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A partner acts not only for his co-partners and the partnership but also as a principal
for himself (in agency, agent acts only for his principal).
Distinguish Agency from negotiorum getio:
Negotiorum gestio is a quasi-contract; the getio acts authority and knowledge of the
owner of the property or business although according to his presumed (not express) will by
exercising all the diligence of a good father of a family. (art. 2145. In both however, there
is representation.
Distinguish Agency from sale;
In sale (as distinguished from agency to sell, the buyer receives the goods as owner,
pays the price (the agent deliver the proceeds of the sale to the principal), can deal with the
thing as he please being the owner (the agent, according to the instructions of the principal)
and as a general rule, cannot return the object sold.
Distinguish agency from brokerage:
A broker is merely an intermediary between the purchaser and the vendor whose
only office is to bring together the parties to the transaction and has nor relation to the thing
he buys or sell, while a (commission) agent maintains a relation not only his principal and
the purchaser or vendor but also with the property the subject matter of the transaction
which is placed and at disposal in accordance with his authority.
Appointment of the Agent:
a. Express one where the agent has been actually authorized by the principal either
orally or in writing.
b. Implied inferred from the a) acts of the principal, b) from principals silence, c)
principals lack of action or d) his failure to repudiate the agency knowing that
another person is acting on his behalf without authority (Art. 1869)
Form: Agency may be oral, unless the law requires specific form.
When forms are required:
For validity:
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.
For convenience:
Art. 1358. The following must appear in a public document:
(1) xxxxxxxxx
(2) xxxxxxxxx
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
Rule in case of revocation: It must be revoked in same manner how the agency was made
known. But revocation made in any manner shall be effective against all persons having
knowledge thereof. Reason according to Justice J.B.L. Reyes is to forestall fraud.
Meaning of Power of Attorney
A written authorization to an agent to perform specific acts in behalf of his principal which
acts, when performed, shall have binding effect on the principal.
Distinguished implied agency from agency by estoppel.
In implied agency, there is an actual agency. The principal alone is liable. In an agency by
estoppel, the authority of the agent is not real but apparent. If the principal causes the
estoppel, he is liable to any third person who relied on the misrepresentation. If the estoppel
is cause by the agent, then only agent is liable (Art. 1911).
As between the principal and the agent:
In implied agency, the agent is true agent, with rights and duties of an agent. In an
agency by estoppel (caused for instance by estoppel on the part of the agent), the agent is
not a true agent; hence he has nor rights as such.
As to third persons:
If the estoppel is caused by the principal, he is liable, but only if the third person
acted on misrepresentation in an implied agency, the principal is always liable.
If the estoppel is caused by the agent, it is only agent who is liable, never the alleged
principal; in an implied agency, the agency is never personally liable.
Authority Discussed:
The right of the agent to effect the legal relations of his principal by the performance
of acts effected in accordance with the principals manifestation of consent.
Kinds of Authority:
1.
2.
3.
4.
5. Authority to collect does not carry with it authority to receive partial payment, nor
the authority to accept commercial paper as payment of the debt.
PRESUMPTION AS CONSIDERATION
Agency is presumed
contrary. (art. 1875)
Note:
1. The cases enumerated involve acts of strict dominion or ownership as distinguish
from acts of administration.
2. A special power to sell excludes the power to mortgage; and a special power to
mortgage does not include the power to sell. (Art. 1879).
Power to sell carries with it the power to find a purchaser or to sell directly;
power to deliver the property, power to make the usual representation and
warranty; power to execute the necessary documents; power to fix the
terms of the sale, including the time, place, mode of delivery, price of the
goods, and the mode of payment unless there be a set conditions stipulated
by the principal; and power to sell only for CASH and power to receive the
price unless he was authorized to only solicit orders.
The power to sell does not carry with it the power to barter or to exchange
to mortgage or to pledge.
The power to mortgage does not include the power to sell; or to execute a
second mortgage; to mortgage for the agents personal benefit of any third
person, unless the contrary has been clearly indicated.
A special power to comprise does not authorize submission to arbitration.
(art. 1880) Hence an agent authorized to compromise can do anything,
which the principal himself can do to effect a settlement unless there is
contrary legal provision.
Requisites in order the agent can bind the principal:
1. The agent must act within the scope of his authority, and
2. The agent act in behalf of the principal (see Art. 1881, 1882)
Cases wherein the principal may still be bound by the acts of an agent who exceeded
his authority:
a.
Where the principals act have contributed to decide a third person in good faith
(see Art. 1911
b.
Where the limitations upon the power created by him could not have been
known by the third person (see Art. 1900)
c.
Where the principal has placed in the hands of the agent instruments signed by
him in blank; and
d.
Where the principal has ratified the acts of the agent. (Art. 1901)
The agent is one directly liable to the person with whom he had contracted as if the
transaction were his own. Therefore, the principal and such person have no right of
action against each other. The exception is:
The principal is bound when the contract involves things belonging to him;
the principal may sue the agent for breach of contract. (Art. 1883).
Specific obligation of the agent:
1. To carry out the agency in accordance with its items; otherwise, he shall be liable for
damages. (art. 1884) Reason: He betray the confidence reposed on him by the
principal;
2. To finish the business already begun on the death of the principal should delay entail
any danger. Reason: In such case, the agency is still deemed in full force;
3. To advance the necessary funds if such is the stipulation except when the principal is
insolvent (art. 1886)
4. To act in accordance with the instruction of the principal and in the absence
therefore, to do all that a good father of the family would do, as required by the
nature of the business (art. 1887).
5. Not to carry out the agency if its execution would manifesty result in loss or damage
to the principal (art. 1888) Reason: The duty of the agent is to render service for the
benefit and not to the determined of the principal.
6. There being a conflict, not to prefer his own interest to those of the principal (e.g.
buying goods of the principal or selling his own goods to the principal without
informing the principal); otherwise, he shall be liable for damages. (art. 1889)
Reason: Agency is a fiduciary relation:
7. Not to borrow money from the principal who was authorize him to lend although at
interest, without his consent. (art. 1890) Reason: the agent may prove to be a bad
debtor. But if the agent has been authorize to borrow money he may himself be the
lender at the current rate. Reason: There is no danger of the principal suffering any
damage;
8. To render an account of his transactions and deliver to principal whatever he may
have received by virtue of the agency though it may not be owing to the principal
(art. 1891):
Note: Duty of the Agent to account is mandatory. Hence in an overpriced received by the
agent for goods he was sell at a certain price, he is duty bound to make an account. This
applies even in cases in cases that the money not be owing to the principal but arose
from the transaction involving the contract of agency.
Stipulation exempting from the duty to account is VOID, being contrary to public policy
as it would be conducive to fraud.
Some Doctrines on the duty to account:
1. Whoever administers anothers affairs must render an account because of the
representative relation and because of the fiduciary position.
2. If an agent refuses to account when it is his duty to do so, the principal may at
once terminate the agency and sue for the balance due. If the principal dies,
the agency is extinguished, BUT the duty to account subsists, and can be
demanded by the principals heirs or legal representatives.
3. The principal, or his legal representative, has the right to pass upon the
correctness of the accounting.
4. Corollary to his right to demand an accounting, a principal has the right to
make reasonable inspection of the books of account and memoranda,
including the original entries.
5. An agent, as a consequence of his duty to account, cannot dispute his
principals title to the property in his possession.
6. To be responsible in certain cases for the acts of the substituted appointed by
him (art. 1891).
7. To be responsible for the goods received by him, etc. To sell on credit only with
the consent of the principal, etc. and to collect with due diligence the credits
of the principal (art. 1903-1908); and
8. To answer for his fraud or negligence (art. 1909)
LIABILITY OF AGENT
Liability of two or more agent, even if they may have been appointed simultaneously
is JOINT. (Art. 1894).
Agent is liable for interest on the sums he has applied to his own use from the day with he
converted the said funds and so which owes after the extinguishment of the agency. He is
liable personally in the contract of agency if he expressly binds himself (art. 1897) or if he
exceeded his authority;
EFFECTS OF CONTRACT ENTERED INTO IN EXCESS OF AUTHORITY
The principal is not at all bound, except of course if there is subsequent ratification
by him. Therefore, it shall be VOID refers to the tie between the agent and the third party.
Regarding the principal, other articles are applicable. (art. 1989)
If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware if the limits of the powers granted by the principal. In
this case, however, the agent is liable if he undertook to secure the principals ratifications.
(art. 1989)
Example: An agent was authorized to sell his principals car. The agent sold in the
principals name the principals radio cabinet to third person who knew that the agent was
not authorized. In the above example, even as between the agent and the third person ,
such sale is completely null and void. However, if the agent had promised to obtain the
principals ratification, said agent would be liable in case of failure to obtain such ratification.
If ratification has been obtained, then the principal would be bound.
DISTINGUISH AUTHORITY FROM INSTRUCTIONS:
Authority is the extent or the limitation of the agents power to represent the
principal. Instructions are directions which the principal may give the agent to follow in the
discharge of his duties as such agent.
Third persons dealing with an agent do so at their own risk and are duty bound to
investigate his authority, the principal is not bound. But persons dealing with the agent need
not verify or investigate the instructions of the principal since they concern only the principal
and the agent.
EXAMPLE: P writes to B that A is authorized to buy certain merchandise. P privately
instructions A not to but merely to obtain Bs lowest price. I violation of said instruction, A
buys the merchandise. In this case, the sale is binding upon P because A has authority to
make the purchase although it is not in accordance with the instruction given.
5. To pay the agent the compensation agreed upon, or if no compensation was specified
the reasonable value of the agents services. (Art. 1875)
The principal is solidarily with the agent even when the latter exceeded his authority
if the principal allowed the agent to act as though he had full powers. (Art. 1911) this
rules is based on the principle of estoppel.
Rules in case two persons contract with regards to the same thing. One of them
with the agent and the other with the principal.
1. If the two contract are compatible to each other, both shall be enforced;
2. If they are incompatible with each other, that of prior date shall be preferred subject
to the provisions of Art. 1544 (Art. 1916)
3. If the agent acted in good faith, the principal shall be liable to the third person whose
agent contract must be rejected; and
4. If the agent acted in bad faith, he alone shall be responsible. (art. 1917)
Rules when there is multiplicity of principals:
When two or more persons have appointed and agent for a common transaction or
understanding they shall solidarily liable to the agent for all the consequences of agency
(art. 1915).
Cases the principal not liable for the expense incurred by the agent.
1. If the agent acted in contravention of the principals instruction, unless the latter
should wish to avail himself, or the benefits derived from the contract;
2. When the expense were due to the fault of the agent.
3. When the agent incurred them with knowledge that the unfavorable result would
ensue, if the principal was not aware thereof, and
4. When it was stipulated that the expenses would be borne by agent, or that he latter
would be allowed only a certain sum.
Extinguishment Of Agent:
1. By its revocation;
2. By the withdrawal of the agent;
3. By the accomplishment of the object or purpose of the agency; and
4. By the expiration of the period for which the agency was constituted. (art. 1919)
Key word: EDWARD
E Expiration
D Death, etc.
W- Withdrawal
A Accomplishment of the agency
R- Revocation
D- Dissolution
Other causes:
Termination by mutual consent, novation, loss of the subject matter of the
agency.
May a contract of agency be revoked?
Expressly; or
Impliedly
1. By the appointment of anew agent for the same business transaction (art.
1923)
2. By direct management by the principal of the business entrusted to agent
(Art. 1944)
3. With respect to a general power of attorney previously granted (e.g. to
manage a business ) as regards the matter involved in the latter (Art. 1926)
Cases when agency is irrevocable
The principal may generally revoke an agency at will. (Art. 1920). In the following
case, he has no right to revoke the agency without incurring liability for damages:
If the agency is coupled with interest, i.e. the agent possesses an interest in the
subject matter of the power conferred and nor merely in the compensation arising from the
exercise of the power (e.g. where the principal pledges his property to the agent as security
for his debt and gives the agent the power to dispose of it should be in default).
Under Art. 1927:
1. If a bilateral contract depends on the agency (e.g. where it is stipulated that
the ownership of the factory sold would be transferred to the buyer only after
payment of the balance of the purchase price and that the seller (principal)
would appoint the agent to manage the factory and that any profit would be
used to pay off the balance.
2. If the agency is means of fulfilling an obligation already contracted (e.g.
agency in favor of creditor to collect sums due debtor- principal) ; and
3. If a partner is appointed manager of a contract of partnership, his appoint
being revocable only upon just and lawful cause and upon the vote of the
partners representing the controlling interest. (see Art. 1927)
4. When there has been waiver by the principal (however, the irrevocability of a
power of attorney cannot affect one who is not party thereto, it being
obligatory only on the principal who created the agency.
5. When the principal is obliged not to revoke. ( here the principal can still revoke
but he can held liable for damages, for breach of contract).
6. When the revocation is done is bad faith. (Here, the principal can still revoke
but innocent third parties should not be prejudiced; moreover the innocent
agent can be entitled to damages from him.
Agency is not terminated immediately by death in the following cases:
1. If the agency is necessary to finish the business already begun on the death of
principal where delay should entail any danger. (1884):
2. If it has been constituted in the common interest of the principal and the agent (art.
1930)
3. If it has constituted in the interest of the third person who has accepted the
stipulation in favor (Art. 1311)
ILLUTRATIVE Cases:
I.
A left his car at shell station, operated by B, to be washed, greased and sprayed.
When the car was being raised in the elevator shaft, it fell from the service platform and as a
result is suffered damage estimated P2,000. Since the car was insured by X insurance Co.,
the latter had to pay P2,000 to A. Upon payment of the amount X, insurance Co. brought an
action against the Shell Company of the Philippines to recover said amount. The defendant
Company interposed the defense that B, operator of the service station, is an independent
contractor, consequently, it cannot be held liable for damages. Is this correct? Reason.
Ruling: The contention of the Shell Philippines is not correct. The Supreme Court ruled
the contract entered between the company and the operator station is a contract of agency.
The operator of a service station is not an independent contractor, but merely and agent of
the Company because even the equipment which he use in his service station are owned by
the Company and oil, gasoline and other products which he sells the public are sold at
commission.
II.
A constituted son as his agent to mortgage parcel of land with the bank. In the
contract of mortgage, there is a provision that the bank can foreclose the mortgage in case
the debtors failure to pay his obligation, the bank foreclosed and sold the same to the
higher bidder. A questioned the sale contending that the authority to mortgage does not
carry with it the power to sell. Is As contention correct? Why?
No. While it is true that Special Power of Attorney to sell does not carry with it the
power of mortgage of the power to mortgage does not carry the power to sell, yet the
stipulation granting an authority to foreclose a mortgage is an ancillary stipulation
supported by the same cause or consideration for the mortgage and forms an essential or
inseparable part of the bilateral agreement.
DOCTRINE OF AGENCY BY NECESSITY
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Strictly speaking, an agency can never be created by necessity. What is meant by the
phrase agency by necessity is however this: That by virtue of the existence of an
emergency the authority of an agent is correspondingly enlarged in order to cope with the
exigencies or the necessities of the moment.
1.
2.
3.
4.
5.
Five conditions laid down by the Supreme Court for Authority of Agency by Necessity:
The real existence of an emergency;
Inability of the agent to communicate with the principal;
The exercise of the additional authority for the principals own protection;
Adoption of fairly reasonable means, premises duly considered;
The ceasing of the authority the moment the emergency no longer demands the
same.
Example:
If a bus conductor is seriously hurt, the driver is authorized to engage the services of
the physician, in the companys name, sot that the conductor may survive. This is really for
the best interest of all concerned.
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