ASSOCIATION OF TAXATION AND LAW STUDENTSACADEMICS DEPARTMENThttp://www.facebook.com/atlas.ue0915-1049090 & 0905-2101285

SALES, AGENCY, LABOR & OTHER COMMERCIAL LAWS (BL 104) REVIEW NOTESOBLIGATION OF THE AGENTSpecific Obligation of an Agent1. To advance the necessary funds if there was a stipulation to that effect, except when the principal is insolvent. (Art. 1886)The insolvency of the principal, in fact, results in the extinguishment of the agency. (Art. 1919)2. To act in accordance with the instructions of the principal in the execution of the agency. In the absence of specific instructions from the principal, he shall do all that a good father of a family would do, as required by the nature of the business. (Art. 1887)a. Instruction, Concept; distinguished from authorityInstructions refer to the order given by the principal to his agent relating to the manner by which the agency shall be carried out. They refer to the private orders given by the principal to his agent to guide him in carrying out the agency. (See 2 C.J.S. 1200-1201.)Authority, on the other hand, refers to the subject matter upon which the agent is commissioned to act. Third persons are bound to know whether an agent is acting within his authority or not. Accordingly, they have the right to require the agent to present his authority as written. (See Art 1900.)b. Rule if agent acts in accordance with the orders of the principalThe principal cannot set up the ignorance of the agent as to circumstances which he himself was, or ought to have been, aware. (Art. 2899)Thus, the principal cannot claim the good faith of the agent in case the buyer should lose by eviction the property sold if the principal ought to have known that there was a rightful claimant to the property.3. Not to carry out an agency if its execution would manifestly result in loss or damage tp the principal. (Art. 1888.)4. To be liable for damages if there being a conflict between his interest and that of the principal, he should prefer his own. (Art. 1889)This is by the reason of the fiduciary nature of an agency relationship.5. Not to borrow the money of the principal without the principals consent, if the latter has authorized him to lend the principals money at interest. (Art. 1890)This is so because the agent may not be a good credit risk. He may not subject himself to the same strict requirements he imposes on prospective borrowersIf he has been empowered to borrow money, he may himself be the lender at the current rate of interest. (Art. 1890)6. To render an accounting of his transactions and to deliver to principal whatever he may have received by virtue of the agency, even though if may not be owing to the principal. Any stipulation exempting the agent from the obligation to render an account shall be void. (Art. 1891)Thus, the agent must account and deliver to his principal any excess price and interest he collects including those on unauthorized credit sales.7. Agents liability when he appoints a substituteThe following rules shall be observed when the agent appoints a substitute:a. Agent is not prohibited to appoint a substituteHere, the power of attorney does not expressly authorize or prohibit the appointment of a substitute, i.e., it is silent on this point.The agent may appoint a substitute. However. He shall be responsible for the acts of substitute. (Art. 1892) the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted. (Art. 1893)b. Agent is authorized to appoint a substitute1. If the principal did not designate the person to be appointed as substitute:A) Agent shall be liable if the person he appointed as substitute is notoriously incompetent or insolvent. (Art. 1892) the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted. (Art. 1893)B) Agent shall not be liable if the person he appointed as substitute is not notoriously incompetent or insolvent, i.e., the substitute is reasonably prudent man.( See Art. 1892.) the substitute himself will be liable.2. If the principal designated the person to be appointed as substitute The agent is not responsible for the acts of the substitute even if the latter is notoriously incompetent ot insolvent since the agent had no choice as to whom he would appoint as substitute. In this case, the substitute himself will be liable to the principal for his own acts. (See Art. 1892)c. Agent is prohibited to appoint a substitute The agent cannot appoint a substitute. If he appoints one, all the acts of the substitute hall be void. (Art. 1892)8. Liability of two or more agents if they have been appointed simultaneously General Rule: Each agent is liable only for his own acts or omissions. (Art. 1894) if all are at fault, their liability shall be joint.Exception: the agents liability shall be solidary if the same has been agreed upon. (Art. 1894) in this case, each of the agents shall be responsible for the following:a. For the non-fulfillment of the agencyb. For the fault or negligence of his fellow agents, except when the latter acted beyond the scope of their authority. (Art.1895)9. To be liable for 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 extinguishment of agency. (Art. 1896)10. Agents liability if he contracts in the name of the principalGeneral Rule: the agent who acts as such shall not be liable to the party with whom he contracts. (Art.1897)Exceptions: the agent shall be personally liable in following cases:a. If he expressly binds himself. (Art. 1897)In this case, both the agent and the principal shall be liable to the party with whom the agent has contracted.b. If he exceeds the limits of his authority without giving such party sufficient notice of his powers. (Art. 1897) (Eurotech Industrial Technologies, Inc. vs. Cuizon, supra)1. Rule if the other party was aware of the agents acting beyond the limits of his authorityA) If the agent did not undertake to secures the principals ratification, the contract shall be void. The agent here will not be liable. (Art. 1898)B) If the agent undertook to secure the principals ratification of the act and the principal does not ratify the same, the agent shall be liable. (Art. 1898)C) If the principal ratifies the contract, the contract shall be enforceable against the principal. (Art. 1910)2. Rights and obligations of third persons who have contracted with an agent who has exceeded his authority A) As to third persons, an act is deemed to have been performed within the scope of the agents authority, if such act is within the power of attorney, as written, even if he agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. (Art. 1900)B) A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agents act. (Art. 1901)C) A third person may require the agent to present his power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. (Art. 1902)11. To be 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. (Art. 1909)Commission Agent1. Commission agent, conceptA commission agent is one who buys and sells goods or chattels consigned or delivered to him by his principal; for a compensation know as commission.2. Distinctions between a commission agent and a broker A commission agent maintains a relation not only with his principal and the buyer or seller but also with the property subject matter of the transaction which is placed in his possession and at his disposal.A broker is merely an intermediary between the buyer and the seller and has no relation to the property. He does not acquire either the custody or possession of the thing. His function is to bring together the parties transaction.A commission agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay by merely bringing the buyer and the seller together, even if no sale is eventually made. (Philippine Health Care Providers, Inc. vs. Estrada, G.R. No. 171052, January 28, 2008, citing Tan vs. Gullas, 44 Phil 662)3. Obligations of a commission agentA. To be responsible for the goods received by him in the terms and conditions and as described in the consignment unless upon receiving the m he should make a written statement of the damage and deterioration suffered by the same. (Art. 1903)B. To distinguish by countermarks goods of the same kind and mark which belong to different owners, and designate the merchandise respectively belonging to each principal. (Art. 1904)C. Authority of commission agent sell on credit General Rule: The commission agent cannot sell on credit. (Art. 1905)Exception: The commission agent can sell on credit only with the express or implied consent of the principal. (Art. 1905)1) Effects if the commission agent sells on credit without principals consenta) the principal may demand payment from him in cash.b) the commission agent, however, shall be entitled to any interest or benefit, which may result from such sale. (Art. 1905)2) Obligation of the commission agent if he is authorized to sell on creditThe commission agent who sells on credit must so inform the principal, with a statement of the names of the buyers. If he fails to do so, the sale should be deemed to have been made in cash insofar as the principal is concerned. (Art. 1906) D. to bear the risk of collection and to pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser if he receives on a sale, in addition to the ordinary commission. (Art. 1907) Guarantee commission is also known as del credere commission.E. To be liable for damages if he does not collect the credits of the principal at that time when they become due and demandable, unless he proves that he exercised due diligence for that purpose. (Art. 1908) this applies only to an ordinary commission agent.

Obligations of the Principal1. To comply with all the obligations which the agent may have contracted within the scope of his authority. (Art. 1910)2. To be bound for any obligation wherein the agent has exceeded his power if he ratifies such obligation expressly or tacitly. (Art. 1910)3. To be solidarily liable with the agent if he allowed the latter to act as though he had full powers when the agent exceeded his authority. (Art. 1911)4. To advance to the agent the sums necessary for the execution of the agency should the agent so request. (Art. 1912)5. To reimburse the agent the sums advanced by the latter even if the business or undertaking was not successful provided the agent is free from all fault. (Art. 1912)The reimbursement shall include interests on the sums advanced from the date on which the advanced from the date on which the advance was made. (Art. 1912)When principal not liable for expenses incurred by the agenta. When the agent acted in contravention of the principals instructions , unless the latter should wish to avail himself of the benefits derived from the contract.b. When the expenses were due to the fault of the agent.c. when the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof.d. when it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. (Art. 1918)6. To indemnify the agent for all damages which the execution of the agency may have caused the latter, without fault or negligence on his part. (Art. 1913)7. Liability when there are two or more principalsWhen two or more persons have appointed an agent for a common transactions or undertaking, they shall be solidarily liable for all the consequences of the agency. (Art. 1915)

Right of retention of agent The agent shall have the right to retain in pledge the things which are the object of the agency until the principal: 1. Reimburses him for the sums necessary for the execution of the agency which he had advanced, even if the business or undertaking was not successful, provided the agent is free from all fault.2. Pays him the indemnity for all damages which the execution of the agency may have caused the agent, without fault or negligence on his part. (Art. 1914)NOTE: the right of retention of the agent is in the nature of legal pledge.

Incompatible contracts with agent and principal1. Rules in incompatible contractsWhen 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, the following rules shall be observed: a. if the thing is a movable-ownership shall belong to:1) The first possessor in good faith2) In the absence thereof, the contract with a prior date shall be preferred. (Arts. 1544, 1916)b. If the thing is an immovable-ownership shall belong to:1) The first registrant in good faith2) In the absence thereof, the first possessor in good faith3) In the absence of both, the one who presents the oldest title in good faith. (Art. 1544)2. Liability for damages to third person whose contract is rejected in incompatible contracts a. Agent is liable if he acted in bad faithb. Principal is liable if the agent acted in good faith. (Art. 1917)

Extinguishment of AgencyModes of extinguishment of agency1. By revocation.2. By withdrawal of the agent.3. By the death, civil interdiction, insanity or insolvency, of the principal or of the agenta. Death There is no one to be represented if the principal dies. If it is the agent who dies, there is no one to represent the principal.b. Civil interdictionA person civilly interdicted is not only in prison. He cannot manage his property or dispose of it by an act or conveyance inter vivos. In the case of the principal, his acts are restricted. In the case of agent, he will not be able to carry out the agency because he is deprived of his liberty.c. InsanityThe principal cannot give his consent if he is insane. An insane agent, on the other hand, cannot be expected to carry out the agency. d. In solvencyThe insolvency of the principal modifies or limits his capacity to act. The insolvency of the agent, on the other hand, results in his not being able to effectively carry out the agency because the trust originally reposed upon his affected.4. By the dissolution of the firm or corporation which entrusted or accepted the agency.This is equivalent to the death of a natural person.5. By the accomplishment of the object or purpose of the agency.There is nothing more to do after the purpose of the agency is accomplished.6. By the expiration of the period for which the agency was constituted. (Art. 1919)The duration of the agency is limited to the period agreed upon by the parties.Revocation by Principal1. Revocation, conceptRevocation refers to the act of the principal of terminating the agency at will confidence and representation being the foundation of the contrast. (See Barreto vs. Sta. Marina, 26 Phil 440.)The principal may evoke the agency at will, and compel the agent to return the document evidencing the agency. (Art. 1920)2. Who may revoke agency when there are two or more principalsWhen the power of attorney was granted for a common transaction, any one of the principals may revoke the same without the consent of the others. (Art. 1925) this is consistent with the solidary liability of the principals. (See Art. 1915)3. Kinds of revocationa. Express- when made orally or in writing.b. Implied- when revocation can be inferred from the act of the principal as in the following:1) When a new agent is appointed for the same business or transaction, the previous agency is revoke from the day on which notice thereof was given to the former agent. (Art. 1923)2) If the principal directly manages the business entrusted to the agent, dealing directly with third persons.If the purpose of the principal is just to assist the agent, the latters authority is not deemed revoked.3) A general power of attorney is revoke by a special one granted to another agent, as regards the special matter involve in the latter. (Art. 1926)4. When agency may not be revoked at willa. If a bilateral contract depends upon the agency.b. If the agency is a means of fulfilling an obligation already contracted.c. If a partner is appointed a manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. (Art. 1927)5. Notice of revocationa. If the agency has been entrusted for the purpose of contracting with specified persons, the principal must give a timely notice of the revocation to such third persons.Without such notice, said third persons will not be prejudiced, i.e., the act done shall be legally operative against the principal. (See Art. 1921)b. If the agent had general powers, i.e., he was entrusted to be contract with the public or any person, revocation o the agency does not prejudiced third persons who acted in good faith and without knowledge of the revocation.Notice of revocation in a newspaper of general circulation is sufficient warning to third persons. (Art. 1922) However, the revocation is in any case binding against third persons who had knowledge thereof.

Withdrawal by the Agent 1. How withdrawal is madeBy the agent giving due notice to the principal of his withdrawal. (Art. 1928)2. Liability/obligation of an agent who withdraws a. the agent must indemnify the principal for any damage suffered by the latter by reason of the withdrawal, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without the grave detriment to himself. (Art. 1928) Thus, the agent will not be liable if the reason for his withdrawal is his failing health.b. the agent who withdraws must continue to act as such until the principal has had reasonable opportunity to take the necessary steps to meet the situation, even if he withdraws for a valid reason. (Art. 1929)

Death of the Principal1. When death of principal does not extinguish the agency As a general rule, the death of the principal extinguishes the agency. However the agency is not extinguished in the following:a. if the agency has been constituted in the common interest of the principal and the agent.b. if the agency has been constituted in the interest of a third person who has accepted the stipulation in his favor. (Art. 1930)2. Validity of agents acts without knowledge of the death of the principal or other cause of extinguishment of the agencyThe acts of the agent which are done without knowledge of the death of the principal or of any other cause which extinguishes the agency are valid and shall be fully effective with respected to third persons who may have contracted with him in good faith. (Art. 1931)The agent must finish the business already begun on the death of the principal, should delay entail any danger. (See Art. 1884.) This presupposes that the agent had knowledge of the principals death.

Death of the Agent 1. Effect of death of agent on agency The death of the agent extinguishes the agency.2. Duty of agent heirs a. to notify the principal of the agents death. b. to adopt in the meantime such measures as the circumstances may demand in the interest of the principal. (Art. 1932) OBLIGATIONS OF THE VENDEE (1) Accept delivery; and (2) Pay the price of the thing sold.The following rules must be borne in mind:1. In contract of sale, the vendor is not required to deliver the thing sold until the price is paid nor the vendee pay the price before the thing is delivered in the absence of an agreement to the contrary

2. If stipulated, then the vendee is bound to accept delivery and to pay the price at the time and place designated.

3. If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to pay at the time and place of delivery.

4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the thing might be at the moment the contract was perfected (Art. 1251).

5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee is required to pay even before the thing is delivered to him; if only the time for payment of the price has been fixed, the vendee is entitled to delivery even before the price is paid by him (Art. 1524).

Instances when the vendee may suspend the payment of the price:a) Should he be disturbed in the possession or ownership of the thing sold;b) Should he have reasonable grounds to fear such disturbance by a vindicatory action or by a foreclosure of mortgage;These rights do not exist in the following cases:(a) Should there be a stipulation to that effect; or(b) Should the vendor give security for the return of the price; or(c) Should the vendor have caused the disturbance or danger to cease; or(d) Should the disturbance consist only of a mere act or trespass.

ACTIONS FOR THE BREACH OF CONTRACT OF SALE OF GOODSGoods include all chattels personal but not things in action or money of legal tender in the Philippines. The term includes growing fruits or crops.Actions available for breach of the contract of sale of goods:Action by the seller for payment of the price (Art. 1595)Action by the seller for damages for non-acceptance of the goods (Art. 1596)Action by the seller for rescission of the contract for breach thereof (Art. 1597)Action by the buyer for specific performance (Art. 1598)Action by the buyer for rescission or damages for breach of warranty (Art. 1599)Remedies allowed to the buyer when the seller has been guilty of a breach of promise or warranty (Art. 1599):1Recoupment - accept the goods and set up the sellers breach to reduce or extinguish the price.The theory of recoupment is that the sellers damages are cut down to an amount which will compensate him for the value of what he has given.

2Set-off or Counterclaim for damages - accept the goods and maintain an action for damages for the breach of the warranty. Both sides of the contract are enforced in the same litigation. The buyer (defendant) does not seek to avoid his obligation under the contract but seeks to enforce the sellers (plaintiffs) obligation and to deduct it from his liability for the price for breach of warranty.

3Action for damages refuse to accept the goods and maintain an action for damages for the breach of the warranty.

4Rescission - rescind the contract of sale by returning or offering the return of the goods, and recover the price or any part thereof which has been paid. This remedy is not available in the following cases: (a) if the buyer accepted the goods knowing of the breach of warranty without protest;(b) if he fails to notify the seller within a reasonable time of his election to rescind; and (c) if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him. But where the injury to the goods was caused by the very defect against which the seller warranted, the buyer may still rescind the sale.

EXTINGUISHMENT OF SALEClassification of modes or causes of extinguishing the contract of sale:Common those causes which are also the means of extinguishing all other contracts like payment, loss of the thing, condonation, etc. (Art. 1231).Special those causes which are recognized by the law on sales (those covered by Arts. 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567, and 1591).Extra-special conventional redemption and legal redemption.Conventional Redemption (Arts. 1601-1618)

It is the right which the vendor reserves to himself, to reacquire the property sold provided her returns to the vendee the price of the sale, the expenses of the contract, any other legitimate payments made therefore and the necessary and useful expenses made on the thing sold, and fulfills other stipulations which may have been agreed upon.

Nature: (a) it is purely contractual because it is a right created, not by mandate of the law, but by virtue of an express contract;(b) it is an accidental stipulation and, therefore, its nullity cannot affect the sale of itself since the latter might be entered into without said stipulation;(c) it is a real right when registered, because it binds third persons;(d) it is a resolutory condition because when exercised, the right of ownership acquired by the vendee is extinguished;(e) it is potestative because it depends upon the will of the vendor;(f) it is a power or privilege, not an obligation, that the vendor has reserved for himself;(g) it is reserved at the moment of the perfection of the contract for if the right to repurchase is agreed upon afterwards, there is only a promise to sell which produces different rights and effects and is governed by Art. 1479;(h) the person entitled to exercise the right of redemption necessarily is the owner of the property sold and not any third party;(i) it gives rise to reciprocal obligation that of returning the price of sale and other expenses, on the part of the vendor, and that of delivering the property and executing a deed of sale therefore, on the part of the vendee.

Legal Redemption (Arts. 1619-1623)

It is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title.

Nature: (a) identical with conventional redemption, except for the source of the right conventional redemption arises from the voluntary agreement of the parties; legal redemption proceeds from law; (b) it is not predicated on proprietary right but on a bare statutory privilege to be exercised only by the person named in the statute the statute does not make actual ownership at the time of sale or redemption a condition precedent, the right following the person and not the property;(c) it is in the nature of a mere privilege created partly for reason of public policy and partly for the benefit and convenience of the redemptioner to afford him a way out of what might be a disagreeable or inconvenient association into which he has been thrust it is intended to minimize co-ownership.Instances of Legal Redemption:(a) Under the Civil Code, those found in Arts. 1620-1622, 1634, and 1088;(b) Under special laws:(1) redemption by owner of real property sold for delinquent taxes period is within 1 year from date of sale;(2) repurchase by homesteader of homestead sold under the Public Land Act period is 5 years ;(3) redemption by judgment debtor or redemptioner or real property sold on execution period is 12 months;(4) redemption by mortgagor after mortgaged property has been judicially foreclosed and sold period is 90 days but before confirmation of sale by the court (in all cases of extra-judicial foreclosure sale, the mortgagor may redeem the property within 1 year from the date of registration of the sale);(5) redemption by an agricultural lessee of landholding sold by the landowner period is 180 days from notice in writing which shall be served by the vendee on all lessees affected by DAR upon the registration of the sale.

An equitable mortgage is one which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible or contrary to law.Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as the accepted equivalent of the performance of an obligation.Pacto de retro

Ownership is transferred but the ownership is subject to the condition that the seller might recover the ownership within a certain period of time.

If the seller does not repurchase the property upon the very day named in the contract, he loses all interest thereon.

Mortgage

Ownership is not transferred but the property is merely subject to a charge or lien as security for the compliance of a principal obligation, usually a loan.

The mortgagor does not lose his interest in the property if he fails to pay the debt at its maturity.

It is the duty of the mortgagee to foreclose the mortgage if he wishes to secure a perfect title thereto, and after the maturity of the debt secured by the mortgage and before foreclosure, the mortgagor has a right to redeem.

Instances when conventional redemption is presumed to be an equitable mortgage:1. when the price of a sale with right to repurchase is unusually inadequate;1. when the vendor remains in possession as lessee or otherwise;1. when upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;1. when the purchaser retains for himself a part of the purchase price;1. when the vendor binds himself to pay the taxes on the thing sold;1. in any other case where it may be fairly inferred the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation; and1. When there is a doubt as to whether the contract is a contract of sale with right or repurchase or an equitable mortgage.Requisites before legal redemption can be exercised:

1There must be a sale or assignment ofcredit. The concept of sale must be understood in its restricted sense. The right cannot be exercised if the transaction is exchange or donation.

2There must be a pending litigation at the time of the assignment. The complaint by the assignor must have been filed and answered by the creditor before the sale of the credit.

3The debtor must pay the assignee (a) the price paid by him, (b) the judicial costs incurred by him, and (c) the interests on the price from the date of payment.

4The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extra-judicially) payment from him.

Redemption

1The sale to a third person has already been perfected

2Has a much broader scope

3Directed against the third person who bought the property

4Effect is to extinguish a contract that has already been perfected or even consummated

Pre-emption

The sale to a third person has not yet been perfected

Narrower in scope may be exercised only where there is a prospective resale of a small piece of urban land originally bought by the prospective vendor merely for speculation

Directed against the prospective vendor who is about to resell the property

Effect is to prevent the birth or perfection of a contract

Nature, Form and Kinds of AgencyArt. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.Agency: A relationship which implies a power in an agent to contract with a 3rd person on behalf of a principal.Kind of Contract: It is a preparatory contract. It is a contract entered not for its own end but to be able to enter into other contracts.Characteristics:1.)Consensual: perfected by mere consent;2.)Nominate: it has its own name;3.)Principal: does not depend on another contract for its existence and validity;4.)Preparatory: entered into as a means to an end;5.)Unilateral/Bilateral:a.)Unilateral: if contract is gratuitous, it creates obligations for only one of the parties, i.e. agent.b.)Bilateral: if for compensation, it gives rise to reciprocal rights and obligations.Basis: Representation. The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if the principal personally did them. Distinguishing Features:1.) Representative character; and2.) Derivative authority. Purpose: To extend the personality of the principal through the facility of the agent. Parties:1. Principal; may be a natural person or a juridical person. He must be capacitated. The rule is if a person is capacitated to act for himself or in his own right, he can act through an agent.

1. Agent; Must the agent have capacity? Insofar as 3rd persons are concerned, it is enough that the principal is capacitated; but insofar as his obligations to his principal are concerned, the agent must be able to bind himself. Essential Elements of Agency:1.) Consent, express or implied;2.) Object of the contract is the execution of a juridical act in relation to 3rdpersons;3.) The agent acts as a representative and not for himself;4.) The agent acts within the scope of his authority. Acts that cannot be done through an agent:1.) Personal acts: if personal performance is read bylaw or public policy or agreement;2.) Criminal or illegal acts: attempt to delegate another authority to do an act which, if done by the principal would be illegal, is void. Nature of Relation between Principal and Agent: Fiduciary, based on trust and confidence. Agency v. Lease of Work or Service

ATLAS 2012-2013 BUSINESS LAW

Art. 1869. Agency must 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.Classifications of Agency: as to1.) Manner of Creation:a.)Express: actually authorized, either orally or in writing. b.)Implied: implied from acts of principal, from his silence or lack of action or his failure to repudiate the agency knowing that another person is acting on his behalf w/o authority.2.) Character:a.)Gratuitous: agent receives no compensation for his services.b.)Onerous: agent does receive compensation.3.) Extent of business covered:a.)General: comprises all the business of the principal.b.)Special: comprises one or more specifictransactions.4.) Authority conferred:a.) Couched in general terms: deemed to comprise only acts of administration. b.) Couched in specific terms: authorizes only the performance of a specific act/s.5.) Nature and effects:a.) Representative: agent acts in name and representation of principal. b.) Simple/Commission: agent acts in his own name but for the account of the principal. Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances.Form of Acceptance by Agent: Acceptance may be express or implied; express when it is oral or written; implied when it can be inferred from the acts of the agent which carry out the agency, or from his silence or inaction accdg to the circumstances.Art. 1871. Between 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.Between 2 persons who are present, when it acceptance deemed implied? When the agent receives a power of attorney from the principal himself personally without objection.Is this presumption conclusive? NO, it can be rebutted by contrary proof.Power of attorney: An instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. Its primary purpose is to evidence the authority of the agent to 3rd parties w/ whom the agent deals.Construction: A power of attorney is strictly construed and strictly pursued. The instrument will be held to grant only those powers which are specified, and the agent may neither go beyond nor deviate from the power of atty. The only exception is when strict construction will destroy the very purpose of the power.Meaning of present: Not limited to face-to-face encounters. 2 persons conversing on the phone are also considered as both present.Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances.Form of Acceptance by Agent: Acceptance may be express or implied; express when it is oral or written; implied when it can be inferred from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances.Art. 1871. Between 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. 1872. Between 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;1. 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.2 Ways of Giving Notice of Agency1. By special information; or1. By public advertisement.Effects:1. Special information: the person appointed as agent is considered such with respect to the person to whom it was given.1. Public advertisement: Agent is considered such with regard to any person. Revocation An agency is revoked in the same manner as it was given.General rule: Special information needs special information of revocation.Except: if you can prove that the 3rd person read the notice in the newspaper.Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given.Agency by Estoppel: There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another.1.) Estoppel of Agent One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the 3rd persons interested in the transaction in which he is engaged.2.) Estoppel of Principal a.)As to Agent One who knows that another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other.b.)As to sub-agent To estop the principal from denying his liability to a 3rd person,he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and sub-agent.c.) As to 3rd persons One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of 3rd persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.3.) Estoppel of 3rd Persons A 3rd person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3rd persons in interest.4.) Estoppel of the government The government is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority.Art. 1874. When 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.Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary.Broker: One who in behalf of others, and for compensation or fee, negotiate contracts relative to property. He is the negotiator between the parties, never acting in his own name, but in the name of those who employ him. He is strictly a middleman and for some purposes, the agent of both parties.When is a broker entitled to compensation? A broker is entitled to commission whenever he rings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. A broker is never entitled to commission for unsuccessful efforts.Does the law allow double agency? Such agency is disapproved by law for being against public policy and sound morality. The exception is where the agent acted with full knowledge and free consent of the principals.In case the agent assumes a double agency, what is his right to compensation?1. If with knowledge of both principals recovery can be had from both.1. If without knowledge of both agent can recover from neither.1. If with knowledge of only one as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public policy and good morals.Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions.Classification of Agents:1. Universal agent: One employed to do all acts that the principal may personally do, and which the principal can lawfully delegate to another the power of doing.1. General agent: One employed to transact all the business of his principal, or all business of a particular kind or in a particular place, or in other words, to do all acts connected with a particular trade, business, or employment.1. Special/Particular agent: One authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion. e.g.:a.) Attorney at law: One whose business is to represent clients in legal proceedings.b.) Auctioneer: One whose business is to sell property for others to the highest bidder at a public sale.c.) Broker: One whose business is to act as intermediary between 2 other parties.d.)Factor: One whose business is to receive and sell goods for a commission, being entrusted with the possession of the goods involved in the transaction. Attorney-in-fact: One who is given authority by his principal to do a particular act not of a legal character. In strict legal sense: An agent having a special authority created by deed.Art. 1877. An 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 execute such acts as he may consider appropriate, or even though the agency should authorize a general or unlimited management.Examples of acts of mere administration:1.) To sue for collection of debts;2.)To employ workers or servants and employees needed for the conduct of business;3.)To engage counsel to preserve the ownership and possession of the principals property;4.)To lease real property to another person for 1year or less, provided the lease is not registered;5.)To make customary gifts for charity or to employees in the business managed by the agent6.)To borrow money if it be urgent and indispensable for the preservation of the things under administration. Art. 1878. Special powers of attorney are necessary in the following cases:1.)To make such payments as are not usually considered as acts of administration;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 or for 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 guarantoror surety;12.)To create or convey real rights over immovable property;13.)To accept or repudiate an inheritance;14.)To ratify or recognize obligations contracted before the agency;15.)Any other act of strict dominion.Scope of General Authority to Purchase Where an agents power to purchase is general and unrestricted, he has implied authority to do whatever is usual and necessary in the exercise of such power. He may:1.)Determine the usual and necessary details of the contract,2.)agree upon the price,3.)modify or rescind the contract of purchase,4.)accept delivery for his principal,5.)give directions for the delivery of the property purchased, and6.)may borrow money to pay for the care and preservation of the property purchased.Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.The ff are included in a Power to Sell: The power to:1.)Find a purchaser or to sell directly;2.)Deliver the property;3.)Make the usual representation and warranty;4.)Execute the necessary transfer documents;5.)Fix the terms of the sale unless there be set conditions stipulated by the principal;6.)Sell only for cash;7.)Receive the price unless he was authorized only to solicit orders.The ff are not included in a Power to Mortgage. The power to:1.)Sell;2.)Execute a 2nd mortgage;3.)Mortgage for the agents personal benefit or for the benefit of any 3rdperson, unless the contrary has been clearly indicated. Art. 1880. A special power to compromise doesnt authorize submission to arbitration.Art. 1881. The 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.Kinds of Authority:1.)Actual: when it is actually granted, and it maybe express or implied. It results from what the principal indicates to the agent.2.)Express: when it is directly conferred by words.3.)Implied: when it is incidental to the transactionor reasonably necessary to accomplish the purpose of the agency.