PARTNERSHIP, AGENCY, AND TRUST

1. A substituted partner is one admitted to all the rights of a limited partner

TRUE
Article 1859 (2). A substituted limited partner is a person admitted to all the rights of a limited partner who has
died or has assigned his interest in a partnership

2. An assignee of a limited partner acquires all the rights of an assignor

FALSE
Only if he becomes a substituted limited partner (Art. 1959)

3. When A, a partner by estoppel, combines with B, a partner in BCD partnership, and on the strength of the
representation, contracted with X, a third person, a partnership liability will result even if the other partners, C and
D, had no knowledge of the representation. However, the innocent partner could demand reimbursement from A
and B
FALSE
The only instance under our law when an existing partnership is bound by the representation made by or in behalf
of a partner by estoppel is when all of the partners had given their consent to such representation. It will be only
then that a partnership shall result. (Art. 1825). Since A alone acted without the consent of C and D. He alone is
liable separately.

4. Winding up may be done by a mere assignee in exceptional circumstances

TRUE
Article 1836 provides that unless otherwise agreed, the partners who have not wrongfully dissolved the
partnership or the legal representative of the last surviving partner, not insolvent, has the right to wind up the
partnership affairs, provided, however, that any partner, his legal representative or his assignee, upon cause
shown, may obtain winding up by the court.

5. The share of each partner in the unpaid obligations of the partnership shall be determined in accordance with the
rule on distribution of losses
FALSE
Art. 1816. All partner including the industrial ones shall be liable pro rata with all their property and after all the
partnership assets have been exhausted

6. The fiduciary duties of partners shall cease after the dissolution of the partnership

7. Except as necessary for winding up, dissolution terminates all authority of partners to act for the partnership
FALSE
After the dissolution, the following acts are binding:
a. Acts to wind up the affairs of the partnership
b. Contracts with the creditor without notice (actual or constructive as the case may be) of the dissolution

8. After dissolution, a partner can bind the partnership by any transaction which would bind the partnership if
dissolution had not taken place, provided the other party to the transaction had extended credit to the partnership
after dissolution
FALSE
Dissolution terminates all authority of any partner to act for the partnership except acts necessary to wind up
partnership affairs and acts necessary to complete transactions begun but not then finished

9. Dissolution necessarily discharges a partner for partnership obligations incurred thereafter

FALSE
Art. 1833. Where the dissolution is caused by the act, death, or insolvency of a partner, each partner is liable to
his co-partners for his share of any liability created by any partner acting for the partnership as if the partnership
had not been dissolved.
Where a partner enters into a new contract with a third person after dissolution, the new contract generally will
bind the partners. Each of them is liable for any liability created by the acting partner as if the partnership had not
been dissolved

10. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal
representative of the last surviving insolvent partner, has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his assignee, upon cause shown, may obtain winding up by
the court.
 FALSE
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent, has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his assignee, upon cause shown, may obtain winding up by
the court

11. When the partnership agreement is rescinded on the ground of fraud or misrepresentation, partners who are not
guilty shall have the right of subrogation for any payments made by them of partnership liabilities.
FALSE
When the partnership agreement is rescinded on the ground of fraud or misrepresentation, the innocent partners
have the right of subrogation in place of the partnership creditors after payment of partnership liabilities

12. FALSE
Among the partners themselves, the authority of a partner to act for the partnership is immediately terminated
upon the death of a partner or expiration of the partnership, unless otherwise agreed upon by the partners.
Art. 1832, 1834. The dissolution of the partnership terminates all authority of the managing partner or of any
partner as the case may be, to act for the partnership. This rule however is subject to the following expectations:
a. Acts necessary to wind up partnership affairs
b. Acts necessary to complete transactions begun but not then finished
c. Acts or transactions which would bind the partnership if dissolution had not taken place, provided the other
party to such transactions:
i. Had extended credit to the partnership prior to the dissolution and had no knowledge or notice of
such dissolution
ii. Although he had not so extended credit, had nevertheless known of the partnership prior to
dissolution and having no knowledge or notice of dissolution, the fact of dissolution had not been
advertised in a newspaper of general circulation in the place at which the business was regularly
carried on.

13. The dissolution of the partnership because of the death of a partner shall result to the discharge of the liability of
the deceased partner
FALSE
The individual property of a deceased partner shall be liable for all the obligations of the partnership incurred while
he was a partner, subject to prior payment of his separate debts (Art. 1835)

14. During the winding up of business operations, the managing partner should no longer enter into a contract without
the consent of the partners, otherwise the contract shall be unenforceable for want of authority.
FALSE
During the winding of business operations, the managing partner may still enter into contract necessary to wind
up the partnership affairs without need for consent of the other partners
TRUE
Dissolution terminates all authority of the partner to act for the partnership. Hence, no partner may enter into a
new contract. All that he may perform are acts necessary to dissolve the partnership

15. A contract of agency to sell personal property is a real contract which requires the delivery of the thing sold
FALSE
In a contract of agency to sell, the agent receives the goods as goods of the principal. Therefore, there is no
delivery because there is no intent to transfer the ownership of the thing sold to the agent. Hence, it is not a real
contract

16. An agency “coupled with an interest” survives the grantor ’s death

FALSE
A mere statement that it is “coupled with an interest” is not enough. In what does such interest consist must be
stated. (Del Rosario vs Abad)

17. In case there are two or more principals, any one of them may revoke the agency provided the consent of the
other is sought
FALSE
Under Article 1925, the revocation may be without the consent of the other(s) if they have granted a power of
attorney for a common transaction

18. 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 even if the latter did not
read the publication when he transacted with the agent
TRUE
Express stipulation under Article 1873. Read it in relation to the accepted principle that publication in a newspaper
of a general circulation is more than sufficient compliance with the notice-posting requirement of the law (Olizon
vs CA)

19. A special power of attorney is necessary to make gifts for harity or to employees in the business managed by the
agent.
FALSE
It is necessary for the agent to secure SPA to bind the principal in the following cases, inter alia, to make gifts,
except customary ones for charity or those made to employees in the business managed by the agent (Art 1878)

20. An agent may be relieved by an agreement from an obligation to render accounting

FALSE
Art. 1891. An agent is bound 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.

21. If the commission agent receives guaranty commission in addition to a guarantee comm, the agent shall bear the
risk of collection and shall pay the principal the proceeds of the sale on the terms agreed upon with the purchaser
unless the principal consented to the sale on credit
TRUE/FALSE
Art. 1907. Should the CA receive on sale, in addition to the ordinary commission, another called a guaranty
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

22. If the third person does not know that the agent exceeded the scope of his authority, he may hold the agent liable
as well as the principal, even if he has not inquired into the authority of the agent
FALSE
The third person is bound to inquire into the authority of the agent to hold the principal liable because the principal
is not bound by the acts of an agent beyond his limited power. In other words, third persons dealing with an agent
do so at their risk and are bound to inquire as to the scope of his powers. There are however four qualifications
whereby the principal is held liable:
a. Where the principal’s act have contributed to deceive a third person in good faith
b. Where the limitations upon the power created by him could not have been known by the third person
c. Where the principal has placed in the hands of the agent instruments signed by him
d. Where the principal has ratified the acts of the agent

23. Agency by ostensible authority consists in the conscious permission of acts beyond those powers granted
TRUE
Apparent authority, or what is sometimes refreed to as the holding out theory, or doctrine of ostensible agency,
imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a
principal or an employer in somehow misleading the public into believing that the relationship or the authority
exists (Megan Sugar Corporation vs RTC of Iloilo)

24. If two or more principals have appointed an agent for a common transaction or undertaking, they are jointly liable
unless solidarity is agreed upon
FALSE
The principals are solidarily liable to the agent for all consequences of the agency (Art. 1915)

25. An agency is not revoked by the principal’s death if it has been constituted in the interest of a third person without
notice or knowledge of the interest

26. A special power to compromise authorizes submission to arbitration

FALSE
Article 1880 provides that a special power to compromise does not authorize submission to arbitration

27. There is an implied acceptance if the principal delivers his power of attorney to the agent and the latter receives it
without objection
TRUE
 Article 1871 states that as between persons who are present, the acceptance of the agency may be implied if the
principal delivers his power of attorney to the agent and the latter receives it without any objection

28. An agent may be exempted from rendering an accounting

FALSE
A stipulation exempting agent from duty to account is void (Domingo vs Domingo. Exceptions: In case of solution
indebiti, agent acted only as a middleman, right of lien in favor of the agent against the principal

29. If the principal does not mention the power to substitute at all, the agent may appoint one but he is responsible for
the acts of the substitute
TRUE
An agent may appoint a sub agent as a general rule. Except when prohibited by principal or the work entrusted
requires the agent’s special skill, knowlesge, or competence. The agent shall be responsible for the acts of the
substitute when he is not given the power to appoint or the person appointed was notoriously incompetent or
insolvent

30. An agency is gratuitous unless compensation is agreed upon

FALSE
The general rule is compensation. Art 1875 provides that agency is presumed to be for a compensation, unless
there is proof to the contrary

31. The accomplishment of the object of the agency extinguishes the agency even prior to the final accounting
FALSE.
Article 1919 (5) is not qualified

32. An agency at will is revoked even if the revocation is not brought to the knowledge of the agent
TRUE
As between the principal and the agent, express notice to the agent that the agency is revoked is not always
necessary. A revocation without notice to the agent will not render invalid an act done in pursuance of the
authority

33. A commission agent cannot sell on credit goods or items without the express or implied consent of the principal
TRUE
Article 1905. The commission agent cannot, without 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

34. Enumerate 5 instances where a SPA is necessary:

a. To make such payments as are not usually considered as acts of administration
b. To effect novations which put an end to obligations already in existence at the time that agency was
constituted
c. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgement, to
waive objections to the venue of an action or to abandon a prescription already acquired
d. To waive any obligation gratuitously
e. To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration
f. To make gifts, except customary ones for charity or those made to employees in business managed by
the agent
g. To loan or borrow money, unless the latter act be urgent and indispensable for preservation of the things
which are under administration
h. To lease any real property to another person for more than one year
i. To bind the principal to render some service without compensation
j. To bind the principal in a contract of partnership
k. To obligate the principal as a guarantor or surety
l. To create or convey real rights over immovable property
m. To accept or repudiate an inheritance
n. To ratify or recognize obligations contracted before the agency
o. Any other act of strict dominion (Art 1878)

35. What are some of the rules governing the interpretation of the power of agents (5)
a. Contracts of agencies as well as the general powers of attorney must be interpreted in accordance with
the language used by the parties (Art 1370)
 b. The real intention of the parties is primarily to be determined from the language used and gathered from
the whole instrument
c. Article 1361
d. The intention of the parties must be sustained than to be defeated
e. The act of the parties in carrying out the contract will be presumed to be done in good faith and in
conformity with the contract

36. How does the agent observe care and diligence in the execution of the agency (5)
a. 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)
b. 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.
c. Art. 1886. Should there be stipulation that the agent shall advance the necessary funds, he shall be
bound to do so except when the principal is insolvent
d. 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)
e. Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or
damage to the principal

37. How does the agent observe fidelity in the execution of the agency (3)
a. Art 1887. Agent shall act in accordance with the instructions of the principal
b. Art 1888. Agent shall not carry out an agency if its execution would manifestly result in loss or damage to
the principal
c. Art 1888. Agent shall be liable for damages if there being conflict between his interests and those of the
principal, he should prefer his own

38. Modes of extinguishing agency (6)

a. Expiration of the period
b. Death, civil interdiction, insanity or insolvency of the principal or of the agent
c. Withdrawal of the agent
d. Accomplishment of the object or the purpose of the agency
e. Revocation
f. Dissolution of the firm or corporation, which entrusted or accepted the agency

39. Requisites for a valid revocation of agency (4)

a. Revocation in the same manner authority was given
b. Good faith
c. No term is fixed, or the fixed term has expired

40. When is agency not revoked by principal’s death (3)

a. If it has been constituted in the common interest of the latter and of the agent
b. In the interest of a third person who has accepted the stipulation in his favor
c. The act of the agent was executed without knowledge of the death of the principal and the third person
who contracted with the agent in good faith