11; Agency agreed to order 1,000 units of the manufacturer's computers

every month and to resell them In the Philippines at the

2003 No V
manufacturer's suggested prices plus 10%. All unsold units
Jo-Ann asked her close friend, Aissa, to buy some groceries at the end of the year shall be bought back by the
for her in the supermarket. Was there a nominate contract manufacturer at the same price they were ordered. The
entered into between Jo-Ann and Aissa? In the affirmative, what manufacturer shall hold the distributor free and harmless
was it? Explain. 5% from any claim for defects in the units. Is the agreement
one for sale or agency? (5%)
Suggested Answer:
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 The contract is one of agency, not sale. The notion of
groceries for her in the supermarket, what they entered into was sale is negated by the following indicia: (1) the price is
a nominate contract of Agency. Article 1868 of the New Civil fixed by the manufacturer with the 10% mark-up constituting
Code provides that by the contract of agency a person binds the commission; (2) the manufacturer reacquires the unsold
himself to render some service or to do something in units at exactly the same price; and (3) warranty for the
representation or on behalf of another, with the consent or units was borne by the manufacturer. The foregoing indicia
authority of the latter. negate sale because they indicate that ownership over the
units was never intended to transfer to the distributor.
Alternative Answer:
11; Agency; appointment of sub-agent
Yes, they entered into a nominate contract of lease to
service in the absence of a relation of principal and agent 1999 No XV.
between them (Article 1644, New Civil Code).
(a) X appoints Y as his agent to sell his products in
11; Agency Cebu City. Can Y appoint a sub-agent and if he does, what
are the effects of such appointment? (5%)
2004 No. IV
ANSWER:
B. CX executed a special power of attorney authorizing DY to
secure a loan from any bank and to mortgage his property covered a. Yes, the agent may appoint a substitute or sub-
by the owner’s certificate of title. In securing a loan from agent if the principal has not prohibited him from doing so,
MBank, DY did not specify that he was acting for CX in the but he shall be responsible for the acts of the substitute:
transaction with said bank.
(1) when he was not given the power to appoint one;
Is CX liable for the bank loan? Why or why not? Justify
(2) when he was given such power, but without
your answer. (5%)
designating the person, and the person appointed was
11; Agency; agency vs sale notoriously incompetent or insolvent.
2000 No XVIII 11; Agency; authority to sell does not include authority to
collect
A foreign manufacturer of computers and a Philippine
distributor entered into a contract whereby the distributor 2004 No. VI

1
 B. 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. (5%)
11; Agency; commission
1978 No. VII-b
A authorized B to sell her property for P20,000 subject to
the condition that the purchaser would assume the mortgage
existing in favor of Plaridel Bank and agreed to pay B a
commission of six per cent (6%) on the purchase price plus
whatever over price he may obtain for the property. B found a
buyer C who was willing to buy the property under the terms
stipulated by A. When B introduce C to A, A told B that she was
no longer interested in selling the property and a document was
signed canceling the written authority to sell with the agreement
of B. One (1) month later, A sold the same property directly to C
for P22,000, A refused to pay B his commission, contending that
when the property was sold to C the authority to sell of B was
already cancelled. B sued to collect his commission. Is B
entitled to his agent's commission? Give reasons for your answer.
Answer
B is entitled to his agent's commission. C, the buyer of B,
was willing to buy the property under the terms stipulated by A.
Despite this, A told B that she was no longer interested in
selling the property. As a result, B's authority was cancelled.
And yet, all of a sudden, one month later, A sold the property
directly to C for P22,000. It is clear that there was bad faith
on the part of A. This act of bad faith cannot serve as a basis
for him to evade payment of the commission of B.
(NOTE: The above answer is based on Infante vs.
Cunanan, 49 Off. Gaz. 3320.)
11; Agency; coupled with an interest
2001 No XV
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.
11; Agency; coupled with an interest
1980 No. VIII
(a) "AA" had an option to purchase a vessel. He
entered into a contract with "BB" wherein he assigned his
option to "BB" under the condition that "BB" would appoint
him as agent of the vessel for five years. "BB" purchased
the vessel and appointed "AA" as agent in accordance with
the contract. After three years of operation "BB" revoked
the appointment of "AA" as agent for loss of confidence.
"AA" sued "BB" for damages.
Would you hold "BB" liable for damages?
Answer
2
 (a) "BB" should be held for damages. True, according to
the Civil Code, the principal may revoke the agency at will.
But there are exceptions. These exceptions are sometimes
denominated as agency coupled with an interest. One of
them is when the agency is the means of fulfilling an obligation
already contracted. It is obvious that the agency is the means
of fulfilling an obligation already contracted in favor
"AA". "BB" has clearly breached his contract
undertaking by revoking the agency before the expiration of
the term or period of five years.
(NOTE: The above answer is based upon Arts. 1927, 1930,
Civil Code.)
11; Agency; coupled with an interest
1979 No. XVI
DT borrowed P50,000.00 from a bank and to secure the
payment thereof, signed a Deed of Real Estate Mortgage in favor
of the bank in the usual printed form wherein it is provided
among others that "for the purpose of extra-judicial foreclosure,
the mortgagor hereby appoints the mortgagee his attorney-in-fact
to sell the property mortgaged under Act 3135, as amended, to
sign all documents and perform any act requisite and necessary to
accomplish said purpose." Upon failure of DT to pay the loan, the
bank foreclosed and bought the property at the foreclosure sale.
During the one year period of redemption DT died and the property
was not redeemed despite the lapse of one year. The bank, despite
its actual knowledge, of DT's death, consolidated its title by
executing the affidavit of consolidation and Deed of Sale of the
land in its favor as empowered in the Deed of Real Estate
Mortgage. After the bank had consolidated its title the heirs of
DT asked the bank to allow them to redeem the property by paying
only the P50,000.00 plus accrued interest and expense of
foreclosure, contending that the sale in favor of the bank was
invalid due to the prior death of DT which therefore revoked the
power of attorney inserted in the Deed of Mortgage but the bank
demanded payment of P200,000.00, the then fair market value of
the property. Can the bank be compelled to accept the tender of
redemption by the heirs of DT? Why?
Answer
The bank cannot be compelled to accept the tender of
redemption by the heirs of DT. True, agency is extinguished
by the death of the principal, but there are two well-known
exceptions. The first exception is where the agency is
coupled with an interest and the second is where the agent,
of
unaware of the death of his principal, enters into a
or
contract in behalf of his principal with a third person who
is also unaware of the death of the principal (Arts. 1930,
1931, Civil Code) The instant case falls squarely within the
purview of agency coupled with an interest. According to the
Civil Code, the agency shall remain in full force and effect
even after the death of the principal, if it has been
constituted in the common interest of the latter and of the
agent, or in the interest of a third person who has accepted
the stipulation in his favor. Hence, despite the death of
DT, the power granted by him to the bank to sell the
property mortgaged and to sign all documents and perform any
act requisite and necessary to accomplish the extra-judicial
foreclosure in case he is unable to pay the loan is still of
full force and effect. The foreclosure, therefore, and the
consolidation by the bank of its title over the mortgaged
property are perfectly valid.
11; Agency; general vs special agency
1992 No 8:
A as principal appointed B is 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.
3
 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,
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
11; Agency; liability of an agent
1975 No. XIV
A borrowed from B the sum of P3,000.00. Three days after A
in a letter authorized the Philippine National Bank to pay his
debt to B out of whatever crop loan might be granted to him by
said Bank. On the same day, the Bank agreed but the Bank paid B
only P2,000.00. On the date of the maturity, B sued the Bank and
A for the remaining P 1,000.00. Is the Bank liable to B? Explain.
Answer
No, the Bank is not liable to B. The letter of A to
PNB is merely an authority given to PNB to pay B. PNB,
therefore, is merely an agent of A, and an agent cannot be
personally liable as long as be acts within the scope of his
authority.
Moreover, the Bank did not assume the obligation to
pay A's indebtedness to B, either as co-principal, surety or
guarantor. (Hodges v. Rey, 111 Phil. 219)
11; Agency; liability of an agent to render an account
1981 No. 15
"A", an official of a mining company, was appointed
by the company as its buying agent for the acquisition of
mining rights in a designated area for operation by the
company. "A" proceeded to enter into contracts with the
claim owners. Claim owner "B", an illiterate, was helped by
"A" in locating and perfecting his rights and for which "A",
by contract, obtained a participation in the royalty paid by
the company to the claim owner.
a) The mining company goes to you for advice as to
whether it is entitled to the royalty obtained by "A" from
"B". What would your advice be and why?
b) May "B", the claim owner, question the royalty
obtained by "A"? On what grounds? Explain,
Answer
(a) I would advice the mining company to withhold the
payment of the part of the royalty corresponding to "A".
This is so because of the explicit mandate of the Civil
Code. According to the law: Every agent is bound to render
an account of his transactions and to deliver to the
principal whatever he may have received by virtue of the
agency, even though it may not be owing to the principal. It
is crystal dear that the act of "A", agent of the mining
company, falls squarely within the purview or coverage of
this rule.
4
 (Note: The above answer is based on Art. 1891 of the Civil
Code.)
(b) "B", the claim owner, may question the royalty obtained
by "A" on the ground that it is "not owing to the principal." It
must be observed that the obligation of the agent to deliver to
his principal anything which he has received by virtue of the
agency is followed by the phrase "even though it may not be owing
to the principal" This means that the action for recovery by "B"
on the ground of undue payment would be directed against the
mining company and not against the agent.
(Note: The above answer is based on Art. 1891 of the Civil
Code and on Manresa's opinion — Vol. 11, p. 512,}
11; Agency; powers of the agent
1994 No. 18:
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?
Alternative 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).
11; Agency; termination; death or principal: double sales
1988 No. 13:
(b) In 1950, A executed a power of attorney
authorizing B to sell a parcel of land consisting of more
than 14 hectares. A died in 1954. In 1956, his four children
sold more than 12 hectares of the land to C. In 1957, B sold
8 hectares of the same land to D, It appears that C did not
register the sale executed by the children. D, who was not
aware of the previous sale, registered the sale executed by
B, whose authority to sell was annotated at the back of the
Original Certificate of Title.
(1) What was the effect of the death of A upon B's
authority to sell the land?
(2) Assuming that B still had the authority to sell
the land—who has a better right over the said land, C or D?
Answer:
(b) (1) While the death of the principal in 1954
ended the authority of the agent to sell the land, it has
not been shown that he was aware of his principal's demise.
5
Hence, the act of such agent is valid and shall be fully
effective with respect to third persons which may have contracted
with him in good faith in conformity with Art. 1931 of the Civil
Code. (Buason vs. Panuyas, 105 Phil. 795, Herrera vs. Luy, 110
Phil. 1020.)
(2) D has better right since he registered first in good
faith.
Alternative Answer to: No, 13 (b):
(b) (1) The agency is terminated upon the death of either
the principal or agent. Exceptionally, a transaction entered into
by the agent with a third person where both had acted in good
faith is valid. Article 1930 of the Civil Code provides that:
"The agency shall remain in full force and effect even
after the death of the principal, if it has been constituted in
the common interest of the latter and of the agent, or in the
interest of a third person who has accepted the stipulation in
his favor.'* and Article 1931 provides that;
"Anything done by the agent, without knowledge of the death
of the principal or of any other cause which extinguishes the
agency, is valid and shall be fully effective with respect to
third persons who may have contracted with him in good faith,"
11; Agency; termination; effect of death of agent
1997 No. 17:
Stating briefly the thesis to support your answer to each
of the following cases, will the death - (c) of an agent end an
agency?
Answer:
(c) Yes. The death of an agent extinguishes the agency,
by express provision of par. 3, Art 1919 of the Civil Code.