Beruflich Dokumente
Kultur Dokumente
the principal can lawfully delegate to another Art. 1877. An agency couched in general terms
the power of doing. comprises only acts of administration, even if the
2.) General agent: One employed to transact all the principal should state that he withholds no power
business of his principal, or all business of a or that the agent may execute such acts as he may
particular kind or in a particular place, or in consider appropriate, or even though the agency
other words, to do all acts connected with a should authorize a general or unlimited
particular trade, business, or employment. management.
3.) Special/Particular agent: One authorized to act
in one or more specific transactions, or to do Examples of acts of mere administration:
one or more specific acts, or to act upon a 1.) To sue for collection of debts;
particular occasion. e.g.: 2.) To employ workers or servants and employees
a.) Atty at law: One whose business is to needed for the conduct of business;
represent clients in legal proceedings. b.) 3.) To engage counsel to preserve the ownership
Auctioneer: One whose business is to sell and possession of the principals property;
property for others to the highest 4.) To lease real property to another person for 1
bidder at a public sale. year or less, provided the lease is not
c.) Broker: One whose business is to act as registered;
intermediary between 2 other parties. 5.) To make customary gifts for charity or to
d.) Factor: One whose business is to receive employees in the business managed by
and sell goods for a commission, being the agent
entrusted with the possession of the 6.) To borrow money if it be urgent and
goods involved in the transaction. indispensable for the preservation of the things
under administration.
Attorney-in-fact: One who is given authority by his
principal to do a particular act not of a legal character. How are contracts of agency construed?
In strict legal sense: An agent having a special authority Contracts of agency as well as general powers of
created by deed. attorney must be interpreted in accordance with the
language used by the parties. The real intention of the
General Agent v. Special Agent [SNETI] parties is primarily determined from the language used
As to General agent Special agent and gathered from the whole instrument. In case of
Scope of All acts connected Only one or more doubt, resort must be had to the situation,
w/ the business in specific acts in surroundings and relations of the parties. The intention
authority of the parties must be sustained rather than defeated.
which he is pursuance of So if the contract be open to 2 constructions, one of
engaged. particular which would uphold the intention while the other would
instructions or w/ overthrow it, the former is to be chosen.
restrictions
necessarily implied MEMORIZE THIS: [PNC-WIGLLS-PG-CARS]
from the act to be Art. 1878. Special powers of attorney
done. are necessary in the following cases:
Nature of Series a Single transaction 1.) To make such payments as are not
transactions or a series of usually considered as acts of
service administration;
authorized involving a transactions not 2.) To effect novations which put an end to
continuity of involving continuity obligations already in existence at the
service. of service. time the agency was constituted;
Extent to By an act within Cannot in a manner 3.) To compromise, to submit questions to
the scope of his beyond or outside renounce the right to
which agent arbitration, to
may bind authority although the specific acts w/c appeal from a judgment, to waive
principal it may be contrary he is authorized to objections to the venue of an action or to
to his special perform. abandon a prescription already acquired;
instructions. 4.) To waive any obligation gratuitously;
Termination Apparent authority Termination 5.) To enter into any contract by which the
rd ownership of an immovable is
of authority does not terminate effective as to 3
by mere revocation party unless agency transmitted or acquired either
of authority w/o was for purpose of gratuitously or for a valuable
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notice to 3 contracting w/ that consideration;
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parties. 3 party.
Construction Merely advisory. Strictly construed. charity or those made to employees in
of Limits the authority the business managed by the agent;
instructions of agent.
of principal
a. principal is deemed to have actually with whom the agent contracted; neither
intended the agent to possess. have such persons against the principal.
4.) Apparent or Ostensible: when it is conferred by In such case the agent is the one directly bound
words, conduct or even by the silence of the in favor of the person with whom he has
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principal which causes a 3 person reasonably to contracted, as if the transaction were his own,
believe that a particular person, who may or may except when the contract involves things
not be the principals agent, has actual authority belonging to the principal.
to act for the principal. Ostensible authority is The provisions of this article shall be
another name for authority by estoppel. understood to be without prejudice to the
5.) General: when it refers to all the business of the actions between the principal and agent.
principal.
6.) Special: when it is limited only to one or more Kinds of Principals:
specific transactions. 1.) Disclosed: if at the time of the transaction
7.) By necessity or by operation of law: when it is contracted by the agent, the other party thereto
b. demanded by virtue of the existence of has known that the agent is acting for a principal
an emergency; it terminates when the and has known the principals identity.
emergency has passed. 2.) Partially disclosed: if the other party knows or
has reason to know that the agent is or may be
Requisites for Principal to be Bound by Act of Agent: acting for a principal but is unaware of the
principals identity. The partially disclosed
1.) The agent must act in behalf of the principal; rd
principal may enforce against the 3 person the
2.) The agent must act within the scope of his
contract of the agent like any disclosed
authority. rd
principal. Similarly, the 3 person has a right of
action against the principal.
When is a principal not bound by the act of his agent? 3.) Undisclosed: if the party has no notice of the
When the agent acts without or beyond the scope of fact that the agent is acting as such for a
his authority; or when the agent acts within the scope of principal.
his authority but in his own name except when the
transaction involves things belonging to the principal. General Rule in 1883: If the agent is authorized to act
on behalf of the principal but instead acts in his own
Authority? Whose behalf? Status of K name, the agent is the one directly liable to the person
With authority Principals Valid with whom he had contracted as if the transaction were
With authority Own Depends. [1883] his own.
Without Principals Unenforceable
Without Own Valid Exception: If the contract involves something belonging
to the principal.
Who to sue?
In case the agent acts in the name of the principal Remedy of the Principal if this situation arises:
and within his scope of authority, you must name the He can demand from the agent damages for his
principal as the defendant. failure to comply with the agency.
Specific Obligations:
1.) To carry out the agency he has accepted.
2.) To answer for damages which through his non-
performance the principal may suffer.
3.) To finish the business already begun on the
death of the principal should delay entail danger.
4.) To observe the diligence of a good father or a
family in the custody and preservation of the
goods forwarded to him by the owner in case he
declines an agency, until an agent is appointed.
5.) To advance the necessary funds should there be
a stipulation to do so.
6.) To act in accordance with the instructions of the
principal, and in default thereof, to do all that a
good father of a family would do.
7.) Not to carry out the agency if its execution
would manifestly result in loss or damage to the
principal.
8.) To answer for damages if there be a conflict
between his interests and those of the principal,
he should prefer his own.
9.) Not to loan to himself if he has been authorized
to lend money at interest.
10.) Not to render an account of his transactions
and to deliver to the principal whatever he may
have received by virtue of the agency.
11.) To be responsible in certain cases for the act of
the substitute appointed by him.
12.) To pay interest on funds he has applied to his
own use.
1.) When the instruction calls for the performance of Every stipulation exempting the agent from the
illegal acts; or obligation to render an account shall be void.
2.) Where he is privileged to do so to protect his
security/interest in the subject matter of the Rationale: Contrary to public policy as it would
agency. encourage fraud. It is in the nature of a waiver of an
action for future fraud w/c is void.
Art. 1888. An agent shall not carry out an
agency if its execution would manifestly result in If the agent fails to deliver and instead converts or
loss or damage to the principal. appropriates for his own use the money or property
belonging to his principal, with what can he be charged?
Rationale: The duty of the agent who is merely an ESTAFA.
extension of the personality of the principal is to render
service for the benefit of the principal and not to act to Art. 1892. The agent may appoint a substitute if
his detriment. Furthermore, the agent must exercise due the principal has not prohibited him from doing
diligence in carrying out the agency. so; but he shall be responsible for the acts of the
substitute:
Art. 1889. The agent shall be liable for damages 1.) When he was not given the power to
if, its execution would manifestly result in loss or appoint one;
damage to the principal. 2.) When he was given such power, but
without designating the person, and the
Note: This provision applies to both onerous and person appointed was notoriously
gratuitous transactions. The law does not distinguish incompetent or insolvent.
so neither should we. All acts of the substitute appointed against the
prohibition of the principal shall be void.
Rationale: An agent occupies a fiduciary position and
therefore is bound to exercise loyalty, obedience, and Sub-agent: A person to whom the agent delegates, as
diligence with respect to the interest of the principal. his agent, the performance of an act for the principal
which the agent has been empowered to perform
If the agent follows the principals instructions yet his acts through his representative.
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still result in damage to 3 persons, who is liable?
General rule: The agent is NOT liable. Relation among the principal, agent and sub-agent
Except: if before acting that way, it is obvious that In reality, the sub-agent is a stranger to the principal
the act will result to damage, then the agent is liable. who originally gave life to the agency. But if the agent is
authorized to appoint a sub-agent, the relation of
Art. 1890. If the agent has been empowered to principal and agent exists between the principal and the
borrow money, he may himself be the lender at sub-agent. That is, the sub-agent may be the agent of
the current rate of interest. If he has been the principal if he is in actual control of the business and
authorized to lend money at interest, he cannot the principal knows of his appointment or knows that
borrow it without the consent of the principal. his appointment is necessary. Consequently, any act
done by the sub-agent in behalf of the principal is
Rationale: The agent can lend money to the principal deemed an act of the principal; so neither agent nor
using the agents own funds at the current rate of sub-agent may be held personally liable as long as they
interest and NOT at a higher interest rate because the act within the scope of their authority.
agent is supposed to act for the principals benefit.
If the agent is authorized to lend the principals When can an agent appoint a sub-agent?
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money, with interest, to 3 persons, the agent cant be So long as theres no prohibition. However, he shall
the borrower without the consent of the principal be responsible for all the sub-agents acts.
because the agent may not be a good borrower or he
may be insolvent or he may not be a good risk. There is 4 Instances where a Sub-agent is appointed and the
a danger here that the interest of the principal would Effects of each:
be jeopardized. Instance Effect
This would also seem to be the case if the agent No prohibition Agent responsible for all
is authorized to lend money w/o interest because of the acts of sub-agent.
the same reason. Prohibition Sub-agents acts are VOID
as to the principal.
Art. 1891. Every agent is bound to render an
Authority to appoint but Agent liable for acts of
account of his transactions and to deliver to the
not designated by principal sub-agent if the sub-agent
principal whatever he may have received by
is notoriously incompetent
virtue of the agency, even though it may not be
or insolvent.
owing to the principal.
Authority to appoint and Agent is released from any
designated by principal liability from the acts of
the sub-agent. Reason for general rule: Because an agent who acts as
such within the scope of his authority represents the
principal so that his contract is really the principals.
Art. 1893. In the cases mentioned in Nos. 1
and 2 of the preceding article, the principal may Exceptions:
furthermore bring an action against the substitute 1.) When the agent binds himself; or
with respect to the obligations which the latter 2.) When he exceeds the limits of his authority
has contracted under the substitution. without giving the third party sufficient notice
of his powers.
When can the principal sue the substitute?
Under the premises given in the previous provision, Reasons for exceptions:
the principal can sue both the agent and the substitute. 1.) When the agent expressly binds himself, he
thereby obligates himself personally and by his
Art. 1894. The responsibility of two or more own act.
agents, even though they have been appointed 2.) When the agent exceeds his authority, he really
simultaneously, is not solidary, if solidarity has not acts without authority and therefore, the
contract is unenforceable against the principal.
been expressly stipulated.
The agent becomes personally liable because y
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If solidarity is not stipulated, what is the liability to 2 or his wrong or omission, he deprives the 3
more agents? JOINT. party with whom he contracts of any remedy
Each is liable only for proportionate part of debt. against the principal.
Not only the actual authorization conferred upon the i.) Vary the terms of an express
agent by the principal, but also that which has
apparently or impliedly been delegated to him. authorization;
ii.) Dispense with a legal requirement
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To hold the principal liable, a 3 person dealing with an enacted for the principals
agent must: benefit;
Discover upon his peril not only the fact of agency iii.) Change a rule of law or dispense
but the nature and extent of authority of the agent. He with a formality required by law;
is put on inquiry. He must also act with ordinary iv.) Vary an essential quality of the
prudence and reasonable diligence. agency relationship.
b.) General rule: principal must have notice
Fundamental principles when inquiring whether authority of the alleged custom, before the agents
exists: acts, in accordance therewith, may bind
1.) The law indulges in no bare presumptions that the principal. Exceptions:
an agency exists, it must be proved and i.) Where the principal and the agent
presumed from facts; reside in the same community,
2.) The agent cannot establish his own authority, the usage is definite and well-
either by his representations or by assuming to known, and the agent has no
exercise it; notice that he is to act to the
3.) An authority cannot be established by mere contrary;
rumor or general reputation; ii.) Where the agent is authorized to
4.) A general authority is not an unlimited one; and deal in a particular place or
5.) Every authority must find its ultimate source in in a particular market
some act or omission of the principal. exchange.
4.) By necessity the existence of an emergency or
In case the fact of agency or the extent of the authority other unusual conditions may operate to invest
of the agent is controverted, the burden of proof is on: in an agent authority to meet the emergency,
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The 3 person to establish the fact of agency or provided:
the extent of authority of the agent. a.) Emergency really exists;
b.) Agent is unable to
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Does the 3 person have to inquire further if the communicate w/ the principal;
power of attorney is written? c.) Agents enlarged authority is
No. He is not required to inquire further than exercised for the principals
the terms of the written power of attorney. protection; and
d.) The means adopted are
If there is a secret mutual understanding between the reasonable under the
principal and the agent, and such is not expressed in
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the written power of attorney, does the 3 person have 5.) By certain doctrines
to inquire?
No. As far as he is concerned, an act of the agent a.) Apparent authority
within the terms of the power of attorney as written, is b.) Liability by estoppel;
within the scope of the agents apparent authority c.) Ratification.
notwithstanding that the agent may have exceeded the 6.) By the ejusdem generis rule such that where
limits of his actual authority according to a secret in an instrument of any kind, an enumeration of
understanding between him and the principal. In such a specific matters is followed by a general phrase
case, the principal is estopped from claiming that the is held to be limited in scope by the specific
agent exceeded his authority. matters.
Ways by which the agents authority may be broadened Responsibility of principal when agent acts w/
or restricted: [Im-UNDEr] improper motives:
1.) By implication agents authority extends not General rule: Motive of agent in entering into a K
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only to express requests, but also to those acts w/ a 3 person is immaterial.
Exceptions:
and transactions incidental thereto. It embraces rd
all the necessary and appropriate means to 1.) Where the 3 person knew that the agent was
acting for his benefit, in w/c case, the
accomplish the desired end. rd
principal is not liable to the 3 person; and
2.) By usage and custom 2.) Where the owner is seeking recovery of personal
a.) An agents authority may not be property of w/c he has been unlawfully deprived.
enlarged through usage and custom in
the following cases: Where it is sought
to
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1.) Within the scope of the agents authority Do secret orders or private instructions prejudice 3
Principal is subject to liability for lass caused persons?
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to another by the 3 persons reliance upon a No, he cannot be prejudiced by any secret
understanding between the principal and the agent.
deceitful representation of an agent in the rd
course of his employment if: Such secret orders cannot be invoked as against 3
parties if the agent had apparent authority.
a.) Representation is authorized; Art.
for
upon 1903.
the
conditions
statement The
goods
and
receiving
of commission
as
the received
described
them
damage hebyagent
andin the shall
him
should be suffered
inmake
the responsible
terms
consignment,
deterioration and
unless
a written
by
the same.
b.) Within the implied authority of the agent
to make for the principal; or Commission agent: One whose business is to receive
c.) Apparently authorized. and sell goods for a commission and who is entrusted by
2.) Beyond the scope of the agents authority the principal with the possession of goods to be sold,
General rule: Principal is not bound. Exception: and usually selling in his own name.
when the principal takes advantage of a K made
under the false misrepresentation of his agent. Ordinary agent v. Commission agent:
Ordinary agent Commission agent
3.) For the agents own benefit Principal is liable Acts for and behalf of his May act in his own name
(motive of agent immaterial). principal. or in that of his principal.
Need not have possession Must be in possession.
Art. 1901. A third person cannot set up the fact of the goods of his
that the agent has exceeded his powers, if the principal.
principal has ratified, or has signified his Commission agent v.
willingness to ratify the agents acts. broker:
Commission agent Broker
Effect of ratification by the principal: Has a relation to principal, No relation w/ the thing
Ratification of a contract gives it the same effect as if buyers or sellers, and the w/c he purchases or sells.
the principal had originally authorized it. property itself. Merely a go-between.
Who must ratify the contract?
Liability of commission agent as to goods received:
Only the principal. But there must be knowledge on
If the commission agent received goods consigned to
the part of the principal of the things he is going to
him, he is responsible for any damage or deterioration
ratify.
suffered by the same in the terms and conditions and
rd as described in the consignment.
When can the 3 person repudiate the contract?
Before actual ratification by the principal, or before
Presumption established in this article:
the principal has signified his willingness to ratify the
Damage in the merchandise were suffered while in
agents acts.
the possession and custody of the agent.
Effect of the principal receiving the benefits of the
What the commission agent must do to avoid liability:
transaction:
He is deemed to have ratified it. A principal may not Make a written statement of the damage and
accept the benefits of a transaction and at the same deterioration if the goods received by him do not agree
time repudiate its burdens. w/ the description in the consignment.
Agent v. Depositary:
Art. 1902. A third person with whom the agent
wishes to contract on behalf of the principal may Agent Depositary
require the presentation of the power of attorney, Cannot commingle goods Can commingle goods of
or the instructions as regards the agency. Private of the same kind. the same kind.
or secret orders and instructions of the principal
do not prejudice third persons who have relied Art. 1904. The commission agent who handles
upon the power of attorney or instructions shown goods of the same kind and mark, which belong
them. to different owners, shall distinguish them by
countermarks, and designate the merchandise
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Duty of a 3 person who deals w/ an agent: respectively belonging to each principal.
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3 person deals w/ an agent at his peril. He is bound to
Purpose of this provision:
inquire as to the extent of the agents authority, and this is
especially true where the act of the agent is of an unusual Prevent any possible confusion or deception.
nature. Ignorance of the agents authority is no excuse. It is
his duty to require the agent to produce his power of Art. 1904 gives the general rule. Exceptions:
1.) By custom;
2.) Collecting banks.
Helen C. Arevalo 11 Section II-D
nd
Finals Reviewer AGENCY 2 Sem; 2003
Art. 1905. The commission agent cannot, On the contrary, the principal may sue the buyers in his
without the express or implied consent of the own name. In such a case, the agent amounts to no
principal, sell on credit. Should he do so, the more than a guaranty. Liability is a contingent pecuniary
principal may demand from him payment in liability.
cash, but the commission agent shall be entitled
to any interest or benefit, which may result from Can the agent with a guarantee commission put up
such sale. the defense of insolvency of the debtor?
No. an agent receiving a guarantee commission
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Rule given in this article: cannot put up the defense that the debtor-3 person
Commission agent can sell on credit only with possesses no property since this is precisely the risk
the express or implied consent of the principal. the commission agent assumes.
Right of the principal in case the commission agent sold Art. 1908. The commission agent who does not
goods on credit without authority: [CR] collect the credits of his principal at the time
2 alternatives: when they become due and demandable shall be
1.) He may require payment in cash, in w/c case, liable for damages, unless he proves that he
any interest or benefit from the sale on credit exercised due diligence for that purpose.
shall belong to the agent since the principal
cannot be allowed to enrich himself at the Obligation of the commission agent under this article:
agents expense; or The commission agent who has made an authorized
2.) He may r atify the sale on credit, in w/c case it sale on credit must collect the credits due the principal
at the time they become due and demandable. If he fails
will have all the risks and advantages to him.
to do so, he shall be liable for damages unless he can
Art. 1906. Should the commission agent, with show that the credit could not be collected
authority of the principal, sell on credit, he shall notwithstanding the exercise of due diligence on his
so inform the principal, with a statement of the part. In such a case, the principals remedy is to proceed
names of the buyers. Should he fail to do so, the against the debtor.
sale shall be deemed to have been made for cash
Does this article apply to a case where there is
insofar as the principal is concerned.
a guarantee commission?
Obligation of the commission agent where a sale No, because the agent already assumed the risks of
on credit was authorized: collection by accepting the guarantee commission.
An authorized sale on credit shall be deemed to have
Art. 1909. The agent is responsible not only
been on a cash basis insofar as the principal is
for fraud, but also for negligence, which shall be
concerned if the agent fails to inform the principal of
judged with more or less rigor by the courts,
such sale on credit with a statement of the names of the
buyers. according to whether the agency was or was not
for a compensation.
Reason for this article: Prevent the agent from stating
Is the agent liable for fraud? Yes, in all cases.
that the same was on credit when in fact it was made
for cash.
For negligence? Yes, but this shall be adjudged with
Art. 1907. Should the commission agent receive rigor by the courts.
on a sale, in addition to the ordinary commission,
another called a guarantee commission, he shall bear Why does the court have to take into consideration
the risk of collection and shall pay the principal the whether the agency was gratuitous or for compensation?
proceeds of the sale on the same terms agreed upon
In order to fix the liability of the agent for
with the purchaser. negligence only (not fraud).
Purpose of guarantee commission: To compensate the Art. 1910. The principal must comply with
agent for the risks he will have to bear in the collection all the obligations which the agent may have
of the credit due to the principal. contracted within the scope of his authority.
As for any obligation wherein the agent has
Nature of liability of guarantee commission agent: exceeded his power, the principal is not bound
Liable to principal if the buyer fails to pay or is except when he ratifies it expressly or tacitly.
incapable of paying. But he is not primarily the debtor.
Where can the specific obligations and duties of ratification is subsequent but it is equivalent to prior
the principal to the agent be found? authority.
Usually in the contract creating the agency.
Conditions to ratification: [ICK-PEC]
Principal obligations of the principal to the agent in the 1.) Intent to ratify;
absence of such agreement: 2.) Principal must have capacity & power to ratify;
1.) To comply with all the obligations which the 3.) He must have had knowledge of material facts;
agent may have contracted in his name and 4.) The act must be done in behalf of the principal;
within the scope of his authority; 5.) Principal must ratify acts in its entirety;
2.) To advance should the agent so request sums 6.) The act must be capable of ratification.
necessary for the execution of the agency;
3.) To reimburse the agent for all advances made Effects of ratification with respect to the agent:
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by him provided the agent is free from fault; 1.) Relieves the agent from liability to the 3 party
4.) To indemnify the agent for all the damages to the unauthorized transaction; and
which the execution of the agency may have 2.) To his principal for acting without authority; and
caused the latter without fault or negligence 3.) He may recover compensation due for
on his part; and performing the act which has been ratified.
5.) To pay the agent the compensation agreed upon
or the reasonable value of the latters services. Effects of ratification with respect to the principal:
1.) He assumes responsibility for the unauthorized
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Liability of the principle to 3 persons: act, as fully as if the agent had acted under
Where the relation of agency legally exists, the original authority; but
principal will be liable to 3
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persons for all acts 2.) He is not liable for acts outside the authority
committed by the agent in his behalf in the course and approved by his ratification.
within the actual or apparent scope of his authority, and rd
this is not altered y the fact that the agent may also be Effects of ratification with respect to 3 persons:
liable, nor by the fact that some of the acts are to the rd
1.) 3 person is bound by ratification to the same
principals advantage while others are to his extent as he would have been bound if the
st
disadvantage. ratified act had been authorized in the 1
instance; and
Liability of the principal for mismanagement of the 2.) He cannot raise the question of the agents
business by the agent: authority to do the ratified act.
Mismanagement of the business of the principal by
the agent does not relieve said principal from the Must ratification be communicated to the agent or to
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responsibility that he had contracted to 3 persons. But the 3 party?
where the agents acts bind the principal, the latter may No. To be effective, ratification need not be
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seek recourse against the agent. communicated or made known to the agent or the 3
party. The act or conduct of the principal rather than his
communication is the key. But before ratification, the
Liability of principal for a tort committed by the agent: rd
rd 3 party is free to revoke the unauthorized contract.
The principal is civilly liable to 3 persons for torts of
an agent committed at the principals direction or I the Art. 1911. Even when the agent has exceeded
course and within the scope of the agents employment. his authority, the principal is solidarily liable with
The principal cannot escape liability whether the tort is the agent if the former allowed the latter to act
committed willfully or negligently so long as the tort is as though he had full powers.
committed by the agent while performing his duties in
furtherance of the principals business. Nor is it a Estoppel: precludes a person from denying or asserting
defense that the act which caused the tort was unknown
anything contrary to that which has been established
to him or even that it was in disobedience to his
instructions. as the truth by his own deed or representation, either
express or implied.
nd
Meaning of ratification in 2 paragraph:
Ratification v. Estoppel
Ratification is the adoption or affirmance by a person
of a prior act which did not bind him, but which was Ratification Estoppel
done or professed to be done on his account, thus giving Rests on intention Rests on prejudice
effect to the act as if originally authorized. The doctrine Affects the entire Affects only relevant parts
applies to the ratification of the act of an agent in excess transaction from the of the transaction.
of his authority of the act of one who purports to be an beginning
agent but who is really not. It may be implied from the Substance is confirmation Substance is the principals
acceptance of benefits by the principal under a contract of a unauthorized act or inducement to another to
entered in his name. The authority created by conduct after it has been act to his prejudice.
done.
Is the principal always liable for damages caused by 2.) By the withdrawal of the agent;
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a 3 person or is it the agent who is liable? 3.) By the death, civil interdiction, insanity or
Whether the principal or the agent will be the one insolvency of the principal or of the agent;
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liable for damages to the 3 person who has been 4.) By the dissolution of the firm or corporation which
prejudiced depends on whether the agent acted in bad entrusted or accepted the agency;
faith or not. If the agent acted in good faith and within 5.) By the accomplishment of the object or
the scope of his authority, the principal incurs liability. If purpose of the agency;
the agent acted in bad faith, he alone shall be 6.) By the expiration of the period for
responsible to such person. which the agency was constituted.
What is the extent of liability covered under this article? Meaning of Presumption of continuance of agency:
Damages. When once shown to have existed, an agency
relation will be presumed to have continued in the
What is good faith referred to in this article? absence of anything to show its termination.
Good faith here means that the agent had no
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knowledge that the principal is dealing with a 3 person. Who has the burden of proving the
revocation/termination of agency?
Note: If the contract is one of sale, article 1544 The burden of proving a revocation or other
governs and not arts. 1916 and 1917.
termination of agency is on the party asserting it.
Art. 1918. The principal is not liable for the
Note: Even if the reason for extinguishing the agency
expenses incurred by the agent in the
is not true, the agent cant insist on reinstatement. The
following cases: [F*CKS]
agent can only demand damages.
1.) If the agent acted in contravention of the
principals instructions, unless the latter
Modes of extinguishing an agency, generally: [ASO]
should wish to avail himself of the benefits
1.) Agreement;
derived from the contract;
2.) Subsequent acts of the parties which may be
2.) When the expenses were due to the fault
either:
of the agent;
a.) By the act of both parties or by mutual
3.) When the agent incurred them with knowledge
consent;
that an unfavorable result would ensue, if the
b.) By the unilateral act of one of them.
principal was not aware thereof;
3.) By operation of law.
4.) When it was stipulated that the expenses
would be borne by the agent, or that the
Modes of extinguishment, specifically: [WR-DEAD]
latter would be allowed only a certain sum.
1.) Withdrawal of the agent;
2.) Revocation;
Instances wherein the principal is not liable for expenses
3.) Death, civil interdiction, insanity or insolvency of
incurred by the agent?
the principal or of the agent;
In the instances enumerated under this article.
4.) Expiration of the period for which the agency
was constituted;
Reasons why the principal is not liable for the agents
5.) Accomplishment of the object or purpose of the
expenses: Under
agency; and
1.) To punish the agent, but when the principal has
6.) Dissolution of the firm/corp which entrusted or
availed of the benefits, he is deemed to have
accepted the agency;
impliedly ratified the agents acts.
2.) Kasi, kasalanan niya, eh.
Necessary characteristics of the parties for
3.) The agent is guilty of bad faith and lack of
the continuance of the agency: [PCS]
diligence;
1.) Present;
4.) An express stipulation which is not contrary to
2.) Capacitated;
law, morals, good customs, public order or
3.) Solvent.
public policy is binding between the parties.
Why is presence necessary?
Because the general rule in art 1919 is that death of
any of the parties extinguishes agency. However in the
Chapter 4. Modes of Extinguishment case where you have several principals and/or several
of Agency agents, whether the death of one principal or of one agent
terminates the agency would depend on the intention of
the parties. Generally the death of one of several
Art. 1919. Agency is extinguished: [WR-DEAD] principals does not revoke the agents authority nor does
1.) By its revocation; the death of one of several agents put an end to the
agency. The intention of the parties controls.
May an agency be terminated by a subsequent act of the 1.) As to former customers, actual notice must e
given to them because they always assume the
agent? Yes, its called withdrawal or renunciation.
continuance of the agency relationship.
Does it matter if the agency is gratuitous or with 2.) As to other persons, notice by publication is
compensation when we speak of revocation by the enough.
principal? No, art 1920 makes no distinction.
May the agent renounce the agency at will?
Reasons: Yes, but subject to the contractual obligations owing
1.) Since the authority of the agent emanates from the the principal.
principal, if the principal wishes to terminate the
Reason: The essence of the principal -agent relationship is
agency the law must enable him to do so.
the consent and willingness of the agent to act for the
2.) Confidence being the cardinal basis of the
principal. The law cannot compel the parties to continue an
relation, it stands to reason that it should
cease when such confidence disappears. agency if they do not want to do so. (The principal cannot
3.) The principal-agent relationship is consensual even sue for affirmative specific performance because that
and personal in nature. No one can nor should would lead to involuntary servitude!)
Art. 1922. If the agent had general powers, What does the above article provide?
revocation of the agency does not prejudice third It provides for another case of implied revocation.
persons who acted in good faith and without
knowledge of the revocation. Notice of the Effect of direct management of the business by
revocation in a newspaper of general circulation the principal himself:
is a sufficient warning to third persons. Generally, it revokes the agency because there would
no longer be any basis for the representation previously
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Effect of revocation in relation to 3 persons if the agent conferred.
was authorized to contract with the public in general: Exception: when the only desire of the principal
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In case the agent has general powers, innocent 3 in doing so is for him and the agent to manage the
parties dealing with the agent will not e prejudiced by business together.
the revocation before they had knowledge thereof. In
this case, however, the fact that the revocation was Art. 1925. When two or more principals have
advertised in a newspaper of general circulation would be granted a power of attorney for a common
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sufficient to 3 persons for publication constitutes notice transaction, any one of them may revoke the
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upon everybody and this is true whether or not such 3 same without the consent of the others.
persons have read the newspaper concerned.
Rationale: Since the appointment of an agent by 2 or
Notice required in art. 1921 v. that in art. 1922:
more principals for a common transaction or undertaking
Art. 1921 Art. 1922
makes them solidarily liable to the agent for all
Must be personal. May be personal.
rd consequences of the agency, then each one of the
Revocation must be known Even if 3 person doesnt principals should be granted the right to revoke the
power of attorney even without the consent of the to deal with the thing in order to make the
others. Remember that in a solidary obligation, the act assignment, pledge or lien effectual.
of one is the act of all.
If the contract of agency stipulates that such will be
Art. 1926. A general power of attorney is irrevocable, is such terminology controlling in all cases?
revoked by a special one granted to another agent, No. Whether an interest will make an agency
as regards the special matter involved in the irrevocable exists in a particular case is to be
latter. determined from the entire agreement between the
parties and from the facts and circumstances. The
How many agents are involved in this article? terminology is not controlling. Even if an agency is
2, one to whom a general power is previously made in terms irrevocable, the fact will not prevent its
granted. Another to whom a special power is revocation by the principal when the agency is not in
given. (Note that this can also apply if a special fact coupled with an interest.
power is subsequently given to the same agent.)
If an agency is coupled with an interest, does this
Effect of the issuance of a special power as regards the mean that the principal can never ever revoke it?
general power: No. You can still revoke in extreme situations, e.g.:
The general power is impliedly revoked as to matters 1.) Irrevocability can never be used as a shield for
covered by the special power because a special power the perpetration of acts in ad faith, breach of
naturally prevails over a general power. confidence or betrayal of trust. The law will
never permit the agent to commit frauds
Art. 1927. An agency cannot be revoked if a against the principal.
bilateral contract depends upon it, or if it is the 2.) When the interest is already terminated.
means of fulfilling an obligation already
contracted, or if a partner is appointed manager of Why is it said that agencies coupled with interest are
a partnership in the contract of partnership and not true agents?
his removal from the management is unjustifiable. Because persons with proprietary interests in the
subject matter of their agency are not true agents at
General rule: Principal may revoke an agency at will all. One of the hallmarks of the agency relation is the
since the essence of agency is the agents duty of control of the principal over the acts of the agent and
obedience to the principal. over the subject matter of the agency. An agency
coupled with an interest removes that control.
Exceptions: [BF=Partner]
1.) When a bilateral contract depends on the Art. 1928. The agent may withdraw from the
agency; agency by giving due notice to the principal. If
2.) When the agency is the means of fulfilling an the latter suffer any damage by reason of the
obligation already contracted; withdrawal, the agent must indemnify him
3.) When a partner is appointed as manager of a therefor, unless the agent should base his
partnership in the contract of partnership and withdrawal upon the impossibility of continuing
his removal from the management is the performance of the agency without grave
unjustifiable. detriment to himself.
Can an agency, coupled with an interest, be terminated Does the agent have a right to renounce or withdraw
by the sole will of the principal? No. from the agency at any time?
Yes. Even without the consent of the principal. But, in
Requisite for agency to be irrevocable for being coupled the latter case, he may be subject to liability for breach
with a interest: of contract or for tort.
Interest of the agent must be in the subject matter of
the power conferred and not merely an interest in the Basis: Constitutional prohibition against involuntary
exercise of the power. servitude.
Instances of an agency coupled with an interest: Obligation of agent if he withdraws from agency without
1.) When the agent has parted with value or just cause:
incurred liability at the principals request, and 1.) Notify principal (even if w/ just cause); and
he is looking to the exercise of the power as the 2.) Indemnify the principal should the latter suffer any
means of reimbursement or indemnity. damage by reason of such withdrawal.
2.) When the interest in the thing concerning which
the power is to be exercised arises from an Reason for indemnity: To answer for losses and
assignment, pledge or lien created by the damages occasioned by the non-fulfillment of his
principal with the agent being given the power obligation as agent.
Is the agent liable for indemnity if the withdrawal was same way that revocation of the agency does not
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for just cause? No. Agent cannot be held liable if the prejudice 3 persons who have dealt with the agent in
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agent withdraws for a valid reason as when: good faith without notice of revocation, such 3 persons
1.) The withdrawal is based on the impossibility of are also protected where it is not shown that the agent
continuing the agency without grave detriment had knowledge of the termination of the agency because
to himself; or of the death of the principal or any other like cause
which extinguishes the agency.
2.) Fortuitous event.
Does this article only require the agent to be in good
What happens when the agent sues the principal? rd
Equivalent to withdrawal of the agent. faith? No, both agent and 3 person must be.
Art. 1932. If the agent dies, his heirs must
Art. 1929. The agent, even if he should
notify the principal thereof, and in the meantime
withdraw from the agency for a valid reason, must
adopt such measures as the circumstances may
continue to act until the principal has had
demand in the interest of the latter.
reasonable opportunity to take the necessary
steps to meet the situation. In case of death of agent, what must the heirs do?
1.) Notify the principal to enable the latter
Obligation of agent after withdrawal: reasonable opportunity to take such steps as
Even when withdrawal is for a valid reason, he must may be necessary to meet the situation; and
continue to act until the principal has had reasonable 2.) Adopt such measures as the circumstances may
opportunity to take the necessary steps like the
demand in the interest of the principal.
appointment of a new agent to remedy the situation
caused by the withdrawal. This is to prevent damage or Can the heirs continue the agency?
prejudice to the principal. General rule: No, since an agency calls for
personal services on the part of the agent.
Art. 1930. The agency shall remain in full force
Exceptions:
and effect even after the death of the principal, if
1.) Agency by operation of law, or a presumed or
it has been constituted in the common interest of tacit agency;
the latter and of the agent, or in the interest of a 2.) Agency is coupled with an interest in the subject
third person who has accepted the stipulation in
matter of the agency.
his favor.