agency (ust)

8/11/2019 Agency (UST)

1/15

USTGOLDENNOTES2011

AGENCY

Q:Whatiscontractofagency?

A:Bycontractofagencyapersonbindshimselfto

render some service or to do something in

representationoronbehalfofanother,with the

consentor

authority

of

the

latter.

(Art.

1868

NCC)

Q: What are the characteristics of a contract of

agency?

A:BUNCPP

1. Bilateral If it is for compensation

because itgivesrisetoreciprocalrights

andobligations

2. Unilateral If gratuitous, because it

createsobligations foronly one of the

parties

3. Nominate

4. Consensual It is perfected by mere

consent

5. Principal

6. Preparatory It is entered into as a

meanstoanend

358CIVILLAWTEAM:

ADVISER:ATTY.ELMERT.RABUYA;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;

ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.

FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

Q:Whataretheclassificationsofagency?

A:

1. Astomannerofcreation

a. Express agent has been actually

authorizedby theprincipal,either

orallyorinwriting

b. Implied agency is implied from

the acts of the principal, from his

silenceor

lack

of

action

or

his

failure to repudiate the agency,

knowing that another person is

acting on his behalf without

authority

2. Astocharacter

a. Gratuitous agent receives no

compensationforhisservices

b. Onerous agent receives

compensationforhisservices

3. Astoextentofbusinessoftheprincipal

a. Generalagencycomprisesallthe

businessoftheprincipalb. Specialagencycomprisesoneor

morespecifictransactions

4. Astoauthorityconferred

a. Couchedingeneraltermsagency

is created in general terms and is

deemed to comprise only acts in

the name and representation of

theprincipal

b. Simpleorcommissionagentacts

in his own name but for the

accountoftheprincipal

Q: What are the essential elements of an

agency?

A:CORS

1. Consent (express or implied) of the

partiestoestablishtherelationship;

2. TheObjectistheexecutionofajuridical

actinrelationtothirdpersons;

3. TheagentactsasaRepresentativeand

notforhimself;and

4. The agent actswithin the Scopeofhis

authority.

Q: Are there any formal requirements in the

appointmentofanagent?

A:

GR: There are no formal requirements

governingtheappointmentofanagent.

XPN:Whenthelawrequiresaspecificform.

i.e.whensaleoflandoranyinteresttherein

isthroughanagent,theauthorityofthelatter

must be inwriting; otherwise, the sale shall

bevoid(Art.1874,NCC)

Q:Whoarethepartiestoacontractofagency?

Distinguish.

A:

1. Principal One whom the agent

represents and fromwhom he derives

authority; he is the one primarily

concernedinthecontract.

2. Agent One who represents the

principalinatransactionorbusiness.

Note:Fromthetimetheagentactsortransactsthe

business for which he has been employed in

representationofanother,athirdparty isaddedto

theagency relationship thepartywithwhom the

business is transacted. (De Leon, Comments and

Caseson

Partnership,

Agency,

and

Trust,

p.

352,

2005ed)

Q: What is the nature of the relationship

betweenprincipalandagent?

A: It is fiduciary innature that isbasedon trust

andconfidence.


2/15

AGENCY

Q:Whatarethequalificationsofaprincipal?

A:

1. Naturalorjuridicalperson

2. Hemusthavecapacitytoact

Note:Ifapersoniscapacitatedtoactforhimselfor

hisown

right,

he

can

act

through

an

agent.

Insofarasthirdpersonsareconcerned, it isenough

that the principal is capacitated.But insofar as his

obligationstohisprincipalareconcerned,theagent

mustbeabletobindhimself.

Q:Whatisthetermjointprincipals?

A: Twoormorepersons appoint an agent fora

common transaction or undertaking. (Art. 1915,

NCC)

Q:Whataretherequisitesforsolidaryliabilityof

jointprincipals?

A:

1. Therearetwoormoreprincipals;

2. They have all concurred in the

appointmentofthesameagent;and

3. Agent is appointed for a common

transactionorundertaking.(DeLeon,p.

604,2005ed)

Q:Whatarethekindsofagents?

A:

1. Universalagentoneemployed todo

allacts

which

the

principal

may

personally do, and which he can

lawfullydelegatetoanotherthepower

ofdoing

2. General agent one employed to

transactallbusinessoftheprincipal,or

allthebusinessofaparticularkindorin

aparticularplace,doallactsconnected

with a particular trade, business or

employment

3. Special or particular agent one

authorized to do act in one or more

specific transactions or to do one or

more specific acts or to act upon a

particularoccasion

Q:Canagencybecreatedbynecessity?

A:No.Whatiscreatedisadditionalauthorityin

anagentappointedandauthorizedbeforethe

emergencyarose.

359

Q:Whataretherequisitesfortheexistenceof

agencybynecessity?

A:

1. Realexistenceofemergency

2. Inability of the agent to communicate

withtheprincipal

3. Exerciseof

additional

authority

is

for

theprincipalsprotection

4. Adoption of fairly reasonable means,

premisesdulyconsidered

Q:Whatistheruleregardingdoubleagency?

A:

GR:Itisdisapprovedbylawforbeingagainst

publicpolicyandsoundmorality.

XPN:Wheretheagentactedwithfull

knowledgeandconsentoftheprincipals.

Q:

A

granted

B

the

exclusive

right

to

sell

his

brandofMaongpantsinIsabela,thepriceforhis

merchandise payable within 60 days from

delivery, and promising B a commission of 20%

on all sales. After the delivery of the

merchandisetoBbutbeforehecouldsellanyof

them,BsstoreinIsabelawascompletelyburned

withouthisfault, togetherwithallofA'spants.

MustBpayAforthelostpants?Why?

A:ThecontractbetweenAandB isasalenotan

agency to sellbecause theprice ispayablebyB

upon60daysfromdeliveryeven ifB isunableto

resell it. IfBwere an agent, he isnot bound to

paythe

price

ifhe

is

unable

to

resell

it.

As

a

buyer,ownershippassedtoBupondeliveryand,

underArt.1504,NCC, the thingperishes for the

owner.Hence, Bmust still pay the price. (1999

BarQuestion)

Q: Is mere representation of an alleged agent

sufficient to prove the existence of a principal

agentrelationship?

A: No. The declarations of the agent alone are

generally insufficient to establish the fact or

extent of agency. It is a settled rule that the

persons dealing with the assumed agent are

boundat

their

peril,

ifthey

would

hold

the

principals liable, toascertainnotonly the factof

agency but also the nature and extent of

authority,and incaseeither iscontroverted, the

burden of proof is upon them to establish it.

(SpousesYuv.PanAmericanWorldAirways,Inc.,

G.R.No.123560,Mar.27,2000)

UNIVERSITY OF SANTO TOMAS

F a c u l t a d d e D e r e c h o i v i l

ACADEMICSCHAIR:LESTERJAYALANE.FLORESII

VICECHAIRSFORACADEMICS:KARENJOYG.SABUGO&JOHNHENRYC.MENDOZA

VICECHAIRFORADMINISTRATIONANDFINANCE:JEANELLEC.LEE

VICECHAIRSFORLAYOUTANDDESIGN:EARLLOUIEM.MASACAYAN&THEENAC.MARTINEZ


3/15

USTGOLDENNOTES2011

Q: A foreign manufacturer of computers and a

Philippine distributor entered into a contract

whereby the distributor agreed to order 1,000

units of the manufacturer's computers every

month and to resell them in the Philippines at

the manufacturer's suggested prices plus 10%.

All unsold units at the end of the year shall be

bought

back

by

the

manufacturer

at

the

same

pricetheywereordered.Themanufacturershall

holdthedistributorfreeandharmlessfromany

claim for defects in the units. Is the agreement

oneforsaleoragency?

A: The contract is one of agency not sale. The

notionofsale isnegatedbythefollowing indicia:

(1)thepriceisfixedbythemanufacturerwiththe

10%markupconstitutingthecommission;(2)the

manufacturer reacquires the unsold units at

exactly the sameprice;and (3)warranty for the

units was borne by the manufacturer. The

foregoing indicia negate sale because they

indicatethat

ownership

over

the

units

was

never

intendedtotransfertothedistributor.(2000Bar

Question)

360CIVILLAWTEAM:




II.POWERS

Q:Whatarethekindsofagencyastoextentof

powersconferred?

A:Anagencymaybecouchedingeneraltermsor

couchedinspecificterms.

Q:Whatisanagencycouchedingeneralterms?

A:One

which

is

created

in

general

terms

and

is

deemed to comprise only actsof administration

(Art.1877,NCC).

Q:Whenisanexpresspowernecessary?

A: It is necessary to perform any act of strict

ownership.

Q:Whatismeantbyactsofadministration?

A: Those which do not imply the authority to

alienate for the exercise of which an express

powerisnecessary.

Q:Whenispaymentanactofadministration?

A:Whenpayment ismade intheordinarycourse

ofmanagement.

Q: When are making gifts an act of

administration?

A: Themaking of customary gifts for charity, or

those made to employees in the business

managed by the agent are considered acts of

administration.

Q: P granted to A a special power to mortgage

theformersrealestate.Byvirtueofsaidpower,

Asecured

aloan

from

Csecured

by

amortgage

onsaidrealestate.IsPpersonallyliableforsaid

loan?

A:No.A special power tomortgage property is

limited to such authority tomortgage and does

not bind the grantor personally to other

obligations contracted by the grantee in the

absence of any ratification or other similar act

thatwouldestopthegrantorfromquestioningor

disowning such other obligations contracted by

thegrantee.

A.TOBINDPRINCIPAL

Q: When is the act of an agent binding to the

principal?

A:

1. When the agent acts as such without

expressly binding himself or does not

exceed the limitsofhisauthority. (Art.

1897)

2. Ifprincipal ratifies theactof theagent

which exceeded his authority. (Art.

1898)

3.

Circumstances where the principal

himself was, or ought to have been

aware.(Art.

1899)

4.

If such act is within the terms of the

powerofattorney,aswritten.(Art.1900

&1902)

5. Principalhasratified,orhassignifiedhis

willingnesstoratifytheagentsact.(Art

1901)

Q: Does knowledge of a fact by an agent bind

theprincipal?

A:

GR: Knowledge of agent is knowledge of

principal.

XPNs:

1. Agents interests are adverse to those

oftheprincipal;

2. Agents duty is not to disclose the

information (confidential information);

or

3. Where theperson claiming thebenefit

of the rule colludeswith the agent to


4/15

AGENCY

361UNIVERSITY OF SANTO TOMAS






defraud the principal. (De Leon,

Comments and Cases on Partnership,

Agency,andTrust,p.367,2005ed)

Q:Whataretheeffectsoftheactsofanagent?

A:

1. Withauthority

a. Inprincipalsnamevalid

b. Inhisownnamenotbindingon

the principal; agent and stranger

are the only parties, except

regarding things belonging to the

principal or when the principal

ratifies the contract or derives

benefittherefrom

2. Withoutauthority

a. Inprincipalsnameunauthorized

and unenforceable but may be

ratified, in which case, may be

validatedretroactively

from

the

beginning

b. In his own name valid on the

agent,butnotontheprincipal

Q: What are the distinctions between authority

andtheprincipalsinstructions?

A:

AUTHORITY INSTRUCTIONS

Sumtotalofthepowers

committedtotheagent

bytheprincipal

Contemplatesonlya

privateruleofguidance

totheagent;

independentand

distinctin

character

Relatestothe

subject/businesswith

whichtheagentis

empoweredtodealor

act

Referstothemanneror

modeofagentsaction

Limitationsofauthority

areoperativeasagainst

thosewhohave/charged

withknowledgeofthem

Withoutsignificanceas

againstthosewith

neitherknowledgenor

noticeofthem

Contemplatedtobe

madeknowntothird

personsdealingwiththe

agent

Notexpectedtobe

madeknowntothose

withwhomtheagent

deals

Q:When istheprincipalboundbytheactualor

apparentauthorityoftheagent?

A:Theprincipalisboundbytheactsoftheagent

on his behalf,whether or not the third person

dealingwiththeagentbelievesthattheagenthas

actualauthority, so longas theagenthasactual

authority,expressorimplied.

Q:Whatisdoctrineofapparentauthority?

A:Theprincipal is liableonlyas to thirdpersons

whohavebeen led reasonably tobelieveby the

conductoftheprincipalthatsuchactualauthority

exists,althoughnonehasbeengiven.

Q:

What

are

the

distinctions

between

apparent

authorityandauthoritybyestoppel?

A:

ApparentAuthority AuthoritybyEstoppel

Thatwhichisthough

notactuallygranted,

theprincipal

knowinglypermitsthe

agenttoexerciseor

holdshimoutas

possessing

Ariseswhentheprincipal,

byhisculpablenegligence,

permitshisagentto

exercisepowersnot

grantedtohim,even

thoughtheprincipalmay

havenonoticeor

knowledgeoftheagents

conduct

Foundedin

conscious

permissionofacts

beyondthepowers

granted

Foundedon

the

principals

negligenceinfailing

properlytosupervisethe

affairsoftheagent

Q: Can an agent maintain an action against

personswithwhomtheycontractedonbehalfof

hisprincipal?

A:No.Agentsarenotapartywithrespecttothat

contractbetweenhisprincipalandthirdpersons.

As agents, they only render some service or do

somethinginrepresentationoronbehalfoftheir

principals. Therenderingofsuchservicedidnot

makethem

parties

to

the

contracts

of

sale

executedinbehalfofthelatter.

The fact thatanagentwhomakesacontractfor

his principal will gain or suffer loss by the

performanceornonperformanceof the contract

by the principal or by the other party thereto

doesnotentitlehimtomaintainanactiononhis

ownbehalfagainsttheotherpartyforitsbreach.

An agententitled to receive a commission from

hisprincipalupontheperformanceofacontract

which he has made on his principal's account

does not, from this fact alone, have any claim

againsttheotherpartyforbreachofthecontract,

eitherin

an

action

on

the

contract

or

otherwise.

Anagentwho isnotapromiseecannotmaintain

an action at law against a purchaser merely

becausehe isentitled tohavehiscompensation

oradvancespaidoutofthepurchasepricebefore

payment to the principal. (Uy v. CA, G.R. No.

120465,Sept.9,1999)


5/15

USTGOLDENNOTES2011

SUMMARYOFRULES;ACTSOFANAGENT

Inbehalfoftheprincipal,withinthescopeofauthority

1. Bindsprincipal;

2. Agentnotpersonallyliable

Withoutorbeyondscopeofauthority

Contractis

unenforceable

as

against

the

principal

but

binds

the

agent

to

the

third

person

Bindingontheprincipalwhen:

1. Ratifiedor

2. Theprincipalallowedtheagenttoactasthoughhehadfullpowers

Withinthescopeofauthoritybutintheagentsname

1. Notbindingontheprincipal;

2. Principalhasnocauseofactionagainstthe3rd

partiesandviceversa

Note:Whenthetransactioninvolvesthingsbelongingtotheprincipal:

Remedyoftheprincipaldamagesforagentsfailuretocomplywiththeagency

Withinthescopeofthewrittenpowerofattorneybutagenthasactuallyexceededhisauthorityaccording

toanunderstandingbetweenhimandtheprincipal

1. Insofaras3rd

personsareconcerned(notrequiredtoinquirefurtherthanthetermsofthewritten

power,agentactedwithinscopeofhisauthority;

2. Principalestopped

Withimpropermotives

Motiveisimmaterial;aslongaswithinthescopeofauthority,valid

Withmisrepresentations bytheagent

1. Authorizedprincipalstillliable

2. Beyondthescopeoftheagentsauthority

GR:Principalnotliable

XPN:Principaltakesadvantageofacontractorreceivesbenefitsmadeunderfalserepresentationofhis

agent

Mismanagementofthebusinessbytheagent

1. Principalstillresponsiblefortheactscontractedbytheagentwithrespectto3rdpersons;

2. Principal,however,mayseekrecoursefromtheagent

Tortcommittedbytheagent

Principalcivillyliablesolongasthetortiscommittedbytheagentwhileperforminghisdutiesinfurtherance

oftheprincipalsbusiness

Agentingoodfaithbutprejudices3rdparties

Principalisliablefordamages

362CIVILLAWTEAM:




B.EXCEPTION

Q:When

is

the

act

of

an

agent

not

binding

to

the

principal?

A:Ifanagentactsinhisownname.Insuchcase,

theagentistheonedirectlyboundinfavorofthe

personwithwhom he has contracted, as if the

transactionwerehisown.(Art.1883,NCC)


6/15

AGENCY

III.EXPRESSVS.IMPLIEDAGENCY

Q:Distinguishexpressandimpliedagency.







A:

EXPRESSAGENCY IMPLIEDAGENCY

As

to

definition

Onewheretheagent

hasbeenactually

authorizedbythe

principal,eitherorally

orinwriting

Onewhichisimpliedfrom

theactsoftheprincipal,

Astoauthority

Whenitisdirectly

conferredbywords

Whenitisincidentaltothe

transactionorreasonably

necessarytoaccomplishthe

purposeoftheagency,and

therefore,theprincipalis

deemedtohaveactually

intendedtheagentto

possess

Q:Distinguishagencyfromguardianship.

A:

AGENCY GUARDIANSHIP

Agentrepresentsa

capacitatedperson

Guardianrepresentsan

incapacitatedperson

Agentderives

authorityfromthe

principal

Guardianderivesauthority

fromthecourt

Agentisappointedby

theprincipalandcan

beremovedbythe

latter

Guardianisappointedby

thecourt,andstandsin

locoparentis

Agentis

subject

to

directionsofthe

principal

Guardianis

notsubject

to

thedirectionsoftheward,

butmustactforthewards

benefit

Agentcanmakethe

principalpersonally

liable

Guardianhasnopowerto

imposepersonalliability

ontheward

Q: Distinguish agency from judicial

administration.

A:

AGENCY JUDICIALADMINISTRATION

Agentisappointed

bythe

principal

JudicialAdministratoris

appointedby

the

court

Representsthe

principal

Representsnotonlythe

courtbutalsotheheirsand

creditorsoftheestate

Agentdoesnotfile

abond

JudicialAdministratorfilesa

bond

Agentiscontrolled

bytheprincipal

thrutheagreement

Hisactsaresubjectto

specificordersfromthe

court

Q:Distinguishagencyfromleaseofservices.

A:

AGENCY LEASEOFSERVICES

Agentrepresentsthe

principal

Workerorlessorof

servicesdoesnot

representhisemployer

Relationshipcan

be

terminatedatthewill

ofeitherprincipalor

agent

Generally,relationship

canbeterminatedonly

atthewillofboth

Agentexercises

discretionarypowers

Employeehasministerial

functions

Q:Distinguishagencyfromtrust.

A:

AGENCY TRUST

Agentusuallyholds

no

title

at

all

Trusteemayholdlegal

titletotheproperty

Agent

usually

acts

in

thenameofthe

principal

Trusteemay

act

in

his

ownname

Agencyusuallymay

beterminatedor

revokedanytime

Trustusuallyendsbythe

accomplishmentofthe

purposesforwhichitwas

formed

Agencymaynotbe

connectedatallwith

property

Trustinvolvescontrol

overproperty

Agenthasauthority

tomakecontracts

whichwillbebinding

onhisprincipal

Trusteedoesnot

necessarilyoreven

possesssuchauthorityto

bindthetrustororthe

cestuique

trust

Agencyisreallya

contractual

relation

Trustmaybetheresultof

acontract,itmayalsobe

createdbylaw

IV.AGENCYBYESTOPPEL

Q:Whenisthereanagencybyestoppel?

A: When one leads another to believe that a

certainperson ishisagent,whenasamatterof

fact such isnot true,and the latteractson such

misrepresentation, the former cannot disclaim

liability,for

he

has

created

an

agency

by

estoppel.

(Paras, Civil Code of the Philippines Annotated,

Vol.V,p.558,6th

ed)

Q:Whataretherulesregardingestoppelin

agency?

A:

1. Estoppel of agentOneprofessing to

act as agent for another may be


7/15

USTGOLDENNOTES2011

364CIVILLAWTEAM:




estopped to deny his agency both as

against his asserted principal and the

third persons interested in the

transactioninwhichheengaged.

2. Estoppelofprincipal

a. AstoagentOnewhoknowsthat

anotheris

acting

as

his

agent

and

fails to repudiate his acts, or

accepts the benefits, will be

estopped to deny the agency as

againsttheother.

b. As to subagent To estop the

principalfrom denying his liability

to a third person, he must have

known or be charged with

knowledge of the fact of the

transaction and the terms of the

agreementbetweentheagentand

subagent.

c. As to third persons One who

knowsthat

another

is

acting

as

his

agent or permitted another to

appearashisagent,totheinjuryof

thirdpersonswhohavedealtwith

theapparentagentassuchingood

faith and in the exercise of

reasonable prudence, is estopped

todenytheagency.

3. Estoppel of third persons A third

person,havingdealtwithoneasagent

maybeestoppedtodenytheagencyas

against the principal, agent, or third

personsininterest.

4. Estoppel of the government The

government is neither estopped by the

mistake or error on the part of its

agents.

Q:Distinguishimpliedagencyfromagencyby

estoppel.

A:

IMPLIEDAGENCY AGENCYBYESTOPPEL

Astoliabilitybetweenprincipalandagent

Agentisatrueagent,

withrights

and

duties

ofanagent

Ifcausedbytheagent,he

isnotconsideredatrue

agent,hence,

he

has

no

rightsassuch

Astoliabilitytothirdpersons

1. The principal is

alwaysliable

2. Theagent isnever

personallyliable

1. If caused by the

principal, he is liable,

but only if the 3rd

person acted on the

misrepresentation;

2. If caused by the agent

alone,onlytheagentis

liable

V.GENERALvs.SPECIALAGENCY

Q:Distinguishageneralagentfromaspecial

agent?

A:

GeneralAgent SpecialAgent

ScopeofAuthority

Allactsconnectedwith

thebusinessor

employmentinwhichhe

isengaged

Specificactsin

pursuanceofparticular

instructionsorwith

restrictionsnecessarily

impliedfromtheactto

bedone

NatureofServiceAuthorized

Involvescontinuityof

serviceNocontinuityofservice

ExtenttowhichtheAgentmayBindthePrincipal

Maybind

his

principal

by

anactwithinthescope

ofhisauthorityalthough

itmaybecontrarytothe

lattersspecial

instructions

Cannotbind

his

principal

inamannerbeyondor

outsidethespecificacts

whichheisauthorizedto

perform

Termination ofAuthority

Apparentauthoritydoes

notterminatebymere

revocationofhis

authoritywithoutnotice

tothethirdparty

Dutyimposeduponthe

thirdpartytoinquire

makesterminationofthe

relationshipeffective

uponrevocation

Construction ofPrincipalsInstruction

Merelyadvisoryin

nature

Strictlyconstruedasthey

limittheagents

authority

Q:Whoisafactor/commissionagent?

A: It isoneengaged in thepurchaseand saleof

personalproperty for aprincipal,which, for this

purpose,hastobeplacedinhispossessionandat

hisdisposal.

Q:Whoisabroker?

A: He is a middleman or intermediary who in

behalf of others and for a commission or fee

negotiatescontracts/transactions relating to real

orpersonalproperty.

Q:Whatisfactorage?

A: It is the compensation of a factor or

commissionagent.


8/15

AGENCY

Q:Whatisordinarycommission?

A: It is the compensation for the sale of goods

whichareplaced in theagentspossessionorat

hisdisposal

Q:Whatisguarantycommission?

A:Itisthefeewhichisgiveninreturnfortherisk

that the agent has to bear in the collection of

credits.







VI.AGENCYCOUCHEDINGENERALTERMS

Q:Whatisanagencycouchedingeneralterms?

A:Onewhichiscreatedingeneraltermsandis

deemedtocompriseonlyactsofadministration

(Art.1877,NCC).

VII.AGENCYREQUIRINGSPECIALPOWEROF

ATTORNEY

Q:Whatisspecialpowerofattorney(SPA)?

A: It is an instrument in writing by which one

person,asprincipal,appointsanotherashisagent

and confers upon him the authority to perform

certainspecifiedactsorkindsofactsonbehalfof

the principal; primary purpose is to evidence

agents authority to third parties within whom

theagentdeals.

Q: Should SPA be in writing and notarized in

ordertobevalid?

A:No.SPAisnotrequiredtobeinwritingand

neednotbenotarizedinordertobevalid.(De

Leon,CommentsandCasesonPartnership,


Q:Istheinterventionofanotarypublicrequired

forthevalidityofanSPA?

A:

GR:Apowerofattorney isvalidalthoughno

notary public intervened in its execution.

(Barrettov.Tuason,G.R.Nos.L36811,36827,

36840, 36872, Mar. 31, 1934) (De Leon, p.

443,2005

ed)

XPN: When SPA is executed in a foreign

country, it must be certified and

authenticatedaccordingtotheRulesofCourt,

particularlySec.25,Rule132.

Note: When the special power of attorney is

executedandacknowledgedbeforeanotarypublic

or other competent official in a foreign country, it

cannotbeadmitted inevidenceunless it iscertified

as such inaccordancewith the foregoingprovision

of the rulesby a secretaryofembassyor legation,

consulgeneral,consul,viceconsul,orconsularagent

or by any officer in the foreign service of the

Philippinesstationedintheforeigncountryinwhich

the record is kept of said public document and

authenticated

by

the

seal

of

his

office.

(Medina

v.

Natividad,G.R.No.177505,Nov.27,2008)

The failure to have the special power of attorney

(executed inaforeigncountry)authenticated isnot

merelyatechnicalityitisaquestionofjurisdiction.

Jurisdiction over the person of the real partyin

interestwasneveracquiredbythecourts.(Ibid.)

Q:Whenisaspecialpowernecessary?

A:CALLMOSPRINGCOW

1. to Create or convey real rights over

immovableproperty;

2. Conveyor

Acquire

immovable

3. to Loan or borrowmoney, unless the

latter act be urgent and indispensable

forthepreservationofthethingswhich

areunderadministration;

4. to Lease any real property to another

personformorethanoneyear;

5. to Make such Payments as are not

usually considered as acts of

administration;

6. to Obligate principal as guarantor or

surety

7. to bind the principal to render some

Servicewithoutcompensation;

8. to bind the principal in a contract of

Partnership;

9. to Ratify obligations contracted before

theagency

10. toAcceptorrepudiateanInheritance

11. EffectNovation

12. tomake Gifts, except customary ones

forcharityorthosemadetoemployees

inthebusinessmanagedbytheagent

13. Compromise, Arbitration and

ConfessionofJudgment

14. anyOtheractofstrictdominion

15. Waiveanobligationgratuitously

Q:Whatarethelimitationstoaspecialpowerof

attorney?

A:

1. A special power to sell excludes the

powertomortgage

2. A special power tomortgage doesnot

include the power to sell (Art. 1879,

NCC)


9/15

USTGOLDENNOTES2011

3. A special power to compromise does

notauthorize submission toarbitration

(Art.1880,NCC)

366CIVILLAWTEAM:




VIII.AGENCYBYOPERATIONOFLAW

Q: When is an agency created by operation of

law?

A:When the agentwithdraws from the agency

foravalid reason,hemust continue toactuntil

theprincipalhashadareasonableopportunityto

takethenecessarysteps liketheappointmentof

a new agent to remedy the situation caused by

thewithdrawal.(Art.1929,NCC)

IX.RIGHTSANDOBLIGATIONSOFPRINCIPAL

Q: What are the obligations of the principal to

theagent?

A:To:

1. comply with all obligations which the

agentmay have contractedwithin the

scopeofhisauthority(Art.1910,NCC);

2. advanceto theagent,shouldthe latter

so request, the sumsnecessary for the

execution of the agency (Art. 1912,

NCC);

3. reimburse the agent for all advance

madebyhim,providedtheagentisfree

fromfault(Ibid.);

4. indemnify the agent for all damages

whichtheexecutionoftheagencymay

havecaused the latterwithout faultor

negligenceon

his

part

(Art.

1913,

NCC);

and

5. paytheagentthecompensationagreed

upon, or if no compensation was

specified, the reasonable value of the

agents services. (De Leon, Comments

andCasesonPartnership,Agency,and

Trust,pp.545555,2005ed)

Q: Is the principal liable for the expenses

incurredbytheagent?

A:

GR:Yes.

XPNs:

1. If the agent acted in contravention of

the principal's instructions, unless

principal derives benefits from the

contract;

2. When the expenses were due to the

faultoftheagent;

3. When the agent incurred them with

knowledge that an unfavorable result

would ensue, if the principal was not

awarethereof;or

4. When it was stipulated that the

expenseswouldbebornebytheagent,

orthatthelatterwouldbeallowedonly

acertain

sum.

Q:Whatistheliabilityoftheprincipalregarding

contractsenteredintobytheagent?

A:

GR: The principal must comply with all the

obligations which the agent may have

contractedwithinthescopeofhisauthority.

XPN:Wheretheagentexceededhisauthority.

XPNtotheXPN:Whentheprincipalratifiesit.

Note:Even

if

the

agent

has

exceeded

his

authority,

theprincipal issolidarily liablewiththeagent if the

formerallowedthelattertoactasthoughhehadfull

powers(Art.1911,NCC)

Q: CX executed a special power of attorney

authorizing DY to secure a loan from any bank

and to mortgage his property covered by the

owners certificate of title. In securing a loan

from M Bank, DY did not specify that he was

actingforCXinthetransactionwiththebank.Is

CXliableforthebankloan?

A: While as a general rule the principal is not

liablefor

the

contract

entered

into

by

his

agent

in

case the agent acted in his own namewithout

disclosinghisprincipal,suchruledoesnotapplyif

the contract involves a thing belonging to the

principal.Insuchcase,theprincipalisliableunder

Art.1883,NCC.Thecontract isdeemedmade in

hisbehalf. (SyJuco v. SyJuco,G.R.No. L13471,

Jan.12,1920)(2004BarQuestion)

Q: What is the liability of the principal for tort

committedbytheagent?

A:

GR:Where the fault or crime committed by

theagent

is

not

in

the

performance

of

an

obligation of the principal, the latter is not

boundbytheillicitactsoftheagent,evenifit

isdoneinconnectionwiththeagency.

XPNs:

1. Where the tortwas committed by the

agentbecauseofdefective instructions

from the principal or due to lack of


10/15

AGENCY

necessaryvigilanceorsupervisiononhis

part;or

2. When the tort consists in the

performance of an actwhich iswithin

the powers of an agent but becomes

criminalonlybecauseof themanner in

which the agent has performed it; the

principalis

civilly

liable

to

3rd

persons

whoactedingoodfaith.

Q:Whenistheprincipalnotboundbytheactof

theagent?

A:

1. GR:Whentheact iswithoutorbeyond

the scope of his authority in the

principalsname.

XPNs:

a. Where the acts of the principal

have contributed to deceive a 3rd

personin

good

faith

b. Where the limitation upon the

power created by the principal

couldnothavebeenknownbythe

3rdperson

c. Where the principal has placed in

thehandsoftheagentinstruments

signedbyhiminblank

d. Where the principal has ratified

theactsoftheagent

2. Whentheactiswithinthescopeofthe

agentsauthoritybut inhisownname,

except when the transaction involves

thingsbelonging

to

the

principal.

Note:Thelimitsoftheagentsauthorityshallnotbe

consideredexceededshouldithavebeenperformed

in a manner more advantageous to the principal

thanthatspecifiedbyhim.

RESPONSIBILITIESANDOBLIGATIONSOFAN

AGENT

Q:Whatarethespecificobligationsofanagent

totheprincipal?

A:CAFOFANALADRIPBIR

1. Carryout

the

agency

which

he

has

accepted

2. Answer fordamageswhich throughhis

nonperformance the principal may

suffer

3. Finish the business already begun on

thedeathof theprincipal shoulddelay

entailanydanger

367

4. Observe thediligenceofagood father

of a family in the custody and

preservationofthegoodsforwardedto

himbytheownerincasehedeclinesan

agency,untilanagentisappointed(Art.

1885,NCC)

5. advance the necessary Funds should

there be a stipulation to do so (Art.

1886,NCC)

6. Actin

accordance

with

the

instructions

of theprincipal,and indefault thereof,

todoall thatagood fatherofa family

woulddo(Art.1887,NCC)

7. Not to carry out the agency of its

execution would manifestly result in

loss or damage to the principal (Art.

1888,NCC)

8. Answer for damages if there being a

conflictbetweenhisinterestsandthose

of the principal, he should prefer his

own(Art.1889,NCC)

9. not to Loan to himself if he has been

authorized to lend money at interest

(Art.1890,

NCC)

10. render an Account of his transactions

andtodelivertotheprincipalwhatever

hemayhave receivedby virtue of the

agency(Art.1891,NCC)

11. Distinguishgoodsbycountermarksand

designate themerchandiserespectively

belongingtoeachprincipal, inthecase

of a commission agent who handles

goodsofthesamekindandmark,which

belong to different owners (Art. 1904,

NCC)

12. be Responsible in certain cases for the

actsofthesubstituteappointedbyhim

(Art.1890,

NCC)

13. Pay interestonfundshehasappliedto

hisownuse(Art.1896,NCC)

14. Inform the principal, where an

authorized sale of credit has been

made,ofsuchsale(Art.1906,NCC)

15. Bear the riskof collection andpay the

principaltheproceedsofthesaleonthe

same terms agreed upon with the

purchaser, should he receive also on

sale, a guarantee commission (Art.

1907,NCC)

16. Indemnifytheprincipalfordamagesfor

his failure to collect the credits of his

principalat

the

time

that

they

become

due(Art.1908,NCC)

17. be Responsible for fraudornegligence

(Art. 1909, NCC; De Leon, Comments

andCasesonPartnership,Agency,and

Trust,pp.478479,2005ed)

Note: Every stipulation exempting the agent from

the obligation to render an account shall be void

(par.2,Art.1891,NCC)








11/15

USTGOLDENNOTES2011

Q: In caseofbreachof loyalty, istheagentstill

entitledtocommission?

A:No,Theforfeitureofthecommissionwilltake

place regardlessofwhether theprincipal suffers

any injurybyreasonofsuchbreachof loyalty. It

does not even matter if the agency is for a

gratuitousone,

or

that

the

principal

obtained

betterresults,orthatusageandcustomsallowa

receiptofsuchabonus.

Note:Anagenthasanabsolutedutytomakeafull

disclosure or accounting to his principal of all

transactionsandmaterialfactsthatmayhavesome

relevance with the agency. (Domingo v. Domingo,

G.R.No.L30573,Oct.29,1971)

Q: When is the obligation to account not

applicable?

A:

1. Ifthe

agent

acted

only

as

amiddleman

with the task of merely bringing

togetherthevendorandvendees;

2. If the agent informed the principal of

the gift/bonus/profit he received from

thepurchaserandhisprincipaldidnot

objectthereto;or

3. Wherea rightof lienexists in favorof

theagent.

Q: What is the responsibility of two or more

agentsappointedsimultaneously?

A:

GR:Jointly

liable.

XPN:Solidarityhasbeenexpresslystipulated.

Each of the agents becomes solidarily liable

for:

1. thenonfulfillmentoftheagency;or

2. faultornegligenceofhisfellowagent.

XPN to the XPN: When one of the other

agentsactsbeyondthescopeofhisauthority

innocentagentisnotliable.

Note:An innocentagenthasa right lateron to

recoverfromtheguiltyornegligentagent.

Q:Whatistherulewithregardtotheexecution

oftheagency?

A:

GR:Theagent isboundbyhisacceptance to

carryouttheagency,andisliablefordamages

which, through his nonperformance, the

principalmaysuffer.

368

XPN:Ifitsexecutioncouldmanifestlyresultin

lossordamagetotheprincipal

Q:Whatarethe instanceswhentheagentmay

incurpersonalliability?

A:

1. Agentexpressly

bound

himself;

2. Agentexceedshisauthority;

3. Acts of the agent prevent the

performance on the part of the

principal;

4. When a person acts as agentwithout

authorityorwithoutaprincipal;or

5. A person who acts as an agent of an

incapacitatedprincipalunless the third

personwas aware of the incapacity at

thetimeofthemakingofthecontract.

Q:Whatisthescopeoftheagentsauthorityas

tothirdpersons?

A: It includes not only the actual authorization

conferredupontheagentbyhisprincipalbutalso

thatwhich isapparentor impliedlydelegated to

him.

Q: Is the third person required to inquire into

theauthorityoftheagent?

A:

1. WhereauthorityisnotinwritingEvery

persondealingwith an assumed agent

must discover upon his peril, if he

wouldholdtheprincipalliable,notonly

thefact

of

the

agency

but

the

nature

and extent of the authority of the

agent.

2. Where authority is in writing 3rd

personisnotrequiredtoinquirefurther

thanthetermsofthewrittenpowerof

attorney.

Note:Athirdpersonwithwhomtheagentwishesto

contractonbehalfof theprincipalmay require the

presentation of the power of attorney or the

instructionsasregardstheagency.

Q:

What

is

the

rule

with

regard

to

the

advancementoffundsbytheagent?

A:

GR: There must be a stipulation in the

contract that the agent shall advance the

necessaryfunds

XPN:Whentheprincipalisinsolvent.

CIVILLAWTEAM:





12/15

AGENCY

RIGHTSOFAGENTS

Q:Whataretheinstanceswhentheagentmay

retaininpledgetheobjectoftheagency?

A:

1. Ifprincipal fails toreimburse theagent

thenecessary

sums,

including

interest,

which the latter advanced for the

execution of the agency (Art. 1912,

NCC);or







2. Ifprincipal fails to indemnify theagent

foralldamageswhich theexecutionof

theagencymayhavecausedthe latter,

without faultornegligenceonhispart.

(Art.1913,NCC)

Q: What is the rule where two persons deal

separatelywiththeagentandtheprincipal?

A:Ifthetwocontractsareincompatiblewitheach

other,the

one

of

prior

date

shall

be

preferred.

Thisissubjecthowevertotheruleondoublesale

underArt.1544,NCC.

Note:Rulesofpreferenceindoublesale

1. Personal property possessor in good

faith

2. Realproperty

a. Registrantingoodfaith

b. Possessoringoodfaith

c. Personwith theoldest title in good

faith(Art.1544,NCC)

If agent acted in good faith, the principal shall be

liable

for

damages

to

the

third

person

whose

contractmustberejected.Ifagentisinbadfaith,he

aloneshallbeliable.(Art.1917,NCC)

PROHIBITEDACTSOFANAGENT

Q:Whataretheprohibitedactsofanagent?

A:

1.

Personalacts

2. Criminalorillegalacts

Note:e.g.:

1. Righttovote

2. Makingofawill

3. Underoathstatements

4. Attendingboardmeetingsofcorporations.

(DeLeon, p.358,2005ed)

Q: Can a person acting as an agent escape

criminal liability by virtue of the contract of

agency?

A:No. The law on agency has no application in

criminalcases.Whenapersonparticipates inthe

commission of a crime, he cannot escape

punishmenton the ground thathe simply acted

asanagentofanotherparty.(Ongv.CA,G.R.No.

119858,Apr.29,2003)

X.IRREVOCABLEAGENCY

Q:Whenisagencyirrevocable?

A:

1. Ifabilateralcontractdependsuponit

2. if it is the means of fulfilling an

obligationalreadycontracted

3. ifpartnerisappointedmanagerandhis

removal from the management is

unjustifiable. (Art1927)

4. if it has been constituted in the

common interest of the principal and

theagent(Art.1930)

5. Stipulationpouratrui

Q: How may the agent withdraw from the

agency?

A:Theagentmaywithdraw from the agencyby

giving due notice to the principal. If the latter

should 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

detrimenttohimself.(1736a)

NOTE:Theagent,even ifheshouldwithdraw from

theagency foravalid reason,mustcontinuetoact

untiltheprincipalhashadreasonableopportunityto

takethenecessarystepstomeetthesituation.

XI.MODESOFEXTINGUISHMENT

Q: What is presumption of continuance of

agency?

A: It means that when once shown to have

existed, an agency relationwill be presumed to

havecontinued,intheabsenceofanythingwhich

showsitstermination.


13/15

USTGOLDENNOTES2011

Q: What are the essential elements for

continuanceofagency?

370CIVILLAWTEAM:




A:

Bothprincipalandagentmustbe:

1. Present

2. Capacitated

3. Solvent (DeLeon,CommentsandCases

onPartnership,

Agency,

and

Trust,

p.

610,2005ed)

Q:Cantheheirscontinuetheagency?

A:

GR:No.

Ratio: The agency calls for personal services

onthepartoftheagentsinceitisfoundedon

afiduciaryrelationship;rightsandobligations

intransmissible.

XPNs:

1. Agency by operation of law, or apresumedortacitagency

2. Agency is coupled with an interest in

the subjectmatter of the agency (e.g.

powerofsaleinamortgage)

Q: What are the modes of extinguishing an

agency?

A:EDWARD

1. Expirationoftheperiod

2. Death, civil interdiction, insanity or

insolvencyofprincipaloroftheagent

3. Withdrawalbytheagent

4. Accomplishment of the object or the

purposeoftheagency

5. Revocation

6. Dissolution of the firm or corporation

which entrusted or accepted the

agency.

Note: The list is not exclusive; May also be

extinguished by the modes of extinguishment of

obligationsingeneralwhenevertheyareapplicable,

likelossofthethingandnovation.

REVOCATION

Q:Is

acontract

of

agency

revocable?

A:

GR: Yes. Agency is revocable at will by the

principal.

XPNs:Itcannotberevokedif:

1. abilateralcontractdependsuponit

2. itisthemeansoffulfillinganobligation

alreadycontracted

3. a partner is appointed manager of a

partnership and his termination is

unjustifiable

4. it iscreatednotonlyforthe interestof

theprincipalbutalsofortheinterestof

thirdpersons

XPN

to

the

XPN:When

the

agent

acts

to

defraudtheprincipal.

Q:Whatarethekindsofrevocation?

A:Revocationmayeitherbeexpressor implied.

(De Leon, Comments and Cases on Partnership,


Q:Howisagencyimpliedlyrevoked?

A:Principal:

1. appoints a new agent for the same

business or transaction (Art. 1923,

NCC);

2. directly manages the business

entrustedtotheagent(Art.1924,NCC);

or

3. after granting general power of

attorney, grants a special one to

another agent which results in the

revocationoftheformerasregardsthe

special matter involved in the latter.

(Art.1926,NCC)

Q: How is agency revoked when the agent has

beenappointedbytwoormoreprincipals?

A:Any

one

of

the

principals

is

granted

the

right

to

revoke the power of attorney without the

consentoftheothers.

Q:Isnoticeofrevocationnecessary?

A:

1. As to theagentExpressnotice isnot

necessary; sufficientnotice if theparty

to be notified actually knows, or has

reason to know, a fact indicating that

his authority has been

terminated/suspended; revocation

without notice to the agent will not

renderinvalid

an

act

done

in

pursuance

oftheauthority

2. As to 3rd

persons Express notice is

necessary

a. As toformer customersActual

notice must be given to them

because theyalwaysassume the

continuance of the agency

relationship


14/15

AGENCY

b. As to otherpersonsNotice by

publicationisenough

Note: There is implied revocation of the previous

agencywhentheprincipalappointsanewagentfor

the samebusinessor transaction,provided there is

incompatibility.Buttherevocationdoesnotbecome

effectiveas

between

the

principal

and

the

agent

untilitisinsomewaycommunicatedtothelatter.

Q:What istheeffectofthedirectmanagement

bytheprincipal?

A:

GR:Theagencyisrevokedfortherewouldno

longer be any basis for the representation

previously conferred. But the principalmust

act ingood faithandnotmerely toavoidhis

obligationtotheagent.

XPN: The only desire of the principal is for

himand

the

agent

to

manage

the

business

together.

Q:Richardsolda largeparcelof landinCebuto

Leo for P100 million payable in annual

installmentsoveraperiodoftenyears,buttitle

willremainwithRicharduntilthepurchaseprice

is fully paid. To enable Leo to pay the price,

Richard gave him a powerofattorney

authorizing him to subdivide the land, sell the

individual lots, and deliver the proceeds to

Richard,tobeappliedtothepurchaseprice.Five

years later, Richard revoked the power of

attorney and took over the sale of the

subdivision

lots

himself.

Is

the

revocation

valid

ornot?Why?

A: The revocation is not valid. The power of

attorneygiventothebuyerisirrevocablebecause

it iscoupledwithan interest theagency is the

meansof fulfilling theobligationof thebuyer to

paythepriceoftheland(Art.1927,NCC).Inother

words, a bilateral contract (contract to buy and

sell the land) isdependenton theagency. (2001

BarQuestion)

Q: Eduardoexecuteda SPAauthorizing Zenaida

to participate in the prequalification and

biddingof

aNIA

project

and

to

represent

him

in

all transactions related thereto. It was granted

to them. Zenaida leased Manuels heavy

equipment to be used for the NIA project.

Manuel interposed no objection to Zenaidas

actuations. Eduardo later revoked the SPA

allegingthatZenaidaactedbeyondherauthority

in contracting with Manuel under the SPA.

Decide.

371

A: No.Eduardo and Zenaida entered into a

partnershipwithregard to theNIAproject.Also,

Eduardo was present when Zenaida contracted

withManuel.UnderArt.1818,NCC,everypartner

isanagentofthepartnershipforthepurposeof

itsbusinessandeachonemayseparatelyexecute

allactsofadministration,unless,underArt.1801,

NCC,aspecification

of

their

respective

duties

has

beenagreedupon,orelseitisstipulatedthatany

oneofthemshallnotactwithouttheconsentof

all the others. (Mendoza v. Paule, G.R. No.

175885,Feb.13,2009)

DEATH

Q:What is theeffectofdeathofaparty tothe

contractofagency?

A:

GR:Theagencyisterminatedbythedeathof

the principal even if the agency is for a

definiteperiod.

XPNs:

1. If it has been constituted in common

interestof the principal and the agent

or in the interest of the third person

who accepted the stipulation in his

favor;or

2. Anythingdonebytheagentwithoutthe

knowledgeofthedeathoftheprincipal

or on any other cause which

extinguishes the agency is valid and

shallbeeffectiveon thirdpersonswho

mayhave contractedwithhim ingood

faith.

Q: Isthesaleof the landbytheagentafterthe

deathoftheprincipalvalid?

A:Article1931,NCCprovidesthatanactdoneby

theagentafterthedeathoftheprincipal isvalid

andeffectiveifthesetworequisitesconcur:

1. that the agent acted without the

knowledgeofthedeathoftheprincipal;

and

2. that the third person who contracted

with the agent himself acted in good

faith.

Goodfaithheremeansthatthethirdpersonwas

not aware of the death of the principal at the

timethathecontractedwithsaidagent.(Rallosv.

FelixGoChan,G.R.No.L24332,Jan.31,1978)








15/15

USTGOLDENNOTES2011

372CIVILLAWTEAM:



FULLEROS CECILIOM JIMENO JR ISMAEL SARANGAYA JR ; CONTRIBUTORS: LOISE RAEG NAVAL MONICA JUCOM

CHANGEOFCIRCUMSTANCESSURROUNDING

TRANSACTION

Q:Whatistheeffectofachangeofcircumstance

surroundingthetransaction?

A:

GR:The

authority

of

the

agent

is

terminated.

XPNs:

1. If the original circumstances are

restoredwithin a reasonableperiodof

time, the agent's authority may be

revived;

2. Wheretheagenthasreasonabledoubts

as to whether the principal would

desirehim toact,hisauthoritywillnot

beterminatedifheactsreasonably;or

3. Where the principal and agent are in

close daily contact, the agent's

authoritytoactwillnotterminateupon

achange

of

circumstances

ifthe

agent

knows the principal is aware of the

change and does not give him new

instructions. (De Leon, pp. 616617,

2005ed)

WITHDRAWALBYTHEAGENT

Q:Cantheagentwithdrawfromtheagency?

A: Yes. The agent may renounce or withdraw

fromtheagencyatanytime,withouttheconsent

of the principal, even in violation of the latters

contractualrights;subjecttoliabilityforbreachof

contractor

for

tort.

Q: What are the kinds of withdrawal by the

agent?

A:

3. Withoutjust cause The law imposes

upon the agent the duty to give due

noticetotheprincipalandtoindemnify

the principal should the latter suffer

damagebyreasonofsuchwithdrawal.

4. Withjust causeTheagent cannotbe

heldliable.

agency (ust)

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