LAW ON AGENCY

GENERAL PROVISIONS
Define Agency (MANDATO): Agency is a contract whereby a person binds to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Art. 1868)

GENERAL PROVISIONS
Observations: Definition is very broad and therefore defective. As worded, the definition includes relationship of master and servant of employer and employee of lessor and independent contractor. The servant, the employee and the independent contractor all render some work or service in representation or on behalf of another.

GENERAL PROVISIONS
NOTE: What the agent really does for the principal is a JURIDICAL ACT, and not merely a material one. In other words, while an agent may exercise discretionary powers, the lessees of service ordinarily performs only ministerial functions.

GENERAL PROVISIONS
Justice JBL Reyes: The true essence of the distribution, it is submitted lies in that the agent enter or is designed to enter judicial relations, with or without representation of the principal.

GENERAL PROVISIONS

Agency is also a representation relation. Representation constitutes its basic. By this legal fiction of representation, the actual absence of the principal is transferred into legal fiction of representation, the actual absence of the principal is transferred into legal or judicial presence.

GENERAL PROVISIONS
Importance: It enables a man to increase the range of his individual and corporate activity by enabling him to be constructively present in many places and to carry on diverse at the same time.

GENERAL PROVISIONS
Purpose and Nature of Agency: The purpose is to extend the personality of the principal. It enables the activity of man which is naturally limited in its exercise by impositions of his physiological conditions to be extended, permitting him to perform diverse juridical acts at the same time in different places.

GENERAL PROVISIONS
Basis of Agency is REPRESENTATION.

GENERAL PROVISIONS
The relation is fiduciary in character since it is based on trust and confidence. Hence the agent is estopped from asserting or acquiring a title to the subject matter of the agency adverse to that or the principal.

GENERAL PROVISIONS
Parties to a Contract of Agency: Principal (Mandante) one whom the agent represent and from whom he derives his authority, he is the person represented; and Agent (Mandatario) one who acts for and represents another; he is the person acting in a representative capacity.

GENERAL PROVISIONS
NOTE: The principal is sometime called employer, constituent or chief. The agent is frequently called attorney, or an attorney in fact. E.g. occasionally is spoken as proxy, delegate or representative.

GENERAL PROVISIONS
Principal or essential elements of contract of Agency: There is consent, expressed or implied; The object is the execution of juridical act in relation to a third person;

GENERAL PROVISIONS
The agent acts as a representative and not for himself; The agent acts within the scope of his authority

GENERAL PROVISIONS
-Agent discloses his principal or acts in behalf of the principal -Cause is for compensation as a general rule

GENERAL PROVISIONS
CHARACTERISTIC AS A CONTRACT;
Nominate Consensual Preparatory Informal Personal Representative Derivative

GENERAL PROVISIONS
Different Kinds or Classification of Agency: As to form: Oral Written As to the manner of creation: Express- one where the agent has been actually authorized by the principal either orally or in writing; Implied one, which implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency.

GENERAL PROVISIONS
As to cause: Onerous or compensated one where the agent receives compensation for his services. Agency is presumed to be for compensation. (art. 1875) Gratuitous one where the agent receives no compensation.

GENERAL PROVISIONS
As to extent of business covered: General one which comprises all business of the principal (art. 1876); or Special one which comprises one or specific transactions;

GENERAL PROVISIONS
As to authority conferred: Couched in general terms one which is created in general terms and is deemed comprise only acts of administration (art. 1877) Couched in specific terms one authorizing only one performance of a specific act or acts (art. 1878)

GENERAL PROVISIONS
As to its nature and Effects: Ostensible or representative one where the agent acts in the name and representation of the principal (art. 1878) Simple or commission one where the agent acts for the account of the principal but in his own name;

GENERAL PROVISIONS
Distinguish Agency from Loan:
In loan, a borrower is given money (a) for purpose of his own, in agency, to advance principals business and he must generally return it whether or not his business is successful.

GENERAL PROVISIONS
Distinguish Agency form lease of service: The basis of lease of service is employment and the lessor (like a servant ordinarily performs only ministerial (not discretionary powers) functions.

GENERAL PROVISIONS
Distinguish Agency from contract for a piece of work:
The independent contractor exercise his employment independently and not in representation of the employer.

GENERAL PROVISIONS
Distinguish Agency from partnership: A partner acts not only for his copartners and the partnership but also as a principal for himself (in agency, agent acts only for his principal).

GENERAL PROVISIONS
Distinguish Agency from negotiorum gestio: Negotiorum gestio is a quasi-contract; the getio acts authority and knowledge of the owner of the property or business although according to his presumed (not express) will by exercising all the diligence of a good father of a family. (art. 2145. In both however, there is representation.

GENERAL PROVISIONS
Distinguish Agency from sale; In sale (as distinguished from agency to sell, the buyer receives the goods as owner, pays the price (the agent deliver the proceeds of the sale to the principal), can deal with the thing as he please being the owner (the agent, according to the instructions of the principal) and as a general rule, cannot return the object sold.

 Distinguish agency from brokerage: A broker is merely an intermediary between the purchaser and the vendor whose only office is to bring together the parties to the transaction and has nor relation to the thing he buys or sell, while a (commission) agent maintains a relation not only his principal and the purchaser or vendor but also with the property the subject matter of the transaction which is placed and at disposal in accordance with his authority.

GENERAL PROVISIONS

Acceptance is either express or implied (Art. 1870)

GENERAL PROVISIONS

GENERAL PROVISIONS
When is there implied acceptance of an agency by an agent? As between person present If the principal (personally) delivers his power or attorney to the agent and the latter receives it without any objection. (art 1873)

GENERAL PROVISIONS
As between persons absent When the principal transmits the power of attorney to the agent, who receives it without any objection; When the principal entrust 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 (Art. 1872)

GENERAL PROVISIONS
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.

GENERAL PROVISIONS
Informing other people of the existence are in two ways: a) Special information b) Public advertisement. c) According to Justice JBL Reyes to forestall fraud, the following paragraph must be added to Article 1873, But revocation made in any manner shall be effective against all persons having actual knowledge thereof.

GENERAL PROVISIONS
The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given.

GENERAL PROVISIONS
Meaning of Power of Attorney
A written authorization to an agent to perform specific acts in behalf of his principal which acts, when performed, shall have binding effect on the principal.

GENERAL PROVISIONS
Distinguished implied agency from agency by estoppel. In implied agency, there is an actual agency. The principal alone is liable. In an agency by estoppel, the authority of the agent is not real but apparent. If the principal causes the estoppel, he is liable to any third person who relied on the misrepresentation. If the estoppel is cause by the agent, then only agent is liable (Art. 1911).

GENERAL PROVISIONS
As between the principal and the agent: In implied agency, the agent is true agent, with rights and duties of an agent. In an agency by estoppel (caused for instance by estoppel on the part of the agent), the agent is not a true agent; hence he has no rights as such.

GENERAL PROVISIONS
As to third persons: If the estoppel is caused by the principal, he is liable, but only if the third person relied on misrepresentation in an implied agency, the principal is always liable.

GENERAL PROVISIONS
If the estoppel is caused by the agent, it is only agent who is liable, never the alleged principal; in an implied agency, the agency is never personally liable.

GENERAL PROVISIONS
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.

GENERAL PROVISIONS
Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) 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.

GENERAL PROVISIONS
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.

 Legal effect of an agency couched in general terms: Such an agency comprises only acts of administration, (a) even if the principal should state that the he withholds no power, or (b) that the agent may execute such acts as he may consider appropriate (c) even though the agency should authorize a general and unlimited management. (art. 1877)

GENERAL PROVISIONS

GENERAL PROVISIONS
Examples of Acts of Mere Administration To sue for the collection of debts. To employ workers or servant and employees needed for the conduct of a business.

GENERAL PROVISIONS
To engage counsel to preserve the ownership and possession of the principals property. To lease real property to another for one year or less provided the lease is not registered . (see Art. 1878 No. 8 by implication)

GENERAL PROVISIONS
To make customary gifts for charity or to employees in business managed by the agent (see Art. 1878, No. 6) To borrow money if it urgent and indispensable for the preservation of the thing under administration (see Art. 1878, No.7)

GENERAL PROVISIONS
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;

GENERAL PROVISIONS
(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;

GENERAL PROVISIONS
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;

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(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;

GENERAL PROVISIONS
(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;

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

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(12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance;

GENERAL PROVISIONS
(14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion. (n)

GENERAL PROVISIONS
Cases where Special powers of Attorney are required:
To make such payment as are not usually considered as act of administration To effect novations which put an end to obligation already in existence at the at the time the agency was constituted;

GENERAL PROVISIONS
To compromise, to submit questions to arbitration, to renounce the right to appeal from the judgment, to waive objections to the venue of an action or to abandon a prescription already acquired.

GENERAL PROVISIONS
To waive any obligation gratuitously;

GENERAL PROVISIONS
To enter into any contract by which the ownership of immovable is transmitted or acquired either gratuitously or for a valuable consideration;

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To make gift, except customary ones for charity or those made to employees in the business management by the agent. To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;

GENERAL PROVISIONS
To lease any real property to another person for more than one year. To bind the principal to render some service without compensation:

GENERAL PROVISIONS
To bind the principal in a contract of partnership; To obligate the principal as guarantor or surety.

GENERAL PROVISIONS
To create or convey real right over immovable property; To accept or repudiate an inheritance;

GENERAL PROVISIONS
To ratify or recognize obligations contracted before the agency; and Any other act of strict dominion. (Art. 1878)

GENERAL PROVISIONS
The case enumerated involve acts of strict dominion or ownership as distinguish from acts of administration.

GENERAL PROVISIONS
A special power to sell excludes the to mortgage; and a special power to mortgage does not include the power to sell. (Art. 1879).

 Power to sell carries with it the power to find a purchaser or to sell directly; power to deliver the property, power to make the usual representation and warranty; power to execute the necessary documents; power to fix the terms of the sale, including the time, place, mode of delivery, price of the goods, and the mode of payment unless there be a set conditions stipulated by the principal; and power to sell only for CASH and power to receive the price unless he was authorized to only solicit orders.

GENERAL PROVISIONS

 The power to sell does not carry with it the power to barter or to exchange to mortgage or to pledge. The power to mortgage does not include the power to sell; or to execute a second mortgage; to mortgage for the agents personal benefit of any third person, unless the contrary has been clearly indicated.

GENERAL PROVISIONS

GENERAL PROVISIONS
A special power to compromise does not authorize submission to arbitration. (art. 1880) Hence an agent authorized to compromise can do anything, which the principal himself can do to effect a settlement unless there is contrary legal provision.

Meaning of Compromise- It is a contract whereby the parties, by entering reciprocal concessions, avoid a litigation or put an end to one already commenced. (Art. 2042, CC) Arbitration means parties submitted their controversies to one or more arbitrators for decision.

GENERAL PROVISIONS

GENERAL PROVISIONS
Art. 1881. 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.

GENERAL PROVISIONS
Art. 1882. Art. 1882. The limits of the agents authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him.

GENERAL PROVISIONS
Requisites in order the agent can bind the principal:
The agent must act within the scope of his authority, and The agent act in behalf of the principal (see Art. 1881, 1882)

GENERAL PROVISIONS
Cases wherein the principal may still be bound by the acts of an agent who exceeded his authority:
Where the principals act have contributed to decide a third person in good faith (see Art. 1911 Where the limitations upon the power created by him could not have been known by the third person (see Art. 1900)

GENERAL PROVISIONS
Where the principal has placed in the hands of the agent instruments signed by him in blank; and Where the principal has ratified the acts of the agent. (Art. 1901)

GENERAL PROVISIONS
The agent is one directly liable to the person with whom he had contracted as if the transaction were his own. Therefore, the principal and such person have no right of action against each other.

GENERAL PROVISIONS
The exception is:
The principal is bound when the contract involves things belonging to him; the principal may sue the agent for breach of contract. (Art. 1883).

GENERAL PROVISIONS
This article speaks of a case where the agent was authorized, but instead of acting in behalf of the principal, he acts in his own behalf. Thus, Art. 1883 does not apply if the agent was unauthorized or he acts in excess of his AUTHORITY.

GENERAL PROVISIONS
Example of General Rule Jose asked Pedro to borrow money from Juan. Pedro did not disclose to Juan that he was borrowing money in Joses behalf, that is, Pedro borrowed in his own name. Can Juan ask Jose to pay the debt> No.. Only Pedro has the duty to pay JUAN

Example: A principal told his agent to sell his (the principals ) car for him (the principal). The agent sold It to a third party. The agent acted in his own name. Can the third party sue the principal in case the car has hidden defects? Ans.: Yes, in this case, although the agent acted in his own name, still the sale involved a property belonging to the principal. Here we apply the exception stated in the second paragraph of Art. 1883. As a matter of fact the sale is COMPLETELY VALID.

OBLIGATIONS OF THE AGENT

Specific obligations of the agent

To carry out the agency in accordance with its items; otherwise, he shall be liable for damages. (Art. 1884) Reason: He betrays the confidence reposed on him by the principal. An agent who does not carry out the agency is liable for damages. On the other hand, if he fulfills his duty, he is not personally liable unless he is so bound himself.

To finish the business already begun on the death of the principal should delay entail any danger. Reason: In such case, the agency is still deemed in full force. general rule, the death of the principal extinguishes the agency, however as an exception agent is obliged to finish the business already begun if delay should entail danger. (ART. 1884 PAR .2)

Duty to exercise diligence of a good father of the family in the custody and preservation of goods forwarded to him if he declines the agency. a person is of course free to refuse to be an agent; however Art. 1885 demands the rule of equity. Duty if the owner: The owner must also act as soon as possible by: a. Appointing an agent b. By taking charge of the goods

* To advance the necessary funds if such is the stipulation except when the principal is insolvent (Art. 1886) Example: Angel is Pedros agent. Both agreed that angel would advance the necessary funds, but later Pedro became insolvent. Is Angel still bound to furnish such necessary funds? Ans.: No more, in view of the principal insolvency. In fact insolvency of the principal is a ground of the extinguishment of agency.

Under Article 1912 paragraphs 2 & 3 Should the agent have advanced them, the principal must reimburse him therefore, 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.

Specific obligation of the agent

* To act in accordance with the instruction of the principal and in the absence therefore, to do all that a good father of the family would do, as required by the nature of the business (art. 1887).

Authority vs. Instructions a) In authority, the principal affects only third persons, because if the act is done outside the scope of the agent's authority, the principal is not bound. Instructions concern only the principal and agent.

a) Third person must therefore verify or investigate the authority.

In instructions, third persons do not have to investigate or verify instructions.

Note: If a person makes an inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of the authority will not be any excuse. The acts of an agent beyond his limited powers are invalid except on the following qualifications which would bind the principal:

a. Where the principals acts have contributed to deceive a third person in good faith; b. Where the limitations upon the power created by the principal could not have been known by a third person; and c. Where the principal has placed in the hands of the Agent instruments signed by him in blank.

If an agent carrying out the orders of the principal carried out the instruction he has received from said principal, he cannot be held responsible for the failure of his principal to accomplish the object of the agency unless the said agent exceeded his authority or has acted with negligence, deceit or fraud.

It is the duty of the principal, if he desires an authority executed in a particular manner to make his terms so clear and unambiguous that they cannot reasonably misconstrued.

If he does this, it is the agents duty to the principal to execute the authority strictly, and faithfully; and third persons who know of the limitations or who from the circumstances of the case ought to have known of them can claim no rights against the principal based upon their violation.

Not to carry out the agency if its execution would manifestly result in loss or damage to the principal (art. 1888) Reason: The duty of the agent is to render service for the benefit and not to the determined of the principal.(Art. 1888)
Agent should exercise due diligence. He must presumably act for the benefit and not to the detriment of the principal.

Manifestly means that the execution would damage the principal.

Example: P instructed his agent to charted a boat from Japan to Manila and to load the principals goods with the specific instructions to sail from Japan to Manila on February 16, 2008 and to thereafter sell the goods upon arrival in Manila.

The weather report on the date of the scheduled departure showed that a strong typhoon was directly going to cross the path of the boat. Considering the circumstances, it would be safe to sail only after one week. In the meantime, the prices of the goods at Manila went down by 50%. P thus felt short of the profits he expected to realize. Would A would be liable to P?

Answer: No, A would not liable to P because had carried out the agency, would have resulted in loss damage to his principal.

be A it or

There being a conflict, not to prefer his own interest to those of the principal (e.g. buying goods of the principal or selling his own goods to the principal without informing the principal); otherwise, he shall be liable for damages. (Art. 1889)

Reason: Agency is a fiduciary relation: This rule applies whether agency is onerous or gratuitous.

Basis of the rule: he underlying principle basis of the rule prohibiting an agent from engaging in self-dealing is to shut the door against temptation on his part and to ensure that he places the rights and welfare of his principal above his own in performing his agency.

 Not to borrow money from the principal who was authorize him to lend although at interest, without his consent. (Art. 1890)

Reason: the agent may prove to be a bad debtor. But if the agent has been authorize to borrow money he may himself be the lender at the current rate. Reason: There is no danger of the principal suffering any damage.

Take note: The borrowing of the money must be for the benefit of the principal and not for the agents personal benefit.

Under Art. 1491, agents cannot acquire property by purchase, even at a public or judicial auction, either in person or thru mediation of another, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given.

The defect of the contract shall be voidable. Reason is breach of trust and confidence

To render an account of his transactions and deliver to principal whatever he may have received by virtue of the agency though it may not be owing to the principal (Art. 1891):

Duty of the Agent to account is mandatory. Hence in an overpriced received by the agent for goods he was sell at a certain price, he is duty bound to make an account. This applies even in cases in cases that the money not be owing to the principal but arose from the transaction involving the contract of agency.

Stipulation exempting from the duty to account is VOID, being contrary to public policy as it would be conducive to fraud.

There is no co-ownership over funds despite agent has right to commission. Co-ownership is not established as the relationship of the principal and the agent is based on trust and confidence and not co-ownership.

Some Doctrines on the duty to account: - Whoever administers anothers affairs must render an account because of the representative relation and because of the fiduciary position. If an agent refuses to account when it is his duty to do so, the principal may at once terminate the agency and sue for the balance due. If the principal dies, the agency is extinguished, BUT the duty to account subsists, and can be demanded by the principals heirs or legal representatives.

The principal, or his legal representative, has the right to pass upon the correctness of the accounting. Corollary to his right to demand an accounting, a principal has the right to make reasonable inspection of the books of account and memoranda, including the original entries. An agent, as a consequence of his duty to account, cannot dispute his principals title to the property in his possession.

-To be responsible in certain cases for the acts of the substitute appointed by the agent. (Art. 1892) What is a sub-agent- it is the 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. The rule is unless prohibited by the principal, the agent may appoint a sub-agent or substitute.

 CASES WHEN THE AGENT IS RESPONSIBLE FOR THE ACTS OF THE SUBSTITUTE APPOINTED BY HIM: When he was not given the power to appoint one he cannot be allowed to enrich himself at the agents expenses. When he was given such power, but without designating the person, and the person appointed was notoriously incomplete of insolvent; and When he was prohibited from appointing a substitute. (see Art. 1892)

Specific obligation of the agent

Art, 1893 provides in pars. 1 and 2 of the Article 1892, the principal may bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. The right of action against the substitute is an exception to the rule on the principle of relativity

Specific obligation of the agent

Examples:

a. A is P s agent. In their contract of agency, nothing was mentioned as to whether or not A could appoint a substitute. A appointed S as his substitute. Is the appointment of the substitute valid?
Answer: Yes but A shall be responsible for the acts of the substitute. ( 1st par. Art. 1892)

b. In the problem (a) suppose the substitute violated the instructions of P, whom can P hold liable? Answer: P can hold A liable (Art. 1892) and P can also hold S liable ( Art. 1893)

c. A is Ps agent. A asked P for permission to appoint a substitute, but A did not mention who the substitute would be. P agreed. Now the substitute violated Ps instructions as well as As instructions causing damage to P. Can P hold A liable for the substitutes actuations, in case for example, the substitute becomes insolvent?

Answer: It depends. If the substitute appointed by A was at the time of appointment notoriously incompetent or insolvent, then P can hold A liable, subsidiary or even primarily. If the substitute at the time of appointment is neither notoriously incompetent or insolvent, then P cannot hold A liable either primarily or subsidiarily ( Art. 1892 par. 2)

(d) A is P s agent. A prohibited by P to appoint a substitute, nevertheless appointed S as substituted. S sold goods belonging to P to B who was a purchaser in good faith. Ans. |The sale is completely null and void. The law says that all acts of the substitute appointed against the prohibition of the principal shall be void. (Art. 1892)

Article 1893 provides THAT OTHER THAN THE AGENT THE PRINCIPAL CAN ALSO SUE THE SUBSTITUTE WITH RESPECT TO THE OBLIGATION WHICH THE SUBSTITUTE HAS CONTRACTED UNDER THE SUBSTITUTION. This is one of the exception to Article 1311 (Principle of Relativity) respecting to privity of contracts.

 Under Art. 1894, The liability of two or more agents, even if they have been appointed simultaneously is JOINT and not solidary, unless the latter is stipulated.

 If solidarity has been agreed upon, each of the agents is responsible for the nonfulfillment of the agency, and of the fault or negligence of his fellow agents, except in the latter case when the fellow agents acted beyond the scope of their authority.

Example: P appointed A and B as agents. Solidarity between agents was agreed upon. Thru Bs fault, the agency was not fulfilled. Can P sue A for damages? Ans; Yes, if B acted within the scope of his authority, A being solidary agent can be made responsible for the entire damages, without prejudice to his right later on to recover from the erring agent.

Example where one acts beyond the scopre of his authority: Two solidary agents were appointed to sell the Cadillac car of the principal. Unfortunately one of them sold the Porche automobile. Here the innocent agent cannot be liable at all to the principal, even if solidarity had been agreed upon.

Agent is liable for interest a. from the day he applied to his own use money intended for the agency and; b. Those which owes the principal sums intended for the agency after the expiration of the agency. Interpretation will however show that there is no liability for the agent's own use unless of course at the expiration of the agency, the agent still owes the principal certain sums ( 2nd par. Art. 1896)

If agent advances expenses for the agency as stipulated under Article 1912 paragraphs 2 & 3, the following are the consequences: Should the agent have advanced them, the principal must reimburse him therefore, 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.

General rule : No personal liability for agent with whom he contracts as an agent represents the principal. In case of acting by the agent in excess of authority, the principal cannot be bound unless he ratifies the act.

The agent is bound to the party with whom he contracts: a) When he expressly binds himself. b) When he exceeds the limits of his authority without giving such party sufficient notice of his powers. (Art. 1897) Reason: The contract being unenforceable the third person is deprived of any remedy against the principal.

The scope of agents Authority as far as third persons are concerned, if such acts 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 (Art. 1800).

If the agent contracts in the name of the principal, exceeding the scope of his authority and this is known to the third person, the contract he enters with said third person is VOID unless principal ratifies the same. The contract is however valid as between them if the agent undertook to secure the principals ratification. ( Art. 1898)

EFFECT OF AGENTS IGNORANCE

Article 1899 provides that if the 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. This is based on equity, for after all the agent had complied his duty. It is the principals fault for appointing an ignorant agent.

EFFECT OF AGENTS IGNORANCE

Notice that under this article, it is not enough for the agent to act within the scope of his authority, it is also imperative for such agent to have complied with the orders and instructions of the principal.

As far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority if such act is within the terms of the power of attorney, as written, even if the agent exceeded the limits of his authority according to an understanding between the principal and the agent (Art. 1900)

This is designed to protect the interest of third person. Notice that for this article to apply, the authority must be in writing. If not, it is the duty of the third person to inquire not only as to the existence of the agency but also to the nature and extent of authority of the agent.

Lack of authority of the agent is not a defense if the agent ratified the act of the agent who exceeded his authority. (Art. 1901) Ratification in effect grants authority to the agent. Ratification may be in the future.

Third person may require presentation of the power of attorney or instructions as regards to the agency. Private or secret orders and instructions of the principal is not binding to the third person who relied upon he power of attorney shown to them. (Art. 1902)

COMMISSION AGENCY
Who is commission agent? A commission agent (or factor is one whose business is to receive and to sell goods for commission and who is entrusted by the principal with the possession of goods to be sold. He may act in his own name of in that of the principal.

COMMISSION AGENCY
Commission agent vs. Broker 1. Commission agent is one engaged in the purchase and sale of personal property for a principal. a) Goods are placed in his possession and at his disposal. b) He has relation not only with his principal and the buyer/sellers, but also with the property constituting the object of the sale. c) He may act in his own name or in the name of his principal d) Subject matter refers only to persona property.

COMMISSION AGENCY
Broker acts as a middleman or intermediary who, in behalf of others, and for a commission or fee, negotiates contracts or transactions relative to a real or personal property. a) He does not have the possession or custody of the property. b) He has no relation with the real or personal property he buys or sells. c) He merely acts as a go between or intermediary between seller and the buyer and cannot close the contract in his own name. d) Subject matter refers to either real or personal property.

COMMISSION

AGENCY

A commission agent is not authorized to sell in credit if not so expressly authorized (Art. 1905). He also has the duty to place countermarks to goods he handles with different owners. (Art. 1904). This is a specific obligation of an agent

COMMISSION AGENCY
What rights are given to the principal where a sale on credit is made without authority?

Require payment in cash, in which case, any interest or benefit from the sale shall belong to the agent since the principal or Ratify the sale on credit in which case it will have all the risks and advantages to him. (Art. 1905)

It is the duty of the commission agent who sells in credit to inform the principal with the statement of the names of the buyer. Should he fails to do so, the sale is deemed to have been made for cash insofar as the principal is concerned. (Art. 1906) Guarantee commission (Del Credere Commission) is given in return for the risks the agent will have to bear in the collection of the credit. An agent who receives a guarantee commission is called Del credere agent.

COMMISSION AGENCY

COMMISSION AGENCY
The guarantee commission is given in the risks the agent will have to bear in the collection of credits. If an agent receives a guarantee commission and the third person does not pay, the agent will have to pay the principal just the same. If the agent receives a guarantee commission, he cannot the put up the defense that the debtor possesses no property.

COMMISSION AGENCY

Commission agent who does not collect the credits of the 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. This applies if agent does not get a guarantee commission.

Liability of Agent
Agent is liable for fraud and/or negligence. This shall be determined by the courts and shall apply whether agency was or was not for a compensation. As to the degree of liability, the courts may refer to the fact whether or not the agency is for compensation. (Art. 1900.

1. To carry out the agency upon his acceptance. ( Art. 1884) 2. To finish the business already begun on the death of the principal (art. 1884) 3. To exercise due diligence in the custody and preservation of the goods still in his possession if he refuses to accept the agency (Art 1885) 4. To advance necessary funds if there is such stipulation (Art. 1886)

SUMMARY OF THE OBLIGATIONS OF THE AGENT

5. To perform the agency in accordance with instructions of the principal. (Art. 1887) 6. Not carry out the agency if execution would result to loss or damage to the principal. (Art. 1888) 7. To place the interest of the principal over and above his personal interest in the execution of agency (Art. 1889) 8. To lend the principal his own money if empowered to borrow money; not to borrow, directly or indirectly principals money without latters consent. (Art. 1890)

9. To render an accounting of his transactions even nothing is owing to the principal and to return to principal whatever he received by virtue of the agency (art. 1891) 10. To appoint a substitute if there is no prohibition. a) liability of agent if not given the power to appoint a substitute. b) liability of agent if authorized but appoints an agent notoriously incompetent or insolvent.

c. effect of appointment of a substitute against the prohibition of the principal. (Art. 1892) d. liability of the substitute ( Art. 1893) 11. Extent of liability of two or more agents appointed by principal

a. Jointly liable only, unless solidarity is agreed upon by agents. (Art. 1894) b. Liability of solidary agents in case of non-performance or negligence. (Art. 1895) 12. To pay interest on agency funds he personally used, or nay debts he owes the principal after termination of the agency. ( Art. 1896)

13. Personally liable to third persons if a. he expressly binds himself to be liable. b. he exceeds his authority without giving third party notice of his power. (Art. 1897)

14. Personally liable to third persons if a. agent acts in principals name but in excess of his authority and third person does not know about it otherwise contract is void if third person is aware of the limits of the agent. b. Undertakes to secure principals ratification and fails to do so. (Art. 1898)

15. Agent not liable to third persons if a. he acts strictly according to principals order or instructions. (Art. 1899)

b. Third person transacted with agent according to written authority or instructions of principal. (Art. 1900) 16. Agent will not be liable to third persons if the principal ratifies or is willing to ratify the acts of agent in excess of his authority. (Art. 1901)

17. Private or secret orders of principal to agent will not be binding on third persons who relied on the power of attorney or written instructions. (Art. 1902) 18. Commission agent must submit a statement of the condition of goods received on consignment. a) Distinction between commission agent and broker. (Art. 1903) b) Commission agent must put distinguishing marks on goods of the same quality, kind and mark received from different principals (Art. 1904)

c. Commission agent must sell in cash unless authorized to sell in credit (Art. 1905) d. Commission agent must report of his credit sales if authorized to sell in credit (Art. 1906) e. Liability of commission agent if he receives additional commission. -Distinction between ordinary commission and del credere commission (Art. 1907) - Liability of commission agent if he fails to collect credit on due dates (Art. 1908)

19. Agent is liable for fraud or negligence in the performance of the agencu. (Art. 1909)

OBLIGATIONS OF THE PRINCIPAL

Specific Obligations of the Principal

1. To comply with all the obligations which the agent may have contracted within the scope of his authority (art. 1910, 1881) and in the name of the principal (art. 1868, 1883)

Specific Obligations of the Principal

As a rule, the principal is honoredbound to comply with all the obligations and commitments made by his agent if the agent: a. acted with the power of attorney or authority b. acted within the scope of his authority c. disclosed his principal.

Specific Obligations of the Principal

If the circumstances are present, agent is considered a representative or extension of the personality of the principal and his acts will be the acts of the principal.

Specific Obligations of the Principal

Other Instances when principal is bound by the acts of the agent: a. When the contract, although the agent exceeded his authority advantageous to the principal (Art. 1882) b. If the object of the contract executed in the name of the agent belongs to the principal (Art. 1883)

Specific Obligations of the Principal

c. When the principal accepts or derives benefits from the contract executed by the agent. (Art. 1883)

Specific Obligations of the Principal

c. When the agent acts beyond the scope of his authority and the principal ratifies the same (Art. 1910)

Specific Obligations of the Principal

c. If the principal allowed the agent to act as though he had full powers, he becomes solidarily liable with the agent (Art. 1911)

Specific Obligations of the Principal

2. Principal shall be solidarily liable with the agent if he allowed the latter to act as if he had full powers ( Art. 1911)

Specific Obligations of the Principal

Apparent Authority vs. Authority by estoppel a. Apparent authority is that which though not actually granted, the principal knowingly permits the agent to exercise or hold him out as possessing. b. Authority by estoppel arises in those cases where the principal by his culpable negligence permits him, even though the principal may have no notice or knowledge of the conduct of the agent.

Specific Obligations of the Principal

3. To advance to the agent, should the latter so request, the sums necessary to the execution of the agency (Art. 1912)

Specific Obligations of the Principal

Reimbursement by the principal of agent expenses. Normally it is the obligation of the principal to advance the funds necessary o carry out the agency and if upon the request of the agent, principal refuses or fails to so the agent is exempted from liability due to non- performance. Exception Art. 1886. stipulation that agent advances said expenses.

Specific Obligations of the Principal

If the agent advances the money to carry out the agency, he is entitled to: 1. Reimbursement from the principal of whether or not the undertaking was successful, provided the agent is free from faults. 2. Plus interest on the total advanced by the agent computed from the day the advances were made up to the day of actual reimbursement.

Specific Obligations of the Principal

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.

Specific Obligations of the Principal

A provision that is based on fairness. Liability is limited only to that which the execution of the agency has caused the agent. Example: P authorizes A to sell his land in Tagum. If A uses his own vehicle to go to Tagum to carry out the agency, and it breaks down due to bad roads, the principal must reimburse him for the repair of As car.

Specific Obligations of the Principal

5. Agent has right to retain the principal things which are the object of agency in the form of legal pledge if principal is unable to reimburse him for expenses advanced or indemnify for damages incurred. (Art. 1914)

Specific Obligations of the Principal

Legal pledge is different from ordinary pledge. (See Article 2121 & 2122) It worthy to note that in legal pledge in case of sale in public auction, the agent has no right to retain the excess proceed of the sales. Agent merely recovers the total amount due to him and must return the balance to the principal.

Specific Obligations of the Principal

6. Appointment of an agent done jointly by principals for a common transaction or undertaking, liability of the principals shall be SOLIDARY. (art. 1915) correlate with Arts. 1894 and 1895

7. Rules in case two persons contract with regards to the same thing. One of them with the agent and the other with the principal. If the two contract are compatible to each other, both shall be enforced; If they are incompatible with each other, that of prior date shall be preferred subject to the provisions of Art. 1544 (Art. 1916)

Specific Obligations of the Principal

Specific Obligations of the Principal

If the agent acted in good faith, the principal shall be liable to the third person whose agent contract must be rejected; and If the agent acted in bad faith, he alone shall be responsible. (Art. 1917)

8. Cases the principal not liable for the expenses incurred by the agent. If the agent acted in contravention of the principals instruction, unless the latter should wish to avail himself, or the benefits derived from the contract; When the expenses were due to the fault of the agent.

Specific Obligations of the Principal

Specific Obligations of the Principal

When the agent incurred them with knowledge that the unfavorable result would ensue, if the principal was not aware thereof, and When it was stipulated that the expenses would be borne by agent, or that he latter would be allowed only a certain sum.

Specific Obligations of the Principal 9. To pay the agent the compensation agreed upon, or if no compensation was specified the reasonable value of the agents services. (Art. 1875)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

To comply with all the obligations which the agent may have contracted within the scope of his authority (art. 1910, 1881) and in the name of the principal (art. 1868, 1883)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

Principal is liable if he ratifies the contract made by agent in excess of authority ( Art. 1910)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

Principal is solidarily liable with the agent if allowed agent to act as I he had full powers ( Art 1911)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

To advance to the agent, should the latter so request, the sums necessary to the execution of the agency (Art. 1912)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

To advance to the agent, should the latter so request, the sums necessary to the execution of the agency (Art. 1912)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

To reimbursement the agent for all advance made by him provided the agent is free from fault. (Art. 1912)

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

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. (Art. 1913);

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

Agent has right to legal pledge in case failure or refusal of principal to reimburse advances made or pay the damages incurred by agent in the execution of the contract of agency (Art 1914

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

Solidary liability if Two principals appointing an agent for common transaction (Art. 1915); Rules on Double sale (Art. 1916 subject to Article 1544 on the law on sale;

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

Principal liable for damages incurred by the buyer of the agent in case contract is rejected Principal is not liable if it is in contravention of his authority, or agent acted in bad faith and when there is agreement that agent will bear the expenses.

SUMMARY OF THE SPECIFIC OBLIGATIONS OF THE PRINCIPAL

To pay the agent the compensation agreed upon, or if no compensation was specified the reasonable value of the agents services. (Art. 1875)

EXTINGUISHMENT OF AGENCY
By its revocation; By the withdrawal of the agent; Death, civil interdiction, insanity or insolvency of the principal or of the agent

EXTINGUISHMENT OF AGENCY
By dissolution of the firm or corporation which entrusted or accepted the agency By the accomplishment of the object or purpose of the agency; and By the expiration of the period for which the agency was constituted. (art. 1919)

EXTINGUISHMENT OF AGENCY
Keyword: EDWARD E Expiration D Death, etc. W- Withdrawal A Accomplishment of the agency R- Revocation D- Dissolution

EXTINGUISHMENT OF AGENCY
Other causes: Termination by mutual consent, novation, loss of the subject matter of the agency, transfer or sale of the object of agency, change of law which makes agency illegal, war, fortuitous event or impossibility or difficulty of performance and other modes of extinguishment of obligation.

EXTINGUISHMENT OF AGENCY
Revocation- applies to the principal. The act of recalling back the authroity as agency is based on trust and confidence in his agent. The moment this ceases, principal can revoke the agency.

EXTINGUISHMENT OF AGENCY
Withdrawal in the agent- In the same manner the agent cannot be compel to act as an agent and as such he can withdraw from the agency. Renunciation of his duty as an agent is equivalent to withdrawal

EXTINGUISHMENT OF AGENCY
Death, Civil Interdiction, Insanity or Insolvency of Either the Principal or the Agent.

EXTINGUISHMENT OF AGENCY
Reason: Agency is personal in nature. Thus if either of the contracting parties dies, contract of agency is extinguished. Dissolution of the Firm or Corporation- this will cause the termination or break up of a legal relationship. This is similar to death of a natural person.

EXTINGUISHMENT OF AGENCY
Accomplishment of the object or purpose of the agency. Expiration of the Period of Agency unless otherwise renewed.

How revocation by principal is made: a) Express may be oral or written b) Implied from the acts of the principal.

EXTINGUISHMENT OF AGENCY
Impliedly Revoked when:
By the appointment of anew agent for the same business transaction (Art. 1923)

EXTINGUISHMENT OF AGENCY
By direct management by the principal of the business entrusted to agent (Art. 1944) With respect to a general power of attorney previously granted (e.g. to manage a business ) as regards the matter involved in the latter (Art. 1926)

EXTINGUISHMENT OF AGENCY
Cases when agency is irrevocable: The principal may generally revoke an agency at will. (Art. 1920).

In the following cases, he has no right to revoke the agency without incurring liability for damages: If the agency is coupled with interest, i.e. the agent possesses an interest in the subject matter of the power conferred and not merely in the compensation arising from the exercise of the power (e.g. where the principal pledges his property to the agent as security for his debt and gives the agent the power to dispose of it should be in default).

EXTINGUISHMENT OF AGENCY

Under Art. 1927:

If a bilateral contract depends on the agency (e.g. where it is stipulated that the ownership of the factory sold would be transferred to the buyer only after payment of the balance of the purchase price and that the seller (principal) would appoint the agent to manage the factory and that any profit would be used to pay off the balance.

EXTINGUISHMENT OF AGENCY If the agency is means of fulfilling an obligation already contracted (e.g. agency in favor of creditor to collect sums due debtor- principal) ; and

EXTINGUISHMENT OF AGENCY
If a partner is appointed manager of a contract of partnership, his appointment being revocable only upon just and lawful cause and upon the vote of the partners representing the controlling interest. (see Art. 1927 in relation to Art. 1800, Law on Partnership)

EXTINGUISHMENT OF AGENCY
When there has been waiver by the principal (however, the irrevocability of a power of attorney cannot affect one who is not party thereto, it being obligatory only on the principal who created the agency.

EXTINGUISHMENT OF AGENCY
When the principal is obliged not to revoke. ( here the principal can still revoke but he can held liable for damages, for breach of contract). When the revocation is done is bad faith. (Here, the principal can still revoke but innocent third parties should not be prejudiced; moreover the innocent agent can be entitled to damages from him.

EXTINGUISHMENT OF AGENCY
Withdrawal of the Agent is another mode of extinguishment of agency. He shall no be liable if: 1) He gives prior notice to the principal of his intention to withdraw and 2) His withdrawal is for a valid and justifiable cause. Nevertheless, he can still withdraw if he insists and if the withdrawal is for unjustifiable cause, agent is liable for damages.

EXTINGUISHMENT OF AGENCY
Some valid reasons for withdrawal a) Poor health b) Where there is conflict of interest between the principal and agent c) Where there is incompatible interest between two, as when the principal or the agent files action against each other.

EXTINGUISHMENT OF AGENCY

Under Art. 1929, although the agent withdraws from the agency for a valid reason, he is still obliged to act until the principal had reasonable opportunity to take necessary steps to meet the situation.

EXTINGUISHMENT OF AGENCY
General Rule: Death of either the principal or agent extinguishes the contract agency Agency is not terminated immediately by death in the following cases: If the agency is necessary to finish the business already begun on the death of principal where delay should entail any danger. (1884):

EXTINGUISHMENT OF AGENCY
If it has been constituted in the common interest of the principal and the agent (art. 1930) If it has constituted in the interest of the third person who has accepted the stipulation in favor (Art. 1311)

EXTINGUISHMENT OF AGENCY
Effect of Agents act without knowledge of the principals death- Anything consummated between third person and the third person even after the death of the principal is considered valid and effective if: a. Agent acted in good faith and without knowledge of his principals death and or of any cause which extinguishes the agency; and b. The third person likewise acted in good faith and without knowledge of the principals death. (Art. 1931)

Obligations of the agents heirs upon death of the agent. Death of the agent also extinguishes the agency, but his heirs assume the following obligation: a. Immediately notify the principal of the agents death. b. Exercise the proper diligence of a good father of a family in the protection of the object of agency while in their possession; c. If unable to do so, consign the object of the agency with the court.

EXTINGUISHMENT OF AGENCY
d. In the meantime, adopt such measures as the circumstances may demand in the interest of the principal. f. Continue the agency temporarily until the principal can make such 1. Appoint a new agent, or 2. Arrange for return of the object to him immediately.

EXTINGUISHMENT OF AGENCY
g. If the agency is coupled with interest, the heirs may exercise such power as may be necessary to protect the interest of the deceased agent. ( Transmissibility of rights may be invoked under Art. 1178)