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You are here: Home ∼ 2013 ∼ May ∼ Civil Law Bar Exam Answers: Agency

CIVIL LAW BAR EXAM ANSWERS: AGENCY

Published by adminC on May 10, 2013 | Leave a response

Agency (2003)

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. On the assumption that 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).

Agency vs. Sale (2000)

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.

Agency; coupled with an interest (2001)

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?

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.

Agency; Guarantee Commission (2004)

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. AL’s principal, DRBI, demanded from AL payment for the customer’s
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 AL’s objection valid? Can DRBI collect from him or not? Reason.

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)

Agency; Real Estate Mortgage (2004)

CX executed a special power of attorney authorizing DY to secure a loan from any bank and to
mortgage his property covered by the owner’s 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.
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”.

Appointment of Sub-Agent (1999)

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?

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.

General Agency vs. Special Agency (1992)

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.

Powers of the Agent (1994)

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).

Termination; Effect of Death of Agent (1997)

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.

From the ANSWERS TO BAR EXAMINATION QUESTIONS in CIVIL LAW by the UP LAW COMPLEX
and PHILIPPINE ASSOCIATION OF LAW SCHOOLS.

Special power of attorney Free power of attorney form Certificate of title

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