AGENCY BAR EXAM QUESTIONS:

1. Jo-Ann asked her close friend, Aissa, to buy some

groceries for her in the supermarket. Was there a
nominate contract entered into between Jo-Ann and
Aissa? In the affirmative, what was it? Explain.
SUGGESTED ANSWER:
Yes, there was a nominate contract. Aissa accepted the
request of her close friend Jo-Ann to but some groceries
for her in the supermarket, what they entered into was a
nominate contract of Agency. Article 1868 of the New
Civil Code provides that 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.
ALTERNATIVE ANSWER:
Yes, they entered into a nominate contract of lease to
service in the absence of a relation of principal and
agent between them (Article 1644, New Civil Code).
2. 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
price they were ordered. The manufacturer shall hold
the distributor free and harmless from any claim for
defects in the units. Is the agreement one for sale or
agency?
SUGGESTED ANSWER:
The contract is one of agency, not sale. The notion of
sale is negated by the following indicia: (1) the price is
fixed by the manufacturer with the 10% mark-up
constituting the commission; (2) the manufacturer
reacquires the unsold units at exactly the same price;
and (3) warranty for the units was borne by the
manufacturer. The foregoing indicia negate sale

because they indicate that ownership over the units was

never intended to transfer to the distributor.
3. Richard sold a large parcel of land in Cebu to Leo for
P100 million payable in annual installments over a
period of ten years, but title will remain with Richard
until the purchase price is fully paid. To enable Leo to
pay the price, Richard gave him a power-of-attorney
authorizing him to subdivide the land, sell the individual
lots, and deliver the proceeds to Richard, to be applied
to the purchase price. Five years later, Richard revoked
the power of attorney and took over the sale of the
subdivision lots himself. Is the revocation valid or not?
Why? (5%)
SUGGESTED ANSWER:
The revocation is not valid. The power of attorney given
to the buyer is irrevocable because it is coupled with an
interest: the agency is the means of fulfilling the
obligation of the buyer to pay the price of the land
(Article 1927, CC). In other words, a bilateral contract
(contract to buy and sell the land) is dependent on the
agency.
4. As an agent, AL was given a guarantee commission,
in addition to his regular commission, after he sold 20
units of refrigerators to a customer, HT Hotel. The
customer, however, failed to pay for the units sold. ALs
principal, DRBI, demanded from AL payment for the
customers accountability. AL objected, on the ground
that his job was only to sell and not to collect payment
for units bought by the customer. Is ALs objection valid?
Can DRBI collect from him or not? Reason. (5%)
SUGGESTED ANSWER:
No, AL's objection is not valid and DRBI can collect from
AL. Since AL accepted a guarantee commission, in
addition to his regular commission, he agreed 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 (Article 1907, Civil Code)
5. 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 MBank, DY did not specify that he
was acting for CX in the transaction with said bank. Is
CX liable for the bank loan? Why or why not? Justify your
answer. (5%)
SUGGESTED ANSWER:
CX is liable for the bank loan because he authorized the
mortgage on his property to secure the loan contracted
by DY. If DY later defaults and fails to pay the loan, CX is
liable to pay. However, his liability is limited to the
extent of the value of the said property.
ALTERNATIVE ANSWER:
CX is not personally liable to the bank loan because it
was contracted by DY in his personal capacity. Only the
property of CX is liable. Hence, while CX has authorized
the mortgage on his property to secure the loan of DY,
the bank cannot sue CX to collect the loan in case DY
defaults thereon. The bank can only foreclose the
property of CX. And if the proceeds of the foreclosure
are not sufficient to pay the loan in full, the bank cannot
run after CX for the deficiency.
ALTERNATIVE ANSWER:
While as a general rule the principal is not liable for the
contract entered into by his agent in case the agent
acted in his own name without disclosing his principal,
such rule does not apply if the contract involves a thing
belonging to the principal. In such case, the principal is
liable under Article 1883 of the Civil Code. The contract

is deemed made on his behalf (Sy-juco v. Sy-juco 40

Phil. 634 [1920]).
ALTERNATIVE ANSWER:
CX would not be liable for the bank loan. CX's property
would also not be liable on the mortgage. Since DY did
not specify that he was acting for CX in the transaction
with the bank, DY in effect acted in his own name. In the
case of Rural Bank of Bombon v. CA, 212 SCRA, (1992),
the Supreme Court, under the same facts, ruled that "in
order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face
purport to be made, signed and sealed in the name of
the principal, otherwise, it will bind the agent only. It is
not enough merely that the agent was in fact authorized
to make the mortgage, if he, has not acted in the name
of the principal. Neither is it ordinarily sufficient that in
the mortgage the agent describes himself as acting by
virtue of a power of attorney, if in fact the agent has
acted in his own name and has set his own hand and
seal to the mortgage. There is no principle of law by
which a person can become liable on a real estate
mortgage which she never executed in person or by
attorney in fact".
6. X appoints Y as his agent to sell his products in Cebu
City. Can Y appoint a sub-agent and if he does, what are
the effects of such appointment? (5%)
SUGGESTED ANSWER:
Yes, the agent may appoint a substitute or sub-agent if
the principal has not prohibited him from doing so, but
he shall be responsible for the acts of the substitute:
(1) when he was not given the power to appoint one;
(2) when he was given such power, but without
designating the person, and the person appointed was
notoriously incompetent or insolvent.

7. A as principal appointed B as his agent granting him

general and unlimited management over A's properties,
stating that A withholds no power from B and that the
agent may execute such acts as he may consider
appropriate. Accordingly, B leased A's parcel of land in
Manila to C for four (4) years at P60,000.00 per year,
payable annually in advance. B leased another parcel of
land of A in Caloocan City to D without a fixed term at
P3,000.00 per month payable monthly. B sold to E a
third parcel of land belonging to A located in Quezon
City for three (3) times the price that was listed in the
inventory by A to B. All those contracts were executed
by B while A was confined due to illness in the Makati
Medical Center. Rule on the validity and binding effect of
each of the above contracts upon A the principal.
Explain your answers,

SUGGESTED ANSWER:
The agency couched in general terms comprised only
acts of administration (Art. 1877, Civil Code). The lease
contract on the Manila parcel is not valid, not
enforceable and not binding upon A. For B to lease the
property to C, for more than one (1) year, A must
provide B with a special power of attorney (Art. 1878.
Civil Code).
The lease of the Caloocan City property to D is valid and
binding upon A. Since the lease is without a fixed term,
it is understood to be from month to month, since the
rental is payable monthly (Art. 1687, Civil Code).
The sale of the Quezon City parcel to E is not valid and
not binding upon A. B needed a special power of
attorney to validly sell the land (Arts. 1877 and 1878,
Civil Code). The sale of the land at a very good price
does not cure the defect of the contract arising from
lack of authority

8. Prime Realty Corporation appointed Nestor the

exclusive agent in the sale of lots of its newly developed
subdivision. Prime Realty told Nestor that he could not
collect or receive payments from the buyers. Nestor was
able to sell ten lots to Jesus and to collect the down
payments for said lots. He did not turn over the
collections to Prime Realty. Who shall bear the loss for
Nestor's defalcation, Prime Realty or Jesus?
SUGGESTED ANSWER:
a) The general rule is that a person dealing with an
agent must inquire into the authority of that agent. In
the present case, if Jesus did not inquire into that
authority, he is liable for the loss due to Nestor's
defalcation unless Article 1900, Civil Code governs, in
which case the developer corporation bears the loss.
Art. 1900 Civil Code provides: "So far as third persons
are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if
such act is within the terms of the power of attorney, as
written, even if the agent has in fact exceeded the limits
of his authority according to an understanding between
the principal and the agent.
However, if Jesus made due inquiry and he was not
informed by the principal Prime Realty of the limits of
Nestor's authority. Prime Realty shall bear the loss.
b) Considering that Prime Realty Corporation only "told"
Nestor that he could not receive or collect payments, it
appears that the limitation does not appear in his
written authority or power of attorney. In this case,
insofar as Jesus, who is a third person is concerned,
Nestor's acts of collecting payments is deemed to have
been performed within the scope of his authority
{Article 1900. Civil Code). Hence, the principal is liable.

However, if Jesus was aware of the limitation of Nestor's

power as an agent, and Prime Realty Corporation does
not
ratify the sale contract, then Jesus shall be liable (Article
1898. Civil Code).
9. Stating briefly the thesis to support your answer to
each of the following cases, will the death - (c) of an
agent end an agency?
SUGGESTED ANSWER:
Yes. The death of an agent extinguishes the agency, by
express provision of par. 3, Art 1919 of the Civil Code.
10.

12.

16. Joe Miguel, a well-known treasure hunter in Mindanao,

executed a Special Power of Attorney (SPA) appointing his nephew,
John Paul, as his attorney-infact. John Paul was given the power to
deal with treasure-hunting activities on Joe Miguels land and to
file charges against those who may enter it without the latters
authority. Joe Miguel agreed to give John Paul forty percent (40%)
of the treasure that may be found on the land. Thereafter, John
Paul filed a case for damages and injunction against Lilo for
illegally entering Joe Miguels land. Subsequently, he hired the
legal services of Atty. Audrey agreeing to give the latter thirty
percent (30%) of Joe Miguels share in whatever treasure that may
be found in the land. Dissatified however with the strategies
implemented by John Paul, Joe Miguel unilaterally revoked the SPA
granted to John Paul. Is the revocation proper?
17.