Finals Notes

Team Partnership 404 2015
LIMITED PARTNERSHIP
Article 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members
one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the
partnership.
Introductory Concepts
 General Partnership vis-à-vis Limited Partnership

1. General partnership is generally a consensual contract, while limited partnership is a formal contract because it has to comply with
all the requirements provided for by law.
Requirements for formation of LTD Partnership:
1. it need to have a certificate signed and sworn toby the partners

2. the certificate must be filed for record in SEC
2. GP is composed of all general partners, while LP is composed of one or more GP and one or more LP.
3. GP can operate with any name, while LP must operate under a firm name followed by word “Limited”.
4. Dissolution and winding up are governed by different rules.
 Distinction between general partner and limited partner
GENERAL PARTNER LIMITED PARTNER
Personally Liable for partnership obligation Liability only extends to his capital contribution
When manner of management hasn’t been agreed Has no share in the management of a limited partnership
upon, al of the general partners have an equal rights
in the management of business
May contribute money, property, or industry to the Must contribute cash or property and not services
partnership
Proper party to proceedings by or against the Not a proper party to proceedings by or against the partnership.
partnership Unless, he is also a general partner, or where the object of the
proceeding is to enforce a limited partner’s rights against, or
liability to, the partnership
Interest may not be assigned as to make the assignee Interest is freely assignable with the assignee acquiring all the
a new partner without consent to other partners rights of the limited partner subject to certain qualification.
although he may associate a third person with him in
his share
Name of the partner may appear in the firm name As a general rule, name of a LP must not
Prohibited in engaging in a business which is of the No such prohibition in the case of a limited partner who is
kind of business in which the partnership is engaged, considered as a mere contributor to the partnership
if he is a capitalist partner, or any business for himself
if he is an industrial partner
Retirement, death, insanity, or insolvency of a general Retirement etc of an LP does not have the same effect for his
partner dissolves the partnership executor or administrator shall have the rights of a limited
partner for the purpose of selling his estate
 Advantages of partnership over a corporation
1. Less people to deal with.

2. A partnership relation is based on trust. Unlike in a corporation where you cant possibly know every member of the
corporation because there may be hundreds of them.
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3. Management in corporation is vested in a board of trustees, thus it follows that if you are not a member of the board your
views and opinion in the management of the business may not be heard.
 Advantages of corporation over partnership
A member’s interest in a corporation enjoys more security considering the fact that his liability is only up to the extent of his
contribution in the corporation ----------------
T: All my properties are addressed. There’s no protection from the law. Because the law says, I could be liable, even up to the extent of my
personal properties.
Now here comes limited partnership. The law offers a WIN-WIN situation. You were afraid, that in a general partnership, you will be liable
beyond your contribution. You also do not want a corporation because you do not know everybody there. So the law says, here it is, you
would know everyone, but you may not be liable beyond your personal properties. So your liability is limited. This is the intention of the law
in coming out with the provisions on limited partnership.
So this is therefore, a situation where you have the best of both worlds. Your risk is limited; you could trust everybody in the group. You
would know them because all of their names will appear in the articles of partnership. Unlike in a corporation, it only indicates the names of
the incorporators who took the initiative in organizing the corporation. And the law says that it cannot be more than 15, not less than 5. So
you know the incorporators, but thereafter, after the corporation is formed, the corporation will be free to issue shares of stocks to anyone.
And there could be not just hundreds but thousands of them especially when it is a publicly listed corporation where the shares of stocks are
sold in the market. Today you are a stockholder, tomorrow you are not, because you trade your stocks in the market. And therefore, you will
not really know, who the stockholders are.
And so, we said, this is the middle ground between a corporation and a partnership. Then articles or certificate of partnership will be
prepared. This is a requirement in a limited partnership. And thus, this is no longer a consensual contract but a formal contract. As a matter
of fact, the names should be indicated therein.
 Options for a business or enterprise to get money or capital:
1. Ordinary loan on interest;

2. Loan where the lender, in lieu of interest, takes a share in the profits of the business;
3. Loan where the lender not only takes a share in the profits but also exercise some measure of control over the business.
 Investor vs. Lender
Investor
The investor has the assumption of risk. You take the risk. Because although your 10M may be entitled to some profits, but there’s no
guarantee. An investor does not enjoy any guarantee of success. Investor always takes the risk.
Lender
Whether or not a partnership is insolvent, the bank can always collect the principal and interest. Otherwise, if you cannot pay, we’ll go after
your assets. That’s the lender. It does not take the risk. It only takes profit.
Article 1844. Two or more persons desiring to form a limited partnership shall:
(1) Sign and swear to a certificate, which shall state -
(a) The name of the partnership, adding thereto the word "Limited";
(b) The character of the business;
(c) The location of the principal place of business;
(d) The name and place of residence of each member, general and limited partners being respectively designated;
(e) The term for which the partnership is to exist;
( f ) The amount of cash and a description of and the agreed value of the other property contributed by each limited partner;
(g) The additional contributions, if any, to be made by each limited partner and the times at which or events on the happening of which they
shall be made;
(h) The time, if agreed upon, when the contribution of each limited partner is to be returned;
(i) The share of the profits or the other compensation by way of income which each limited partner shall receive by reason of his
contribution;
( j) The right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and conditions of the
substitution;
(k) The right, if given, of the partners to admit additional limited partners;
(l) The right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions or as to compensation
by way of income, and the nature of such priority;
(m) The right, if given, of the remaining general partner or partners to continue the business on the death, retirement, civil interdiction,
insanity or insolvency of a general partner; and
(n) The right, if given, of a limited partner to demand and receive property other than cash in return for his contribution.
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(2) File for record the certificate in the Office of the Securities and Exchange Commission.
A limited partnership is formed if there has been substantial compliance in good faith with the foregoing requirements.
Article 1845. The contributions of a limited partner may be cash or property, but not services.
Article 1846. The surname of a limited partner shall not appear in the partnership name unless:
(1) It is also the surname of a general partner, or
(2) Prior to the time when the limited partner became such, the business has been carried on under a name in which his surname appeared.
A limited partner whose surname appears in a partnership name contrary to the provisions of the first paragraph is liable as a general
partner to partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner.
Article 1847. If the certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the
certificate who knew the statement to be false:
(1) At the time he signed the certificate, or
(2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file
a petition for its cancellation or amendment as provided in article 1865.
Article 1848. A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as a
limited partner, he takes part in the control of the business.
 When else is a limited partner be liable as a general partner?
ARTICLE 1848 – A limited partner shall not become liable as a general partner unless, in addition to the exercise of rights and powers as a
Article 1847. If the certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the
certificate who knew the statement to be false:
(1) At the time he signed the certificate, or
(2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file
a petition for its cancellation or amendment as provided in article 1865.
Article 1848. A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as a
Article 1849. After the formation of a lifted partnership, additional limited partners may be admitted upon filing an amendment to the
original certificate in accordance with the requirements of article 1865.
Article 1850. A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a
partnership without limited partners. However, without the written consent or ratification of the specific act by all the limited partners, a
general partner or all of the general partners have no authority to:
(1) Do any act in contravention of the certificate;
(2) Do any act which would make it impossible to carry on the ordinary business of the partnership;
(3) Confess a judgment against the partnership;
(4) Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose;
(5) Admit a person as a general partner;
(6) Admit a person as a limited partner, unless the right so to do is given in the certificate;
(7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner,
unless the right so to do is given in the certificate.
Article 1851. A limited partner shall have the same rights as a general partner to:
(1) Have the partnership books kept at the principal place of business of the partnership, and at a reasonable hour to inspect and copy any of
them;
(2) Have on demand true and full information of all things affecting the partnership, and a formal account of partnership affairs whenever
circumstances render it just and reasonable; and
(3) Have dissolution and winding up by decree of court.
A limited partner shall have the right to receive a share of the profits or other compensation by way of income, and to the return of his
contribution as provided in articles 1856 and 1857.
 What are the rights of a limited partner?
ARTICLE 1851
(1) To require that the partnership books be kept at the principal place of business of the partnership (see Art. 1805.);
(2) To inspect and copy at a reasonable hour partnership books or any of them (Ibid.);
(3) To demand true and full information of all things affecting the partnership (see Art. 1806.);
(4) To demand a formal account of partnership affairs whenever circumstances render it just and reasonable (see Art.
1809.);
(5) To ask for dissolution and winding up by decree of court (see Arts. 1831, 1857, par. 4.);
(6) To receive a share of the profi ts or other compensation by way of income (Art. 1856.); and
(7) To receive the return of his contribution provided the partnership assets are in excess of all its liabilities. (Art. 1857.)
Article 1852. Without prejudice to the provisions of article 1848, a person who has contributed to the capital of a business conducted by a
person or partnership erroneously believing that he has become a limited partner in a limited partnership, is not, by reason of his exercise of
the rights of a limited partner, a general partner with the person or in the partnership carrying on the business, or bound by the obligations
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of such person or partnership, provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business, or
other compensation by way of income.
Article 1853. A person may be a general partner and a limited partner in the same partnership at the same time, provided that this fact shall
be stated in the certificate provided for in article 1844.
A person who is a general, and also at the same time a limited partner, shall have all the rights and powers and be subject to all the
restrictions of a general partner; except that, in respect to his contribution, he shall have the rights and powers and be subject to all the
restrictions of a general partner; except that, in respect to his contribution, he shall have the rights against the other members which he
would have had if he were not also a general partner.against the other members which he would have had if he were not also a general
partner.
 A general partner may also be a limited partner at the same time. In such case, their names must appear twice in the certificate. One
as a general partner, and other as a limited partner.
What is the reason for the law?
Limited partners enjoy preference.
Examples:
All limited partners will enjoy a return of 3%, there is already a defined return.
All limited partners will enjoy the profits every 3 months.
All limited partners may withdraw their contributions one year after.
The reason why they should be indicated separately is because all of these are not contributions as a general partner but rather merely
investments and therefore may be subject to some preferences, privileges, priorities etc.
The moment a 3rd party would go after G (a general and limited partner at the same time) would go after the personal assets of G. Can G say
no for he is a limited partner?
No, she cannot exempt herself from liabilities as to third persons but she can claim reimbursement from other partners for
liabilities in excess of her contribution.
If a partner is both a general partner and a limited partner, such partner is considered a general partner as to the liabilities to third persons.
Your being a limited partner does not change your liability.
Q. The fact that a limited partner as well enjoys the right to give their conformity before a limited partner or a general partner can
submit, what would that show?
A. It would show that “the element of trust is still there even if they are limited partners. They are still entitled to know who is with them
and who will be joining them, otherwise, if they would not know who will be with them later or after they joined the partnership, then there
would be no more difference between a corporation and a partnership because the rest of the partners may just admit as many as they want
without the conformity of the other limited partners.”
Q. Earlier we learned that a partner can engage in any business.
A. In General Partnership – Capitalist Partner – Relative prohibition
Industrial Partner – Absolute prohibition
(In the example of Sir on the board – “I” is an industrial partner and is also listed as a limited partner)
Q. Can “I” engage in another business?
A. No, because he is also a general partner as an industrial partner and the absolute prohibition would still apply. Thus, when a person is
both a limited partner and a general partner, he is considered as a general partner for all intents and purposes insofar as third parties and
the public is concerned.
Q. But for a limited partner since he is only an investor, other than his investment of 1M, may he lend to the company?
A. Yes. Because it is one of the allowable transactions for a limited partner.
Article 1854. A limited partner also may loan money to and transact other business with the partnership, and, unless he is also a general
partner, receive on account of resulting claims against the partnership, with general creditors, a pro rata share of the assets. No limited
partner shall in respect to any such claim:
(1) Receive or hold as collateral security any partnership property, or
(2) Receive from a general partner or the partnership any payment, conveyance, or release from liability if at the time the assets of the
partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners.
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The receiving of collateral security, or payment, conveyance, or release in violation of the foregoing provisions is a fraud on the creditors of
the partnership.
C, being a limited partner already with a 10M contribution, partnership wanted to borrow 20M from her. Do you think C can lend
money to the partnership?
Yes. C can still lend money to the partnership. However, if she was a general partner she can no longer lend money because of the conflict of
interest. A general partner is even prohibited from engaging in another business similar to the partnership, how much more dealing with the
partnership itself.
What’s the danger? Why is there a conflict of interest?
This occurs especially when the assets of the partnership are not sufficient to meet all its liabilities. There is a tendency that the general
partner may give preference to his credits over the credits in favor of 3rd parties.
Going back to the limited partner, he can lend money. But can he demand for interest?
Yes he can demand for interest.
But can he ask for collateral as security?
No. he cant.
If you were the partner would you lend money? Is the amount that you lend at risk?
No. It is not at risk. (a creditor does not assume the risk as compared to an investor). Because he still enjoy preference to be paid. He can still
collect for payment. (although the possibility of collection is affected by the fact that there is no collateral)
We said that a limited partner can lend money, however he is prohibited from making as collateral the partnership property and to receive
payment, conveyance or release from liability, if the assets of the partnership are not sufficient to discharge partnership liabilities to persons
not claiming as general or limited partners
In short, if the limited partner acts as a creditor, he has disadvantages over the other creditors, namely:
1. Although he has preference of credits over general partners, he has no preference over third persons (cannot receive ahead of creditors
who are not partners)
2. He is not entitled to hold collaterals
Otherwise, if he does?
This would constitute as fraud to third party creditors.
A limited partner enjoys certain preferences. What are these preferences?
1. Preference on the return of capital, sharing of profits over the general partners but not over third parties (creditors who are not partners)
Senior over general partners in so far as preferences of credits but junior to third parties.
Article 1855. Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority
over other limited partners as to the return of their contributions, as to their compensation by way of income, or as to any other matter. If
such an agreement is made it shall be stated in the certificate, and in the absence of such a statement all the limited partners shall stand upon
equal footing.
Among the limited partners, do they have preferences?
G.R: they stand in equal footing
Exc: They may agree among themselves that one or more limited partners shall have priority over other limited partners as to the return of
their contributions, as to their compensation by way of income, or as to any other matter.
Article 1856. A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated
for in the certificate; provided, that after such payment is made, whether from property of the partnership or that of a general partner, the
partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on account of their contributions and
to general partners
Article 1857. A limited partner shall not receive from a general partner or out of partnership property any part of his contributions until:
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(1) All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been
paid or there remains property of the partnership sufficient to pay them;
(2) The consent of all members is had, unless the return of the contribution may be rightfully demanded under the provisions of the second
paragraph; and
(3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction.
Subject to the provisions of the first paragraph, a limited partner may rightfully demand the return of his contribution:
(1) On the dissolution of a partnership; or
(2) When the date specified in the certificate for its return has arrived, or
(3) After he has six months' notice in writing to all other members, if no time is specified in the certificate, either for the return of the
contribution or for the dissolution of the partnership.
In the absence of any statement in the certificate to the contrary or the consent of all members, a limited partner, irrespective of the nature
of his contribution, has only the right to demand and receive cash in return for his contribution.
A limited partner may have the partnership dissolved and its affairs wound up when:
(1) He rightfully but unsuccessfully demands the return of his contribution, or
(2) The other liabilities of the partnership have not been paid, or the partnership property is insufficient for their payment as required by
the first paragraph, No. 1, and the limited partner would otherwise be entitled to the return of his contribution.
During the dissolution, there will be a distribution and where does a limited partner stand?
A limited partner is senior to that of general partner and junior to that of third party creditors.
If the limited partners, upon dissolution, are demanding the return of their contributions, can they immediately demand for the
return?
No, they can only demand if all the partnership liabilities (except liability to limited partners for their contribution and to general partners)
are already paid, or if it with the consent of all the members, or the certificate is cancelled or amended.
Can they demand the return of their contributions even if credits due to general partners still exist?
No. They can only demand the return of their contributions as a matter of right:
1. on the dissolution of a partnership,
2. when the date specified in the certificate for its return has arrived,
3. after he has given 6 months’ notice in writing to all other members, if no time is specified in the certificate for the return of the
contribution or for the dissolution of the partnership
If the partnership does not return his contribution, what could happen?
He may have the partnership dissolved and its affairs wound up. Upon dissolution, there will be distribution of the assets.
So, if a limited partner is entitled to the return of his contribution, for example the date specified in the certificate of its return has
arrived, can he demand a specific property as the return of his contribution?
No. For the return of the contribution, the law provides that it shall be in CASH. But there are exceptions as when (1) all the partners agreed
to pay the contribution in the form of property or (2) when it is stated in the certificate.
We already mentioned of one instance when a limited partner may ask for the dissolution of the partnership, is there another
instance?
The other liabilities of the partnership have not been paid, or the partnership is insufficient for their payment and the limited partner would
otherwise be entitled to the return of his contribution
The partnership might become insolvent and might no longer be able to settle all its liabilities. We don’t have to wait for that so a LP is
entitled to protect his contribution, and one way of protecting that is to seek for dissolution and distribute all the assets if it is now clear that
the partnership has now become insolvent.
Article 1858. A limited partner is liable to the partnership:

(1) For the difference between his contribution as actually made and that stated in the certificate as having been made, and
(2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the
certificate.
A limited partner holds as trustee for the partnership:
(1) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned,
and
(2) Money or other property wrongfully paid or conveyed to him on account of his contribution.
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The liabilities of a limited partner as set forth in this article can be waived or compromised only by the consent of all members; but a waiver
or compromise shall not affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before a
cancellation or amendment of the certificate, to enforce such liabilities.
When a contributor has rightfully received the return in whole or in part of the capital of his contribution, he is nevertheless liable to the
partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors who extended credit
or whose claims arose before such return.
We said a LP has his own obligations, what are some of its obligations?
1. To give his contribution as he has promised, (in lump sum or in installments depending on their agreement)
2. To answer for interest and damages in case he fails to give his contribution – partners may demand from him what he has promised to
contribute (he is a creditor as to the amount he promised to contribute if it has become overdue the partnership may even seek for damages
and interest )
However, during the time that he fails to deliver this, he is considered as a trustee of the funds thus he is responsible to preserve and protect
these amounts while it is in his custody.
if LP has still obligations to perform can a third party creditor go to him and demand payment?
Yes, that is property of the partnership forming part of partnership funds so LP is supposed to give it as part of partnership assets. So the
creditors now may compel him to put it in so they could go after such amount.
Article 1859. A limited partner's interest is assignable.

A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a
partnership.
An assignee, who does not become a substituted limited partner, has no right to require any information or account of the partnership
transactions or to inspect the partnership books; he is only entitled to receive the share of the profits or other compensation by way of
income, or the return of his contribution, to which his assignor would otherwise be entitled.
An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor, being
thereunto empowered by the certificate, gives the assignee that right.
An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with article 1865.
The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those
liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate.
The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under articles 1847 and
1858.
May a GP assign their rights?
GP can assign his right, regardless of whether or not there is consent of other partners.
General Partner Limited Partner
GR: Can assign his interest Can freely assign his interest
Effect of 1. Assignee does not become a partner (unless 1. Assignee may become a substituted limited partner provided:
all of the partners give their consent a. All members of the partnership consent to the assignee
assignment: thereto) becoming a substituted limited partner, unless the
assignor is empowered to by the certificate to give the
assignee such right
b. Certificate is amended to reflect the substitution
c. Amended certificate is registered with SEC (Art. 1859)
1.1 Assignee’s rights: 1.1 Assignee’s rights:
a. Receive profits the assigning partner a. If he does not become a limited partner
would otherwise be entitled 1.1 Receive profits the assigning partner would
b. Avail himself of usual remedies in otherwise be entitled
case of fraud in management 1.2 Receive other compensation by way of income the
c. If case of dissolution, require an assigning partner would otherwise be entitled
account of partnership affairs from 1.3 Receive a return of the contribution
date of last account agreed to by all
partners
NO right to: NO right to:
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a. Interfere in management 1.1 Interfere in management

b. Require any information of 1.2 Require any information of partnership transactions
partnership transactions 1.3 Inspect partnership books
c. Inspect partnership books
2. Does not cause dissolution of partnership b. If he becomes a substituted limited partner
1.1 He has all the rights and powers, and is subject to
all restrictions and liabilities of the assignor,
except
i. Liabilities which he is ignorant at the time he
became a limited partner
ii. Liabilities which could not be ascertained form
the certificate
1.2 Substitution does not release the assignor from
liability
i. To persons who rely on a false statement in
the certificate
ii. To creditors who extended credit of whose
claims arose before the assignment (Art. 1858)
Q: Can an assignee inspect the partnership books?
An assignee has no right to inspect the partnership books. However, the substituted limited partner has the right to inspect the partnership
books.
Other rights:
The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor,
except
̵ those liabilities of which he was ignorant at the time he became a limited partner;
̵ and which could not be ascertained from the certificate.
If a substituted limited partner is admitted, there should be amendment to the certificate and shall be recorded with SEC.
Once partnership is dissolved, there should be winding up. Winding up is the settlement of business or partnership affairs involving the
collection and distribution of the partnership assets, payment of debts, and determination of each partner’s interest in the partnership.
So during the winding up assets will be gathered and liabilities will be settle, who could be interested in these assets?
Third party creditors and the partners, general or limited.
Article 1860. The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the partnership, unless the
business is continued by the remaining general partners:
(1) Under a right so to do stated in the certificate, or
(2) With the consent of all members.
Article 1861. On the death of a limited partner his executor or administrator shall have all the rights of a limited partner for the purpose of
setting his estate, and such power as the deceased had to constitute his assignee a substituted limited partner.
The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner.
Article 1862. On due application to a court of competent jurisdiction by any creditor of a limited partner, the court may charge the interest
of the indebted limited partner with payment of the unsatisfied amount of such claim, and may appoint a receiver, and make all other orders,
directions and inquiries which the circumstances of the case may require.
The interest may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property.
The remedies conferred by the first paragraph shall not be deemed exclusive of others which may exist.
Nothing in this Chapter shall be held to deprive a limited partner of his statutory exemption.
Article 1863. In settling accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order:
(1) Those to creditors, in the order of priority as provided by law, except those to limited partners on account of their contributions, and to
general partners;
(2) Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions;
(3) Those to limited partners in respect to the capital of their contributions;
(4) Those to general partners other than for capital and profits;
(5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.
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Subject to any statement in the certificate or to subsequent agreement, limited partners share in the partnership assets in respect to their
claims for capital, and in respect to their claims for profits or for compensation by way of income on their contribution respectively, in
proportion to the respective amounts of such claims
Article 1864. The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such.
A certificate shall be amended when:
(1) There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner;
(2) A person is substituted as a limited partner;
(3) An additional limited partner is admitted;
(4) A person is admitted as a general partner;
(5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued under
article 1860;
(6) There is a change in the character of the business of the partnership;
(7) There is a false or erroneous statement in the certificate;
(8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution;
(9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate, or
(10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement
among them.
Article 1865. The writing to amend a certificate shall:
(1) Conform to the requirements of article 1844 as far as necessary to set forth clearly the change in the certificate which it is desired to
make; and
(2) Be signed and sworn to by all members, and an amendment substituting a limited partner or adding a limited or general partner shall be
signed also by the member to be substituted or added, and when a limited partner is to be substituted, the amendment shall also be signed
by the assigning limited partner.
The writing to cancel a certificate shall be signed by all members.
A person desiring the cancellation or amendment of a certificate, if any person designated in the first and second paragraphs as a person
who must execute the writing refuses to do so, may petition the court to order a cancellation or amendment thereof.
If the court finds that the petitioner has a right to have the writing executed by a person who refuses to do so, it shall order the Office of the
Securities and Exchange Commission where the certificate is recorded, to record the cancellation or amendment of the certificate; and when
the certificate is to be amended, the court shall also cause to be filed for record in said office a certified copy of its decree setting forth the
amendment.
A certificate is amended or cancelled when there is filed for record in the Office of the Securities and Exchange Commission, where the
certificate is recorded:
(1) A writing in accordance with the provisions of the first or second paragraph, or
(2) A certified copy of the order of the court in accordance with the provisions of the fourth paragraph;
(3) After the certificate is duly amended in accordance with this article, the amended certified shall thereafter be for all purposes the
certificate provided for in this Chapter.
Article 1866. A contributor, unless he is a general partner, is not a proper party to proceedings by or against a partnership, except where
the object is to enforce a limited partner's right against or liability to the partnership.
Article 1867. A limited partnership formed under the law prior to the effectivity of this Code, may become a limited partnership under this
Chapter by complying with the provisions of article 1844, provided the certificate sets forth:
(1) The amount of the original contribution of each limited partner, and the time when the contribution was made; and
(2) That the property of the partnership exceeds the amount sufficient to discharge its liabilities to persons not claiming as general or
limited partners by an amount greater than the sum of the contributions of its limited partners.
A limited partnership formed under the law prior to the effectivity of this Code, until or unless it becomes a limited partnership under this
Chapter, shall continue to be governed by the provisions of the old law.
And there is a danger that some may not be able to get and some may get even more than what is due them, there could be a problem so the
law establishes order on how to make the distribution fair and orderly. So how is this done?
In General Partnership:
The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
In Limited Partnership:
(1) Those to creditors, in the order of priority as provided by law, except those to limited partners on account of their
contributions, and to general partners;
(2) Those to limited partners in respect to their share of the profits and other compensation by way of income on their
contributions;
(3) Those to limited partners in respect to the capital of their contributions;
(4) Those to general partners other than for capital and profits;
(5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.
AGENCY
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Introductory Concepts:
Agency is taken together with partnership because more or less they are similar in the sense that an agent as well as the partner may be
acting in behalf of another and the agent may act in behalf of its principal.
There is representation because in partnership, if there is no agreement as to who the managing partner is, every partner will be acting as
managing partner such that they represent not just themselves but those other partners of the partnership.
Each partner is an agent of the partnership. And therefore, being an agent of the partnership, can bind the partnership. That’s how somehow
partnership is even a type of agency. But agency is not a type of partnership. The principles of agency can be applied in partnership because
in partnership each partner is an agent of the partnership but partnership can never be the same with agency. Why?
In agency, the agent represents only his principal.

In partnership, a partner represents the other partners and himself. He himself can be bound because he is a partner.
In agency, generally, the principal will be bound by the acts of the agent and the agent will not be bound as long as he acts in the scope of his
authority. He is acting in behalf of the principal.
 Agency vs. Guardianship
Agency Guardianship
It is the principal who gives authority to the agent to act on his A guardian is not an agent of the ward because the authority given
behalf and to execute juridical acts in behalf of the principal to the guardian comes NOT from the ward but from the court.
The principal has capacity. The agent represents somebody who The ward does not have the capacity. The guardian represents the
has the capacity. ward who has no capacity
 Employee vs Agent
Employee Agent
Not authorized to enter into contract. Empowered to enter into contracts in behalf of the principal
Authorized to perform his responsibilities in his employment Perform any juridical act within the authority given by the principal
contract
There must be an Employer-employee relationship satisfying

the four-fold test
- Power to hire
- Power of dismissal
- Payment of wage
- Power of control the means and manner, methods and
result
 Trustee vs Agent
Trustee Agent
Trust holds the property in his own name Agency holds the property in the name of the principal
- Revocable only upon fulfillment of the agreement - Revocable any time

- Holds in trust the property or funds of another. - Appointed by the principal to act for or in his behalf
- Title of the property is in the name of the trustee - Title of the property is still under the name of the principal
Legal owner for all intents and purposes in so far as the law
is concerned but not the beneficial owner
Question:
1. If a trustee holds the legal title of the trustor, can the former dispose of that property or asset?
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- Simply indicates he is holding asset in trust of someone else. Although title in his name, it does not follow that he can dispose the
property held. He holds the same in his name only for purposes of acquiring benefits and privileges appertaining to that property.
Thus, generally a trustee merely holds the property of a trustor in trust. Unless you have expressed authority to dispose.
 Independent Contractor vs Agent
Independent Contractor Agent
Independent Contractor renders service to the principal but not Agent renders acts subject to the control and supervision of the
subject to the control over the means and methods of the work principal
Independent contractor performs his acts independently without Always under the supervision of the principal cannot perform acts in
supervision from the principal. May perform acts according to his own method
method
 Administrator vs Agent
Administrator Agent
Administers the estate of the decedent -Subject of the contract of agency generally is anything as long as it is
Administrator is appointed by the court within the authority of the principal
You cannot have a principal. You represent the estate of the -Appointed by the principal himself
deceased - The person that is being represented is existing
Article 1868. 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. (1709a)
Article 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate
the agency, knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form. (1710a)
Article 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or
inaction according to the circumstances. (n)
Creation of agency
How is agency created?
- EXPRESSLY or Orally
- IMPLIEDLY: from the acts of the principal, his silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority.
What is the nature of contract of agency?
Generally, agency is a CONSENSUAL contract because it is perfected by mere consent of the parties. Unless, a particular form is required by
law like (Art 1874) a sale of piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise,
the sale shall be void.
Agency maybe created impliedly. On the part of the agent, may it also be accepted impliedly?
You need to qualify between persons who are present and persons who are absent.
Article 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of
attorney to the agent and the latter receives it without any objection. (n)
Article 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent, who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually
engaged as an agent, and he did not reply to the letter or telegram. (n)
Although agency may be implied, it cannot be presumed because there is a need to establish intent to constitute an agency.
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The burden of proof rests upon the person alleging the agency to show the fact of its existence, and must prove, among others, the intention
of the parties, the nature of the agency, and the extent of authority given by the principals.
However, there is an exception. The burden will be shifted if the parties who are alleged to be principal and agent done acts that would estop
them from saying that there is no agency.
Article 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person,
the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and
in the latter case with regard to any person.
The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. (n)
Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void. (n)
Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n)
Scenario: You were authorized to sell the property of the principal within 30 days. And on the 25 th day, you got sick so that the 30-day
expired without you selling the property, only to learn that Mr. B himself was able to sell the property later. So since the property was sold,
you went to the principal and asked for the 5% because the property was already sold. Can you now demand payment?
Ans: No because you need to be the procuring cause, and prove that you caused the selling of the property. Thus, if you cannot prove such,
you are not entitled to a compensation.
No cure, no pay. You must earn your pay.
Article 1876. An agency is either general or special.

The former comprises all the business of the principal. The latter, one or more specific transactions. (1712)
Article 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds
no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and
unlimited management. (n)
 Classifications of agency
A. Scope of Business Covered (Art. 1876)
1. General Agency – all the business of the principal
2. Special Agency – one or more specific transactions
B. Extent of Power Conferred

1. Agency couched in General terms (Art. 1877)– includes only acts of administration and an express power is necessary to
perform any act of strict ownership, even if the principal states that:
(a) he withholds no power, or that
(b) the agent may execute such acts as he may consider appropriate, or that
(c) he authorizes a general or unlimited management.
So, if what is authorized is to take care or to look up to all of my properties in Cebu City, it is an authority couched in
general term. Even if the last paragraph of the written authority states that the agent may execute such acts as he may
find fair and reasonable, it is still couched in general terms and the agent cannot dispose of the properties of the principal
because the authority given is only for acts of administration not of strict dominion.
2. Agency couched in Specific terms (Art. 1878)– includes acts of strict dominion wherein special powers of attorney are
necessary.
 Acts of Administration – all necessary and usual means to carry out the agency into effect. (Acts of Management)
 Acts of Strict Dominion – includes the authority to alienate or dispose of a property. (Acts of Ownership)
Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of
an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration;
(6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under
administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
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(10) To bind the principal in a contract of partnership;

(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (n)
 Attorney in fact – an agent holding a special power of attorney.

 Attorney at law – one whose business is to represent clients in legal proceedings.
 Difference between surety and guaranty:
In guaranty, the liability is subsidiary such that the guarantor pays when the principal is insolvent. In surety, the liability
is solidary such that he warrants that he will pay regardless of whether or not, the principal is insolvent.
 The foregoing 15 situations require SPA since these are acts of dominion. A general power of attorney is not enough to perform any of
these 15 acts. In other words, the authority given must specify what particular acts the agent can perform or what particular rights the
agent may waive or what particular properties the agent may convey.
Article 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.
Q: What is your authority if you have general powers?
A: If the agent is couched with general powers, the agent is authorized to do all acts of administration. On the other hand, if it is specific, the
agent is only authorized to do the acts that the principal had specified.
Scenario: You are appointed as an administrator of the property of your principal, and because the property was quite a wide area, you
needed to hire security guards. And so, you sold the portion of these properties to be able to pay the security guards. Could you sell?
A: If the expense is considered as a necessity, the agent is authorized to hire a security guards and the selling of the other portion of the
property for the purpose of preservation is justified.
Sir: You could do something if the intention is to protect, secure or preserve the properties of the principal. Although in practice, it is
different because you cannot sell unless you have the special power of attorney.
Q: That would be true if what you sell might be…? If you sell a parcel of land, can it be done?
You cannot sell the property because the law does not allow you and it expressly states that with regard to acts of strict dominion, there
should be a SPA, otherwise, the acts would be deemed not within the scope of the agent’s authority. Thus, you need to COMMUNICATE with
your principal.
Sir: You do not violate the law just because you want to preserve. Because most likely, if the law would allow you to do this, it would be open
for abuse – that’s a protection. Thus, the law says that if you are a mere administrator, just administrator, do not sell. However, if there are
personal properties, you could. Of course, you need to justify later. Because generally, you are not allowed to dispose and exercises rights of
dominion and selling by any definition is an act of ownership. Here you could just justify this by necessity. But as long as there is an
opportunity to communicate with the principal, you will have to communicate and convey.
Q: In case of doubt insofar as agency is concerned?
A: If you were in doubt, that doubt must be interpreted to mean that you don’t have such authority.
Q: If you are given authority to sell a parcel of land, and it appears in a SPA, can you sell?
A: Yes.
Q: The buyer now brings the deed of sale, and ask you to sign the document. If you signed the Deed of Sale, do you think the document would
be binding?
A: No, because you will be in doubt if the authority to sell includes the authority to sign the document. Thus, the construction in case of doubt
applies and must be interpreted that you don’t have an authority.
Q: So what will you state in the Deed of Sale?
A: To be sure, state “authorizing Mr. C to sell my property Lot no. XXX located at XXX with an area of
XXX, further authorizing Mr. C to execute and sign the appropriate DOS or such other documents as may be necessary to transfer and convey
my property” Hence, there is no more doubt.
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THUS, AUTHORITY TO SELL DOES NOT INCLUDE THE AUTHORITY TO SIGN THE DEED OF SALE.
Scenario: So Mr. C is now given an authority to sell with an authority to sign and execute the DOS. He never found a buyer. And the principal
needs 5 million. Mr. C wanted to help and asked the bank how much loan could they expect if they mortgage the property. SO Mr. C got the
5M that the principal needed.
A: The act of mortgaging is not valid. Because under the law, an authority to sell does not include authority to mortgage and the authority to
mortgage does not include the authority to sell.
Q: Is it beneficial to the principal?
A: It is not beneficial. Because although in the first glance, it seems beneficial to the principal. However, in the long run, maybe the law
contemplates that the principal cannot anymore pay the bank for the mortgage, so it may result to a disadvantage.
Article 1880. A special power to compromise does not authorize submission to arbitration. (1713a)
The principal might not have confidence in the judgment of the arbitrator. While in compromise, the terms that are compromise will benefit
both parties.
Article 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the
purpose of the agency. (1714a)
Article 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more
advantageous to the principal than that specified by him. (1715)
Article 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted;
neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own,
except when the contract involves things belonging to the principal.
The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. (1717)
If an agent is given the authority to lend, can the agent himself lend the money?
Generally No. Exception is the principal gives his consent. If the principal does not agree, only third parties may borrow the money.
Reason: Conflict of interest. This opens room for abuse of the agent’s authority.
Example: He can always say that Mr X, the borrower can no longer (Himanhiman siya ra diay si Mr X).
He controls the rate of interest imposed on the debt. (Boss, 2% lang atu interest ani. Ingnan dayun ang borrowers nga 5% ang interest) he
fraudulently enjoys the profit dayun.
On the other hand, If you are authorize to borrow can you lend?
Yes. Parties now may easily determine the terms as to their contract of loan.
The law expects the agent to act strictly within the limits of his authority. Otherwise, if he exceeds his authority, it will not bind the
principal.
 What is necessary in order that the act of the agent will be binding upon the principal?
1. The agent must have authority
2. He must act within the limits of his authority
3. He must follow the instructions of the principal
4. He must disclose the name of the principal
[The two most important elements are that: (1) He acted within the limit of the authority given and (2) he disclosed the principal]
Discussion: If the agent did not disclose the principal, then the latter has nothing to do with the contract under the Principle of Privity of
contract. This means that the contract will only bind the parties. The principle of liberality also applies in a contract of agency.
Should the authority given to the principal always be in writing?

No, it need not be in writing.
Discussion: As a matter of fact, it may be given orally. Actual authority need not be expressly given, because we said that it may be impliedly
given. Although not impliedly given even, there are circumstances where we can presume authority. Namely?
Implied Authority- are those that are incidental to the express authority.
Illustration:
X is the principal. He authorized me to sell his book. When I sold it to Y, he asked me for a receipt. In that case, I can issue a receipt because it
is an incidental to my authority to sell.
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So, that is an example of an implied authority, when you perform an act incidental to the express authority.
Any other authority which is not expressly provided but the agent can perform?
Authority by necessity- the intention of doing the act is to protect or preserve the subject of the agency or thing of the principal
This is now a very thin line. Because if it is always an express authority, that is not a problem. But now, we are saying that there are instances
when the agent can perform acts which are not expressly given but could be implied from the express authority or acts which are not
express and yet under the circumstances, by necessity or urgency, he has to do. That’s a very dangerous line.
How are we to follow that thin line?
Even without express authority, you can act so long as the intention was for the benefit of the principal or to protect or preserve his
property.
Generally, if you exceed the authority, it will not bind the principal and the authority ceases as well. That is why the law provides that even if
the agent exceeds his authority, there is an instance when the agent’s acts will still bind the principal.
 Expansion of an agent’s authority:

1. implied authority
2. necessary authority
3. authority by customs
4. authority by doctrine – (estoppel, ratification, apparent authority)
 Acts that will still bind the principal even if the agent exceeds his authority or was without authority
1. The acts of the principal herself caused the violation of the authority given.
2. When the principal’s acts have contributed to deceive a third person in good faith.
3. When the principal fails to repudiate the act of the agent exceeding her authority.
4. When there is a delivery of an instrument in blank
5. Ratification by the principal
6. There is a limitation imposed in the authority and this is unknown to the principal.
7. Acts of the agent benefited the principal
8. Due to the negligence of the principal
9. If the thing which is the subject of the transaction belongs to the principal
10. When the principal is guilty of estoppel
General rule: Principal is liable for the acts of the agent
Exception: The agents is personally liable when:
 When the agent expressly binds himself

 When the agent exceeds his authority
 When an agent by his act prevents performance on the part of the principal
 When a person acts as an agent without authority or without a principal
 A person who purports to act as agent of an incapacitated principal
SITIUATION:
Agent sold the car of Macapobre. He did not disclose the fact that Macapobre owned the car. He made it appear that the agent owned the car.
Car was already delivered and the price was already received
Q: Can buyer go to Macapobre in the event that subsequent to the buying of the car he discovers there are defects in it and there is a need for
repairs?
A: YES. It falls within the exception. Even if there was no disclosure as to the fact that Macapobre is the principal, the property is for a fact
owned by Macapobre and the same was already delivered to the buyer
Q: ON THE OTHER HAND, if upon selling the property, agent had not delivered the price paid by the buyer to Macapobre, and the unit sold
was not yet delivered to the buyer too. And, the day after the sale, the buyer saw Macapobre driving the car. Can buyer get the car from
Macapobre?
A: NO. Agent did not disclose who his principal was.
THE DIFFERENCE FROM SITUATION 1 AND SITUATION 2:
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 The fact of delivery. In the 1st situation, we construed that Macapobre impliedly ratified the sale despite the fact that there was an
absence of disclosure due to his receipt of the payment of the price of the car.
THIRD SITUATION: There was NO authority. Agent sold Mr. Macapobre’s car to A.
Q: Can A demand from Mr. Macapobre the delivery of the car.
A: NO. There was no authority at all.
OBLIGATIONS OF THE AGENT
 General obligations:
1. He must act in good faith and loyalty to his principal
2. Obedience to principal’s instructions
3. Exercise reasonable care in performance of his service.
 Specific Obligations:
1. To carry out the agency which he has accepted
2. To answer for damages which through his performance the principal may suffer
3. To finish the business already begun on the death of the principal should delay entail any danger
4. To observe the diligence of a good father of the family in the custody and preservation of the goods forwarded to him by the owner
in case he declines the agency, until an agent id appointed
5. To advance necessary funds if there is 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 the family will 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 being a conflict of interest, and the agent prefer his own
9. Not to loan to himself if he has been authorized to lend money at interest
10. To render account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency.
(pls refer to the book for the complete list…pp 448..tnx..)
Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-
performance, the principal may suffer.
He must also finish the business already begun on the death of the principal, should delay entail any danger. (1718)
Article 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and
preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. (n)
A TRUCKLOAD OF FISH
Mr. M, with a truckload of fish, went to the house of Ms. G, in order to appoint her as agent with the authority to sell said fishes. However,
before Ms. G could decline the offer of agency because she was likewise busy studying for the finals, Mr. M was already long gone, on his way
to Manila to help the BarOps. Mr. M could not be reached through any means of communication. What will Ms. G do?
Can Ms. G call BGMP or DSWD and give them the fishes rather than let it rot?
- NO
Can you call your neighbors and sell the fishes at a lower price?
- NO.
Reason: Since you refused to accept the agency, you cannot give away the goods nor sell them at a lower price. What is required of you by
law is only to exercise the diligence of a good father of a family. That means you are to exert your best efforts within your reasonable means
or capacity so as to preserve the goods in your custody until such a time that the owner appoints an agent or take charge of the goods
himself.
You need not go beyond your means to preserve the goods in your custody. It is sufficient that you exercised the diligence required of you by
law. If your best efforts are still not enough, then there is nothing more you can do about it. In case of loss or damage to the goods, the owner
thereof shall bear it.
(Ex: Ms. G, in the exercise of said diligence, could only afford to buy ice. She cannot be burdened to the extent of what is beyond her means.)
Article 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so except when the
principal is insolvent. (n)
Article 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal.
In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. (1719)
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Situation: X was authorized by Y. The seller in Santander is leaving at 5 o’clock in the morning, you have to catch him before he leaves and
finalize the sale. Take the first available means of transportation. 10M transaction if cannot seal the transaction, the expected profit of 2M
will be lost.
As early as 3am bound for Santander, you were already at the highway waiting for the first available transportation. (Tigidigtigidig sound)
The obligation of an agent is to follow instructions.
You failed to catch up the seller, can you be blamed and seek damages from you?
Did you follow instructions? No.
As a rule, the agency must follow the instructions of the principal but the agent may go beyond if it is reasonable in fulfilling the task or the
business.
Which should be followed, the authority or instruction?
(The explanation was for both, but wala ni-comment/ ni-concur/ no reaction si sir)
In the case, if the principals instruction is ambiguous then he cannot ask for damages.
When it was said take the first available means of transportation, what was in my mind was the fastest since time is of the essence, probably
a bus.
Situation:
X authorized Y to sell her property in Colon St. Sell it at a price as you may find fair and reasonable as written in the special power of
attorney.
I hereby authorize Y to sell my property at Colon St. Cebu, with full power of attorney to execute a deed of sale and documents as may be
required to carry out the authority given to her. At a price which she may find fair and reasonable.
Y looked for a buyer but as she was about to board her car, Y was instructed further to sell it at no less than P15,000 per square meter. Y
found a buyer Z, and sold it for P10,000 and by virtue of the SPA, executed a deed of sale. X expected P15M (P15k x 1k sq. m.) but Y delivered
only P10M (P10k x 1k sq. m.).
With respect to Z, the sale is binding as she has no knowledge of the instruction between X and Y. X cannot go after Z for the difference. X can
go after Y for the balance (5M) because as an agent she is bound to follow the authority and instructions.
There are instances where the agent can deviate from the instructions. However, an agent cannot deviate from the authority given.
 Instances when an agent may deviate from the Principal’s Intructions:
1. Sudden emergency
2. Ambiguous instructions
3. insubstantial departure from the principal’s instructions which does not affect the result
Article 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n)
Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer
his own. (n)
Article 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been
authorized to lend money at interest, he cannot borrow it without the consent of the principal. (n)
Article 1891. 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.
Every stipulation exempting the agent from the obligation to render an account shall be void. (1720a)
 An agent has the obligation to:

̵ render an account of his transactions and
̵ to deliver to the principal whatever he may have received by virtue of the agency
Situation: X is authorized to sell the property in Colon St. X, together with the buyer went to the location, showed the lot for sale. Adjacent to
the land was a vacant lot owned by X. (X told the buyer that the taxes of the land of the principal were not paid etc. The buyer preferred the
lot of X. What could happen?
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X will be liable to the principal. Art. 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of
the principal, he should prefer his own. (n)
 The rule is the interest of the principal should be given priority.
Article 1892. The agent may appoint a substitute 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.
All acts of the substitute appointed against the prohibition of the principal shall be void. (1721)
 A sub-agent is a person employed or appointed by an agent as his agent, to assist him in the performance of an act for the principal
which the agent has been empowered to perform.
 An agent can appoint a substitute agent when:
 There is no prohibition
 There is authority given, provided he shall not employ someone who is notoriously incompetent and insolvent.
 If a sub-agent fails in his obligation, what could happen?
 If no prohibition to appoint, binds the principal.
 The agent is liable if:
(1) If he was not given the power to appoint one;
(2) When he was given the power, but without designating the person, and the person was notoriously incompetent and
insolvent.
 Thus, If the principal appoints or if the appointment of the sub-agent was valid, the principal is bound by the acts of the sub-agent
so long as he acts within his authority.
 Effects if despite the prohibition, the agent appointed a sub-agent;
 Acts by the sub-agent is not binding to the principal
 If there results any damage, the agent will be liable for the acts of the unauthorized sub-agent.
 If damages are incurred, the principal may sue the agent for the acts of the sub-agent. If agent can no longer be found, the principal
can sue or go after the sub-agent despite the lack of privity on contract. This is an exception to that principle
Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the
substitute with respect to the obligations which the latter has contracted under the substitution. (1722a)
Article 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity
has not been expressly stipulated. (1723)
Article 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of agency, and for the fault or
negligence of his fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (n)
If several agents were appointed, the nature of their liability is joint except if there is a stipulation that there liability will be solidary.
If more than one principal, each of the principal is solidarily liable to the agent.
RULES:
 Two or more agents, jointly liable.
 Two or more principals, solidarily liable.
Article 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he
still owes after the extinguishment of the agency. (1724a)
Article 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers. (1725)
Article 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the
contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this
case, however, the agent is liable if he undertook to secure the principal's ratification. (n)
Article 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the
agent as to circumstances whereof he himself was, or ought to have been, aware. (n)
Agent X was instructed to sell the car and the buyer is waiting behind the Cathedral Church at 10am. Agent X, instead of bringing the car to
the buyer waiting behind the cathedral church, went behind the Redemptorist Church because X does not know Cebu city. Buyer sues the
principal.
Ms. A will be liable for the ignorance of C(agent) because Ms. A warrantied the capability and capacity of C and his failure to perform his
obligation will revert back to the principal(Ms. A) which the third party can personally hold Ms. A liable.
Page | 18
Article 1900. 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. (n)
Article 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
Article 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of
attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons
who have relied upon the power of attorney or instructions shown them. (n)
Article 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the
consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. (n)
Commission Agent (Factor agents)- agent contracted for the purchase and selling of the goods and he has the possession of the goods to be
sold.
Article 1904. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish
them by countermarks, and designate the merchandise respectively belonging to each principal. (n)
WAREHOUSING RICE SITUATION
What is the responsibility of the commission agent?
If the commission agent has several principals, he must countermark and designate the specified goods that was given to him by the
principal. Meaning, he must be able to account for them and designate which goods belong to which principal.
Commission agents are obliged to sell in CASH. Otherwise, if he sold on credit without the principal’s authority, he will be liable to pay the
goods sold in cash.
Article 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the
principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result
from such sale. (n)
Article 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement
of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned.
(n)
Article 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee
commission, he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the
purchaser. (n)
Guarantee Agent– He binds himself liable in case the principal debtor cannot pay the debt. In such case he warrants the performance of the
obligation of the principal debtor.
Article 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable
shall be liable for damages, unless he proves that he exercised due diligence for that purpose. (n)
What is her obligation if she is allowed to sell it on credit?
To collect the credit when it is due.
If the commission agent sold the goods on credit without the authority of the principal, the principal may demand from the agent payment in
cash. If it sold on credit with the authority of the principal, the agent is bound to notify the principal upon the sale of the goods on credit.
Otherwise, the agent will be liable for the value of the goods. If the agent failed to notify the principal that the goods have been sold on credit,
then the sale will be deemed to have been sold on cash.
When we say an agent with a guarantee commission, would it necessarily have to be a commission agent as well? Not necessarily
Can a commission agent be an agent in guarantee commission? Yes
Situation: I authorize you o sell my property Ms. C. You are entitled for a 10% commission. However if you succeed, I will give you a
guarantee commission of 5% too, if you can sell it within six months. Could that be done? Yes
If you have collected after 5 months what will happen? The agent will get the guarantee commission of 5% plus the 10% commission.
If you failed to collect? Consequence? Agent cannot get the guarantee commission. He is entitled only to the ordinary commission.
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What can the principal do? The principal can get the proceeds of the sale from the agent. Because he is an agent with a guarantee
commission, he guarantees the collection of proceeds regardless if buyer paid the purchase price. In effect the guarantee will be
liable to the principal for the purchase price in the event when the buyer fails to pay the purchase price
Article 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts,
according to whether the agency was or was not for a compensation. (1726)
OBLIGATIONS OF THE PRINCIPAL
 Obligations of the Principal:

1. To comply with the obligations which the agent may have contracted within the scope of his authority and in the name of the
principal.
2. To advance to the agent, should the latter request, sums necessary for the execution of the agency.
3. To reimburse the agent for all advances made by him, provided the agent is free from fault.
4. To indemnify the agent for all the damages which the execution of the agency my have cause the latter without fault or negligence
on his part.
5. To pay the agent the compensation agreed upon
Situation1: Agent is authorized to sell a parcel of land. He went to a potential buyer but the potential buyer is very busy attending to his sick
child. The agent told the buyer that he can do something to cure his child. So, the buyer attended to the sick child. He chewed guava leaves
and applied it to the sick child. Unfortunately the sick child became more ill because of infection. Eventually, the child was brought to the
hospital and needed more serious surgery. The potential buyer incurred 2million hospital expenses. The buyer sued the agent for the
expenses, but his defense is that he is only an agent and his principal must be the one being sued. Is the principal liable?
- No. The act of the agent was an extreme deviation from the authority given. He has nothing to do with the illness. He was only
authorized to sell the land. Thus, he cannot act as a doctor or pretend to be a doctor to cure the child.
Situation2: Same agent was authorized by the same principal to sell his jewelry…
Article 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.
(1727)
 Requirements for ratification

1. The principal must have the capacity and power to ratify.
2. He must have had knowledge or reason to know of material and essential facts about the transaction
3. He must ratify the acts in its entirety
4. The act must be capable of ratification
5. The act must be done in behalf of the principal
 Difference between ratification and estoppel: (Time is the difference.)

In ratification, it is the confirmation of an act after the perfection of the transaction had already been made. Estoppel, on the other
hand, refers to an act misleading a person, prior or simultaneous to the perfection of the transaction.
Article 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter
to act as though he had full powers. (n)
Article 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency.
Should the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful,
provided the agent is free from all fault.
The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. (1728)
Situation: The Vessel

Agent M was authorized by his principal to sell a vessel which was anchored and afloat in the Mactan channel. However, prior to its sale, a
storm came. The vessel hit the Mactan bridge, got damaged, and thereafter sunk. Can the agent be held liable?
Answer: No. The cause thereof was a fortuitous event that is beyond his control. However, he can only be free from liability if he exercised
the diligence required of him to preserve and protect the vessel from the damages it may suffer due to the incoming storm (i.e. secure or
anchor the vessel). It is sufficient for him to exert his best efforts within his reasonable means to protect and preserve the said vessel. The
law does not require him to do the impossible.
Q: As a matter of fact, 1 week before, PAG-ASA already announced that a strong typhoon is coming. However, the agent did not do anything
in response.
Page | 20
A: The agent is negligent, therefore liable.
Q: If after hearing the announcement, the agent doubled the anchors, tied up the vessel. Despite the protection employed on the vessel, it
sank.
A: He will no longer be held liable because at the very least, he did his part in protecting the vessel but the typhoon was just too strong. It is
not his fault anymore.
Q: If you were the principal, would you take that reason of the agent as he says “I did my best, but my best wasn’t good enough.”? How about
insuring the vessel?
A: While the agent is obliged to protect the property of the principal, the law never requires him to go beyond the expenses he can afford
unless he is so directed to getting an insurance policy. It would involve not minor but major expenses which can only be incurred by the
agent if so stipulated.
Q: Granting Galia is an agent and as stipulated, she is authorized to have the vessel insured. She spent a lot of money in paying the premiums,
what can she demand from the principal?
A: She can demand for the reimbursement of her expenses for the protection and preservation of the property.
Q: On the other hand, if it were jewelries, she also incurred expenses for the trips (taxi, habal2, traysikad) as she looked for potential buyers,
do you think she can demand reimbursement from the principal?
A: Yes.
Article 1913. The principal must also indemnify the agent for all the damages which the execution of the agency may have caused the latter,
without fault or negligence on his part. (1729)
 Principal’s liability as regards an agent’s tortious acts

o Rule: Motivation-deviation test. 2 things must exist:
1. Act of the agent must have been motivated to serve his employer
2. Act was not an extreme deviation from the normal conduct of such employee
Situation1: Agent is authorized to sell a parcel of land. He went to a potential buyer but the potential buyer is very busy attending to his sick
child. The agent told the buyer that he can do something to cure his child. So, the buyer attended to the sick child. He chewed guava leaves
and applied it to the sick child. Unfortunately the sick child became more ill because of infection. Eventually, the child was brought to the
hospital and needed more serious surgery. The potential buyer incurred 2million hospital expenses. The buyer sued the agent for the
expenses, but his defense is that he is only an agent and his principal must be the one being sued. Is the principal liable?
- No. The act of the agent was an extreme deviation from the authority given. He has nothing to do with the illness. He was only
authorized to sell the land. Thus, he cannot act as a doctor or pretend to be a doctor to cure the child.
Situation2: Same agent was authorized by the same principal to sell his jewelry. . While walking in Colon St., before said agent could talk to a
close friend who could be a potential buyer, he was confronted by a robber who asked him to give the jewelry at gunpoint. Although there
was no sufficient provocation, the agent, who also carried a gun with him, countered it by shooting the robber which then led to the latter's
death. The heirs of the killed robber are now suing. Can the principal be held liable for the tortious acts of his agent.
- Yes. Both requisites are existing
Difference in the situations: Although in both cases, it was evident that the agent acted with the motivation to serve his principal, the
difference lies in the presence of extreme deviation from the authority given to him.
In the 1st situation, there was an extreme deviation. An agent, who was only authorized to sell a parcel of land, extremely deviated from said
authority when he played doctor when in truth and in fact he had no experience nor knowledge in the field of medicine whereas in the 2nd
situation, no extreme deviation can be inferred from the facts. The agent's act of killing the robber was prompted by his desire to serve his
principal and the intention to protect the property (jewelries) of his principal, from the hands of said robber. The absence of extreme
deviation in this case can make the principal liable for the agent's tortious act.
Q1: Can the agent ask for reimbursement or indemnity from the principal for damages suffered in those cases where he is obliged to pay the
victims?
A1: Yes, provided said agent acted without fault or negligence.
If the agent was at fault or was negligent, he cannot demand for reimbursement or indemnity from the principal.
Q3: What if the person whom the agent killed was not the robber but the "other man" of his girlfriend whom he saw HHWW with her?
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A3: In that case, since his motivation is no longer to serve his principal but a personal one, that is revenge due to jealousy, the agent alone is
personally liable for his act, not the principal.
Article 1914. The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and
pays the indemnity set forth in the two preceding articles. (1730)
Q: Now, if Galia have incurred a lot of expenses (agent in selling a jewelry) but she was never able to sell any jewelry. Would she still be
entitled for reimbursement?
A: Yes. Galia can even retain the jewelries until she will be reimbursed. As soon as reimbursement is made, she must return the jewelries.
Pledge has been established.
Q. What is the obligation of the principal?
A. The obligation of the principal is to indemnify the agent or to reimburse the agent for the expenses that the agent has incurred. And if ever
the principal will not indemnify or reimburse the agent, the latter can hold as pledge the jewelry he has.
Situation: Agent was able to sell some jewelry worth 20,000 and has a commission of 2,000. He only paid 18,000 to the principal because he
got already his 2,000 commission.
If he does not pay the entire 20,000, what could happen? Can the principal force him to turn over the entire 20,000? What about his
commission?
A: The principal can force him to turn over the entire 20,000 because the whole amount should be given to the principal. As to the
commission, it is the principal who will give the commission and the agent should not directly get the 2,000 from the whole amount.
Q. If I could hold the jewelry for my expenses, why can’t I hold my commission which I have earned? Can you see the difference?
Sir’s Opinion: “Retention for pledge and Retention for commission. I don’t see any difference at all. But maybe on trust. Anyway, let’s keep it
that way. That’s what the law says: Legal pledge in case of things belonging to the principal, but not the right to retention for the commission
earned by the agent.”
Article 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the
agent for all the consequences of the agency. (1731)
Article 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the
two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544. (n)
Q. Ms. A, if you are the agent, and your principal was Ms. G, you were authorized to sell the land of Ms. G, complied with the formalities.
Instead of waiting for you to sell, Ms. G saw another buyer. Ms. G then also executed a deed of sale. Which of the two buyers will be entitled to
the parcel of the land?
A. In case of a double sale of an immovable property: (Art. 1544 – Law on Sales)
1. The one who first recorded it in the Registry of Property (Registration);

2. The person who in good faith was first in the possession (Possession);
3. The person who presents the oldest title in good faith (Oldest Title)
For a movable property:
1. That which of a prior date;

2. Possession in good faith
Article 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in damages to
the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. (n)
Article 1918. The principal is not liable for the expenses incurred by the agent in the following cases:
(1) If the agent acted in contravention of the principal's instructions, unless the latter should wish to avail himself of the benefits derived
from the contract;
(2) When the expenses were due to the fault of the agent;
(3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof;
(4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. (n)
Page | 22
DISSOLUTION OF AGENCY
Discussion:
Revocation- is the extinguishment of the agency by the principal. It expresses the intention of the principal to end the relationship that he
has established. In effect, the principal is withdrawing the authority to represent him that he gave to the agent.
Revocation may be for any reason. But until there is revocation, the agency continues to exist. Until there is extinguishment, the authority is
presumed to be continuous.
Revocation may either be express or implied.
1. Express- principal notifies the agent. Until then, the authority is presumed to continue.
2. Implied-
(a) When the principal appoints another agent for the same business or transaction provided there is incompatibility;
(b) If agent is given a general power and the principal grants a special one to another agent – there is an implied revocation in so
far as the power covered by the special authority is concerned. Thus there is a partial implied revocation.
(c) Principal directly manages the business in such a way that he intends to revoke or make ineffective the authority given to the
agent.
However, we said earlier that if there are 2 or more agents, they are jointly liable. But if there are 2 or more principals, they are solidarily
liable.
In such a situation when there are several principal, and one principal revokes the authority, there is a valid revocation. The revocation of
one principal does not need the consent of the other principals. Revocation by one is revocation by all.
On the other hand, if one of the principal dies, it does not extinguish the obligation. There is still another source of authority from one the
other principal and there was really no intent to extinguish the agency.
Rule: Death of one of the principals does not revoke agency. But revocation by one of the principals revokes the entire agency.
What is the effect if the agency is revoked?
Generally, it extinguishes the agency. Agent no longer has an authority to represent the principal.
Unless (still binds the principal):
1. no notice to agent; and
2. third party has no knowledge of the revocation
Even if the agent is not notified, but the third party was aware of the revocation, the principal is still not bound. Two things are to be done:
1. notify the agent
2. notify the third party
General Rule: Principal has the authority to revoke the agency anytime since such relationship is founded on trust and confidence.
Exception (when principal has no right to revoke):
1. Agency is coupled with interest
a.) when the agency is created not only for the interest of the principal but also for the interest of third persons
Example: A factory was sold by the principal and partial payment was made. There was a stipulation that the balance shall be paid
by installment. The seller appoints an agent to manage the factory and collect the proceeds and apply it to the balance. Such agency
cannot be revoked by the principal.
- third person must have accepted the situation in favor of him
b.) when the agency is created for the mutual interest of both the principal and the agent
2. agency is means of fulfilling an obligation already contracted
3. partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable
Page | 23
- managing partner can only be revoked upon just and lawful cause and with the vote of the partners who have the controlling
interest
Withdrawal – done by the agent. When the agent would no longer carry on the power conferred by the principal. He should give notice to
the principal with regards to the withdrawal. If it is without just cause, he may be liable for damages. If for just cause, such as when there is
impossibility in carrying out the agency without causing great detriment to the agent, he is not liable for damages.
Death – if principal dies, his heir has no duty to notify the agent. But when the agent dies, his heirs must notify the principal. Within that
time, they must still exercise reasonable diligence in taking care of the subject of the agency.
Summary [EDWARD]
Expiration
Dissolution of the firm or corporation who granted or accepted the agency
Withdrawal
Accomplishment of the purpose/object of agency
Revocation
a. expressed
b. implied (refer to the 3 instances above)
Dissolution
Article 1919. Agency is extinguished:

(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation which entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose of the agency;
(6) By the expiration of the period for which the agency was constituted. (1732a)
Article 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such
revocation may be express or implied. (1733a)
Article 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the
latter if they were not given notice thereof. (1734)
Article 1922. If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and
without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons.
(n)
Article 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which
notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. (1735a)
Article 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third
persons. (n)
Article 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the
same without the consent of the others. (n)
Article 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the
latter. (n)
Article 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already
contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is
unjustifiable. (n)
Article 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by
reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of
continuing the performance of the agency without grave detriment to himself. (1736a)
Article 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had
reasonable opportunity to take the necessary steps to meet the situation. (1737a)
Article 1930. 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. (n)
Article 1931. 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. (1738)
Article 1932. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances
may demand in the interest of the latter. (1739)
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Team Partnership 404 2015

 General Partnership vis-à-vis Limited Partnership

Requirements for formation of LTD Partnership:

1. it need to have a certificate signed and sworn toby the partners

 Distinction between general partner and limited partner

GENERAL PARTNER LIMITED PARTNER

 Advantages of partnership over a corporation

1. Less people to deal with.

 Advantages of corporation over partnership

 Options for a business or enterprise to get money or capital:

1. Ordinary loan on interest;

 Investor vs. Lender

 When else is a limited partner be liable as a general partner?

 What are the rights of a limited partner?

What is the reason for the law?

Limited partners enjoy preference.

Q. Earlier we learned that a partner can engage in any business.

A. In General Partnership – Capitalist Partner – Relative prohibition

Industrial Partner – Absolute prohibition

Q. Can “I” engage in another business?

A. Yes. Because it is one of the allowable transactions for a limited partner.

What’s the danger? Why is there a conflict of interest?

Yes he can demand for interest.

But can he ask for collateral as security?

2. He is not entitled to hold collaterals

This would constitute as fraud to third party creditors.

A limited partner enjoys certain preferences. What are these preferences?

Among the limited partners, do they have preferences?

G.R: they stand in equal footing

1. on the dissolution of a partnership,

Article 1858. A limited partner is liable to the partnership:

Article 1859. A limited partner's interest is assignable.

May a GP assign their rights?

General Partner Limited Partner

a. Interfere in management 1.1 Interfere in management

Q: Can an assignee inspect the partnership books?

Third party creditors and the partners, general or limited.

In agency, the agent represents only his principal.

 Agency vs. Guardianship

There must be an Employer-employee relationship satisfying

- Revocable only upon fulfillment of the agreement - Revocable any time

 Independent Contractor vs Agent

Independent Contractor Agent

How is agency created?

What is the nature of contract of agency?

No cure, no pay. You must earn your pay.

Article 1876. An agency is either general or special.

B. Extent of Power Conferred

(10) To bind the principal in a contract of partnership;

 Attorney in fact – an agent holding a special power of attorney.

Q: What is your authority if you have general powers?

Q: In case of doubt insofar as agency is concerned?

Q: So what will you state in the Deed of Sale?

Q: Is it beneficial to the principal?

Should the authority given to the principal always be in writing?

How are we to follow that thin line?

 Expansion of an agent’s authority:

General rule: Principal is liable for the acts of the agent

Exception: The agents is personally liable when:

 When the agent expressly binds himself

A: NO. Agent did not disclose who his principal was.

THE DIFFERENCE FROM SITUATION 1 AND SITUATION 2:

Q: Can A demand from Mr. Macapobre the delivery of the car.

A: NO. There was no authority at all.