for: 1.) The non-fulfillment of the agency; or 2.) The fault or negligence of the fellow agent provided the latter acted within the scope of his authority. But the innocent agent has a right later on to recover from the guilty or negligent agent. What happens if the fellow agent acted beyond the scope of his authority? Then the innocent agent cannot be liable at all to the principal even if solidarity had been agreed upon. H. Pay interest Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. (1724a) I. Fraud; negligence 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) Is the agent liable for fraud? Yes, in all cases. For negligence? Yes, but this shall be adjudged with rigor by the courts. Why does the court have to take into consideration whether the agency was gratuitous or for compensation? In order to fix the liability of the agent for negligence only (not fraud). J. Specific obligations of commission agents 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) Commission agent: One whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold, and usually selling in his own name. Ordinary agent v. Commission agent: Ordinary agent Commission agent Acts for and behalf of his principal. May act in his own name or in that of his principal. Need not have possession of the goods of his principal. Must be in possession.

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) Purpose of this provision: Prevent any possible confusion or deception. Art. 1904 gives the general rule. Exceptions: 1.) By custom; 2.) Collecting banks. 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) Rule given in this article: Commission agent can sell on credit only with the express or implied consent of the principal. Right of the principal in case the commission agent sold goods on credit without authority: [CR] 2 alternatives: 1.) He may require payment in cash, in w/c case, any interest or benefit from the sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agents expense; or 2.) He may ratify the sale on credit, in w/c case it will have all the risks and advantages to him. 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) Obligation of the commission agent where a sale on credit was authorized: An authorized sale on credit shall be deemed to have been on a cash basis insofar as the principal is concerned if the agent fails to inform the principal of such sale on credit with a statement of the names of the buyers. Reason for this article: Prevent the agent from stating that the same was on credit when in fact it was made for cash. 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)

No. an agent receiving a guarantee commission cannot put up the defense that the debtor-3 person possesses no property since this is precisely the risk the commission agent assumes. Art. 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for that purpose. (n) Obligation of the commission agent under this article: The commission agent who has made an authorized sale on credit must collect the credits due the principal at the time they become due and demandable. If he fails to do so, he shall be liable for damages unless he can show that the credit could not be collected notwithstanding the exercise of due diligence on his part. In such a case, the principals remedy is to proceed against the debtor. Does this article apply to a case where there is a guarantee commission? No, because the agent already assumed the risks of collection by accepting the guarantee commission. 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) Sub-agent: A person to whom the agent delegates, as his agent, the performance of an act for the principal which the agent has been empowered to perform through his representative. Relation among the principal, agent and sub-agent In reality, the sub-agent is a stranger to the principal who originally gave life to the agency. But if the agent is authorized to appoint a sub-agent, the relation of principal and agent exists between the principal and the sub-agent. That is, the sub-agent may be the agent of the principal if he is in actual control of the business and the principal knows of his appointment or knows that his appointment is necessary. Consequently, any act done by the sub-agent in behalf of the principal is deemed an act of the principal; so neither agent nor sub-agent may be held personally liable as long as they act within the scope of their authority. When can an agent appoint a sub-agent? So long as theres no prohibition. However, he shall be responsible for all the sub-agents acts. 4 Instances where a Sub-agent is appointed and the Effects of each: Instance No prohibition Prohibition Authority to appoint but not designated by principal Authority to appoint and designated by principal Effect Agent responsible for all the acts of sub-agent. Agent liable for acts of subagent if the sub-agent is notoriously incompetent or insolvent. Agent is released from any liability from the acts of the sub-agent.

Guarantee commission: One where, in consideration of an increased commission, the commission agent guarantees to the principal the payment of debts arising through his agency. Purpose of guarantee commission: To compensate the agent for the risks he will have to bear in the collection of the credit due to the principal. Nature of liability of guarantee commission agent: Liable to principal if the buyer fails to pay or is incapable of paying. But he is not primarily the debtor. On the contrary, the principal may sue the buyers in his own name. In such a case, the agent amounts to no more than a guaranty. Liability is a contingent pecuniary liability. Can the agent with a guarantee commission put up the defense of insolvency of the debtor?
rd

Sub-agents acts are VOID as to the principal.

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) When can the principal sue the substitute?

Under the premises given in the previous provision, the principal can sue both the agent and the substitute. IX. 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) Kinds of Principals: 1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and has known the principals identity. 2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principals identity. The partially disclosed principal may enforce against the 3 person the contract of the agent like any disclosed principal. Similarly, the 3 person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal. General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency.
rd rd rd

Remedy of the 3 person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both. 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) Principal Agent 3 Party (wrong party to complain if the principal doesnt complain of the agents acts) General rule: an agent who acts as such is not personally liable to the party with whom he contracts. Reason for general rule: Because an agent who acts as such within the scope of his authority represents the principal so that his contract is really the principals. Exceptions: 1.) When the agent binds himself; or 2.) When he exceeds the limits of his authority without giving the third party sufficient notice of his powers. Reasons for exceptions: 1.) When the agent expressly binds himself, he thereby obligates himself personally and by his own act. 2.) When the agent exceeds his authority, he really acts without authority and therefore, the contract is unenforceable against the principal. The agent becomes personally liable because y his wrong or omission, he deprives the 3 party with whom he contracts of any remedy against the principal. Art. 1899. 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. (n)
rd rd rd

B.

This article refers to the liability of the principal towards 3 persons. What happens if the principal appoints an agent who is ignorant? Then the fault is the principals alone. Equity demands that the principal should be bound by the acts of the agent if the latter acts within the scope of his authority and in accordance with the instructions of the former. Agent acting outside of authority 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) Principal Agent 3 Party (wrong party to complain if the principal doesnt complain of the agents acts) General rule: an agent who acts as such is not personally liable to the party with whom he contracts. Reason for general rule: Because an agent who acts as such within the scope of his authority represents the principal so that his contract is really the principals. Exceptions: 1.) When the agent binds himself; or 2.) When he exceeds the limits of his authority without giving the third party sufficient notice of his powers. Reasons for exceptions: 1.) When the agent expressly binds himself, he thereby obligates himself personally and by his own act. 2.) When the agent exceeds his authority, he really acts without authority and therefore, the contract is unenforceable against the principal. The agent becomes personally liable because y his wrong or omission, he deprives the 3 party with whom he contracts of any remedy against the principal.
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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. 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) Estoppel: precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied. Ratification v. Estoppel Ratification Estoppel Rests on intention Rests on prejudice Affects the entire transaction from the beginning Affects only relevant parts of the transaction. Substance is confirmation of a unauthorized act or conduct after it has been done. Apparent authority v. Authority by estoppel Apparent authority That which though not actually granted, the principal knowingly permits the agent to exercise or holds him out as possessing. Authority by estoppel

Substance is the principals inducement to another to act to his prejudice.

Basis of article 1911:

Principle of estoppel. Necessary for the protection of innocent 3 persons. Instance when solidarity is imposed by law. 1. With notice to 3rd parties 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) Effect of ratification by the principal: Ratification of a contract gives it the same effect as if the principal had originally authorized it. When can the 3 person repudiate the contract? Before actual ratification by the principal, or before the principal has signified his willingness to ratify the agents acts. Effect of the principal receiving the benefits of the transaction: He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens. 2. Without notice to 3rd parties Agent acting in his own name; exception 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) Kinds of Principals: 1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and has known the principals identity. 2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is rd unaware of the principals identity. The partially disclosed principal may enforce against the 3 person the contract of the agent like any disclosed principal. Similarly, the 3 person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal. General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency.
rd rd

rd

Arises in cases where the principal, by his negligence, permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent.

Who must ratify the contract? Only the principal. But there must be knowledge on the part of the principal of the things he is going to ratify.
rd

C.

Remedy of the 3 person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both. X. Obligations and liabilities of principals to agents A. Advance/reimburse Art. 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency.

B.

C.

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) Should the principal reimburse the agent for advances made by the latter even if the agency was unsuccessful? It depends. Yes, if the agent is free from fault. No, if the agent was with fault. Is a broker always entitled to a commission? A broker is entitled to a commission if the sale is effected, but not if there is no perfected transaction. 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) What happens when the principal fails to reimburse or indemnify the agent for expenses set forth in arts. 1912 and 1913? The agent has the right to retain in pledge the things which are the object of the agency. In case the agent sells the goods for more than his claim, is he entitled to the excess? No. What is the nature of the agents right of lien? Specific or particular. It is not general in the sense that it gives the agent a right to retain the goods for claims disconnected with the agency. 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 th e 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) Instances wherein the principal is not liable for expenses incurred by the agent? In the instances enumerated under this article. Reasons why the principal is not liable for the agents expenses: Under 1.) To punish the agent, but when the principal has availed of the benefits, he is deemed to have impliedly ratified the agents acts. 2.) Kasi, kasalanan niya, eh. 3.) The agent is guilty of bad faith and lack of diligence; 4.) An express stipulation which is not contrary to law, morals, good customs, public order or public policy is binding between the parties. Indemnify 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) Basis for the above rule: Equity. Since the principal receives the benefits of the agency, and has a right to demand damages from the agent should the latter not perform the agency, he should answer for the damages resulting from the execution thereof without fault or negligence on the part of the agent. Solidary liability Art. 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) Requisites for application of this article: [2C ] 1.) There are 2 or more principals; 2.) The principals have all concurred in the appointment of the same agent; 3.) The agent is appointed for a common transaction or undertaking. Why is solidarity the rule? Because of the common transaction. Thus, even if the agent was appointed separately, the rule should apply in the interest of justice. Compensation Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) Broker: One who in behalf of others, and for compensation or fee, negotiate contracts relative to property. He is the negotiator between the parties, never acting in his own name, but in the name of those who employ him. He is strictly a middleman and for some purposes, the agent of both parties. When is a broker entitled to compensation? A broker is entitled to commission whenever he rings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. A broker is never entitled to commission for unsuccessful efforts. Does the law allow double agency? Such agency is disapproved by law for being against public policy and sound morality. The exception is where the agent acted with full knowledge and free consent of the principals. In case the agent assumes a double agency, what is his right to compensation?
2

D.

Agents lien 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) What happens when the principal fails to reimburse or indemnify the agent for expenses set forth in arts. 1912 and 1913? The agent has the right to retain in pledge the things which are the object of the agency. In case the agent sells the goods for more than his claim, is he entitled to the excess? No. What is the nature of the agents right of lien? Specific or particular. It is not general in the sense that it gives the agent a right to retain the goods for claims disconnected with the agency. XI. Obligations of principals 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) Kinds of Principals: 1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and has known the principals identity. 2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principals identity. The partially disclosed principal may enforce against the 3 person the contract of the agent like any disclosed principal. Similarly, the 3 person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal.
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E.

1.) If with knowledge of both principals recovery can be had from both. 2.) If without knowledge of both agent can recover from neither. 3.) If with knowledge of only one as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public polisy and good morals.

General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency.
rd

Remedy of the 3 person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both. Art. 1910. 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. (1727) Where can the specific obligations and duties of the principal to the agent be found? Usually in the contract creating the agency. Principal obligations of the principal to the agent in the absence of such agreement: 1.) To comply with all the obligations which the agent may have contracted in his name and within the scope of his authority; 2.) To advance should the agent so request sums necessary for the execution of the agency; 3.) To reimburse the agent for all advances made by him provided the agent is free from fault; 4.) To 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; and 5.) To pay the agent the compensation agreed upon or the reasonable value of the latters services. Liability of the principle to 3 persons:
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Where the relation of agency legally exists, the principal will be liable to 3 persons for all acts committed by the agent in his behalf in the course and within the actual or apparent scope of his authority, and this is not altered y the fact that the agent may also be liable, nor by the fact that some of the acts are to the principals advantage while others are to his disadvantage. Liability of the principal for mismanagement of the business by the agent: Mismanagement of the business of the principal by the agent does not relieve said principal from the responsibility that he had contracted to 3 persons. But where the agents acts bind the principal, the latter may seek recourse against the agent. Liability of principal for a tort committed by the agent:
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The principal is civilly liable to 3 persons for torts of an agent committed at the principals direction or I the course and within the scope of the agents employment. The principal cannot escape liability whether the tort is committed willfully or negligently

so long as the tort is committed by the agent while performing his duties in furtherance of the principals business. Nor is it a defense that the act which caused the tort was unknown to him or even that it was in disobedience to his instructions.
nd

Meaning of ratification in 2 paragraph: Ratification is the adoption or affirmance by a person of a prior act which did not bind him, but which was done or professed to be done on his account, thus giving effect to the act as if originally authorized. The doctrine applies to the ratification of the act of an agent in excess of his authority of the act of one who purports to be an agent but who is really not. It may be implied from the acceptance of benefits by the principal under a contract entered in his name. The authority created by ratification is subsequent but it is equivalent to prior authority. Conditions to ratification: [ICK-PEC] 1.) Intent to ratify; 2.) Principal must have capacity & power to ratify; 3.) He must have had knowledge of material facts; 4.) The act must be done in behalf of the principal; 5.) Principal must ratify acts in its entirety; 6.) The act must be capable of ratification. Effects of ratification with respect to the agent: 1.) Relieves the agent from liability to the 3 party to the unauthorized transaction; and 2.) To his principal for acting without authority; and 3.) He may recover compensation due for performing the act which has been ratified. Effects of ratification with respect to the principal: 1.) He assumes responsibility for the unauthorized act, as fully as if the agent had acted under original authority; but 2.) He is not liable for acts outside the authority approved by his ratification. Effects of ratification with respect to 3 persons: 1.) 3 person is bound by ratification to the same extent as he would have been bound if the ratified act had been authorized in the 1 instance; and 2.) He cannot raise the question of the agents authority to do the ratified act. Must ratification be communicated to the agent or to the 3 party? No. To be effective, ratification need not be communicated or made known to the agent or the 3 party. The act or conduct of
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the principal rather than his communication is the key. But before ratification, the 3 party is free to revoke the unauthorized contract. 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) Is the principal always liable for damages caused by a 3 person or is it the agent who is liable?
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Whether the principal or the agent will be the one liable for damages to the 3 person who has been prejudiced depends on whether the agent acted in bad faith or not. If the agent acted in good faith and within the scope of his authority, the principal incurs liability. If the agent acted in bad faith, he alone shall be responsible to such person. What is the extent of liability covered under this article? Damages. What is good faith referred to in this article?
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B.

Good faith here means that the agent had no knowledge that the principal is dealing with a 3 person. Note: If the contract is one of sale, article 1544 governs and not arts. 1916 and 1917. Agent acting outside scope of authority Art. 1910. 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. (1727) Where can the specific obligations and duties of the principal to the agent be found? Usually in the contract creating the agency. Principal obligations of the principal to the agent in the absence of such agreement: 1.) To comply with all the obligations which the agent may have contracted in his name and within the scope of his authority; 2.) To advance should the agent so request sums necessary for the execution of the agency; 3.) To reimburse the agent for all advances made by him provided the agent is free from fault; 4.) To 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; and 5.) To pay the agent the compensation agreed upon or the reasonable value of the latters services. Liability of the principle to 3 persons:
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Where the relation of agency legally exists, the principal will be liable to 3 persons for all acts committed by the agent in his behalf in the course and within the actual or apparent scope of his authority, and this is not altered y the fact that the agent may also be liable, nor by the fact that some of the acts are to the principals advantage while others are to his disadvantage. Liability of the principal for mismanagement of the business by the agent: Mismanagement of the business of the principal by the agent does not relieve said principal from the responsibility that he had
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contracted to 3 persons. But where the agents acts bind the principal, the latter may seek recourse against the agent. Liability of principal for a tort committed by the agent: rd The principal is civilly liable to 3 persons for torts of an agent committed at the principals direction or I the course and within the scope of the agents employment. The principal cannot escape liability whether the tort is committed willfully or negligently so long as the tort is committed by the agent while performing his duties in furtherance of the principals business. Nor is it a defense that the act which caused the tort was unknown to him or even that it was in disobedience to his instructions. Meaning of ratification in 2 paragraph: Ratification is the adoption or affirmance by a person of a prior act which did not bind him, but which was done or professed to be done on his account, thus giving effect to the act as if originally authorized. The doctrine applies to the ratification of the act of an agent in excess of his authority of the act of one who purports to be an agent but who is really not. It may be implied from the acceptance of benefits by the principal under a contract entered in his name. The authority created by ratification is subsequent but it is equivalent to prior authority. Conditions to ratification: [ICK-PEC] 1.) Intent to ratify; 2.) Principal must have capacity & power to ratify; 3.) He must have had knowledge of material facts; 4.) The act must be done in behalf of the principal; 5.) Principal must ratify acts in its entirety; 6.) The act must be capable of ratification. Effects of ratification with respect to the agent:
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1.) Relieves the agent from liability to the 3 party to the unauthorized transaction; and 2.) To his principal for acting without authority; and 3.) He may recover compensation due for performing the act which has been ratified. Effects of ratification with respect to the principal: 1.) He assumes responsibility for the unauthorized act, as fully as if the agent had acted under original authority; but 2.) He is not liable for acts outside the authority approved by his ratification. Effects of ratification with respect to 3 persons:
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1.) 3 person is bound by ratification to the same extent as he would have been bound if the ratified act had been authorized in the 1 instance; and 2.) He cannot raise the question of the agents authority to do the ratified act. Must ratification be communicated to the agent or to the 3 party? No. To be effective, ratification need not be communicated or made known to the agent or the 3 party. The act or conduct of
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Ratification v. Estoppel Ratification Rests on intention Affects the entire transaction from the beginning

the principal rather than his communication is the key. But before ratification, the 3 party is free to revoke the unauthorized contract. 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) Estoppel: precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied. Estoppel Rests on prejudice Affects only relevant parts of the transaction. Authority by estoppel

Substance is confirmation of a unauthorized act or conduct after it has been done. Apparent authority v. Authority by estoppel Apparent authority That which though not actually granted, the principal knowingly permits the agent to exercise or holds him out as possessing.

Substance is the principals inducement to another to act to his prejudice.

Arises in cases where the principal, by his negligence, permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent.

Basis of article 1911:

Principle of estoppel. Necessary for the protection of innocent 3 persons. Instance when solidarity is imposed by law. 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) May 2 persons contract with regard to the same thing, one with the agent and the other with the principal? Yes. If this situation arises, which of the contracts will be preferred? If the contracts are compatible, they will both be given effect. If they are incompatible, then the contract of prior date shall be preferred. Art. 1544: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have 1 taken possession thereof in good faith if it should e movable property. Should it be immovable property, the
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ownership shall belong to the person acquiring it who in good faith 1 recorded it in the Registry of Property. Should there be

st

no inscription, the ownership shall pertain to the person who in good faith was 1 in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. 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) Is the principal always liable for damages caused by a 3 person or is it the agent who is liable?
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Whether the principal or the agent will be the one liable for damages to the 3 person who has been prejudiced depends on whether the agent acted in bad faith or not. If the agent acted in good faith and within the scope of his authority, the principal incurs liability. If the agent acted in bad faith, he alone shall be responsible to such person. What is the extent of liability covered under this article? Damages. What is good faith referred to in this article? C. Good faith here means that the agent had no knowledge that the principal is dealing with a 3 person. Note: If the contract is one of sale, article 1544 governs and not arts. 1916 and 1917. For crimes; torts
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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) Duty of a 3 person who deals w/ an agent:
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3 person deals w/ an agent at his peril. He is bound to inquire as to the extent of the agents authority, and this is especially true where the act of the agent is of an unusual nature. Ignorance of the agents authority is no excuse. It is his duty to require the agent to produce his power of attorney to ascertain the scope of his authority. He may also ask for the instructions of the principal. Do secret orders or private instructions prejudice 3 persons? No, he cannot be prejudiced by any secret understanding between the principal and the agent. Such secret orders cannot be invoked as
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against 3 parties if the agent had apparent authority. XIII. How is agency extinguished A. Revocation; agency coupled with an 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) Agency by Estoppel: There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another. 1.) Estoppel of Agent One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the 3 persons interested in the transaction in which he is engaged. 2.) Estoppel of Principal a.) As to Agent One who knows that another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other. b.) As to sub-agent To estop the principal from denying his liability to a 3 person, he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and sub-agent.
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c.) As to 3 persons One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of 3 persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.

3.) Estoppel of 3 Persons A 3 person, having dealt with one as an agent may be estopped to deny the agency as against the
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principal, agent or 3 persons in interest. 4.) Estoppel of the govt The govt is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority. 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) Meaning of Presumption of continuance of agency: When once shown to have existed, an agency relation will be presumed to have continued in the absence of anything to show its termination. Who has the burden of proving the revocation/termination of agency? The burden of proving a revocation or other termination of agency is on the party asserting it. Note: Even if the reason for extinguishing the agency is not true, the agent cant insist on reinstatement. The agent can only demand damages. Modes of extinguishing an agency, generally: [ASO] 1.) Agreement; 2.) Subsequent acts of the parties which may be either: a.) By the act of both parties or by mutual consent; b.) By the unilateral act of one of them. 3.) By operation of law.

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Modes of extinguishment, specifically: [WR-DEAD] 1.) Withdrawal of the agent; 2.) Revocation; 3.) Death, civil interdiction, insanity or insolvency of the principal or of the agent; 4.) Expiration of the period for which the agency was constituted; 5.) Accomplishment of the object or purpose of the agency; and 6.) Dissolution of the firm/corp which entrusted or accepted the agency; Necessary characteristics of the parties for the continuance of the agency: [PCS] 1.) Present; 2.) Capacitated; 3.) Solvent. Why is presence necessary? Because the general rule in art 1919 is that death of any of the parties extinguishes agency. However in the case where you have several principals and/or several agents, whether the death of one principal or of one agent terminates the agency would depend on the intention of the parties. Generally the death of one of several principals does not revoke the agents authority nor does the death of one of several agents put an end to the agency. The intention of the parties controls. Why is capacity necessary? For instance, in the case of civil interdiction, it deprives the offender during the period of his sentence of the right to manage his property and dispose of such property by any act or any conveyance inter vivos. A person under civil interdiction hence, cannot validly give consent. Same is true for insane people. Why is solvency necessary? As by an act of insolvency, the principal loses control of the subject matter of the agency, the authority of the agent to act for his principal ceases by operation of law upon an adjudication of the principals insolvency. On the other hand, the insolvency of the agent will ordinarily put an end to the agency, at least if it is in any way connected with the agents business which has caused his failure. General rule as to death of the principal or agent: By reason of the very nature of the relationship between the principal and the agent (which is fiduciary argh!), agency is distinguished ipso jure upon the death of the principal. Exceptions: 1.) If the agency is coupled with an interest; 2.) If the act of the agent was executed without the knowledge of the death of the principal and the 3 person who contracted w/ the agent acted in good faith. Why does dissolution of a firm or corp extinguish the agency? Dissolution of a corp extinguishes its juridical existence. What happens when the object or the purpose of the agency is accomplished? As between the parties, the principal and the agent, the fulfillment of the purpose for which the agency was created ipso facto terminates the agency.
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What happens when the term for which the agency was supposed to continue expires? When an agency is created for a fixed period, the expiration of such period ends the agency, even though the purpose for which the agency was created has not been accomplished. What happens if no time is specified? The agency terminates at the end of a reasonable period of time. Can the period be implied? Yes, from 1.) The terms of the agreement; 2.) Purpose of the agency; and 3.) The circumstances of the parties. What happens if the subject matter of the agency is lost or destroyed? In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the agency terminates the agents authority to deal with reference to it. Exceptions: 1.) If it is possible to substitute other material for that which was destroyed without substantial detriment to either party, or 2.) If the destroyed subject matter was not in fact essential to the contract; and 3.) A partial loss or destruction. Are the modes of extinguishments of agency exclusive? No. Art. 1919 gives only those causes of extinction which are particular to agency. But the list is not exclusive. The general rule actually is, an agency may be extinguished by the modes of extinguishments of obligations in general whenever they are applicable, like loss of the thing and novation (see art. 1231). Does war extinguish agency? During the existence of war, a contract of agency is inoperative if the agent or the principal is an enemy alien. But since it is generally conceded that war suspends all commercial intercourse between the residents of 2 belligerent states, the general rule is that agency is terminated, as a matter of law, upon the break of war.

Does legal impossibility terminate agency? Implied in every contract is the understanding that it shall be capable of being carried out legally at the time called for by the contract. An agency then terminates if a change in the law makes the purpose of the agency unlawful. What happens if the principals authority terminates? A position which flows from a trust relationship whether directly or indirectly, terminates as a matter of law with the destruction of the trust. Consequently, a sub-agents authority terminates with the termination of the principals authority. In case of loss of the subject matter, does the principal incur any liability? It depends. If the loss was brought about by the principal as in the case where the principal sells the subject matter to another party notwithstanding that an agency had been constituted in reference to it, then he may be liable for damages for his wrongful terminating act. But if the subject matter is lost without the fault of the principal, no liability is assumed by him. Will a change of conditions affect the agency? General rule: When there is a basic change in the circumstances surrounding the transaction not contemplated by the parties which would reasonably lead the agent to believe that the principal would not desire him to act, authority of agent is terminated. Exceptions: 1.) If the original circumstances are restored within a reasonable period of time, the agents authority may be revived. 2.) Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably. (But when in doubt, agent could contract principal for instructions if possible). 3.) Where the principal and agent are in close daily contact, the agents authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions. Confidential information It is difficult to determine whether information is confidential or not, because while the relation of principal and agent is confidential, not all knowledge acquired by the agent is of a confidential nature. Some clearly is of so general a nature that equity ought not attempt to restrict its subsequent use. Usually, what a court does is to determine 2 things: 1.) Whether the knowledge or information is indeed confidential, and 2.) Whether its subsequent use ought to be prevented. Principle behind enjoining an agent from using confidential information: There is in the contract of service subsisting between the principal and the agent an implied contract on the part of the agent that he will not, after the service is terminated, use information which he has gained while the service has been subsisting to the detriment of his former employer. 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) May an agency be terminated by a subsequent act of the principal? Yes, when he does so, its called revocation. May an agency be terminated by a subsequent act of the agent? Yes, its called withdrawal or renunciation. Does it matter if the agency is gratuitous or with compensation when we speak of revocation by the principal? No, art 1920 makes no distinction. Reasons:

1.) Since the authority of the agent emanates from the principal, if the principal wishes to terminate the agency the law must enable him to do so. 2.) Confidence being the cardinal basis of the relation, it stands to reason that it should cease when such confidence disappears. 3.) The principal-agent relationship is consensual and personal in nature. No one can nor should be forced to retain another as his agent against his will. In case a principal does revoke an agency, is there any way by which the agent can hold him liable for damages? Yes. For instance, 1.) If the agency was constituted for a fixed period, the principal shall be liable in damages occasioned by the wrongful discharge of the agent before the expiration of the period fixed. 2.) If the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid payment of commission about to be earned, the principal can be held liable for damages. Reason for requiring agent to return the document evidencing the agency: To prevent the agent from making use of the power of attorney and thus avoid liability to 3 persons who may subsequently deal with the agent on the faith of the instrument. Kinds of Revocation: 1.) Express; or 2.) Implied, e.g.: a.) When the principal appoints a new agent for the same business or transaction, or b.) When the principal directly manages the business entrusted to the agent. Is notice of revocation to the agent necessary? Yes. A revocation without notice to the agent will not render invalid an act done in pursuance of the authority. Is express notice of revocation to the agent necessary? As between the principal and the agent, express notice to the agent that the agency is revoked is not always necessary. If the party to be notified actually knows, or has reason to know, facts indicating that his authority has been terminated or suspended, there is sufficient notice. Is notice of revocation to 3 persons necessary? Yes.
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What kind of notice should you give 3 persons? 1.) As to former customers, actual notice must e given to them because they always assume the continuance of the agency relationship. 2.) As to other persons, notice by publication is enough. May the agent renounce the agency at will? Yes, but subject to the contractual obligations owing the principal. Reason: The essence of the principal-agent relationship is the consent and willingness of the agent to act for the principal. The law cannot compel the parties to continue an agency if they do not want to do so. (The principal cannot even sue for affirmative specific performance because that would lead to involuntary servitude!) Form of renunciation: It is not always necessary for the agent to renounce the agency expressly. He can do so impliedly, as for example 1.) Where he has conducted himself in a manner incompatible with his duties as agent; or 2.) When he abandons the object of his agency and acts for himself in committing a fraud upon his principal; or 3.) When he files a complaint against the principal and adopts an antagonistic attitude towards him. Does a violation of the instructions of the principal amount to a renunciation? No. Mere fact that agent violates his instructions does not amount to renunciation, and although he may thus render himself liable to the principal, he does not cease to become an agent. 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) What is the effect of revocation in relation to 3 persons if the agent was authorized to contract with specified persons?
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If the agency is created for the purpose of contracting with specified persons, its revocation will not prejudice such 3 persons until notice thereof is given them. The reason for this is obvious. Since 3 persons have been made to believe by the principal that the agent is authorized to deal with them, they have a right to presume that the representation continues to exist in the absence of notification by the principal. But of course, notice is not required if the 3 persons already know of the revocation. 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) Effect of revocation in relation to 3 persons if the agent was authorized to contract with the public in general:
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such 3 persons have read the newspaper concerned. Notice required in art. 1921 v. that in art. 1922: Art. 1921 Must be personal.

In case the agent has general powers, innocent 3 parties dealing with the agent will not e prejudiced by the revocation before they had knowledge thereof. In this case, however, the fact that the revocation was advertised in a newspaper of general circulation would be sufficient to 3 persons for publication constitutes notice upon everybody and this is true whether or not
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Art. 1922

May be personal.

Revocation must be known

to 3rd person informed of the appointment.

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General rule: Special information needs special information of revocation.

Even if 3 person doesnt know, as long as there is publication in a newspaper of general circulation.

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Except: If you can prove that the 3 person read the notice in the newspaper. Art. 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. (1735a) What does this article mean? 1.) There is implied revocation of the previous agency when the principal appoints a new agent for the same business or transaction if there is incompatibility. But the revocation does not become effective as between the principal and the agent
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unless it is in some way communicated to the latter. Again, the rights of 3 persons who acted in good faith and without knowledge of the revocation will not be prejudiced thereby. 2.) There is no implied revocation where the appointment of another agent is not incompatible with the continuation of like st st authority in the 1 agent, or if the 1 agent is not given notice of the appointment of the new agent. Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. (n) What does the above article provide? It provides for another case of implied revocation. Effect of direct management of the business by the principal himself: Generally, it revokes the agency because there would no longer be any basis for the representation previously conferred. Exception: when the only desire of the principal in doing so is for him and the agent to manage the business together. 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) Rationale: Since the appointment of an agent by 2 or more principals for a common transaction or undertaking makes them solidarily liable to the agent for all consequences of the agency, then each one of the principals should be granted the right to revoke the power of attorney even without the consent of the others. Remember that in a solidary obligation, the act of one is the act of all. 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) How many agents are involved in this article? 2, one to whom a general power is previously granted. Another to whom a special power is given. (Note that this can also apply if a special power is subsequently given to the same agent.) Effect of the issuance of a special power as regards the general power: The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. 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) General rule: Principal may revoke an agency at will since the essence of agency is the agents duty of obedience to the principal. Exceptions: [BF=Partner] 1.) When a bilateral contract depends on the agency; 2.) When the agency is the means of fulfilling an obligation already contracted; 3.) When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Can an agency, coupled with an interest, be terminated by the sole will of the principal? No. Requisite for agency to be irrevocable for being coupled with a interest: Interest of the agent must be in the subject matter of the power conferred and not merely an interest in the exercise of the power. Instances of an agency coupled with an interest: 1.) When the agent has parted with value or incurred liability at the principals request, and he is looking to the exercise of the power as the means of reimbursement or indemnity. 2.) When the interest in the thing concerning which the power is to be exercised arises from an assignment, pledge or lien created by the principal with the agent being given the power to deal with the thing in order to make the assignment, pledge or lien effectual. If the contract of agency stipulates that such will be irrevocable, is such terminology controlling in all cases? No. Whether an interest will make an agency irrevocable exists in a particular case is to be determined from the entire agreement between the parties and from the facts and circumstances. The terminology is not controlling. Even if an agency is made in terms irrevocable, the fact will not prevent its revocation by the principal when the agency is not in fact coupled with an interest.

B.

C.

If an agency is coupled with an interest, does this mean that the principal can never ever revoke it? No. You can still revoke in extreme situations, e.g.: 1.) Irrevocability can never be used as a shield for the perpetration of acts in ad faith, breach of confidence or betrayal of trust. The law will never permit the agent to commit frauds against the principal. 2.) When the interest is already terminated. Why is it said that agencies coupled with interest are not true agents? Because persons with proprietary interests in the subject matter of their agency are not true agents at all. One of the hallmarks of the agency relation is the control of the principal over the acts of the agent and over the subject matter of the agency. An agency coupled with an interest removes that control. Withdrawal 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. 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) Does the agent have a right to renounce or withdraw from the agency at any time? Yes. Even without the consent of the principal. But, in the latter case, he may be subject to liability for breach of contract or for tort. Basis: Constitutional prohibition against involuntary servitude. Obligation of agent if he withdraws from agency without just cause: 1.) Notify principal (even if w/ just cause); and 2.) Indemnify the principal should the latter suffer any damage by reason of such withdrawal. Reason for indemnity: To answer for losses and damages occasioned by the non-fulfillment of his obligation as agent. Is the agent liable for indemnity if the withdrawal was for just cause? No. Agent cannot be held liable if the agent withdraws for a valid reason as when: 1.) The withdrawal is based on the impossibility of continuing the agency without grave detriment to himself; or 2.) Fortuitous event. What happens when the agent sues the principal? Equivalent to withdrawal of the agent. 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) Obligation of agent after withdrawal: Even when withdrawal is for a valid reason, he must continue to act until the principal has had reasonable opportunity to take the necessary steps like the appointment of a new agent to remedy the situation caused by the withdrawal. This is to prevent damage or prejudice to the principal. Death; agency coupled with an interest 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. 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) If the agent dies, his heirs should tell the principal. However, if the principal dies, the principals heirs have no obligation to tell the agent. General rule: Agency is terminated instantly by the death of the principal. Rationale: Agency, being based on representation, there is no one to e represented where the principal is already dead. Exceptions: 1.) If the agency has been constituted in the common interest of the principal and the agent; and
rd

2.) If the agency has been constituted in the interest of a 3 person who has accepted the stipulation in his favor. 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) What does this article provide?

It provides that the death of the principal or any other like cause, extinguishes the agency. But in the same way that revocation of the agency does not prejudice 3 persons who have dealt with the agent in good faith without notice of revocation, such 3 persons are also protected where it is not shown that the agent had knowledge of the termination of the agency because of the death of the principal or any other like cause which extinguishes the agency.
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D. E. F. G.

Does this article only require the agent to be in good faith? No, both agent and 3 person must be. Art. 1932. 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. (1739) In case of death of agent, what must the heirs do? 1.) Notify the principal to enable the latter reasonable opportunity to take such steps as may be necessary to meet the situation; and 2.) Adopt such measures as the circumstances may demand in the interest of the principal. Can the heirs continue the agency? General rule: No, since an agency calls for personal services on the part of the agent. Exceptions: 1.) Agency by operation of law, or a presumed or tacit agency; 2.) Agency is coupled with an interest in the subject matter of the agency. Dissolution of the firm/corporation Accomplishment of the object/purpose Expiration of the period Civil interdiction, insanity, insolvency