De Leon Reviewer

b. CHAPTER 1 NATURE, FORM, AND KINDS OF AGENCY (1868 – 1884)

Persons prohibited from acquiring property because of their relation with the persons under their charge 1491

Nature of Relations Between Agent and Principal 1868 – Definition of Agency 1. Five Characteristics of Agency: 1. Consensual 2. Principal 3. Nominate 4. Unilateral 5. Preparatory

2. 3. 4.

Five Essential Elements of Agency: 1. Consent 2. Object 3. Representative 4. Acted within Authority 5. Competent to be a principal and agent Agency character in Jurisprudence: 1. 2. 3.

Personal Representative Derivative

Fiduciary in Nature (based on trust and confidence) Agent estopped from asserting adverse interest to the principal Agent can’t act for an adverse party (unless he acts with the knowledge and consent of both) Agent must not use or disclose secret information

Agency Distinguished Contracts: 1. 2. 3. 4. 5. 6. 7.

from

the

Following

Loan Lease of Service Independent Contact Partnership Negotiorum Gestio Brokerage Sale

1869 – Kinds of Agency Capacity Requirement: 1. 2.

Principals – Any person who is capacitated before the eyes of the law (1327; 1329) Agents – No need to possess full capacity, as long as not totally incapacitated; Must be competent to bind himself

Two General Acts that can’t be delegated to agents:

Kinds of Agency are differentiated from the following general denominations: 1. 2. 3. 4. 5.

Creation Character Extent of Business Covered Authority Conferred Nature and Effects

1870 Form of Acceptance of Agent 1. Personal Acts – if personal performance is required by law or public policy or the agreement of the parties, the doing of the act by a person on behalf of another does not constitute performance by the latter.

1. 2. 3. 4.

Ex: a. b. c. d. e.

Right to vote during an election in a corporation under section 25 of the Corporation Code Making of a will pursuant to Art. 784 Statements which are required to be done personally A member of the board of directors acting in proxy capacity B.P. 68 An agent can’t delegate to sub-agent performance of acts where he was appointed to do in person 1892 – 1893

2. Criminal Acts or Acts Not Allowed by Law – An attempt to delegate to another authority to do an act which, if done by the principal would be illegal, is void.

Express Implied from his acts which carry out the agency (subdivided to 1871 and 1872) Silence Inaction according to the circumstances

1871 – Acceptance between present persons (personal delivery of Principal) 1872 – Acceptance when absent (transmittal only of the Principal) 1. 2.

When Principal transmits power of attorney and it was received without objection When Principal entrusts by letter or telegram a power of attorney to the agent with which he was habitually engaged in and did not reply to it

1873 – Communication or Giving of Notice of Agency

Ex: a.

Ownership of an alien of a land in the country through a Filipino agent is against the law (Article 12 sec. 3, 7)

1. 2.

By way of special information, the person appointed as agent is considered such with respect to the person to whom it was given; or If by public advertisement, the agent is considered as such with regard to any person.

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Public advertisement may be made in any form (newspaper, radio, posters, billboards) Agency presumed to exist whether there is actually an agency or not Manner of revocation us be done in the same manner it was conferred.

Acts of Administration is a question of fact, because the agency relationship sometimes exists for a specific business, that, even if it were required of the agent to produce an SPA, an act may done not as act of strict dominion but mere act of administration Ex: a.

1874 – sale of piece of land without authority in writing is void b. unenforceable, not necessarily void – Article 1403 2 (e) [need for proof through written, otherwise unenforceable] 1875 – Agency Presumed for Compensation 1876- Kind of agency as to extent of business covered Three Classifications of Agent: 1. Universal agent – authorized to do all acts that the principal may personal do, and which he can lawfully delegate to another the power of doing, presumed to have universal authority 2. General agent – authorized to transact all the business of his principal in relation to a particular trade, business or employment 3. Special Agent – one authorized to act in one or more specific transactions/ particular occasion only Special types of Agent: 1. 2. 3. 4. 5. 6.

Attorney at law – represents client in legal matters Auctioneer – business is to sell property for others Broker – one whose business is to act as intermediary between two parties such as insurance and real estate brokers Factor – one whose business is to receive and sell goods for a commission (entrusted with possession) Cashier in Bank – represents a banking institution in its financial transactions Attorney-in-fact – given authority to do a particular act not of legal character.

Person employed to sell goods in a retail store may sell the goods without need of a special power of attorney because the ‘selling’ is the act of administration Attorney-in-fact authorized to pay debts and employ services of a lawyers to defend the principal’s interest impliedly authorized to pay for attorney’s fees for services

1878 – SPECIAL POWER OF ATTORNEY a. b. c.

Payment (1232) Novation Compromise (2028) (arbitration 2042) and the three waivers d. Waive obligation gratuitously e. Sale of immovable f. Make gifts, other than customary ones (or gifts to employees) g. Loan h. Lease more than a year i. Gratuitous service j. Contract of Partnership k. Obligation principal as guarantor or surety l. Create or convey real rights over immovable property without special power m. Accept or repudiate an inheritance n. Ratify obligations contracted before the agency o. Strict Dominion 1879 – Vice versa rule on mortgage and sale through agent 1880 – exclusion of arbitration from power to compromise 1881 – definition of authority of agent 1882 – acts beneficial even if beyond instruction to the principal Authority of the agent – power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestation of consent to him

1877 – Agency couched in General Terms Distinguish Authority from Power Agency couched in general terms may be general agency or special agency (1876) Agency couched in general terms grants only acts of administration even if the principal would state: 1. 2. 3.

He withholds no power from the exercise of the agent Agent may execute acts appropriate to carry out the agency Authorizes a general or unlimited management

1. 2.

Authority – Source i.e. Authority from Principal to sell Power – Effect i.e. Authority from principal gives the agent the power to sell.

Kinds or Types of Authority 1. 2.

Actual – Actually granted (express or implied) Express – conferred by words (1869)

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3. 4. 5. 6. 7.

Implied – incidental to the transaction or reasonable necessary to accomplish the purpose of the agency apparent or ostensible – conferred by conduct or even by silence (another name for authority by estoppel) [also an implied form] General – covers all business of the principal Special – particular transaction By necessity – demanded by virtue of the existence of an emergency

When may Principal be Bound by Acts of Agent: 1. Standard Requisites: a. Agent acts within the scope of authority b. He acted on behalf of the principal 2. Ratification by principal 3. Acts more advantageous to principal

1884 – agent bound by his acceptance to carry out the agency and is liable for non performance General Obligations: 1. 2. 3.

Specific Obligations of the Principal 1. 2. 3. 4.

When Principal Bound by Acts of Agent beyond his Powers: 1. 2. 3. 4.

The acts of the principal contributed to deceive third persons in good faith Limitations upon the power created by him could not have been known by the third person Principal placed to the agent instruments signed by P in blank Ratified the acts

5. 6. 7. 8.

1883 – Kinds of Principal (and also agent acting as per identity)

9.

Kinds of Principal:

10.

1. Disclosed principal – if at the time of the transaction contracted by the agent, the other party thereto has notice that the agent is acting for a principal and of the principal’s identity 2. Partially disclosed – if the other party has notice that the agent is or may be acting for a principal but has no notice of the principal’s identity 3. Undisclosed – The other party has no notice of the principal

11.

12. 13. 14.

AGENCY WITH UNDISCLOSED PRINCIPAL; Effects 1. Agent directly responsible a. Agent authorized to act on behalf of the principal b. Acts in agent’s own name

15.

Thus, the Principal reserves no right of action against Agent or Third persons

17.

UNLESS, contract involves things belonging to principal, PRINCIPAL IS BOUND CHAPTER 2 OBLIGATIONS OF THE AGENT (1884 – 1909)

Good faith and loyalty to his trust Obedience to principal’s instruction Exercise of reasonable care

16.

To carry out the agency according to its terms 1884 To answer for the damages which through his non performance the principal may suffer 1884 To finish the business already begun on the death of the principal, should delay detail any danger 1884 To observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until agent is appointed 1885 To advance the necessary funds should there be a stipulation to that effect 1886 To act in accordance with the instructions of the principal 1887 Not to carry out the agency if its execution would manifestly result in loss or damage to the principal (1888) To answer for damages should he prefer in case of conflict, his own interests to those of the principal (1889) Not to loan to himself without the consent of the principal when he has bee authorized to lend at interest (1890) To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency (1891) Distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same kind and mark, which belong to different owners (1904) To be responsible in certain cases for the acts of the substitute appointed by him (1892) To pay interest on funds he has applied to his own use (1896) TO inform the principal, where an authorized sale of credit has been made, of such sale (1906) To bear the risk of collection, should he receive also on a sale, a guarantee commission (1907) To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become due (1908) To answer for his fraud or negligence (1909)

1885 – obligations of person who declines an agency It also creates an obligation on the owner to act as soon as practicable to: 1. Appoint a new agent; or 2. Taking charge of the goods

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1886 – Stipulation of advancing 1887 – agent bound by the instruction of the principal Instructions – private direction which the principal may give the agent in regard to the manner of performing his duties as such agent but of which a third party is ignorant. They are said to be secret if the principal intended them not to be made known to such party. Duty of Obedience – it is the fundamental duty of the agent to obey all the reasonable and lawful instructions given to him by his principal. Liability for loss or damage – If the agent exceeds or violates the instructions, he will be liable. 1888 – Do not carry out the agency if it shall result to loss or damage to principal 1889 – agent’s liability for damages if he prefers his own interest 1890 – Obligation not to loan 1891 – Duty to Account

1905 – right of principal where sale on credit was without authority 1.

He may require payment in cash, in which case, any interest or benefit from the sale shall belong to the agent since the principal cannot be allowed to enrich himself at the agent’s expense; or 2. He may ratify the sale on credit in which case it will have all the risks and advantages to him 1906 – authorized sale on credit 1907 – guarantee commission Guarantee commission – (del credere commission) is one where in consideration of an increased commission the factor or commission agent guarantees to the principal the payment of debts arising through his agency. Its purpose is to compensate the agent for the risks he will have to bear in the collection of the credit due the principal

1892 – SUBAGENTS Liability against him if he: 1. He was not given the power to appoint one 2. When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent 1893 – An action against the sub agent Subagent – is a person to whom the agent delegates as his agent, the performance of an act for the principal which the agent has been empowered to perform through his representative

1908 – Obligation of commission agent to collect credits of principal 1909 – Liability of agent for fraud and negligence CHAPTER 3 OBLIGATIONS OF THE PRINCIPAL (1910 – 1918) 1910 – Compliance of the Principal to the contracted obligations of the agent Specific Obligations of Principal to Agent 1.

Effects of Substitution 1. 2. 3.

1901 – Agent’s lack of authority; when not as defense 1902 – presentation of power of attorney 1903 – Commission agent as to goods received 1904 – obligation of commission agent against co-mingling

Substitution prohibited Substitution authorized Substitution not authorized, but not prohibited

2.

1894 – Agents jointly liable, not solidary 1895 – condition on solidary liability 1896 – Agent owes interest on the sums he has applied to his own use from the day on which he did so

3.

Necessity of demand principle

5.

1897 – Personal liability of the agent 1898 – agent contracting in the name of the principal 1899 – Effect of ignorance of agent 1900 – Scope of agent’s authority as to third persons

4.

Comply with all the obligations which the agent may have contracted within the scope of his authority (1910, 1881) and in the name of the principal (1868, 1883) To advance to the agent, should the latter so request, the sums necessary for the execution of the agency (1912) To reimburse the agent for all advances made by him provided the agent is free from fault To indemnify the agent for all the damages which the execution of the agency ay have caused the latter without fault or negligence on his part (1913) To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agent’s services (1875, 1306)

Ratification – is the adoption by a person of a prior act which did not bind him, but which was done or

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professed to be done on his account thus giving effect to the acts as if originally authorized by him VOID ACTS CANNOT BE RATIFIED, IT BEING INOPERATIVE FROM ITS INCEPTION Acts that may be ratified: 1. 2. 3.

Valid acts Voidable acts Unrevoked acts of the third party

good faith if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith, was the first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. 1917 – Liability to third persons of agent or principal

1911 – solidary liability of principal and agent when agent exceeds authority yet principal allowed him to act as if he were authorized

1918 – Principal; when excused from liability 1.

This rule establishes the concept of agency by estoppel Distinguish Estoppel from Apparent Authority and Implied Agency Apparent Authority – is that which though not actually granted, the principal knowingly permits the agent to exercise or holds him out as possessing

2. 3. 4.

Authority by Estoppel – arises in those cases where the principal by his culpable negligence permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent Implied Agency – is an actual and existing agency relationship distinguished by the manner in which it was created 1912 – advancing of funds (importan review)

If the agent acted in contravention of the principal’s instructions, unless the latter should wish to avail himself of the benefits derived from the contract; When the expenses were due to the fault of the agent; When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof; When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum.

CHAPTER 4 MODES OF EXTINGUISHMENT OF AGENCY (1919 – 1932) 1919 – 6 LISTED MODES Contract of Agency may be extinguished by this list but it is not exclusive.

1913 – Obligation to indemnify agent It may, therefore, be generally extinguished by the following general denominations:

1914 – Right of retention For failing to reimburse based from 1912 and 1913, the agent may retain in pledge the object of the agency as a right over the thing prior to being reimbursed. 1915 – When Principals solidarily liable to agency Three requisites: 1. There are two or more principals 2. The principals have all concurred in he appointment of the same agent; and 3. The agent is appointed for a common transaction or undertaking

1. 2. 3.

Agreement Subsequent Acts of the parties Operation of Law

Rules on Information: 1. 2.

Determination

of

Confidential

Whether the knowledge or information, the use of which the complainant seeks to enjoin, is confidential; Whether it be confidential in whole or in part, its use ought to be prevented

1916 Two persons contract separately with agent and principal Two persons may contract separately with the agent and the principal with regard to the same thing. If the two contracts are incompatible with each other, the one of prior date shall be preferred. Subject to the rules under 1544: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in

Rules on Destruction of Thing: 1. General Rule – absence of the agreement, the agency terminates; 2. Exceptions – a. If substitution is possible; b. Partial loss or destruction of the subject matter Other causes may exist for the extinguishment of the Agency Relationship

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Other modes: 1. 2. 3. 4. 5.

Extinguishment of the obligation War Legal Impossibility Termination of the sub-agent’s authority from the termination of the agent Occurrence of a specified event

1920 – Revocation of the Agency by the Principal Revocation – is the act of the Principal which is done by terminating the agency relationship in accordance with his will. Principal’s Revocation of the Agency: 1. 1920 – Revocation 2. 1925 – Two Principal Rule

An agency coupled with an interest is when the agent receives an estate or interest in the property that is the subject of the agency. The agent in this relationship holds or controls the principal's property and has legal rights against interference by outside parties. Stated differently, an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agents interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. When an agents interest is confined to earning his agreed compensation, the agency is not one coupled with an interest, since an agents interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship (Lim v Saban)

Express Revocation: 1928 - Renunciation 1. 1921 – contracting with specified persons 2. 1922 – Third party with no knowledge of the revocation

1. 2.

Without just cause – duty to notify renunciation and bears damages; With Just cause

Implied Revocation: 1. 1923 – New Agent appointed for the same business 2. 1924 – Direct management (exemption: if interest is to manage it together with the agent 3. 1926 – Revocation of GPA by SPA

1929 – Continuing renunciation

1. 1927 – When is agency irrevocable 2. 2. 3.

Agency cannot be revoked if a bilateral contract depends upon it, It is the means of fulfilling an obligation already contracted Partner is appointed manager of a partnership

after

When Agency Persists Despite Death of Principal

1926 – GPA v SPA on special matters

1.

management

1930 constitution for: (1) common interest of the principal and agent; (2) Interest of a third person who has accepted the stipulation in his favor 1931 – Done without knowledge of death of Principal

1932 – Duty to notify principal by the heirs of the agent

Agency Coupled with an Interest

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