WHAT ARE THE OBLIGATIONS AND LIABILITIES OF AGENTS TO THIRD PARTIES?

A. AGENT ACTING WITHIN SCOPE OF AUTHORITY

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. Kinds of Principals: 1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and has known the principals identity. 2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principals identity. The partially disclosed principal may enforce against the 3rd person the contract of the agent like any disclosed principal. Similarly, the 3rd person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal. General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency. Remedy of the 3rd person with whom the agent

contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both. Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Principal > Agent > 3rd Party (wrong party to complain if the principal doesnt complain of the agents acts) General rule: an agent who acts as such is not personally liable to the party with whom he contracts. Reason for general rule: Because an agent who acts as such within the scope of his authority represents the principal so that his contract is really the principals. Exceptions: 1.) When the agent binds himself; or 2.) When he exceeds the limits of his authority without giving the third party sufficient notice of his powers. Reasons for exceptions: 1.) When the agent expressly binds himself, he thereby obligates himself personally and by his own act. 2.) When the agent exceeds his authority, he really acts without authority and therefore, the contract is unenforceable against the principal. The agent becomes personally liable because y his wrong or omission, he deprives the 3rd party with whom he contracts of any remedy against the principal. Art. 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been aware.

 This article refers to the liability

of the principal towards 3rd persons. What happens if the principal appoints an agent who is ignorant? Then the fault is the principals alone. Equity demands that the principal should be bound by the acts of the agent if the latter acts within the scope of his authority and in accordance with the instructions of the former.

B. AGENT ACTING OUTSIDE OF AUTHORITY Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Principal > Agent > 3rd Party (wrong party to complain if the principal doesnt complain of the agents acts) General rule: an agent who acts as such is not personally liable to the party with whom he contracts. Reason for general rule: Because an agent who acts as such within the scope of his authority represents the principal so that his contract is really the principals. Exceptions: 1.) When the agent binds himself; or 2.) When he exceeds the limits of his authority without giving the third party sufficient notice of his powers. Reasons for exceptions: 1.) When the agent expressly

2.) When the agent exceeds his authority, he really acts without authority and therefore, the contract is unenforceable against the principal. The agent becomes personally liable because y his wrong or omission, he deprives the 3rd party with whom he contracts of any remedy against the principal. Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principals ratification. Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. o Estoppel: precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied.

Basis of article 1911: Principle of estoppel. Necessary for the protection of innocent 3rd persons. Instance when solidarity is imposed by law. binds himself, he thereby obligates himself personally and by his own act.

1. With notice to third parties

 Art. 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agents acts. Effect of ratification by the principal: Ratification of a contract gives it the same effect as if the principal had originally authorized it. Who must ratify the contract? Only the principal. But there must be knowledge on the part of the principal of the things he is going to ratify. When can the 3rd person repudiate the contract? Before actual ratification by the principal, or before the principal has signified his willingness to ratify the agents acts. Effect of the principal receiving the benefits of the transaction: He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens. 2. Without notice to third parties C. AGENT ACTING IN HIS OWN NAME; EXCEPTION Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. Kinds of Principals: 1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and has known the principals identity. 2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principals

identity. The partially disclosed principal may enforce against the 3rd person the contract of the agent like any disclosed principal. Similarly, the 3rd person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal. General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency. Remedy of the 3rd person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both. WHAT ARE THE OBLIGATIONS AND LIABILITIES OF PRINCIPALS TO AGENTS? A. ADVABCE/REIMBURSE Art. 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful, provided the agent is free from all fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. Should the principal reimburse the agent for advances made by the latter even if the agency was unsuccessful? It depends. Yes, if the agent is free from fault. No, if the agent was with fault.

Is a broker always entitled to a commission? A broker is entitled to a commission if the sale is effected, but not if there is no perfected transaction.

Art. 1914. The agent may retain in pledge the tings which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles. What happens when the principal fails to reimburse or indemnify the agent for expenses set forth in arts. 1912 and 1913? The agent has the right to retain in pledge the things which are the object of the agency. In case the agent sells the goods for more than his claim, is he entitled to the excess? No. What is the nature of the agents right of lien? Specific or particular. It is not general in the sense that it gives the agent a right to retain the goods for claims disconnected with the agency. Art. 1918. The principal is not liable for the expenses incurred by the agent in the following cases: [F*CKS] 1.) If the agent acted in contravention of the principals instructions, unless the latter should wish to avail himself of the benefits derived from the contract; 2.) When the expenses were due to the fault of the agent; 3.) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof; 4.) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. Instances wherein the principal is not liable for expenses incurred by the agent? In the instances enumerated under this article. Reasons why the principal is not liable for the agents expenses: Under 1.) To punish the agent, but when the principal has availed of the benefits, he is deemed to have impliedly ratified the agents acts.

2.) Kasi, kasalanan niya, eh. 3.) The agent is guilty of bad faith and lack of diligence; 4.) An express stipulation which is not contrary to law, morals, good customs, public order or public policy is binding between the parties. B. INDEMNIFY Art. 1913. The principal must also indemnify the agent for all the damages which the executive of the agency may have caused the latter, without fault or negligence on his part. Basis for the above rule: Equity. Since the principal receives the benefits of the agency, and has a right to demand damages from the agent should the latter not perform the agency, he should answer for the damages resulting from the execution thereof without fault or negligence on the part of the agent. C. SOLIDARY LIABILITY Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. Requisites for application of this article: [2C2] 1.) There are 2 or more principals; 2.) The principals have all concurred in the appointment of the same agent; 3.) The agent is appointed for a common transaction or undertaking. Why is solidarity the rule? Because of the common transaction. Thus, even if the agent was appointed separately, the rule should apply in the interest of justice. D. COMPENSATION Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. Broker: One who in behalf of others, and for compensation or

fee, negotiate contracts relative to property. He is the negotiator between the parties, never acting in his own name, but in the name of those who employ him. He is strictly a middleman and for some purposes, the agent of both parties. When is a broker entitled to compensation? A broker is entitled to commission whenever he rings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. A broker is never entitled to commission for unsuccessful efforts. Does the law allow double agency? Such agency is disapproved by law for being against public policy and sound morality. The exception is where the agent acted with full knowledge and free consent of the principals. In case the agent assumes a double agency, what is his right to compensation? 1.)If with knowledge of both principals recovery can be had from both. 2.)If without knowledge of both agent can recover from neither. 3.)If with knowledge of only one as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public polisy and good morals. E. AGENTS LIEN Art. 1914. The agent may retain in pledge the tings which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles. What happens when the principal fails to reimburse or indemnify the agent for expenses set forth in arts. 1912 and 1913? The agent has the

right to retain in pledge the things which are the object of the agency. In case the agent sells the goods for more than his claim, is he entitled to the excess? No. What is the nature of the agents right of lien? Specific or particular. It is not general in the sense that it gives the agent a right to retain the goods for claims disconnected with the agency. WHAT ARE THE OBLIGATIONS OF PRINCIPALS TO THIRD PARTIES A. AGENT ACTING WITHIN SCOPE OF AUTHORITY Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. Kinds of Principals: 1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and has known the principals identity. 2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principals identity. The partially disclosed principal may enforce against the 3rd person the contract of the agent like any disclosed principal. Similarly, the 3rd person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal. General Rule in 1883: If the agent is authorized to act on behalf of the

principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency. Remedy of the 3rd person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both. Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. Where can the specific obligations and duties of the principal to the agent be found? Usually in the contract creating the agency. Principal obligations of the principal to the agent in the absence of such agreement: 1.) To comply with all the obligations which the agent may have contracted in his name and within the scope of his authority; 2.) To advance should the agent so request sums necessary for the execution of the agency; 3.) To reimburse the agent for all advances made by him provided the agent is free from fault; 4.) To indemnify the agent for all the damages which the execution of the agency may have caused the latter without fault or negligence on his part; and 5.) To pay the agent the compensation agreed upon or the reasonable value of the latters services. Liability of the principle to 3rd persons:

Where the relation of agency

legally exists, the principal will be liable to 3rd persons for all acts committed by the agent in his behalf in the course and within the actual or apparent scope of his authority, and this is not altered y the fact that the agent may also be liable, nor by the fact that some of the acts are to the principals advantage while others are to his disadvantage. Liability of the principal for mismanagement of the business by the agent: Mismanagement of the business of the principal by the agent does not relieve said principal from the responsibility that he had contracted to 3rd persons. But where the agents acts bind the principal, the latter may seek recourse against the agent. Liability of principal for a tort committed by the agent: The principal is civilly liable to 3rd persons for torts of an agent committed at the principals direction or I the course and within the scope of the agents employment. The principal cannot escape liability whether the tort is committed willfully or negligently so long as the tort is committed by the agent while performing his duties in furtherance of the principals business. Nor is it a defense that the act which caused the tort was unknown to him or even that it was in disobedience to his instructions. Meaning of ratification in 2nd paragraph: Ratification is the adoption or affirmance by a person of a prior act which did not bind him, but which was done or professed to be done on his account, thus giving effect to the act as if originally authorized. The doctrine applies to the ratification of the act of an agent in excess of his authority of the act of one who purports to be an agent but who is really not. It may be implied from the acceptance of benefits by the principal under a contract entered in his name.

The authority created by ratification is subsequent but it is equivalent to prior authority. Conditions to ratification: [ICK-PEC] 1.) Intent to ratify; 2.) Principal must have capacity & power to ratify; 3.) He must have had knowledge of material facts; 4.) The act must be done in behalf of the principal; 5.) Principal must ratify acts in its entirety; 6.) The act must be capable of ratification. Effects of ratification with respect to the agent: 1.) Relieves the agent from liability to the 3rd party to the unauthorized transaction; and 2.) To his principal for acting without authority; and 3.) He may recover compensation due for performing the act which has been ratified. Effects of ratification with respect to the principal: 1.) He assumes responsibility for the unauthorized act, as fully as if the agent had acted under original authority; but 2.) He is not liable for acts outside the authority approved by his ratification. Effects of ratification with respect to 3rd persons: 1.) 3rd person is bound by ratification to the same extent as he would have been bound if the ratified act had been authorized in the 1st instance; and 2.) He cannot raise the question of the agents authority to do the ratified act. Must ratification be communicated to the agent or to the 3rd party? No. To be effective, ratification need not be communicated or made known to the agent or the 3rd party. The act or conduct of the principal rather than his communication is the key. But before ratification, the 3rd party is free to revoke the unauthorized contract. Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the

principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. Is the principal always liable for damages caused by a 3rd person or is it the agent who is liable? Whether the principal or the agent will be the one liable for damages to the 3rd person who has been prejudiced depends on whether the agent acted in bad faith or not. If the agent acted in good faith and within the scope of his authority, the principal incurs liability. If the agent acted in bad faith, he alone shall be responsible to such person. What is the extent of liability covered under this article? Damages. What is good faith referred to in this article? Good faith here means that the agent had no knowledge that the principal is dealing with a 3rd person. *Note: If the contract is one of sale, article 1544 governs and not arts. 1916 and 1917. B. AGENT ACTING OUTSIDE SCOPE OF AUTHORITY Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, is such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. Requisite for article to apply: Authority to agent must be in writing. Scope of agents authority includes:Not only the actual authorization conferred upon the agent by the principal, but also that which has apparently or impliedly been delegated to him. person dealing with an agent must: Discover upon his peril not only the fact of agency but the nature and extent of authority of the agent. He is put on inquiry. He must also act with ordinary prudence and reasonable diligence. Fundamental principles when inquiring whether authority exists:

To hold the principal liable, a 3rd

1.) The law indulges in no bare presumptions that an agency exists, it must be proved and presumed from facts; 2.) The agent cannot establish his own authority, either by his representations or by assuming to exercise it; 3.) An authority cannot be established by mere rumor or general reputation; 4.) A general authority is not an unlimited one; and 5.) Every authority must find its ultimate source in some act or omission of the principal.

In case the fact of agency or the extent of the authority of the agent is controverted, the burden of proof is on: The 3rd person to establish the fact of agency or the extent of authority of the agent.

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

i.) Vary the terms of an express authorization; ii.) Dispense with a legal requirement enacted for the principals benefit; iii.) Change a rule of law or dispense with a formality required by law; iv.) Vary an essential quality of the agency relationship. b.) General rule: principal must have notice of the alleged custom, before the agents acts, in accordance therewith, may bind the principal. Exceptions: i.) Where the principal and the agent reside in the same community, the usage is definite and well-known, and the agent has no notice that he is to act to the contrary; ii.) Where the agent is authorized to deal in a particular place or in a particular market exchange. 4.) By necessity the existence of an emergency or other unusual conditions may operate to invest in an agent authority to meet the emergency, provided: a.) Emergency really exists; b.) Agent is unable to communicate w/ the principal; c.) Agents enlarged authority is exercised for the principals protection; and d.) The means adopted are reasonable under the circumstances. 5.) By certain doctrines a.) Apparent authority b.) Liability by estoppel; c.) Ratification.

6.) By the ejusdem generis rule such that where in an instrument of any kind, an enumeration of specific matters is

followed by a general phrase is held to be limited in scope by the specific matters. Responsibility of principal when agent acts w/ improper motives: General rule: Motive of agent in entering into a K w/ a 3rd person is immaterial. Exceptions: 1.) Where the 3rd person knew that the agent was acting for his benefit, in w/c case, the principal is not liable to the 3rd person; and 2.) Where the owner is seeking recovery of personal property of w/c he has been unlawfully deprived.

Principals responsibility for an agents misrepresentation: 1.) Within the scope of the agents authority Principal is subject to liability for lass caused to another by the 3rd persons reliance upon a deceitful representation of an agent in the course of his employment if: a.) Representation is authorized; b.) Within the implied authority of the agent to make for the principal; or c.) Apparently authorized. 2.) Beyond the scope of the agents authority General rule: Principal is not bound. Exception: when the principal takes advantage of a K made under the false misrepresentation of his agent. 3.) For the agents own benefit Principal is liable (motive of agent immaterial). Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. o Estoppel: precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied. Basis of article 1911: Principle of estoppel. Necessary for the protection of innocent 3rd persons. Instance when solidarity is imposed by law.

Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of Article 1544. May 2 persons contract with regard to the same thing, one with the agent and the other with the principal? Yes. If this situation arises, which of the contracts will be preferred? If the contracts are compatible, they will both be given effect. If they are incompatible, then the contract of prior date shall be preferred. Art. 1544: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have 1st taken possession thereof in good faith if it should e movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith 1st recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was 1st in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. o Is the principal always liable for damages caused by a 3rd person or is it the agent who is liable? Whether the principal or the agent will be the one liable for damages to the 3rd person who has been prejudiced depends on whether the agent acted in bad faith or not. If the agent acted in good faith and within the scope of his authority, the principal incurs liability. If the agent acted in bad

faith, he alone shall be responsible to such person. o What is the extent of liability covered under this article? Damages. What is good faith referred to in this article? Good faith here means that the agent had no knowledge that the principal is dealing with a 3rd person. *Note: If the contract is one of sale, article 1544 governs and not arts. 1916 and 1917. C. FOR CRIMES; FOR TORTS DUTY OF THIRD PARTIES DEALING WITH AGENT Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. Duty of a 3rd person who deals w/ an agent: 3rd person deals w/ an agent at his peril. He is bound to inquire as to the extent of the agents authority, and this is especially true where the act of the agent is of an unusual nature. Ignorance of the agents authority is no excuse. It is his duty to require the agent to produce his power of attorney to ascertain the scope of his authority. He may also ask for the instructions of the principal. Do secret orders or private instructions prejudice 3rd persons? No, he cannot be prejudiced by any secret understanding between the principal and the agent. Such secret orders cannot be invoked as against 3rd parties if the agent had apparent authority. HOW IS AGENCY EXTINGUISHED A. REVOCATION; AGENCY COUPLED WITH AN INTEREST Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received

the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. Agency by Estoppel: There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another. 1.) Estoppel of Agent One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the 3rd persons interested in the transaction in which he is engaged. 2.) Estoppel of Principal a.) As to Agent One who knows that another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other. b.) As to sub-agent To estop the principal from denying his liability to a 3rd person, he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and sub-agent. c.) As to 3rd persons One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of 3rd persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency. 3.) Estoppel of 3rd Persons A 3rd person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3rd persons in interest. 4.) Estoppel of the govt The govt is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority.

Art. 1919. Agency is extinguished: [WRDEAD] 1.) By its revocation; 2.) By the withdrawal of the agent; 3.) By the death, civil interdiction, insanity or insolvency of the principal or of the agent;

4.) By the dissolution of the firm or corporation which entrusted or accepted the agency; 5.) By the accomplishment of the object or purpose of the agency; 6.) By the expiration of the period for which the agency was constituted. Meaning of Presumption of continuance of agency: When once shown to have existed, an agency relation will be presumed to have continued in the absence of anything to show its termination. Who has the burden of proving the revocation/termination of agency? The burden of proving a revocation or other termination of agency is on the party asserting it. Note: Even if the reason for extinguishing the agency is not true, the agent cant insist on reinstatement. The agent can only demand damages. Modes of extinguishing an agency, generally: [ASO] 1.) Agreement; 2.) Subsequent acts of the parties which may be either: a.) By the act of both parties or by mutual consent; b.)By the unilateral act of one of them. 3.) By operation of law. Modes of extinguishment, specifically: [WRDEAD] 1.) Withdrawal of the agent; 2.) Revocation; 3.) Death, civil interdiction, insanity or insolvency of the principal or of the agent; 4.) Expiration of the period for which the agency was constituted; 5.) Accomplishment of the object or purpose of the agency; and 6.) Dissolution of the firm/corp which entrusted or accepted the agency; Necessary characteristics of the parties for the continuance of the agency: [PCS] 1.) Present; 2.) Capacitated; 3.) Solvent. Why is presence necessary? Because the general rule in art 1919 is

that death of any of the parties extinguishes agency. However in the case where you have several principals and/or several agents, whether the death of one principal or of one agent terminates the agency would depend on the intention of the parties. Generally the death of one of several principals does not revoke the agents authority nor does the death of one of several agents put an end to the agency. The intention of the parties controls. Why is capacity necessary? For instance, in the case of civil interdiction, it deprives the offender during the period of his sentence of the right to manage his property and dispose of such property by any act or any conveyance inter vivos. A person under civil interdiction hence, cannot validly give consent. Same is true for insane people. Why is solvency necessary? As by an act of insolvency, the principal loses control of the subject matter of the agency, the authority of the agent to act for his principal ceases by operation of law upon an adjudication of the principals insolvency. On the other hand, the insolvency of the agent will ordinarily put an end to the agency, at least if it is in any way connected with the agents business which has caused his failure. General rule as to death of the principal or agent: By reason of the very nature of the relationship between the principal and the agent (which is fiduciary argh!), agency is distinguished ipso jure upon the death of the principal. Exceptions: 1.) If the agency is coupled with an interest; 2.) If the act of the agent was executed without the knowledge of the death of the principal and the 3rd person who contracted w/ the agent acted in good faith. Why does dissolution of a firm or corp extinguish the agency? Dissolution of a corp extinguishes its juridical existence. What happens when the object or the purpose of the agency is accomplished? As between the parties, the principal and the agent, the fulfillment of the purpose for which the agency was created ipso facto terminates the agency.

 What happens when the term for which the agency was supposed to continue expires? When an agency is created for a fixed period, the expiration of such period ends the agency, even though the purpose for which the agency was created has not been accomplished. What happens if no time is specified? The agency terminates at the end of a reasonable period of time. Can the period be implied? Yes, from 1.) The terms of the agreement; 2.) Purpose of the agency; and 3.) The circumstances of the parties. What happens if the subject matter of the agency is lost or destroyed? In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the agency terminates the agents authority to deal with reference to it. Exceptions: 1.) If it is possible to substitute other material for that which was destroyed without substantial detriment to either party, or 2.) If the destroyed subject matter was not in fact essential to the contract; and 3.) A partial loss or destruction. Are the modes of extinguishments of agency exclusive? No. Art. 1919 gives only those causes of extinction which are particular to agency. But the list is not exclusive. The general rule actually is, an agency may be extinguished by the modes of extinguishments of obligations in general whenever they are applicable, like loss of the thing and novation (see art. 1231). Does war extinguish agency? During the existence of war, a contract of agency is inoperative if the agent or the principal is an enemy alien. But since it is generally conceded that war suspends all commercial intercourse between the residents of 2 belligerent states, the general rule is that agency is terminated, as a matter of law, upon the break of war. Does legal impossibility terminate agency? Implied in every contract is the understanding that it shall be capable of being carried out legally at the time called for by the contract. An agency then terminates if a change in the law makes the purpose of the agency unlawful.

What happens if the principals authority terminates? A position which flows from a trust relationship whether directly or indirectly, terminates as a matter of law with the destruction of the trust. Consequently, a sub-agents authority terminates with the termination of the principals authority. In case of loss of the subject matter, does the principal incur any liability? It depends. If the loss was brought about by the principal as in the case where the principal sells the subject matter to another party notwithstanding that an agency had been constituted in reference to it, then he may be liable for damages for his wrongful terminating act. But if the subject matter is lost without the fault of the principal, no liability is assumed by him. Will a change of conditions affect the agency? General rule: When there is a basic change in the circumstances surrounding the transaction not contemplated by the parties which would reasonably lead the agent to believe that the principal would not desire him to act, authority of agent is terminated. Exceptions: 1.) If the original circumstances are restored within a reasonable period of time, the agents authority may be revived. 2.) Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably. (But when in doubt, agent could contract principal for instructions if possible). 3.) Where the principal and agent are in close daily contact, the agents authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions. Confidential information - It is difficult to determine whether information is confidential or not, because while the relation of principal and agent is confidential, not all knowledge acquired by the agent is of a confidential nature. Some clearly is of so general a nature that equity ought not attempt to restrict its subsequent use. Usually, what a court does is to determine 2 things:

1.) Whether the knowledge or information is indeed confidential, and 2.) Whether its subsequent use ought to be prevented. Principle behind enjoining an agent from using confidential information: There is in the contract of service subsisting between the principal and the agent an implied contract on the part of the agent that he will not, after the service is terminated, use information which he has gained while the service has been subsisting to the detriment of his former employer. Art. 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied. May an agency be terminated by a subsequent act of the principal? Yes, when he does so, its called revocation. May an agency be terminated by a subsequent act of the agent? Yes, its called withdrawal or renunciation. Does it matter if the agency is gratuitous or with compensation when we speak of revocation by the principal? No, art 1920 makes no distinction. Reasons: 1.) Since the authority of the agent emanates from the principal, if the principal wishes to terminate the agency the law must enable him to do so. 2.) Confidence being the cardinal basis of the relation, it stands to reason that it should cease when such confidence disappears. 3.) The principal-agent relationship is consensual and personal in nature. No one can nor should be forced to retain another as his agent against his will. In case a principal does revoke an agency, is there any way by which the agent can hold him liable for damages? Yes. For instance, 1.) If the agency was constituted for a fixed period, the principal shall be liable in damages occasioned by the wrongful discharge of the agent before the expiration of the period fixed. 2.) If the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid payment of commission about to be earned, the principal can be held liable for damages. Reason for requiring agent to return the document evidencing the

agency: To prevent the agent from making use of the power of attorney and thus avoid liability to 3rd persons who may subsequently deal with the agent on the faith of the instrument. Kinds of Revocation: 1.) Express; or 2.) Implied, e.g.: a.) When the principal appoints a new agent for the same business or transaction, or b.) When the principal directly manages the business entrusted to the agent. Is notice of revocation to the agent necessary? Yes. A revocation without notice to the agent will not render invalid an act done in pursuance of the authority. Is express notice of revocation to the agent necessary? As between the principal and the agent, express notice to the agent that the agency is revoked is not always necessary. If the party to be notified actually knows, or has reason to know, facts indicating that his authority has been terminated or suspended, there is sufficient notice. Is notice of revocation to 3rd persons necessary? Yes. What kind of notice should you give 3rd persons? 1.) As to former customers, actual notice must e given to them because they always assume the continuance of the agency relationship. 2.) As to other persons, notice by publication is enough. May the agent renounce the agency at will? Yes, but subject to the contractual obligations owing the principal. Reason: The essence of the principal-agent relationship is the consent and willingness of the agent to act for the principal. The law cannot compel the parties to continue an agency if they do not want to do so. (The principal cannot even sue for affirmative specific performance because that would lead to involuntary servitude!) Form of renunciation: It is not always necessary for the agent to renounce the agency expressly. He can do so impliedly, as for example 1.) Where he has conducted himself in a manner incompatible with his duties as agent; or 2.) When he abandons the object of his agency and acts for himself in

committing a fraud upon his principal; or 3.) When he files a complaint against the principal and adopts an antagonistic attitude towards him. Does a violation of the instructions of the principal amount to a renunciation? No. Mere fact that agent violates his instructions does not amount to renunciation, and although he may thus render himself liable to the principal, he does not cease to become an agent. Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. What is the effect of revocation in relation to 3rd persons if the agent was authorized to contract with specified persons? If the agency is created for the purpose of contracting with specified persons, its revocation will not prejudice such 3rd persons until notice thereof is given them. The reason for this is obvious. Since 3rd persons have been made to believe by the principal that the agent is authorized to deal with them, they have a right to presume that the representation continues to exist in the absence of notification by the principal. But of course, notice is not required if the 3rd persons already know of the revocation. Art. 1922. If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. Effect of revocation in relation to 3rd persons if the agent was authorized to contract with the public in general: In case the agent has general powers, innocent 3rd parties dealing with the agent will not e prejudiced by the revocation before they had knowledge thereof. In this case, however, the fact that the revocation was advertised in a newspaper of general circulation would be sufficient to 3rd persons for publication constitutes notice upon everybody and this is true whether or not such 3rd persons have read the newspaper concerned.

General rule: Special information needs special information of revocation. Except: If you can prove that the 3rd person read the notice in the newspaper. Art. 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. What does this article mean? There is implied revocation of the previous agency when the principal appoints a new agent for the same business or transaction if there is incompatibility. But the revocation does not become effective as between the principal and the agent unless it is in some way communicated to the latter. Again, the rights of 3rd persons who acted in good faith and without knowledge of the revocation will not be prejudiced thereby. There is no implied revocation where the appointment of another agent is not incompatible with the continuation of like authority in the 1st agent, or if the 1st agent is not given notice of the appointment of the new agent. Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. What does the above article provide? It provides for another case of implied revocation. Effect of direct management of the business by the principal himself: Generally, it revokes the agency because there would no longer be any basis for the representation previously conferred. Exception: when the only desire of the principal in doing so is for him and the agent to manage the business together. Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others.

Rationale: Since the appointment of an agent by 2 or more principals for a common transaction or undertaking makes them solidarily liable to the agent for all consequences of the agency, then each one of the principals should be granted the right to revoke the power of attorney even without the consent of the others. Remember that in a solidary obligation, the act of one is the act of all. Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. How many agents are involved in this article? 2, one to whom a general power is previously granted. Another to whom a special power is given. (Note that this can also apply if a special power is subsequently given to the same agent.) Effect of the issuance of a special power as regards the general power: The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. Art. 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. General rule: Principal may revoke an agency at will since the essence of agency is the agents duty of obedience to the principal. Exceptions: [BF=Partner] When a bilateral contract depends on the agency; When the agency is the means of fulfilling an obligation already contracted; When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Can an agency, coupled with an interest, be terminated by the sole will of the principal? No. Requisite for agency to be irrevocable for being coupled with a interest:

Interest of the agent must be in the subject matter of the power conferred and not merely an interest in the exercise of the power. Instances of an agency coupled with an interest: When the agent has parted with value or incurred liability at the principals request, and he is looking to the exercise of the power as the means of reimbursement or indemnity. When the interest in the thing concerning which the power is to be exercised arises from an assignment, pledge or lien created by the principal with the agent being given the power to deal with the thing in order to make the assignment, pledge or lien effectual. If the contract of agency stipulates that such will be irrevocable, is such terminology controlling in all cases? No. Whether an interest will make an agency irrevocable exists in a particular case is to be determined from the entire agreement between the parties and from the facts and circumstances. The terminology is not controlling. Even if an agency is made in terms irrevocable, the fact will not prevent its revocation by the principal when the agency is not in fact coupled with an interest. If an agency is coupled with an interest, does this mean that the principal can never ever revoke it? No. You can still revoke in extreme situations, e.g.: Irrevocability can never be used as a shield for the perpetration of acts in ad faith, breach of confidence or betrayal of trust. The law will never permit the agent to commit frauds against the principal. When the interest is already terminated. Why is it said that agencies coupled with interest are not true agents? Because persons with proprietary interests in the subject matter of their agency are not true agents at all. One of the hallmarks of the agency relation is the control of the principal over the acts of the agent and over the subject matter of the agency. An agency coupled with an interest removes that control.

B. WITHDRAWAL

Art. 1919. Agency is extinguished: [WRDEAD] 1.) By its revocation; 2.) By the withdrawal of the agent; 3.) By the death, civil interdiction, insanity or insolvency of the principal or of the agent; 4.) By the dissolution of the firm or corporation which entrusted or accepted the agency; 5.) By the accomplishment of the object or purpose of the agency; 6.) By the expiration of the period for which the agency was constituted. Meaning of Presumption of continuance of agency: When once shown to have existed, an agency relation will be presumed to have continued in the absence of anything to show its termination. Who has the burden of proving the revocation/termination of agency? The burden of proving a revocation or other termination of agency is on the party asserting it. Note: Even if the reason for extinguishing the agency is not true, the agent cant insist on reinstatement. The agent can only demand damages. Modes of extinguishing an agency, generally: [ASO] 1.) Agreement; 2.) Subsequent acts of the parties which may be either: a.) By the act of both parties or by mutual consent; b.)By the unilateral act of one of them. 3.) By operation of law. Modes of extinguishment, specifically: [WRDEAD] 1.) Withdrawal of the agent; 2.) Revocation; 3.) Death, civil interdiction, insanity or insolvency of the principal or of the agent; 4.) Expiration of the period for which the agency was constituted; 5.) Accomplishment of the object or purpose of the agency; and

Dissolution of the firm/corp which entrusted or accepted the agency; Necessary characteristics of the parties for the continuance of the agency: [PCS] 1.) Present; 2.) Capacitated; 3.) Solvent. Why is presence necessary? Because the general rule in art 1919 is that death of any of the parties extinguishes agency. However in the case where you have several principals and/or several agents, whether the death of one principal or of one agent terminates the agency would depend on the intention of the parties. Generally the death of one of several principals does not revoke the agents authority nor does the death of one of several agents put an end to the agency. The intention of the parties controls. Why is capacity necessary? For instance, in the case of civil interdiction, it deprives the offender during the period of his sentence of the right to manage his property and dispose of such property by any act or any conveyance inter vivos. A person under civil interdiction hence, cannot validly give consent. Same is true for insane people. Why is solvency necessary? As by an act of insolvency, the principal loses control of the subject matter of the agency, the authority of the agent to act for his principal ceases by operation of law upon an adjudication of the principals insolvency. On the other hand, the insolvency of the agent will ordinarily put an end to the agency, at least if it is in any way connected with the agents business which has caused his failure. General rule as to death of the principal or agent: By reason of the very nature of the relationship between the principal and the agent (which is fiduciary argh!), agency is distinguished ipso jure upon the death of the principal. Exceptions: 1.) If the agency is coupled with an interest; 2.) If the act of the agent was executed without the knowledge of the death of the principal and the 3rd person who

6.)

contracted w/ the agent acted in good faith. Why does dissolution of a firm or corp extinguish the agency? Dissolution of a corp extinguishes its juridical existence. What happens when the object or the purpose of the agency is accomplished? As between the parties, the principal and the agent, the fulfillment of the purpose for which the agency was created ipso facto terminates the agency. What happens when the term for which the agency was supposed to continue expires? When an agency is created for a fixed period, the expiration of such period ends the agency, even though the purpose for which the agency was created has not been accomplished. What happens if no time is specified? The agency terminates at the end of a reasonable period of time. Can the period be implied? Yes, from 1.) The terms of the agreement; 2.) Purpose of the agency; and 3.) The circumstances of the parties. What happens if the subject matter of the agency is lost or destroyed? In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the agency terminates the agents authority to deal with reference to it. Exceptions: 1.) If it is possible to substitute other material for that which was destroyed without substantial detriment to either party, or 2.) If the destroyed subject matter was not in fact essential to the contract; and 3.) A partial loss or destruction. Are the modes of extinguishments of agency exclusive? No. Art. 1919 gives only those causes of extinction which are particular to agency. But the list is not exclusive. The general rule actually is, an agency may be extinguished by the modes of extinguishments of obligations in general whenever they are applicable, like loss of the thing and novation (see art. 1231). Does war extinguish agency? During the existence of war, a contract of agency is inoperative if the agent or the principal is an enemy alien. But since it is generally conceded that war

suspends all commercial intercourse between the residents of 2 belligerent states, the general rule is that agency is terminated, as a matter of law, upon the break of war. Does legal impossibility terminate agency? Implied in every contract is the understanding that it shall be capable of being carried out legally at the time called for by the contract. An agency then terminates if a change in the law makes the purpose of the agency unlawful. What happens if the principals authority terminates? A position which flows from a trust relationship whether directly or indirectly, terminates as a matter of law with the destruction of the trust. Consequently, a sub-agents authority terminates with the termination of the principals authority. In case of loss of the subject matter, does the principal incur any liability? It depends. If the loss was brought about by the principal as in the case where the principal sells the subject matter to another party notwithstanding that an agency had been constituted in reference to it, then he may be liable for damages for his wrongful terminating act. But if the subject matter is lost without the fault of the principal, no liability is assumed by him. Will a change of conditions affect the agency? General rule: When there is a basic change in the circumstances surrounding the transaction not contemplated by the parties which would reasonably lead the agent to believe that the principal would not desire him to act, authority of agent is terminated. Exceptions: 1.) If the original circumstances are restored within a reasonable period of time, the agents authority may be revived. 2.) Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably. (But when in doubt, agent could contract principal for instructions if possible). 3.) Where the principal and agent are in close daily contact, the agents authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the

change and does not give him new instructions. Confidential information - It is difficult to determine whether information is confidential or not, because while the relation of principal and agent is confidential, not all knowledge acquired by the agent is of a confidential nature. Some clearly is of so general a nature that equity ought not attempt to restrict its subsequent use. Usually, what a court does is to determine 2 things: 1.) Whether the knowledge or information is indeed confidential, and 2.) Whether its subsequent use ought to be prevented. Principle behind enjoining an agent from using confidential information: There is in the contract of service subsisting between the principal and the agent an implied contract on the part of the agent that he will not, after the service is terminated, use information which he has gained while the service has been subsisting to the detriment of his former employer. Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. Does the agent have a right to renounce or withdraw from the agency at any time? Yes. Even without the consent of the principal. But, in the latter case, he may be subject to liability for breach of contract or for tort. Basis: Constitutional prohibition against involuntary servitude. Obligation of agent if he withdraws from agency without just cause: 1.) Notify principal (even if w/ just cause); and 2.) Indemnify the principal should the latter suffer any damage by reason of such withdrawal. Reason for indemnity: To answer for losses and damages occasioned by the nonfulfillment of his obligation as agent. Is the agent liable for indemnity if the withdrawal was for just cause? No. Agent

cannot be held liable if the agent withdraws for a valid reason as when: 1.) The withdrawal is based on the impossibility of continuing the agency without grave detriment to himself; or 2.) Fortuitous event. What happens when the agent sues the principal? Equivalent to withdrawal of the agent. Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. Obligation of agent after withdrawal: Even when withdrawal is for a valid reason, he must continue to act until the principal has had reasonable opportunity to take the necessary steps like the appointment of a new agent to remedy the situation caused by the withdrawal. This is to prevent damage or prejudice to the principal. C. DEATH; AGENCY COUPLED WITH AN INTEREST

Art. 1919. Agency is extinguished: [WRDEAD] 1.) By its revocation; 2.) By the withdrawal of the agent; 3.) By the death, civil interdiction, insanity or insolvency of the principal or of the agent; 4.) By the dissolution of the firm or corporation which entrusted or accepted the agency; 5.) By the accomplishment of the object or purpose of the agency; 6.) By the expiration of the period for which the agency was constituted. Meaning of Presumption of continuance of agency: When once shown to have existed, an agency relation will be presumed to have continued in the absence of anything to show its termination. Who has the burden of proving the revocation/termination of agency? The burden of proving a revocation or other termination of agency is on the party asserting it. Note: Even if the reason for extinguishing the agency is not true,

the agent cant insist on reinstatement. The agent can only demand damages. Modes of extinguishing an agency, generally: [ASO] 1.) Agreement; 2.) Subsequent acts of the parties which may be either: a.) By the act of both parties or by mutual consent; b.)By the unilateral act of one of them. 3.) By operation of law. Modes of extinguishment, specifically: [WRDEAD] 1.) Withdrawal of the agent; 2.) Revocation; 3.) Death, civil interdiction, insanity or insolvency of the principal or of the agent; 4.) Expiration of the period for which the agency was constituted; 5.) Accomplishment of the object or purpose of the agency; and 6.) Dissolution of the firm/corp which entrusted or accepted the agency; Necessary characteristics of the parties for the continuance of the agency: [PCS] 1.) Present; 2.) Capacitated; 3.) Solvent. Why is presence necessary? Because the general rule in art 1919 is that death of any of the parties extinguishes agency. However in the case where you have several principals and/or several agents, whether the death of one principal or of one agent terminates the agency would depend on the intention of the parties. Generally the death of one of several principals does not revoke the agents authority nor does the death of one of several agents put an end to the agency. The intention of the parties controls. Why is capacity necessary? For instance, in the case of civil interdiction, it deprives the offender during the period of his sentence of the right to manage his property and dispose of such property by any act or any conveyance inter vivos. A person under civil interdiction hence, cannot validly give consent. Same is true for insane people.

Why is solvency necessary? As by an act of insolvency, the principal loses control of the subject matter of the agency, the authority of the agent to act for his principal ceases by operation of law upon an adjudication of the principals insolvency. On the other hand, the insolvency of the agent will ordinarily put an end to the agency, at least if it is in any way connected with the agents business which has caused his failure. General rule as to death of the principal or agent: By reason of the very nature of the relationship between the principal and the agent (which is fiduciary argh!), agency is distinguished ipso jure upon the death of the principal. Exceptions: 1.) If the agency is coupled with an interest; 2.) If the act of the agent was executed without the knowledge of the death of the principal and the 3rd person who contracted w/ the agent acted in good faith. Why does dissolution of a firm or corp extinguish the agency? Dissolution of a corp extinguishes its juridical existence. What happens when the object or the purpose of the agency is accomplished? As between the parties, the principal and the agent, the fulfillment of the purpose for which the agency was created ipso facto terminates the agency. What happens when the term for which the agency was supposed to continue expires? When an agency is created for a fixed period, the expiration of such period ends the agency, even though the purpose for which the agency was created has not been accomplished. What happens if no time is specified? The agency terminates at the end of a reasonable period of time. Can the period be implied? Yes, from 1.) The terms of the agreement; 2.) Purpose of the agency; and 3.) The circumstances of the parties. What happens if the subject matter of the agency is lost or destroyed? In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the

agency terminates the agents authority to deal with reference to it. Exceptions: 1.) If it is possible to substitute other material for that which was destroyed without substantial detriment to either party, or 2.) If the destroyed subject matter was not in fact essential to the contract; and 3.) A partial loss or destruction. Are the modes of extinguishments of agency exclusive? No. Art. 1919 gives only those causes of extinction which are particular to agency. But the list is not exclusive. The general rule actually is, an agency may be extinguished by the modes of extinguishments of obligations in general whenever they are applicable, like loss of the thing and novation (see art. 1231). Does war extinguish agency? During the existence of war, a contract of agency is inoperative if the agent or the principal is an enemy alien. But since it is generally conceded that war suspends all commercial intercourse between the residents of 2 belligerent states, the general rule is that agency is terminated, as a matter of law, upon the break of war. Does legal impossibility terminate agency? Implied in every contract is the understanding that it shall be capable of being carried out legally at the time called for by the contract. An agency then terminates if a change in the law makes the purpose of the agency unlawful. What happens if the principals authority terminates? A position which flows from a trust relationship whether directly or indirectly, terminates as a matter of law with the destruction of the trust. Consequently, a sub-agents authority terminates with the termination of the principals authority. In case of loss of the subject matter, does the principal incur any liability? It depends. If the loss was brought about by the principal as in the case where the principal sells the subject matter to another party notwithstanding that an agency had been constituted in reference to it, then he may be liable for damages for his wrongful terminating act. But if the subject matter is lost without the fault of the principal, no liability is assumed by him.

Will a change of conditions affect the agency? General rule: When there is a basic change in the circumstances surrounding the transaction not contemplated by the parties which would reasonably lead the agent to believe that the principal would not desire him to act, authority of agent is terminated. Exceptions: 1.) If the original circumstances are restored within a reasonable period of time, the agents authority may be revived. 2.) Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably. (But when in doubt, agent could contract principal for instructions if possible). 3.) Where the principal and agent are in close daily contact, the agents authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions. Confidential information - It is difficult to determine whether information is confidential or not, because while the relation of principal and agent is confidential, not all knowledge acquired by the agent is of a confidential nature. Some clearly is of so general a nature that equity ought not attempt to restrict its subsequent use. Usually, what a court does is to determine 2 things: 1.) Whether the knowledge or information is indeed confidential, and 2.) Whether its subsequent use ought to be prevented. Principle behind enjoining an agent from using confidential information: There is in the contract of service subsisting between the principal and the agent an implied contract on the part of the agent that he will not, after the service is terminated, use information which he has gained while the service has been subsisting to the detriment of his former employer. Art. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the

interest of a third person who has accepted the stipulation in his favor. If the agent dies, his heirs should tell the principal. However, if the principal dies, the principals heirs have no obligation to tell the agent. General rule: Agency is terminated instantly by the death of the principal. Rationale: Agency, being based on representation, there is no one to e represented where the principal is already dead. Exceptions: 1.) If the agency has been constituted in the common interest of the principal and the agent; and 2.) If the agency has been constituted in the interest of a 3rd person who has accepted the stipulation in his favor. Art. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. What does this article provide? It provides that the death of the principal or any other like cause, extinguishes the agency. But in the same way that revocation of the agency does not prejudice 3rd persons who have dealt with the agent in good faith without notice of revocation, such 3rd persons are also protected where it is not shown that the agent had knowledge of the termination of the agency because of the death of the principal or any other like cause which extinguishes the agency. Does this article only require the agent to be in good faith? No, both agent and 3rd person must be. Art. 1932. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. In case of death of agent, what must the heirs do? 1.) Notify the principal to enable the latter reasonable opportunity to take such steps as may be necessary to meet the situation; and 2.) Adopt such measures as the circumstances may demand in the interest of the principal. Can the heirs continue the agency? General rule: No, since an agency calls for personal services on the part of the agent.

Exceptions: 1.) Agency by operation of law, or a presumed or tacit agency; 2.) Agency is coupled with an interest in the subject matter of the agency.

D. DISSOLUTION OF THE FIRM/CORPORATION E. ACCOMPLISHMENT OF THE OBJECT/PURPOSE F. EXPIRATION OF THE PERIOD G. CIVIL INTERDICTION, INSANITITY, INSOLVENCY