ARELLANO UNIVERSITY SCHOOL OF LAW

ANALYSIS: AGENCY LEADERS

CONTRACT PROVISIONS
BUSINESS ORGANIZATION 1

Sison, Yolanda C.
05.26.16

An analysis on the nature, kinds and elements of Agency embodied in the Agency Contract between PHILAM
LIFE and AGENCY LEADER. Also, the obligations of the principal and agent incorporated therein, and modes
of termination of the agency.

NATURE OF AGENCY
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 of the authority of
the latter (Article 1868, NCC).
In line with the aforequoted provision, AGENCY LEADER (herein referred to as Agent) is a
bonafide agent of PHILAM LIFE (herein referred to as Company), as evinced by the Contract
of Agency (herein referred to as Contract) which expressly states that the former binds itself to
render services as a propagator of the latters brand of franchise. Further, under the AGENCY
LEADERS STATUS clause, the parties mutually agreed that nothing in the aforesaid Contract
shall be construed to create an employer-employee relationship, whether explicit or implied,
between the Company and Agency leader, any of its agents or persons under its charge. Also,
under the NATURE OF THE AGENCY FORCE AND FUNCTIONS OF AN AGENCY
LEADER clause, AGENCY LEADER are free to experiment and employ different business
methodologies to get best quantitative and qualitative output that will benefit the Agents,
Leaders, and Company as a whole. It can be inferred that AGENCY LEADER exercises
discretionary powers and not merely employed to perform ministerial functions. Under the same
clause, AGENCY LEADER must conduct himself with a strong sense of business ethics,
integrity and professionalism in carrying out his duties based on the terms and conditions of the
Law on Agencies and guidelines embodied in the aforesaid Contract. AGENCY LEADER,
therefore, is a bonafide agent of PHILAM LIFE and not a mere employee.

BASIS OF AGENCY
It can be inferred that a fiduciary relationship exists between the parties, PHILAM LIFE reposed
trust and confidence to AGENCY LEADERS in representing its brand franchise and in
searching out of person whom said Company may, in its sound discretion, employee as agents.

KINDS OF AGENCY
1. Express Agency

PHILAM LIFE expressly authorized in writing AGENCY LEADER to be its

agent. The acceptance of the latter is also expressed, as can be inferred from the
aforesaid Contract.

2. Compensated or Onerous Agency

Under the OVERRIDES, INCENTIVES AND LEVELLING OF AGENCY
LEADER clause, AGENCY LEADER is entitled to fees, commission and incentives set
forth in the Agency Compensation System as full override compensation for services and
business cost under the aforesaid Contract.

3. Special or Particular Agent and authority conferred is couched in general terms

AGENCY LEADER functions as a propagator of the PHILAM LIFEs

brand

of franchise, he is authorized to search out qualified people whom the Company may
employ to monitor and assist said insurance business.

4. Simple or Commission Agency

AGENCY LEADER is a self-employed entrepreneur, free to use his own time,
place, method and resources in achieving the results contemplated in the aforesaid
Contract, provided that the same shall not be against the interest of the Company and its
brands franchise. In line with such undertaking, AGENCY LEADER shall account for
all applications for

insurance and other

agency or by any agent in his agency.

official business forms obtained by his

ELEMENTS OF AGENCY
The essential elements of agency are as follows:
1. There is consent, express or implied, of the parties to establish the relationship;
2. The object is the execution of a juridical act in relation to third persons;
3. The agent acts as representative and not for himself; and
4. The agent acts within the scope of his authority.

All of which are present in the aforesaid Contract, to wit,

(1) The Contract of Agency entered into and between by PHILAM LIFE and AGENCY
LEADER is the manifestation of consent of both parties to establish an expressed agency,
which can be inferred directly from the words used in the aforesaid Contract;
(2) The Contract provides that AGENCY LEADER shall render services as propagator of the
Company authorized to search out for qualified people to monitor and assist the Company to
become the best professionals in the insurance industry;
(3) The Contract expressly states that AGENCY LEADER is first and foremost a bonafide
agent of PHILAM LIFE.
(4) The Contract provides for certain powers and authorities in favor of Agent Leaders
coupled with limitations as to the scope of such authorities. To wit,
(a) Under the AGENCY LEADERS BUSINESS UNDERTAKINGS clause, in
Contracting and Trainings Agents provision, the former has the authority to screen
quality prospects willing to learn to build business by giving sound financial advice,
however, the right to decide who fit the quality criteria and choose whom to enter into a
contract of agency with the PHILAM Life is reserved to the latter.
(b) Under the Building and Strengthening the Agency provision, AGENCY LEADER
shall undertake continuous activities directed at building and improving his agency
organization, but the same shall be done in accordance with the Companys goals,
directives, policies, and sound agency management practice.

(c) More specifically, under the LIMITATIONS ON AGENCY LEADERS

AUTHORITY clause, AGENCY LEADER shall avoid the practice of Advancing
Premiums and Advancing Premiums to complete Balance to Annual Payments; to uphold
the sanctity of existing policies whether within the Company or from another insurance
company; to abide with by the Companys prescribed guidelines in the proper use of sign
ages, Company logos and letterheads, et cetera.

OBLIGATIONS OF THE PRINCIPAL

1. To pay the agent the compensation agreed upon.
Under the OVERRIDES, INCENTIVES AND LEVELLING OF AGENCY LEADER
clause, the Company shall pay AGENCY LEADER the fees, commission and incentives set
forth in the Agency Compensation System as full override compensation for his services and
business costs under the aforesaid Contract.

2. To advance to the agent should the latter so request, the sums necessary for the execution of
the agency.
Under the Responsibilities in Doing Business provision, the Company may, by special
arrangement and at its sole discretion, from time to time, advance future commissions or
overrides to the agent or provide subsidies/incentives which may help the latter to stabilize his
business.

OBLIGATIONS OF THE AGENT

General Obligations of the Agent
1. To Act with utmost good faith and loyalty for furtherance of principals interest.

AGENCY LEADER undertakes to comply with the foregoing transactions and

authorizations of PHILAM LIFE with utmost good faith and dedication for the attainment of
mutually desired goals and results.

2. To Obey all lawful orders and instructions of principal within the scope of the agency.
Under the NATURE OF THE AGENCY FORCE AND FUNCTIONS OF AN
AGENCY LEADER clause, AGENCY LEADER must conduct himself with a strong sense of
business ethics, integrity and professionalism in carrying out his duties based on the terms and
conditions of the Franchise guidelines embodied in the aforesaid Contract. Further, AGENCY
LEADER shall be accountable to the Company for his actions and the actions of any agents, coagency leader, trainee, hired staff or person(s) acting under his charge in relation to his insurance
business.

3. To Exercise reasonable care, skill and diligence.

Under the AGENCY LEADERS ROLE IN PROPAGATING CORRECT BUSINESS
CONDUCT and the AGENCY CONTRACT clause, AGENCY LEADER shall ensure that all
agents and agency leaders under his charge shall strictly abide by the Agents Business
Guidelines on Solicitations, Underwriting, Documentation, Premium Collection and Remittance
and Policy Delivery as embodied in the Agent Contract.
Under the Responsibility over Agency Staff provision, AGENCY LEADER shall be
responsible for the proper staffing of his agency office with employees personally engaged by
him in order to conduct the regular operations of his agency.

Also, under the same provision, AGENCY LEADER shall ensure that his agency employees
observe and adhere to all policies and procedures specified by the Company for the proper
conduct of its business including accounting and safekeeping of all Company documents, forms,
sales, materials and the likes.

Specific Obligations of the Agent

1. To carry out the agency which he has accepted, as enunciated under Article 1888,NCC.
To function as a responsible and excellent propagator of the Companys
franchise.
2. To answer for damages which through agents non-performance the principal may suffer, as
enunciated under Article 1884,NCC.
Under the Agency Leader to be Bonded provision, AGENCY LEADER may be
required by the Company to either furnish a bond, or contribute to a non-refundable
indemnity fund established and maintained by the Company which shall be used by the
company to set off any debt, liability or obligation incurred by him or any agent or coagency leader under his charge.
3. Not to carry out the agency if its execution would manifestly result in loss or damage to the
principal, as enunciated under Article 1888, NCC.
Under the REBATING, CHURNING,TWISTING and REPLACEMENT
provision, AGENCY LEADER, shall not make any misrepresentation or incomplete or
inaccurate comparison of policies, or lead a policy owner of the Company or any other
Company to convert, lapse, forfeit, drain cash values or surrender his insurance in order
to purchase a new one. Also, the agent shall not to induce or enter into any arrangement
with any policyholder or any other person to make an improper or invalid insurance
claim.

MODES OF EXTINGUISHMENT OF AGENCY

As provided under the TERMINATION OF CONTRACT clause, Agency may be terminated
in any of the following grounds:

1. Death;
2. Totally or permanently disabled to perform duties on a regular and continuing basis;
3. Withdrawal of the Company from the territory in which Agency Leader is operating;
4. Other causes:
(a) Breach against integrity and honesty;
(b) Agency Leader joins PHILAM LIFEs competitors in whatever capacity;
(c) Acting beyond the scope of the authority as specified by the aforesaid contract; and
(d) Revocation, cancellation, or non-renewal of agency issued by the Insurance
Commission.

TERMINATION OF CONTRACT OF AGENCY

The aforesaid contract does not provide for a fixed period for the continuance of agency, hence,
establishes an agency at will. In this regard, termination can be had by the agent, as provided
under the Termination of Contract provision, by providing a written notice to the Company
thirty (30) days prior desired date of termination.

Under the same provision, should AGENCY LEADER choose to unilaterally terminate the
contract in order to escape any pending investigation, the latter will be considered as terminated
with cause, and any debit will automatically be demandable in full.

In line with the termination of the Contract of Agency, the Company, at its sole discretion, may
decide as to whether Agency Leader can still remain as its agent in accordance with the Rules of
Agents embodied in the Agent Contract.

ASSIGNMENT OF CONTRACT
Under the Article 1932, NCC, if the agent dies, the agency is also extinguished. In such case, the
law imposes upon the heirs of the deceased agent not only the obligation to notify the principal
but also to adopt such measures as the circumstances may demand in the interest of the principal.
In this connection, the authority conferred to the agent may pass to the agents heirs in cases of
agency by operations of law or where agency is coupled with an interest.
Under the ASSIGNMENT OF AGENCY LEADERS CONTRACT clause, such assignment
may or may not be made to any heir, successor or affiliated entity, subject to the sole discretion
and criteria set by the Company.

RETURN OF DOCUMENTS
Article 1920, NCC provides that if the authority of the agent is in writing, the principal can
compel the agent to return the document evidencing the agency, to prevent the latter from
making use of the instrument and to avoid liability to third persons who may subsequently deal
with the agent on the faith of the instrument.

In compliance thereto, the aforesaid contract incorporated such provision, stating among others
that upon termination of any agent or co-leader under him, Agency Leader shall ensure that the
terminated agent signs a sworn statement in favor of the Company declaring that he has returned
all such documents and data to the Company and no longer holds any of such in whatever form.

NOTICE OF TERMINATION

The power shall continue to be in full force until the notice is rescinded in the
same manner in which it was given (par 2, Art. 1873, NCC).
The aforesaid Contract expressly provides under its Publication Upon Termination provision
that the Company shall be entitled to publish notices in the newspapers or dispatch
correspondence notifying its policyholders and the general public that Agency Leader has ceased
to be an agency leader or as an agent of the Company.