agency midterms reviewer

8/10/2019 Agency Midterms Reviewer

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AGENCY midterms (from the given outline)

I. Agency as a Concept

A.

Definition

Art. 1868By the contract of agency, a

person binds himself to render someservice or to do something in

representation or on behalf of another,

with the consent or authority of the latter.

Art. 1869Agency may be express, or

implied from the acts of the principal, from

his silence or lack of action, or his failure to

repudiate the agency, knowing that another

person is acting on his behalf without

authority. Agency may be oral, unless the

law requires a specific form.

Art. 1870Acceptance by the agent may

also be expressed, or implied from his acts

which carry out the agency, or from his

silence or inaction according to the

circumstances.

---

Characteristics:

a. Consensual

b.

Principal

c.

Nominate

d. Unilateral/Bilateral

e.

Preparatory

Nature:

>manifest consent

>agent becomes principal

>presence/absence of

contract/consideration

Basis:

>personal contract of representation

>acts of agent = acts of principal

Purpose:

>Extend personality of principal through

agent

Parties to a contract:

1.

Principal

2.

Agent

Delegation of Acts:

General Rule:What a man may do in

person, he may do thru another.

Exceptions:

1.

Personal acts

a.

Right to vote

b.

Making of a will

c.

Statements made under oath

d.

Right to attend board meetings

e.

Re-delegation of agency

2.

Criminal acts/acts not allowed by law

a.

Alien cannot purchase land

through Filipino-agent

b.

Persons prohibited to acquire

property theyre in charge of

cannot acquire it through

mediation of another

c.

When one participates in a

commission of a crime, he

cannot escape punishment

using agency as a defense

How to determine existence of agency:

a.

Designation by parties

b.

Fact of existence

c.

Intention to create relationship


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Nature of relationship between principal

and agent

a.

Relation fiduciary in character

b.

Agent estopped from asserting interest

adverse to his principal

c.

Agent must not act as an adverse party

d.

Agent must not act for an adverse party

e.

Agent must not use or disclose secret

information

f.

Agent must give notice of material facts

General Rule: Knowledge of agent is

imputed to the principal.

Exceptions:

1.

Agents interests are adverse to

principal

2.

Agents duty is not to disclose

information

3.

Person claiming the benefit of the rule

colludes with agent to defraud principal

Agent subject to principals control:

>subject matter of agencycontrol

>act of agentGeneral Rule: Principal may

direct the acts of his agent even though the

principal has promised not to do so.

Characteristic which distinguishes agency

relationship from similar contracts or

relations:

*Agents power to bring about business

relations between his principal and third

person.

LOAN AGENCY

Money advanced to

another is expressly

regarded as loan

Financing of

operations to be

carried by another

for the mutual

advantage of both,

without any

obligation of such

other to return

money advanced

Borrower is given

money for purposes

of his own and must

return it

Agent may be given

funds by principal to

advance the latters

business

After checks are

collected, the

creditor-debtor

relationship is

created between

depositor and bank

Checks deposited

with a collecting

bank, agency

One deposits money

in bank with

instructions to apply

it in satisfaction or

debt of another

person (creditor-

debtor relationship

between bank and

depositor)

Agency between

bank and creditor

AGENCY LEASE (of service)

Basis is

representation

Employment

Agent exercisesdiscretionary powers

Performsministerial

functions

3 persons involved 2 persons (lessor,

lessee)

Relates to

commercial or

Mere manual or

mechanical


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business transactions execution

Note: Agent is employed to establish contractual relations

between his principal and third persons, servant is not.

AGENCY INDEPENDENT

CONTRACT

Agent is subject to

control and

direction of

principal

Not subject to control

of employer except as

to result of work

Note: Employer is not liable for torts or

injury inflicted by the independent

contractor upon third persons or by

employees of contractor.

AGENCY PARTNERSHIP

Re: control by principal

Applicable Not applicable

Re: Liability of agent

Generally not liable Liable

Re: sharing of profits

Agreed

compensation

Profits belong to all

parties in agreed

proportions

AGENCY NEGOTIORUM

GESTIO

Representation is

expressly conferred

Without authority

and knowledge of

owner

Contract Quasi-contract

AGENCY BROKERAGE

Engaged for

purchase or sale ofproperties and

maintains

relationship with

principal, purchaser,

and property

No relation with

thing he buys/sells

Receives

commission upon

successful

conclusion of

transaction

Earns pay by merely

bringing the buyer

and seller together

AGENCY SALE

Agent receives goods

as the goods of the

principal

Buyer receives

goods as owner

Agent delivers

proceeds of sale

Buyer pays price

Agent can return theobject in case he is

unable to sell it

Buyer as a generalrule cannot return

object sold

Agent is bound to act

according to the

instructions of a

principal

Buyer can deal

with the thing as

he pleases

Saletransfer of title from one to another

Agencyappointment of one to act for

another

AGENCY BAILMENT

Bailee has no power

to bind bailor in

personal liability


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Owes neither loyalty

nor obedience to

bailor

AGENCY GUARDIANSHIP

Derives authority

from principal

Does not derive his

authority from ward

Relationship is

founded upon

consent

Not founded upon

consent

Subject to control

of principal

Not subject to control

by ward

Agent is appointee

of the principal, at

any time can

abrogate agent

Legal guardian is

substituted by law

AGENCY TRUST

Represents and

acts for principal

Title and control of

property passes to

the trustee who acts

on his own name

Agency may be

revoked at any

time

Trust may be

terminated only by

the fulfillment of itspurpose

Constant

supervision and

control of principal

Discretion of the

trustee and guidance

by the settler

AGENCY JUDICIAL

ADMINISTRATION

Appointed by court

Representative of court,

heirs, and creditors of

the estate

Required to file a bond

B.

Elements

1.

Consentcan be express or implied

2.

Objectexecution of juridical act in

relation to third persons

3.

Agent acts as a representative and not

for himself

4.

Agent acts within the scope of his

authority

C.

Nature of Agency

1. Scope

Art. 1876An agency is either general or

special. The former comprises all the

business of the principal. The latter, one or

more specific transactions.

Classes and kinds of agents:

f.

Universal agentone employed to do

all acts that the principal may

personally do, and which he can

lawfully delegate to another the power

of doing.

g.

General agentone employed to

transact all the business of his principal,

or all business of a particular kind or in

a particular place; to do all acts

connected with a particular trade,

business, or employment.

h.

Special/particular agentone

authorized to act in one or more

specific transactions, or to do one or

more specific acts, or to act upon a

particular occasion.

Special types of agents:

a.

Attorney at lawrepresent clients in

legal proceedings

b.

Auctioneersell property for others to

the highest bidder at a public sale

c.

Brokeract as intermediary between

two other parties


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d.

Factorreceive and sell goods for a

commission, being entrusted with the

possession of the goods involved

e.

Cashier in bankrepresent a banking

institution in its financial transactions

f.

Attorney-in-factone given authority

to do a particular act not of a legal

character

General Agent Special Agent

Scope of authority

All acts connected

with the business or

employment in which

a principal is engaged

Only one or more

specific acts in

pursuance of

particular

instructions or with

restrictionsnecessarily implied

from the act to be

done

Continuous nature of service authorized

Conduct a series of

transactions over

time involving a

continuity of service

Conduct a single

transaction or

series of

transactions not

involving continuity

of service and

covering a

relatively limited

period of time

Extent to which agent may bind the

principal

Can bind principal by

an act within the

scope of his authority

although it may becontrary to his special

instructions

Cannot bind a

principal in a

manner beyond or

outside the specificacts which he is

authorized to

perform on behalf

of the principal

Knowledge/disclosure of limitations of

power

Continuing and

unrestricted by

limitations other than

those which confine

the authority within

the bounds of what is

usual, proper, and

necessary under like

circumstances. If

there are limitations,

principal must

disclose them.

Temporary and

naturally suggests

limitations of

power of which

third persons must

inform themselves

Note: The expertise of the agent or the

amount of discretion given to him is not

relevant in making a distinction between

general and special agents.

Termination of authority

Apparent authority

created in a general

agent does not

terminate by mere

revocation of his

authority without

notice to the third

party

Duty imposed upon

the third party to

inquire makes

termination of the

relationship

between the

principal and agent

effective as to such

third party unless

the agency has

been entrusted forthe purpose of

contracting with

such third party

Construction of instructions of principal

Statement by

principal with respect

to agents authority

would ordinarily be

regarded as advisoryin nature only

Statement by

principal with

respect to agents

authority would be

regarded as wordslimiting the

authority of the

agent

General rule: Authority of a special agent

must be strictly pursued. Persons dealing

with such an agent must at their peril

inquire into the nature and extent of his


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authority.

2.

Authority

Art. 1877An agency couched in

general terms comprises only acts of

administration, even if the principal

should state that he withholds no

power or that the agent may executesuch acts as he may consider

appropriate, or even though the agency

should authorize a general and

unlimited management.

Art. 1878Special powers of attorney

are necessary in the following cases:

1.

To make such payments

as are not usually

considered as acts ofadministration

2.

To effect novations

which put an end to

obligations already in

existence at the time

the agency was

constituted

3.

To compromise, to

submit questions to

arbitration, to renounce

the right to appeal from

a judgment, to waive

objections to the venue

of an action or to

abandon a prescription

already acquired

4.

To waive any obligation

gratuitously

5.

To enter into any

contract by which the

ownership of an

immovable is

transmitted or acquired

either gratuitously orfor a valuable

consideration

6.

To make gifts, except

customary ones for

charity or those made

to employees in the

business managed by

the agent

7.

To loan or borrow

money, unless the

latter act be urgent and

indispensable for the

preservation of the

things which are under

administration

8.

To lease any real

property to another

person for more than

one year

9.

To bind the principal to

render some service

without compensation

10.

To bind the principal in

a contract of

partnership

11.

To obligate the

principal as a guarantor

or surety

12.

To create or convey rea

rights over immovable

property

13.

To accept or repudiate

an inheritance


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14.

To ratify or recognize

obligations contracted

before the agency

15.

Any other act of strict

dominion

When special powers are necessary:

*Acts of strict dominion

*Powers of attorney are generally

construed strictly and courts will not

infer or presume broad powers from

deeds which do not sufficiently include

property or subject under which the

agent is to deal. Exception: Rule should

not be applied to the extent of

destroying the very purpose of the

power.

*Art. 1878 refers to the nature of the

authorization, not its form.

*A power of attorney is valid although

no notary public intervened in its

execution.

*The special power of attorney can be

included in a general power of attorney

when it specifies therein the act or

transaction for which the special power

is required.

To make payment:

*Payment is the delivery of money or

the performance in any other manner

of an obligation.

*It is an act of ownership because it

involves the conveyance of ownership

of money or property.

*If payment is made in the ordinarycourse of management, it is considered

a mere act of administration.

*A special power to make payment is

implied from the authority to buy a

designated piece of land at a certain

price.

To effect novation:

*Novation is the extinction of an

obligation through the creation of a

new one which substitutes the old one.

*Obligations must already be in

existence at the time the agency was

constituted.

To compromise etc.:

*A compromise must be strictly

construed.

*These are acts of ownership since they

involve the possibility of disposing of

the thing or right subject to

compromise or arbitration.

*Compromise is merely unenforceable

if without a special power of attorney.

To waive an obligation gratuitously:

*Agent cannot waive a right belonging

to the principal without valuable

consideration or even for a nominal

consideration.

*Waiver may not be inferred when the

terms thereof do not explicitly andclearly prove an intent to abandon the

right.

To convey or acquire immovable:

*Applies whether gratuitous or

onerous.

*Refers only to immovable.

*Refers only to sales made by an agent

for a principal and not to sales made by

the owner personally to another,

whether that other be acting personally

or through a representative.

To make gifts:

*Donations.


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*Making of customary gifts for charity

or those made to employees in the

business managed by the agent are

considered acts of administration only.

To loan or borrow money:

*If authorized to borrow money, it is

not deemed implied that he can also

use the money as he pleases.

*Authority to borrow money is rarely

inferred. It can only be inferred if such

borrowing is usually incident to the

performance of acts which the agent is

authorized to perform and in cases

which the agent cannot contact the

principal and it is indispensable to the

continuance of the business or to

prevent a very considerable loss.

*Refers only to money and not to other

fungible things.

To lease realty for more than one year:

*Unrecorded lease of real estate is not

binding upon third persons.

*Less than one year of lease is mere act

of administration provided that the

lease is not registered.

*Requirement of special power of

attorney extends to renewal or

extension of lease to another.

*Agreement for leasing of real property

for more than one year is

unenforceable unless made in writing.

*Even if agent is authorized, lease must

still be in writing because it would still

be unenforceable to the principal if not

made in writing.

*Does not refer to lease of real

property of another person and to lease

of personalty.

To bind the principal to render service

gratuitously:

*If the service is for compensation, the

power may be implied.

To bind the principal in a contract of

partnership:

*By the contract of partnership, thepartners bind themselves to contribute

money, property, or industry to a

common fund with the intention of

dividing the profits among themselves.

*It creates obligations in which the

fulfillment of those require an act of

strict ownership.

To obligate a principal as guarantor or

surety:*By the contract of guaranty, the

guarantor binds himself to fulfill the

obligation of the principal debtor in

case the latter should fail to do so. If

the person binds himself solidarily, he is

a surety and the contract is called a

suretyship.

*Contract of guaranty or surety cannot

be inferred from the use of vague or

general words.

*The power to create a contract of

suretyship cannot be inferred; it must

be expressed.

*Contract of guaranty is unenforceable

unless it is made in writing.

To create or convey real rights over

immovable property:

*Mortgage, usufruct, etc.

To accept or repudiate an inheritance:

*Act of strict dominion

To ratify obligations contracted before

the agency:


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*He cannot ratify or recognize

obligations contracted before the

agency without special power from

principal.

Any other act of strict dominion:

*Sale or purchase of personal property

II.

How Agency is Established

A. Oral or Written

Art. 1869Agency may be express, or

implied from the acts of the principal, from

his silence or lack of action, or his failure to

repudiate the agency, knowing that another

person is acting on his behalf without

authority.

Art. 1874When a sale of a piece of land

or any interest therein is through an agent,

the authority of the latter shall be in

writing; otherwise, the sale shall be void.

Kinds of Agency

As to manner of creation

Express Implied

As to character

Gratuitous Onerous

As to extent of business covered

General Special

As to authority conferred

General terms Specific terms

As to nature and effects

Ostensible/representati Simple/commissi

ve on

Form of agency:

>created by contract which may be oral,

written, or implied.

1. In general no formal requirements inappointment of an agent.

2. May be implied from words and conduct

of the parties and circumstances of the

particular case (cannot be inferred from

mere family ties)

Appointment of agency:

>not essential that he should be appointed

directly by principal

Presumption of agency:

General Rule: Agency is not presumed and

must exist as a fact.

Exceptions:

a.

Agency arises from operation of law

b.

To prevent unjust enrichment

Sale of land through an agent:

>Sale of a piece of land (not any other real

estate) or any interest thereon (usufruct,

mortgage) is void unless the authority of

agent to sell is in writing. It should be

considered as voidable, however.

>It may be argued that an agency topurchase need not be in writing (Shans

thoughts: however, a sale and purchase is

one and the same!)

>Refers only to sales made by an agent for a

principal and not to sales made by the

owner personally through another.

>Real estate broker is not covered by this.


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>Letter containing specific authority to sell

is held sufficient. Except when there is

reasonable doubt.

>Sale must be expressly mentioned

>Power of attorney must be plain in its

terms

>Where co-owners affixed their signatureson the contract to sell, they were selling the

same in their own right

B.

Express and Implied Agency; Agency by

Estoppel

c. Implied from the acts of the principal

d.

Implied from acts of the agent

Art. 1870Acceptance by the agent

may also be expressed, or implied fromhis acts which carry out the agency, or

from his silence or inaction according to

the circumstances.

Art. 1871Between persons who are

present, the acceptance of the agency

may also be implied if the principal

delivers his power of attorney to the

agent and the latter receives it without

any objection.

Art. 1872Between persons who are

absent, the acceptance of the agency

cannot be implied from the silence of

the agent, except:

(1) When the principal transmits his

power of attorney to the agent, who

receives it without any objection

(2) When the principal entrusts to him

by letter or telegram a power of

attorney with respect to the business in

which he is habitually engaged as an

agent, and he did not reply to the letter

or telegram

Form of acceptance by agent:

>Express or implied

Definition and purpose of a power of

attorney:

>Power of attorney is an instrument in

writing by which one person, as principal,

appoints another as his agent and confersupon him the authority to perform certain

specified acts or kinds of acts on behalf of

the principal.

>Primary purpose is to evidence the

authority of the agent to third parties

within whom the agent deals.

Construction of powers of attorney:

General Rule:Power of attorney must be

strictly construed and strictly pursued.

Exception:General rule must not be applied

to the extent of destroying the very

purpose of the power.

Acceptance between persons absent (Art.

1872):

If both principal and agent are absent,

acceptance of the agency by the agent is

NOT implied from his silence or inaction.

Except in the two cases mentioned in the

article.

Art. 1872 Art. 1871

Principal transmits

the power of

attorney to the

agent

Principal personally

deliversthe power of

attorney to the

agent

e.

Estoppel

Art. 1873If 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


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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.

2 Ways of Giving Notice of Agency

a. By special information (letter)

person appointed as agent is

considered such with respect to the

person to whom it was given

b. By public advertisementagent is

considered as such with regard to any

person

*Agency is deemed to exist whether

there is actually an agency or not.

*Power of attorney must be revoked in

the same manner it was given.

*Revocation made in any manner is

effective where the person dealing with

agent has actual knowledge thereof;

otherwise bad faith and fraud would be

transmitted.

Estoppel to deny agency

Estoppel of AGENTone professing to

act as agent for another may be

estopped to deny his agency both as

against his asserted principal and third

persons

Estoppel of PRINCIPAL

As to

AGENT:

As to SUB-

AGENT:

As to

THIRD

PERSONS:

If he

knows that

an agent is

acting on

behalf of

principal

and fails to

repudiate

his acts or

accepts

benefits

from it, he

is

estopped

to deny

agency

He will be

estopped to

deny agency

if he has

knowledge

of the fact

of the

transaction

and the

terms of

agreement

between

the agent

and sub-

agent

If principal

knows that

the other is

acting as

his agent

or

permitted

him to act

as his

agent,

injury to

third

persons is

imputed to

principal

and

principal

cannot

denyagency

Estoppel of THIRD PERSONSa third

person having dealt with one as an

agent may be estopped to deny the

agency as against the principal, agent,

or third persons in interest. Exception:

If he has withdrawn from the contract

made with an unauthorized agent

before receiving any benefits.

Estoppel of the GOVERNMENT

General Rule: Government is neither

estopped by the mistake or error on the

part of its agents. Exception: It may be

estopped through affirmative acts of its

officers acting within the scope of their

authority.

AGENCY BY

ESTOPPEL

IMPLIED

AGENCY

Existence of actual agency

No agency at all, but

the one assuming to

act as agent has

apparent or

ostensible, although

There is an

actual agency,

as much as if it

were created by


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not real, authority to

represent another

-If estoppel is caused

by principal, he is

liable to any third

person who relied on

the

misrepresentation.

-If estoppel is caused

by agent, only agent

is liable.

express words.

-Principal alone

is liable.

Reliance by third persons

Can be invoked only

by a third person

who in good faith

relied on the conduct

of the principal in

holding agent out as

being authorized.

-Principal is liable

Reliance is not

necessary since

the agent is a

real agent.

-Principal is

liable

Nature of authority

An apparent agent is

no agent at all, and

as against the

principal, has none of

the rights of an agent

except where the

principals conduct or

representations are

such that the agent

believed that the

principal intended

him to act as agent in

the matter

An agent by

implied

appointment is

a real agent

with all the

rights and

liabilities; he

has actual

authority to act

on behalf of the

principal

Should be restricted

to cases in which

authority is not real

but apparent

An actual

agency in which

it is a fact to be

proved by

deductions or

inferences from

other facts

Note: Agency by estoppel is well

recognized in the law. The agency is

allowed upon the theory that, when

one of two innocent persons must

suffer loss, the loss should fall upon him

whose conduct brought about the

situation.

III. Agents Rights

A.

Right to Compensation

Art. 1875Agency is presumed to be for a

compensation, unless there is proof to the

contrary.

Art. 1909The agent is responsible not

only for fraud, but also for negligence,

which shall be judged with more or less

rigor by the courts, according to whetherthe agency was or was not for a

compensation.

Presumption:There is compensation.

Necessity of compensation:

>There can be agency even without

compensation.

>Even though it is gratuitous, agent is still

bound to act like how an agent with

compensation is to act.

Liability of principal to pay compensation:

>Amount must be paid based on whatever

compensation is agreed upon or if theres

nothing agreed upon, a reasonable value

for the services.

>Liability of the principal to pay commission

presupposes that the agent has complied

with his obligation as such to the principal.

>The agent must prove that he was the

guiding cause for the transaction or the

procuring cause thereof, depending upon

the facts of the particular case.

>>Procuring causerefers to a cause

originating a series of events which, without

break in their continuity, result in the


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Art. 1892The agent may appoint a

substitute if the principal has not prohibited

him from doing so; but he shall be

responsible for the acts of the substitute:

(1) When he was not given the power to

appoint one

(2) When he was given such power, but

without designating the person, and the

person appointed was notoriously

incompetent or insolvent.

All acts of the substituted appointed against

the prohibition of the principal shall be

void.

Art. 1893In the cases mentioned in Nos. 1

and 2 of the preceding article, the principal

may furthermore bring an action against

the substitute with respect to the

obligations which the latter has contracted

under the substitution.

*A sub-agent is a person employed or

appointed by an agent as his agent, to assist

him in the performance of an act for the

principal which the agent has been

empowered to perform.

*There can be an implied sub-agency.

Power of agent to appoint sub-agent:

>Unless prohibited by principal, agent can

appoint sub-agent.

>An agent may not delegate to a sub-agent

works that require special knowledge, skill,

or competence unless he has been

authorized to do so by the principal.

Relation among the principal, agent, and

sub-agent:

*Sub-agent appointed by agent for his sole

account

>Sub-agent is a stranger to the principal.

>Principal will not be liable to third parties

for the sub-agents acts.

>Agent is liable to principal and third parties

for the sub-agents wrongful acts.

*Sub-agent appointed by agent with

authority from principal

>Any act done by the sub-agent is deemed

an act of the principal.

>Neither agent nor sub-agent can be held

liable as long as they act within the scope of

their authority.

*Effect of death of principal/agent

>If sub-agent derives authority from

principal: Death of agent does not affect

sub-agents authority.

>If sub-agent derives authority on the sole

account of agent: Death of agent

terminates his authority.

Effects of substitution:

*If substitution is prohibited:

>Agent exceeds limits of his authority.

>All acts of substitute is void.

*If principal has not prohibited agent from

appointing substitute:

>Principal is liable to third persons for acts

of the substitute even though he may not

know the substitute.

*If substitution authorized:

>If the substitute is the person designated

by the principal, the consequence is the

absolute exemption of the agent.

*Substitution not authorized, but not

prohibited:


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>Law recognizes the validity of substitution

if the same is beneficial to the principal.

>>Because the agency has thus been

executed in fulfillment of its object.

>If substitution has occasioned damage to

the principal, the agent shall be primarily

responsible for the acts of the substitute as

if he himself executed them.

>>Principal also has a right of action against

the substitute.

D.

Right to Retain in Pledge Objects of the

Agency

Art. 1912The principal must advance to

the agent, should the latter so request, the

sums necessary for the execution of the

agency. Should the agent have advancedthem, 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.

Art. 1913The principal must also

indemnify the agent for all the damages

which the executive of the agency may havecaused the latter, without fault or

negligence on his part.

Art. 1914The agent may retain in pledge

the things which are the object of the

agency until the principal effects the

reimbursement and pays the indemnity set

forth in the two preceding articles.

Obligation to advance funds:

>Principal must advance funds to the agent

>If agent has advanced them, principal must

reimburse him

>If principal fails to comply with his

obligations, agent will not be liable for

damage which, through his non-

performance, the principal may suffer

Obligation to reimburse agent for funds

advanced by him:

>Demand is not necessary in order that

delay on the part of the principal to exist.

*Obligation founded on implied promise to

repay

>General Rule: Principal reimburses agent

who acted in good faith

*Obligation not affected even if

undertaking not successful

>Even if the business or undertaking was

not successful, principal must still

reimburse provided that agent is free from

all fault.

Obligation to indemnify agent for

damages:

>Rule is based on equity

*Where damages caused by the execution

of agency:

>Agent has right to assume that principal

wont order anything that would make him

liable for damages to third persons.

>If in the performance of his agency, he

incurs liability, the principal being the one

who was the cause of everything should be

liable and not the agent.

>If theres an unlawful order by the

principal in which the agent didnt know

that its unlawful, then damages should be

paid to the agent.


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*Where damages caused by wrongful acts

of third persons:

>No promise of principal to indemnify the

agent for acts done by third persons in

which the principal is in no way responsible.

*Where agent acted upon his own account:

>No obligation to indemnify because noagency exists when the agent acted on his

own and for his own.

*Agent has a right to retain in pledge the

object of agency.

Requisites:

a. Agent must have possession first.

b. If principal fails to reimburse or

indemnify agent.

Nature of agents right of lien:

>Right is limited to subject matter of agency

only. No right to retain the principals goods

for claims not related to the agency.

>Agent must have possession over the

subject matter in which the lien is claimed.

>If no ratification of the sub-agents acts by

principal, this right is only available to

agent.

IV. Agents Obligations

A. Obligation to act within the scope of his

authority

Art. 1881The agent must act within the

scope of his authority. He may do such acts

as may be conducive to the

accomplishment of the purpose of the

agency.

Art. 1882The limits of the agents

authority shall not be considered exceeded

should it have been performed in a manner

more advantageous to the principal than

that specified by him.

*Authority is the power of the agent to

affect the legal relations of the principal by

acts done in accordance with the principals

manifestation of consent to him.

AUTHORITY POWER

Source/cause Effect

Limits are defined by

purpose

-not a violation of his

duty to principal

Law

-it is within his

power if he has the

legal ability to bind

the principal to a

third person

although the act

constitutes a

violation of his dutyto the principal

Kinds of authority:

a. Actual

b.

Express

c.

Implied

d.

Apparent or ostensible

e.

General

f. Special

g.

Authority by necessity or law

ACTUAL APPARENT

No express

authority

No agency; no

authority at all

Agent has a real

right

-principal is liable

as if in a regular

agency

relationship

-agent has same

rights

Apparent agentonly

by conduct or

silence/inaction

-does not enjoy rights

as regular agent

Does not require Third party in good


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reliance by third

party in good faith

faith can invoke

existence

When principal bound by act of agent:

*Requisites:

a. Agent must act within the scope of his

authority

b. Agent must act in behalf of his principal

>Principal is bound by either actual or

apparent authority of agent.

>There are times when a person who is not

an agent makes a contract on behalf of

another or he is an agent but he exceeded

his powers. If the principal ratifies the

agents actions, an agency relationship is

created.

A person is not bound by an act of another:

1.

The agent acts without or beyond the

scope of his authority in the principals

name

2.

The agent acts within the scope of his

authority but in his own name, except

when the transaction involves things

belonging to the principal

General Rule: Unauthorized acts areunenforceable.

Exceptions:

1.

When the principal ratifies the

transaction before it is revoked by the

other contracting party.

2.

When principal is in estoppel to deny

agents authority.

3.

When acts in excess of authority is

more advantageous to the principal.

Liability of principal/agent for acts of agent

beyond his authority/power:

*Principal

General Rule: Principal is not liable.

Exceptions:

1.

Where his acts have contribute to

deceive a third person in good faith

2.

Where the limitations upon the power

created by him could not have been

known by the third person

3.

Where the principal has placed in the

hands of the agent instruments signed

by him in blank

4.

Where the principal has ratified acts of

agent

*Agent

General Rule: If no ratification by principal,

agent is liable to either principal or third

party.

>If principal is liable to third party on

ground of apparent authority:

>>Agent is liable to principal

>If principal is not liable to third person

because no apparent authority is present:

>>Agent is liable to third party

>If agent personally assumes responsibility

for a particular transaction:

>>If the principal defaults, he is also liable

as a co-principal

*Action must be brought by and against

principal.


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B.

Obligations to third persons

Art. 1900So far as third persons are

concerned, an act is deemed to have beenperformed within the scope of the agents

authority, if such act is within the terms of

the power of attorney, as written, even if

the agent has in fact exceeded the limits of

his authority according to an understanding

between the principal and the agent.

*Scope of agents authority includes:

-actual authorization conferred upon the

agent by principal

-authorization which has apparently or

impliedly been delegated to him

If authority is not in writing:

>Third person must inquire and he must

know the nature and extent of authority of

the agent.

>General Rule: Third person must act with

ordinary prudence and reasonable diligence

to ascertain whether the agent is acting anddealing with him within the scope of his

powers.

>Mere opinion of an agent as to the extent

of his powers will not bind the principal

who may act on the presumption that third

persons dealing with his agent will not be

negligent to ascertain the extent of his

authority as well as the existence of agency.

Fundamental principles (to know whether

an assumed authority exists):

1.

Law indulges no bare presumptions that

an agency exists; it must be proved and

presumed from the facts

2.

Agent cannot establish his own

authority, either by his representation

or by assuming to exercise it

3.

Authority cannot be established by

mere rumor or general reputation

4.

Even a general authority is not an

unlimited one

5.

Every authority must find its ultimate

source in some act or omission of the

principal. An assumption of authority to

act as agent for another of itself

challenges inquiry.

If authority is in writing:

>Third person is not required to inquire

further than the terms of the written power

of attorney.

Methods of broadening and restricting

agents authority:

1.

By implication

2.

By usage or custom

3.

By necessity

4.

By doctrines of:

a.

Apparent authority

b.

Liability of estoppel

c.

Ratification

5.

By the rule of ejusdem generis

Responsibility of principal where agent

acted with improper motives:


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SAPP

General Rule: Motive is immaterial

Exceptions:

1.

When third person knew that the agent

was acting for his private benefit

(principal is not liable to third person)

2.

When the owner is seeking recovery of

personal property of which he has beenunlawfully deprived (principal is entitled

to recover the thing)

Principals responsibility for agents

misrepresentation

>If within the scope of agents authority

principal is liable

>If beyond the scope of agents authority

principal is not liable

>If agent acted for his own benefit and

within the scope of agencyprincipal is

liable

C.

Obligation to obey instructions

Art. 1887In the execution of the agency,

the agent shall act in accordance with the

instructions of the principal. In default

thereof, he shall do all that a good father of

a family would do, as required by the

nature of the business.

Art. 1899If 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.

*Instructions are private directions which

the principal may give the agent in regard

to the manner of performing his duties as

such agent but of which a third party isignorant.

AUTHORITY INSTRUCTIONS

Sum total of

powers permitted

to agent; may be

limited in scope

and such

limitations are part

of the authority

Direct the manner of

transacting the

authorized business

and contemplates

only a private rule of

guidance to agent

and are independent

and distinct

Relates to thesubject with which

the agent is

empowered to act

Manner or mode ofhis action with

respect to matters

which in their

substance are within

the scope of

permitted action

Limitations of

authority are

operative as

against those whohave or are

charged with

knowledge of them

Instructions limiting

the agents authority

are without

significance as againstthose dealing with

the agent with

neither knowledge

nor notice of them

To be made known

to the third person

dealing with the

agent

Not expected to be

made known to those

with whom the

person deals

Effect of violation of principals

instructions:

>If the act done by an agent is within his

authority, principal is liable to third party

and it doesnt matter if instructions were

followed or not


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SAPP

>Agent is liable to principal if agent did not

act within his authority

Obligation to act in accordance with the

principals instructions:

>Agent has duty to obey reasonable and

lawful instructions

>If the agent exceeds, violates, or fails toact upon such instructions, he is liable to

the principal for any damage or loss

resulting therefrom

>In the absence of specific instructions of

principal, agent has a duty to do all that a

good father of a family would do to take

care of the business as if it were his own

>If agent followed instructions and acted

within the scope of his powers, he cannotbe held responsible if there was failure to

accomplish the object of the agency

>Agent may disobey instructions where it

calls for the performance of illegal acts or

where he is privileged to do so to protect

his security interest in the subject matter of

the agency

Where departure from principals

instructions justified:

>When there is a sudden emergency

>When instructions are ambiguous

>When there is an insubstantial departure

from the principals instructions (did not

affect results)

*If principal appoints an ignorant agent,

principal is at fault and equity demands that

he should be bound by the acts of the

agent.

D.

Obligation to carry out the agency

Art. 1884The agent is bound by his

acceptance to carry out the agency and is

liable for the damages which, through his

non-performance, the principal may suffer.

He must also finish the business already

begun on the death of the principal, should

delay entail any danger.

Obligations, in general, of agent to

principal

*Agent must be in good faith and must be

loyal to principal

>General Rule: Agent performed his duty in

good faith and the principal may rely upon

his agents faithfulness. Exception: Where

there is no relation of trust between

parties.

*Agent must obey principals instructions

>If he did not obey principal, he becomesliable for any loss even if he can show that

he acted in good faith.

>An agent is not liable if he violates the

principals instructions for a good reason.

*Agent must exercise reasonable care

Specific obligations of agent to principal:

1.

Carry out agency

2.

Answer for damages which through hisperformance the principal may suffer

3.

Finish the business already begun on

the death of the principal should delay

entail any danger

4.

Advance necessary funds if theres a

stipulation to do so

5.

Observe diligence of a good father of a

family with regards to things forwarded

to him in case he declines agency, until

an agent is appointed

6.

Act in accordance with the instructions

of the principal and if no instructions

were given, to do all that a good father

of a family will do


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SAPP

7.

Not to carry out agency if its execution

would result in loss or damage to

principal

8.

To answer for damages if theres a

conflict of interest and he preferred his

own

9.

Not to loan to himself if he has been

authorized to lend money at interest

10.

To render an account of transactions

and deliver to principal whatever he

may have received during the agency

11.

To distinguish goods in case he holds

similar goods but with different owners

12.

To be responsible for acts of substitute

appointed by him

13.

To pay interest on funds he has applied

to his own use

14.

To inform principal, where an

authorized sale of credit has been

made, of such sale

15.

To bear the risk of collection, should he

receive also on a sale, a guarantee

commission

16.

To indemnify the principal for damages

for his failure to collect the credits of

the principal at the time they became

due

17.

To be responsible for fraud or

negligence

E.

Obligation to advance funds

Art. 1886Should there be a stipulation

that the agent shall advance the necessary

funds, he shall be bound to do so except

when the principal is insolvent.

General Rule: Principal must advance to

agent the sums necessary for execution of

agency.

Exception: When theres a stipulation that

agent shall advance necessary funds.

Exception to exception: When principal is

insolvent.

F.

Obligation to prioritize principals interests

Art. 1889The agent shall be liable for

damages if, there being a conflict between

his interests and those of the principal, he

should prefer his own.

h. Principals property

Art. 1491 (2)Agents, the property

whose administration or sale may have

been entrusted to them, unless the

consent of the principal have been

given.

i.

Double sale

Art. 1916When 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.

Art. 1917In 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.

Art. 1544If the same thing should

have been sold to different vendees,

the ownership shall be transferred to

the person who may have first taken

possession thereof in good faith, if it

should be movable property. Should it

be immovable property, the ownership

shall belong to the person acquiring it

who in good faith first recorded it in the

Registry of Property. Should there be no

inscription, the ownership shall pertain

to the person who in good faith was

first in the possession; and, in the

absence thereof, to the person who


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SAPP

presents the oldest title, provided there

is good faith.

G.

Obligation to account and to deliver

proceeds

Art. 1891Every agent is bound to render

an account of his transactions and to deliver

to the principal whatever he may have

received by virtue of the agency, even

though it may not be owing to the principal.

Every stipulation exempting the agent from

the obligation to render an account shall be

void.

Obligation to render accounts

>It is immaterial whether such money is the

result of performance or violation of agents

duty.

>In case of secret profit, principal can forfeit

agents commission even if there was no

damage to him because of breach of

loyalty.

*Stipulation that an agent is exempt to

render an account is void because it

encourages fraud.

*If agent fails to deliver and converts it for

his own use he is liable for estafa.

When obligation to account not applicable:

>If agent or broker acted only as a

middleman in which his task is merely to

bring together principal and third person.

>If agent or broker notified principal that he

received a profit from third person and

principal did not object.

>When a right of lien exists in favor of

agent.

H. Obligation to pay interest

Art. 1896The agent owes interest on the

sums he has applied to his own use from

the day on which he did so, and on those

which he still owes after the extinguishmen

of the agency.

2 cases contemplated:

1.

Sums belonging to principal which

agent applied to his own use

>Agent is liable for indemnity or

compensation from the day on which

he did so

>Also liable for criminal prosecution

2.

Sums which the agent still owes the

principal after expiration of agency

>Agent is liable for interest from the

date agency is extinguished

I.

Obligation to make good in case of fraud or

negligence

Art. 1909The agent is responsible not

only for fraud, but also for negligence,

which shall be judged with more or less

rigor by the courts, according to whether

the agency was or was not for a

compensation.

Liability of agent for fraud andnegligence/intentional wrong:

>Agent is responsible to the principal for

fraud and negligence.

>Agents duty is to notify the principal all

relevant and material facts or any

information having a bearing on the

interests of the principal.

>The circumstance that the agency is or is

not gratuitous will be considered by the

courts in fixing the liability of the agent for

NEGLIGENCE (not fraud).

>General Rule:Principal is not responsible i

the agents tort was intentional rather than

merely negligent.


23/23

>The principal is solidarily liable if the tort

was committed by the agent while

performing his duties in the furtherance of

the principals business.

agency midterms reviewer

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