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2.) Object of the contract is the execution of a juridical act in relation to 3rd persons;
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 Acts that cannot be done through an agent:
another, with the consent or authority of the 1.) Personal acts: if personal performance is
reqd by
agent to contract with a 3rd person on behalf of a the principal would be illegal, is void.
principal.
Characteristics:
person.
5.) Unilateral/Bilateral:
The acts of the agent on behalf of the principal within Agent appointed by Guardian
appointed by
the scope of his authority produce the same legal and principal and can be court and stands
in loco
binding effects as if the principal personally did them. removed by him. parentis.
2.) Derivative authority. Agent can make principal Guardian has no power to
principal.
Who can be principal? Agent delivers proceeds of Buyer pays the price.
person. He must be capacitated. The rule is if a person Agent can return object in Generally,
buyer cannot
is capacitated to act for himself or in his own right, he case he is unable to sell to return the object
sold.
Must the agent have capacity? thing received is bound to thing as he pleases,
being
Insofar as 3rd persons are concerned, it is enough act accdg to the the owner.
that the principal is capacitated; but insofar as his instructions of his principal
Agent v. Independent Contractor Art. 1870. Acceptance by the agent may also be
Agent Independent Contractor express, or implied from his acts which carry out
Represents the principal. Employed by employer. the agency, or from his silence or inaction
Acts under the control and Acts according to his own according to the circumstances.
Principal liable for torts Employer not liable for Form of Acceptance by Agent:
Art. 1869. Agency must be express, or implied from his silence or inaction accdg to the
circumstances.
lack of action, or his failure to repudiate the Art. 1871. Between persons who are present,
agency, knowing that another person is acting on the acceptance of the agency may also be
implied
his behalf without authority. if the principal delivers his power of attorney to
Agency may be oral, unless the law requires a the agent and the latter receives it without any
a.) Express: actually authorized, either When the agent receives a power of atty from the
failure to repudiate the agency knowing NO, it can be rebutted by contrary proof.
that another person is acting on his
a.) Gratuitous: agent receives no and confers upon him the authority to perform
certain
compensation for his services. specified acts or kinds of acts on behalf of the
principal.
b.) Onerous: agent does receive Its primary purpose is to evidence the authority of
the
b.) Special: comprises one or more specific pursued. The instrument will be held to grant
only those
transactions. powers which are specified, and the agent may neither
4.) Authority conferred: go beyond nor deviate from the power of atty. The only
a.) Couched in general terms: deemed to exception is when strict construction will
destroy the
a.) Representative: agent acts in name and conversing on the phone are also considered as
both
own name but for the account of the Art. 1872. Between persons who are absent,
Can agency be presumed? 1.) When the principal transmits his power
Generally NO because the relationship between the of attorney to the agent, who
receives it
principal and agent must exist as a fact. The only without any objection;
exceptions to this rule are when agency arises by 2.) When the principal entrusts to him by
Form: Generally, NO formal requirements. Agent’s did not reply to the letter or telegram.
private writings. The only exception is when the law 2 Ways of Giving Notice of Agency
requires a specific form (e.g. sale of real property or any 1.) By special information; or
1.) Special information: the person appointed as affirmative acts of its officers acting
within the
2.) Public advertisement: Agent is considered such Art. 1874. When a sale of a piece of land or
any
with regard to any person. interest therein is through an agent, the authority
as it was given.
General rule: Special information needs special A letter is sufficient [Jimenez v. Rabot].
information of revocation.
Except: if you can prove that the 3rd person read the Art. 1875. Agency is presumed to be for a
contrary.
or states by public advertisement that he has Broker: One who in behalf of others, and for
given a power of attorney to a third person, the compensation or fee, negotiate contracts
relative to
latter thereby becomes a duly authorized agent, in property. He is the negotiator between the
parties,
the former case with respect to the person who never acting in his own name, but in the
name of those
received the special information, and in the latter who employ him. He is strictly a middleman
and for
case with regard to any person. some purposes, the agent of both parties.
the notice is rescinded in the same manner in When is a broker entitled to compensation?
Agency by Estoppel: There is really no agency at all, but the property, and enter into a valid
contract upon the
the alleged agent seemed to have apparent or terms named by the principal, although the
particulars
ostensible, although no real authority to represent may be arranged and the matter negotiated
and
1.) Estoppel of Agent – One professing to act as directly. A broker is never entitled to
commission for
and the 3rd persons interested in the transaction Does the law allow double agency?
2.) Estoppel of Principal – public policy and sound morality. The exception is where
a.) As to Agent – One who knows that the agent acted with full knowledge and free
consent of
benefits of them, will be estopped to In case the agent assumes a double agency, what
is his
b.) As to sub-agent – To estop the principal 1.) If with knowledge of both principals –
recovery
from denying his liability to a 3rd person, can be had from both.
he must have known or be charged with 2.) If without knowledge of both – agent can
transmission and the terms of the 3.) If with knowledge of only one – as to the
agreement between the agent and sub- principal who knew of that fact and as to
the
another is acting as his agent or between them being void as against public polisy
have dealt with the apparent agent as Art. 1876. An agency is either general or
reasonable prudence, is estopped to The former comprises all the business of the
or 3rd persons in interest. 1.) Universal agent: One employed to do all acts
4.) Estoppel of the govt – The govt is neither that the principal may personally do, and
which
the principal can lawfully delegate to another the Art. 1877. An agency couched in general
terms
2.) General agent: One employed to transact all the principal should state that he withholds no
power
business of his principal, or all business of a or that the agent may execute such acts as he may
particular kind or in a particular place, or in consider appropriate, or even though the agency
other words, to do all acts connected with a should authorize a general or unlimited
one or more specific acts, or to act upon a 1.) To sue for collection of debts;
a.) Atty at law: One whose business is to needed for the conduct of business;
represent clients in legal proceedings. 3.) To engage counsel to preserve the ownership
b.) Auctioneer: One whose business is to and possession of the principal’s property;
sell property for others to the highest 4.) To lease real property to another person for 1
intermediary between 2 other parties. 5.) To make customary gifts for charity or to
d.) Factor: One whose business is to receive employees in the business managed by the
entrusted with the possession of the 6.) To borrow money if it be urgent and
goods involved in the transaction. indispensable for the preservation of the things
under administration.
principal to do a particular act not of a legal character. How are contracts of agency construed?
In strict legal sense: An agent having a special authority Contracts of agency as well as general
powers of
created by deed. attorney must be interpreted in accordance with the
General Agent v. Special Agent [SNETI] parties is primarily determined from the language
used
As to… General agent Special agent and gathered from the whole instrument. In case of
Scope of All acts connected Only one or more doubt, resort must be had to the situation,
surroundings
authority w/ the business in specific acts in and relations of the parties. The intention of the
parties
instructions or w/ uphold the intention while the other would overthrow it,
necessarily implied
which agent the scope of his beyond or outside time the agency was constituted;
may bind authority although the specific acts w/c 3.) To compromise, to submit questions to
of authority does not terminate effective as to 3rd 4.) To waive any obligation gratuitously;
by mere revocation party unless agency 5.) To enter into any contract by which the
of authority w/o was for purpose of ownership of an immovable is
of Limits the authority 6.) To make gifts, except customary ones for
7.) To loan or borrow money, unless the 5.) Fix the terms of the sale unless there be set
latter act be urgent and indispensable for conditions stipulated by the principal;
the preservation of the things which are 6.) Sell only for cash;
under administration; 7.) Receive the price unless he was authorized only
9.) To bind the principal to render some The ff are not included in a Power to Mortgage
11.) To obligate the principal as a guarantor 3.) Mortgage for the agent’s personal benefit or
for
12.) To create or convey real rights over has been clearly indicated.
immovable property;
13.) To accept or repudiate an inheritance; Does the principal have the power to revoke a
contract
contracted before the agency; YES. But he may not have the right to use such
15.) Any other act of strict dominion. power if he has agreed not to exercise such power
unrestricted, he has implied authority to do whatever is Art. 1880. A special power to compromise
does
usual and necessary in the exercise of such power. He not authorize submission to arbitration.
may:
2.) agree upon the price, because of absolute confidence in the latter’s judgment
3.) modify or rescind the contract of purchase, and discretion to protect the former’s rights and
obtain
4.) accept delivery for his principal, for him the best bargain in the transaction. If the
5.) give directions for the delivery of the property transaction would be left in the hands of an
arbitrator,
purchased, and said arbitrator may not enjoy the trust of the principal.
1.) Settle a contest between the principal and a 3rd Then the arbitration award binds the
principal,
person regarding the ownership of goods provided, of course, that the agent acted within
the
3.) Do anything not usual or necessary to the Art. 1881. The agent must act within the scope
purchases upon certain terms and conditions, the agent Authority: The power of the agent to affect
the legal
1.) Purchase upon different terms and conditions the principal’s manifestation of consent to
him. The
from those authorized, or authority of the agent is the very essence – sine qua
2.) Modify or rescind a contract of purchase made non – of the principal and agent relationship.
This
Art. 1879. A special power to sell excludes the the source of the authority is the principal and
never the
Kinds of Authority:
The ff are included in a Power to Sell: 1.) Actual: when it is actually granted, and it may
2.) Deliver the property; 2.) Express: when it is directly conferred by words.
3.) Make the usual representation and warranty; 3.) Implied: when it is incidental to the
transaction
4.) Execute the necessary transfer documents; or reasonably necessary to accomplish the
principal is deemed to have actually intended with whom the agent contracted; neither have
4.) Apparent or Ostensible: when it is conferred by In such case the agent is the one directly
bound
words, conduct or even by the silence of the in favor of the person with whom he has
principal which causes a 3rd person reasonably to contracted, as if the transaction were his
own,
believe that a particular person, who may or except when the contract involves things
may not be the principal’s agent, has actual belonging to the principal.
authority to act for the principal. Ostensible The provisions of this article shall be
6.) Special: when it is limited only to one or more 1.) Disclosed: if at the time of the
transaction
7.) By necessity or by operation of law: when it is has known that the agent is acting for a
principal
demanded by virtue of the existence of an and has known the principal’s identity.
emergency; it terminates when the emergency 2.) Partially disclosed: if the other party
knows or
Requisites for Principal to be Bound by Act of Agent: principal’s identity. The partially
disclosed
1.) The agent must act in behalf of the principal; principal may enforce against the 3rd
person the
2.) The agent must act within the scope of his contract of the agent like any disclosed
principal.
authority. Similarly, the 3rd person has a right of action
When is a principal not bound by the act of his agent? 3.) Undisclosed: if the party has no
notice of the
When the agent acts without or beyond the scope of fact that the agent is acting as such
for a
his authority; or when the agent acts within the scope of principal.
transaction involves things belonging to the principal. General Rule in 1883: If the agent is
authorized to act
Authority? Whose behalf? Status of K name, the agent is the one directly liable to the
person
With authority Principal’s Valid with whom he had contracted as if the transaction
were
to the principal.
Who to sue?
In case the agent acts in the name of the principal Remedy of the Principal if this situation
arises:
and within his scope of authority, you must name the He can demand from the agent damages
for his
Note: The authority to look for buyers does not carry Remedy of the 3rd person with whom the
agent
with it the authority to sell. contracted in case the oblig is not complied with:
Art. 1882. The limits of the agent’s authority the agent. But when the contract involves things
shall not be considered exceeded should it have belonging to the principal, he can sue the
principal. But
conducive to the accomplishment of the purpose of the Art. 1884. The agent is bound by his
acceptance
Test: Would the principal enter into this transaction? principal may suffer.
He must also finish the business already begun Art. 1886. Should there be a stipulation that
the
on the death of the principal, should delay entail agent shall advance the necessary funds, he
shall
insolvent.
1.) To act with the utmost good faith and loyalty for In a contract of agency, may the parties
stipulate that
the furtherance and advancement of the the agent shall advance the necessary funds?
YES.
2.) To obey the principal’s instructions. What is the oblig then of the agent?
performance the principal may suffer. Art. 1887. In the execution of the agency, the
3.) To finish the business already begun on the agent shall act in accordance with the
instructions
4.) To observe the diligence of a good father or a In default thereof, he shall do all that a good
family in the custody and preservation of the father of a family would do, as required by the
5.) To advance the necessary funds should there be Instructions: Private directions which the
principal may
a stipulation to do so. give the agent in regard to the manner of performing his
6.) To act in accordance with the instructions of the duties as such agent.
principal, and in default thereof, to do all that a
7.) Not to carry out the agency if its execution Authority Instructions
would manifestly result in loss or damage to the Sum total of powers Direct the manner
of
8.) To answer for damages if there be a conflict the agent by the principal. business and
contemplates
between his interests and those of the principal, only a private rule of
9.) Not to loan to himself if he has been authorized Relates to the subject with Refers to the
manner or
to lend money at interest. which the agent is mode of his action with
10.) Not to render an account of his transactions empowered to deal or the respect to
matters which in
and to deliver to the principal whatever he may kinds of business or their substance are
within
have received by virtue of the agency. transactions upon which he the scope of permitted
11.) To be responsible in certain cases for the act of is powered to act. action.
12.) To pay interest on funds he has applied to his operative as against those against those
dealing with
own use. who have or are charged the agent with neither
father of a family in the custody and preservation known to the 3rd person known to those
w/ whom
of the goods forwarded to him by the owner until dealing w/ the agent. the agent deals.
the latter should appoint an agent. The owner Instructions pertain to the principal and agent
shall as soon as practicable either appoint an Authority pertain to the agent and 3rd persons.
agent or take charge of the goods.
What is the rule if a person declines agency? from the instructions of the principal: [SAI]
family in the custody and preservation of the goods 2.) If the instructions are ambiguous; or
forwarded to him by the owner. 3.) If the departure is so insubstantial that it does
agent or by taking charge of the goods. When the Agent has a right to disobey the
principal’s
instructions:
1.) When the instruction calls for the performance of Every stipulation exempting the agent from
the
security/interest in the subject matter of the Rationale: Contrary to public policy as it would
agency if its execution would manifestly result in If the agent fails to deliver and instead converts
or
loss or damage to the principal. appropriates for his own use the money or property
service for the benefit of the principal and not to act to Art. 1892. The agent may appoint a
substitute if
his detriment. Furthermore, the agent must exercise due the principal has not prohibited him from
doing so;
diligence in carrying out the agency. but he shall be responsible for the acts of the
substitute:
Art. 1889. The agent shall be liable for damages 1.) When he was not given the power to
damage to the principal. 2.) When he was given such power, but
Note: This provision applies to both onerous and person appointed was notoriously
neither should we. All acts of the substitute appointed against the
diligence with respect to the interest of the principal. his agent, the performance of an act for the
principal
If the agent follows the principal’s instructions yet his through his representative.
General rule: The agent is NOT liable. Relation among the principal, agent and sub-agent
Except: if before acting that way, it is obvious that In reality, the sub-agent is a stranger to the
principal
the act will result to damage, then the agent is liable. who originally gave life to the agency. But if
the agent is
Art. 1890. If the agent has been empowered to principal and agent exists between the
principal and the
borrow money, he may himself be the lender at sub-agent. That is, the sub-agent may be the
agent of
the current rate of interest. If he has been the principal if he is in actual control of the
business and
authorized to lend money at interest, he cannot the principal knows of his appointment or
knows that his
borrow it without the consent of the principal. appointment is necessary. Consequently, any
act done
Rationale: The agent can lend money to the principal act of the principal; so neither agent nor
sub-agent may
using the agent’s own funds at the current rate of be held personally liable as long as they act
within the
interest and NOT at a higher interest rate because the scope of their authority.
If the agent is authorized to lend the principal’s When can an agent appoint a sub-agent?
money, with interest, to 3rd persons, the agent can’t be So long as there’s no prohibition.
However, he shall
the borrower without the consent of the principal be responsible for all the sub-agent’s acts.
may be insolvent or he may not be a good risk. There is 4 Instances where a Sub-agent is appointed
and the
a danger here that the interest of the principal would be Effects of each:
This would also seem to be the case if the agent is No prohibition Agent responsible for all
authorized to lend money w/o interest because of the the acts of sub-agent.
as to the principal.
Art. 1891. Every agent is bound to render an Authority to appoint but Agent liable for acts
of
account of his transactions and to deliver to the not designated by principal sub-agent if the
sub-agent
the sub-agent. Reason for general rule: Because an agent who acts as
furthermore bring an action against the substitute 1.) When the agent binds himself; or
with respect to the obligations which the latter 2.) When he exceeds the limits of his
authority
has contracted under the substitution. without giving the third party sufficient
notice of
his powers.
Under the premises given in the previous provision, Reasons for exceptions:
the principal can sue both the agent and the substitute. 1.) When the agent expressly binds
himself, he
agents, even though they have been appointed 2.) When the agent exceeds his authority,
he really
simultaneously, is not solidary, if solidarity has not acts without authority and therefore, the
If solidarity is not stipulated, what is the liability to 2 or his wrong or omission, he deprives the
3rd party
Art. 1895. If solidarity has been agreed upon, Art. 1898. If the agent contracts in the name
of
each of the agents is responsible for the non- the principal, exceeding the scope of his
authority,
fulfillment of the agency, and for the fault or and the principal does not ratify the contract, it
negligence of his fellow agents, except in the shall be void if the party with whom the agent
latter case when the fellow agents acted beyond contracted is aware of the limits of the
powers
the scope of their authority. granted by the principal. In this case, however,
1.) The non-fulfillment of the agency; or Art. 1899. If a duly authorized agent acts in
2.) The fault or negligence of the fellow agent accordance with the orders of the principal,
the
provided the latter acted within the scope of his latter cannot set up the ignorance of the
agent as
But the innocent agent has a right later on to recover to have been aware.
What happens if the fellow agent acted beyond the towards 3rd persons.
Then the innocent agent cannot be liable at all to the What happens if the principal appoints an
agent who is
Art. 1896. The agent owes interest on the sums demands that the principal should be bound
by the acts
he has applied to his own use from the day on of the agent if the latter acts within the
scope of his
which he did so, and on those which he still owes authority and in accordance with the
instructions of the
personally liable to the party with whom he concerned, an act is deemed to have been
contracts, unless he expressly binds himself or performed within the scope of the agent’s
exceeds the limits of his authority without giving authority, is such act is within the terms of
the
such party sufficient notice of his powers. power of attorney, as written, even if the agent
Principal Agent 3rd Party (wrong party to complain if according to an understanding between
the
General rule: “an agent who acts as such is not Authority to agent must be in writing.
Not only the actual authorization conferred upon the i.) Vary the terms of an express
To hold the principal liable, a 3rd person dealing with an iii.) Change a rule of law or
dispense
Discover upon his peril not only the fact of agency iv.) Vary an essential quality of the
but the nature and extent of authority of the agent. He agency relationship.
is put on inquiry. He must also act with ordinary b.) General rule: principal must have
notice
prudence and reasonable diligence. of the alleged custom, before the agent’s
1.) The law indulges in no bare presumptions that reside in the same community,
the
2.) The agent cannot establish his own authority, is to act to the contrary;
4.) A general authority is not an unlimited one; and other unusual conditions may operate to
invest
5.) Every authority must find its ultimate source in in an agent authority to meet the
emergency,
In case the fact of agency or the extent of the authority b.) Agent is unable to
The 3rd person to establish the fact of agency or the c.) Agent’s enlarged authority
is
protection; and
Does the 3rd person have to inquire further if the power d.) The means adopted are
principal and the agent, and such is not expressed in the c.) Ratification.
written power of attorney, does the 3rd person have to 6.) By the ejusdem generis rule – such
that where
No. As far as he is concerned, an act of the agent specific matters is followed by a general
phrase
within the terms of the power of attorney as written, is is held to be limited in scope by the
specific
limits of his actual authority according to a secret Responsibility of principal when agent acts w/
improper
case, the principal is estopped from claiming that the General rule: Motive of agent in entering
into a K w/
Exceptions:
Ways by which the agent’s authority may be broadened 1.) Where the 3rd person knew that
the agent was
or restricted: [I’m-UNDEr] acting for his benefit, in w/c case, the principal
1.) By implication – agent’s authority extends not is not liable to the 3rd person; and
only to express requests, but also to those acts 2.) Where the owner is seeking recovery of
personal
and transactions incidental thereto. It embraces property of w/c he has been unlawfully
deprived.
a.) An agent’s authority may not be 1.) Within the scope of the agent’s authority –
enlarged through usage and custom in Principal is subject to liability for lass caused
to
the following cases: Where it is sought another by the 3rd persons reliance upon a
b.) Within the implied authority of the agent Art. 1903. The commission agent shall be
to make for the principal; or responsible for the goods received by him in the
2.) Beyond the scope of the agent’s authority – consignment, unless upon receiving them he
General rule: Principal is not bound. should make a written statement of the damage
Exception: when the principal takes advantage and deterioration suffered by the same.
3.) For the agent’s own benefit – Principal is liable and sell goods for a commission and who is
entrusted by
(motive of agent immaterial). the principal with the possession of goods to be sold,
that the agent has exceeded his powers, if the Ordinary agent v. Commission agent:
principal has ratified, or has signified his Ordinary agent Commission agent
willingness to ratify the agent’s acts. Acts for and behalf of his May act in his own name
Effect of ratification by the principal: Need not have possession Must be in possession.
Only the principal. But there must be knowledge on Commission agent Broker
the part of the principal of the things he is going to Has a relation to principal, No relation w/ the
thing
Before actual ratification by the principal, or before Liability of commission agent as to goods
received:
the principal has signified his willingness to ratify the If the commission agent received goods
consigned to
Effect of the principal receiving the benefits of the described in the consignment.
transaction:
He is deemed to have ratified it. A principal may not Presumption established in this article:
accept the benefits of a transaction and at the same Damage in the merchandise were
suffered while in
time repudiate its burdens. the possession and custody of the agent.
Art. 1902. A third person with whom the agent What the commission agent must do to
avoid liability:
wishes to contract on behalf of the principal may Make a written statement of the damage
and
require the presentation of the power of attorney, deterioration if the goods received by him
do not agree
or the instructions as regards the agency. Private w/ the description in the consignment.
them.
persons?
1.) By custom;
Art. 1905. The commission agent cannot, On the contrary, the principal may sue the
buyers in his
without the express or implied consent of the own name. In such a case, the agent amounts
to no
principal, sell on credit. Should he do so, the more than a guaranty. Liability is a contingent
pecuniary
interest or benefit, which may result from such Can the agent with a guarantee commission
put up the
Rule given in this article: cannot put up the defense that the debtor-3rd person
Commission agent can sell on credit only with the possesses no property since this is precisely
the risk the
Right of the principal in case the commission agent sold Art. 1908. The commission agent who
does not
goods on credit without authority: [CR] collect the credits of his principal at the time
when
1.) He may require payment in cash, in w/c case, for damages, unless he proves that he
exercised
any interest or benefit from the sale on credit due diligence for that purpose.
cannot be allowed to enrich himself at the Obligation of the commission agent under this
article:
2.) He may ratify the sale on credit, in w/c case it sale on credit must collect the credits due the
principal
will have all the risks and advantages to him. at the time they become due and demandable. If
he fails
Art. 1906. Should the commission agent, with show that the credit could not be collected
authority of the principal, sell on credit, he shall so notwithstanding the exercise of due diligence
on his
inform the principal, with a statement of the part. In such a case, the principal’s remedy is to
proceed
names of the buyers. Should he fail to do so, the against the debtor.
insofar as the principal is concerned. Does this article apply to a case where there is a
guarantee commission?
Obligation of the commission agent where a sale on No, because the agent already assumed
the risks of
been on a cash basis insofar as the principal is Art. 1909. The agent is responsible not only for
concerned if the agent fails to inform the principal of fraud, but also for negligence, which shall be
such sale on credit with a statement of the names of the judged with more or less rigor by the
courts,
for a compensation.
that the same was on credit when in fact it was made Is the agent liable for fraud? Yes, in all
cases.
for cash.
Art. 1907. Should the commission agent receive rigor by the courts.
another called a guarantee commission, he shall Why does the court have to take into
consideration
bear the risk of collection and shall pay the whether the agency was gratuitous or for
compensation?
principal the proceeds of the sale on the same In order to fix the liability of the agent for
negligence
Principal obligations of the principal to the agent in the 2.) Principal must have capacity & power
to ratify;
absence of such agreement: 3.) He must have had knowledge of material facts;
1.) To comply with all the obligations which the 4.) The act must be done in behalf of the
principal;
agent may have contracted in his name and 5.) Principal must ratify acts in its entirety;
within the scope of his authority; 6.) The act must be capable of ratification.
necessary for the execution of the agency; Effects of ratification with respect to the
agent:
3.) To reimburse the agent for all advances made 1.) Relieves the agent from liability to
the 3rd party
by him provided the agent is free from fault; to the unauthorized transaction; and
4.) To indemnify the agent for all the damages 2.) To his principal for acting without
authority; and
which the execution of the agency may have 3.) He may recover compensation due for
caused the latter without fault or negligence on performing the act which has been
ratified.
5.) To pay the agent the compensation agreed upon Effects of ratification with respect to the
principal:
or the reasonable value of the latter’s services. 1.) He assumes responsibility for the
unauthorized
principal will be liable to 3rd persons for all acts approved by his ratification.
within the actual or apparent scope of his authority, and Effects of ratification with respect to 3rd
persons:
this is not altered y the fact that the agent may also be 1.) 3rd person is bound by ratification to
the same
liable, nor by the fact that some of the acts are to the extent as he would have been bound if
the
principal’s advantage while others are to his ratified act had been authorized in the 1st
Liability of the principal for mismanagement of the authority to do the ratified act.
the agent does not relieve said principal from the 3rd party?
responsibility that he had contracted to 3rd persons. But No. To be effective, ratification need
not be
where the agent’s acts bind the principal, the latter may communicated or made known to the
agent or the 3rd
seek recourse against the agent. party. The act or conduct of the principal rather
than his
Liability of principal for a tort committed by the agent: party is free to revoke the unauthorized
contract.
an agent committed at the principal’s direction or I the Art. 1911. Even when the agent has
exceeded
course and within the scope of the agent’s employment. his authority, the principal is solidarily
liable with
The principal cannot escape liability whether the tort is the agent if the former allowed the latter
to act as
committed willfully or negligently so long as the tort is though he had full powers.
furtherance of the principal’s business. Nor is it a Estoppel: precludes a person from denying or
asserting
defense that the act which caused the tort was unknown anything contrary to that which has
been established as
to him or even that it was in disobedience to his the truth by his own deed or representation,
either
of a prior act which did not bind him, but which was Rests on intention Rests on
prejudice
done or professed to be done on his account, thus giving Affects the entire Affects only
relevant parts
effect to the act as if originally authorized. The doctrine transaction from the of the
transaction.
of his authority of the act of one who purports to be an Substance is confirmation Substance is
the principal’s
agent but who is really not. It may be implied from the of a unauthorized act or inducement
to another to
acceptance of benefits by the principal under a contract conduct after it has been act to his
prejudice.
In case the agent sells the goods for more than his
That which though not Arises in cases where the What is the nature of the agent’s right of
lien?
actually granted, the principal, by his Specific or particular. It is not general in the sense
principal knowingly negligence, permits his that it gives the agent a right to retain the goods
for
permits the agent to agent to exercise powers claims disconnected with the agency.
as possessing. though the principal may Art. 1915. If two or more persons have
Principle of estoppel. Necessary for the protection of 1.) There are 2 or more principals;
innocent 3rd persons. Instance when solidarity is 2.) The principals have all concurred in the
necessary for the execution of the agency. Why is solidarity the rule?
Should the agent have advanced them, the Because of the common transaction. Thus,
even if
principal must reimburse him therefor, even if the the agent was appointed separately, the rule
should
sums advanced, from the day on which the regard to the same thing, one of them with
the
advance was made. agent and the other with the principal, and the
Should the principal reimburse the agent for advances that of prior date shall be preferred,
without
made by the latter even if the agency was unsuccessful? prejudice to the provisions of Article
1544.
the agent was with fault. May 2 persons contract with regard to the same thing,
one with the agent and the other with the principal?
effected, but not if there is no perfected transaction. If this situation arises, which of the contracts
will be
preferred?
Art. 1913. The principal must also indemnify the If the contracts are compatible, they will
both be
agent for all the damages which the executive of given effect. If they are incompatible, then
the contract
the agency may have caused the latter, without of prior date shall be preferred.
Basis for the above rule: Equity. Since the principal different vendees, the ownership shall be
transferred to
receives the benefits of the agency, and has a right to the person who may have 1st taken
possession thereof
demand damages from the agent should the latter not in good faith if it should e movable
property. Should it
perform the agency, he should answer for the damages be immovable property, the ownership
shall belong to
resulting from the execution thereof without fault or the person acquiring it who in good faith
1st recorded it
negligence on the part of the agent. in the Registry of Property. Should there be no
Art. 1914. The agent may retain in pledge the who in good faith was 1st in possession; and in
the
tings which are the object of the agency until the absence thereof, to the person who presents
the oldest
principal effects the reimbursement and pays the title, provided there is good faith.
What happens when the principal fails to reimburse or preceding article, if the agent has acted in
good
indemnify the agent for expenses set forth in arts. 1912 faith, the principal shall be liable in
damages to
The agent has the right to retain in pledge the things If the agent acted in bad faith, he alone shall
be
Is the principal always liable for damages caused by a 2.) By the withdrawal of the agent;
3rd person or is it the agent who is liable? 3.) By the death, civil interdiction, insanity or
Whether the principal or the agent will be the one insolvency of the principal or of the
agent;
liable for damages to the 3rd person who has been 4.) By the dissolution of the firm or
corporation
prejudiced depends on whether the agent acted in bad which entrusted or accepted the
agency;
faith or not. If the agent acted in good faith and within 5.) By the accomplishment of the object
or
the scope of his authority, the principal incurs liability. If purpose of the agency;
the agent acted in bad faith, he alone shall be 6.) By the expiration of the period for which
What is the extent of liability covered under this article? Meaning of Presumption of continuance
of agency:
What is good faith referred to in this article? absence of anything to show its termination.
knowledge that the principal is dealing with a 3rd person. Who has the burden of proving the
revocation/termination of agency?
Note: If the contract is one of sale, article 1544 governs The burden of proving a revocation or
other
and not arts. 1916 and 1917. termination of agency is on the party asserting it.
Art. 1918. The principal is not liable for the Note: Even if the reason for extinguishing the
agency is
expenses incurred by the agent in the following not true, the agent can’t insist on
reinstatement. The
derived from the contract; 2.) Subsequent acts of the parties which may be
knowledge that an unfavorable result would b.) By the unilateral act of one of
them.
ensue, if the principal was not aware thereof; 3.) By operation of law.
would be borne by the agent, or that the latter Modes of extinguishment, specifically: [WR-
DEAD]
2.) Revocation;
Instances wherein the principal is not liable for expenses 3.) Death, civil interdiction, insanity or
insolvency of
In the instances enumerated under this article. 4.) Expiration of the period for which the
agency
was constituted;
Reasons why the principal is not liable for the agent’s 5.) Accomplishment of the object or
purpose of the
1.) To punish the agent, but when the principal has 6.) Dissolution of the firm/corp which
entrusted or
2.) “Kasi, kasalanan niya, eh.” Necessary characteristics of the parties for the
3.) The agent is guilty of bad faith and lack of continuance of the agency: [PCS]
diligence; 1.) Present;
Art. 1919. Agency is extinguished: [WR-DEAD] nor does the death of one of several agents
put an end
1.) By its revocation; to the agency. The intention of the parties controls.
Why is capacity necessary? the contrary, the loss or destruction of the subject
For instance, in the case of civil interdiction, it matter of the agency terminates the agent’s
authority to
deprives the offender during the period of his sentence deal with reference to it.
person under civil interdiction hence, cannot validly give 1.) If it is possible to substitute other
material for
consent. Same is true for insane people. that which was destroyed without
substantial
Why is solvency necessary? 2.) If the destroyed subject matter was not in fact
As by an act of insolvency, the principal loses control essential to the contract; and
of the subject matter of the agency, the authority of the 3.) A partial loss or destruction.
the other hand, the insolvency of the agent will No. Art. 1919 gives only those causes of
extinction
ordinarily put an end to the agency, at least if it is in any which are particular to agency. But the list
is not
way connected with the agent’s business which has exclusive. The general rule actually is, an
agency may
General rule as to death of the principal or agent: loss of the thing and novation (see art.
1231).
between the principal and the agent (which is fiduciary – Does war extinguish agency?
argh!), agency is distinguished ipso jure upon the death During the existence of war, a contract
of agency is
1.) If the agency is coupled with an interest; residents of 2 belligerent states, the general
rule is that
2.) If the act of the agent was executed without the agency is terminated, as a matter of law,
upon the
Why does dissolution of a firm or corp extinguish the shall be capable of being carried out
legally at the time
Dissolution of a corp extinguishes its juridical a change in the law makes the purpose of the
agency
existence. unlawful.
What happens when the object or the purpose of the What happens if the principal’s
authority terminates?
As between the parties, the principal and the agent, whether directly or indirectly, terminates
as a matter of
the fulfillment of the purpose for which the agency was law with the destruction of the trust.
Consequently, a
created ipso facto terminates the agency. sub-agent’s authority terminates with the
termination of
What happens when the term for which the agency was
supposed to continue expires? In case of loss of the subject matter, does the
principal
When an agency is created for a fixed period, the incur any liability?
expiration of such period ends the agency, even though It depends. If the loss was brought
about by the
the purpose for which the agency was created has not principal as in the case where the
principal sells the
What happens if no time is specified? may be liable for damages for his wrongful
terminating
The agency terminates at the end of a reasonable act. But if the subject matter is lost without
the fault of
Can the period be implied? Yes, from… Will a change of conditions affect the agency?
1.) The terms of the agreement; General rule: When there is a basic change in the
2.) Purpose of the agency; and circumstances surrounding the transaction not
3.) The circumstances of the parties. contemplated by the parties which would
reasonably
What happens if the subject matter of the agency is lost desire him to act, authority of agent is
terminated.
or destroyed? Exceptions:
1.) If the original circumstances are restored within be forced to retain another as his agent
against
2.) Where the agent has reasonable doubts as to In case a principal does revoke an agency, is
there any
whether the principal would desire him to act, way by which the agent can hold him liable for
his authority will not be terminated if he acts damages? Yes. For instance,
reasonably. (But when in doubt, agent could 1.) If the agency was constituted for a fixed
period,
contract principal for instructions if possible). the principal shall be liable in damages
3.) Where the principal and agent are in close daily occasioned by the wrongful discharge of
the
contact, the agent’s authority to act will not agent before the expiration of the period
fixed.
terminate upon a change of circumstances if the 2.) If the agent can prove that the principal
acted in
agent knows the principal is aware of the change bad faith by revoking the agency in order
to
and does not give him new instructions. avoid payment of commission about to be
confidential or not, because while the relation of Reason for requiring agent to return the
document
principal and agent is confidential, not all knowledge evidencing the agency: To prevent the agent
from
acquired by the agent is of a confidential nature. Some making use of the power of attorney and
thus avoid
clearly is of so general a nature that equity ought not liability to 3rd persons who may
subsequently deal with
attempt to restrict its subsequent use. the agent on the faith of the instrument.
Usually, what a court does is to determine 2 things:
Principle behind enjoining an agent from using b.) When the principal directly manages
the
the principal and the agent an implied contract on the Is notice of revocation to the agent
necessary? Yes.
part of the agent that he will not, after the service is A revocation without notice to the agent will
not render
terminated, use information which he has gained while invalid an act done in pursuance of the
authority.
Art. 1920. The principal may revoke the agency notice to the agent that the agency is revoked
is not
at will, and compel the agent to return the always necessary. If the party to be notified
actually
document evidencing the agency. Such revocation knows, or has reason to know, facts
indicating that his
sufficient notice.
principal? Yes, when he does so, it’s called revocation. Is notice of revocation to 3rd persons
necessary? Yes.
May an agency be terminated by a subsequent act of the What kind of notice should you give 3rd
persons?
agent? Yes, it’s called withdrawal or renunciation. 1.) As to former customers, actual notice
must e
Does it matter if the agency is gratuitous or with continuance of the agency relationship.
1.) Since the authority of the agent emanates from Yes, but subject to the contractual
obligations owing
2.) Confidence being the cardinal basis of the Reason: The essence of the principal-agent
relationship
relation, it stands to reason that it should cease is the consent and willingness of the agent to
act for the
when such confidence disappears. principal. The law cannot compel the parties to
continue
3.) The principal-agent relationship is consensual an agency if they do not want to do so. (The
principal
and personal in nature. No one can nor should cannot even sue for affirmative specific
performance
2.) When he abandons the object of his agency and Except: If you can prove that the 3rd
person read the
acts for himself in committing a fraud upon his notice in the newspaper.
principal; or
3.) When he files a complaint against the principal Art. 1923. The appointment of a new agent
for
and adopts an antagonistic attitude towards him. the same business or transaction revokes
the
Does a violation of the instructions of the principal thereof was given to the former agent,
without
No. Mere fact that agent violates his instructions does articles.
render himself liable to the principal, he does not cease What does this article mean?
Art. 1921. If the agency has been entrusted for for the same business or transaction if
there is
the purpose of contracting with specified persons, incompatibility. But the revocation does
not
its revocation shall not prejudice the latter if they become effective as between the principal
and
were not given notice thereof. the agent unless it is in some way
What is the effect of revocation in relation to 3rd persons 3rd persons who acted in good faith
and without
if the agent was authorized to contract with specified knowledge of the revocation will not
be
If the agency is created for the purpose of 2.) There is no implied revocation where the
contracting with specified persons, its revocation will not appointment of another agent is not
prejudice such 3rd persons until notice thereof is given incompatible with the continuation of
like
them. The reason for this is obvious. Since 3rd persons authority in the 1st agent, or if the 1st
agent is
have been made to believe by the principal that the not given notice of the appointment of
the new
the absence of notification by the principal. But of Art. 1924. The agency is revoked if the
principal
course, notice is not required if the 3rd persons already directly manages the business entrusted to
the
Art. 1922. If the agent had general powers, What does the above article provide?
revocation of the agency does not prejudice third It provides for another case of implied
revocation.
knowledge of the revocation. Notice of the Effect of direct management of the business by
the
was authorized to contract with the public in general: Exception: when the only desire of the
principal in
In case the agent has general powers, innocent 3rd doing so is for him and the agent to
manage the
parties dealing with the agent will not e prejudiced by business together.
this case, however, the fact that the revocation was Art. 1925. When two or more principals
have
be sufficient to 3rd persons for publication constitutes transaction, any one of them may revoke
the same
notice upon everybody and this is true whether or not without the consent of the others.
Notice required in art. 1921 v. that in art. 1922: more principals for a common transaction or
undertaking
Art. 1921 Art. 1922 makes them solidarily liable to the agent for all
Must be personal. May be personal. consequences of the agency, then each one of
the
Revocation must be known Even if 3rd person doesn’t principals should be granted the right to
revoke the
power of attorney even without the consent of the to deal with the thing in order to make
the
others. Remember that in a solidary obligation, the act assignment, pledge or lien effectual.
Art. 1926. A general power of attorney is irrevocable, is such terminology controlling in all
cases?
revoked by a special one granted to another agent, No. Whether an interest will make an
agency
as regards the special matter involved in the irrevocable exists in a particular case is to be
How many agents are involved in this article? terminology is not controlling. Even if an
agency is made
2, one to whom a general power is previously in terms irrevocable, the fact will not prevent
its
granted. Another to whom a special power is given. revocation by the principal when the
agency is not in
(Note that this can also apply if a special power is fact coupled with an interest.
Effect of the issuance of a special power as regards the that the principal can never ever revoke it?
general power: No. You can still revoke in extreme situations, e.g.:
The general power is impliedly revoked as to matters 1.) Irrevocability can never be used as a
shield for
covered by the special power because a special power the perpetration of acts in ad faith,
breach of
naturally prevails over a general power. confidence or betrayal of trust. The law will
bilateral contract depends upon it, or if it is the 2.) When the interest is already terminated.
means of fulfilling an obligation already
contracted, or if a partner is appointed manager of Why is it said that agencies coupled with
interest are not
his removal from the management is unjustifiable. Because persons with proprietary interests
in the
General rule: Principal may revoke an agency at will One of the hallmarks of the agency relation
is the
since the essence of agency is the agent’s duty of control of the principal over the acts of the
agent and
obedience to the principal. over the subject matter of the agency. An agency
Exceptions: [BF=Partner]
1.) When a bilateral contract depends on the Art. 1928. The agent may withdraw from the
2.) When the agency is the means of fulfilling an latter suffer any damage by reason of the
3.) When a partner is appointed as manager of a therefor, unless the agent should base his
his removal from the management is the performance of the agency without grave
Can an agency, coupled with an interest, be terminated Does the agent have a right to renounce
or withdraw
by the sole will of the principal? No. from the agency at any time?
Requisite for agency to be irrevocable for being coupled the latter case, he may be subject to
liability for breach
the power conferred and not merely an interest in the Basis: Constitutional prohibition against
involuntary
1.) When the agent has parted with value or just cause:
incurred liability at the principal’s request, and 1.) Notify principal (even if w/ just cause); and
he is looking to the exercise of the power as the 2.) Indemnify the principal should the latter
suffer
the power is to be exercised arises from an Reason for indemnity: To answer for losses and
assignment, pledge or lien created by the damages occasioned by the non-fulfillment of his
principal with the agent being given the power obligation as agent.
Is the agent liable for indemnity if the withdrawal was same way that revocation of the agency
does not
for just cause? No. Agent cannot be held liable if the prejudice 3rd persons who have dealt with
the agent in
agent withdraws for a valid reason as when: good faith without notice of revocation, such
3rd persons
1.) The withdrawal is based on the impossibility of are also protected where it is not shown that
the agent
continuing the agency without grave detriment had knowledge of the termination of the
agency because
What happens when the agent sues the principal? Does this article only require the agent to
be in good
Equivalent to withdrawal of the agent. faith? No, both agent and 3rd person must be.
Art. 1929. The agent, even if he should Art. 1932. If the agent dies, his heirs must
withdraw from the agency for a valid reason, must notify the principal thereof, and in the
meantime
continue to act until the principal has had adopt such measures as the circumstances may
reasonable opportunity to take the necessary demand in the interest of the latter.
Obligation of agent after withdrawal: 1.) Notify the principal to enable the latter
Even when withdrawal is for a valid reason, he must reasonable opportunity to take such
steps as
continue to act until the principal has had reasonable may be necessary to meet the situation;
and
opportunity to take the necessary steps like the 2.) Adopt such measures as the
circumstances may
appointment of a new agent to remedy the situation demand in the interest of the
principal.
Art. 1930. The agency shall remain in full force services on the part of the agent.
it has been constituted in the common interest of 1.) Agency by operation of law, or a
presumed or
third person who has accepted the stipulation in 2.) Agency is coupled with an interest in the
subject
However, if the principal dies, the principal’s heirs have GOOD LUCK! ☺
Rationale: Agency, being based on representation, there problems. I don’t think the problems are
all that important,
is no one to e represented where the principal is already they’re Atty. Quimson problems not
Enrile’s. Our case outline
dead. differs from theirs a bit too. Besides, we’re all set with case
Exceptions:
common interest of the principal and the agent; reviewer guys, but I wouldn’t have had to if
you didn’t stamp
in good faith.