TEAM PARTNERSHIP | ROOM 404

SEPTEMBER 28, 2015 TRANSCRIPT

ART. 1892. The agent may appoint a substitute if theprincipal has not prohibited him from doing so; but heshall be
responsible for the acts of the substitute:

(1) When he was not given the power to appointone;

(2) When he was given such power, but withoutdesignating the person, and the person appointed wasnotoriously
incompetent or insolvent.

All acts of the substitute appointed against the prohibitionof the principal shall be void. (1721)

ART. 1893. In the cases mentioned in Nos. 1 and 2of the preceding article, the principal may furthermorebring an
action against the substitute with respect tothe obligations which the latter has contracted underthe substitution.
(1722a)
Magaso 19:00-31:00

Substitute agencyhappens when a sub-agent is 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.

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.

Art. 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)

Art. 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)

Art. 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)

If several agents were appointed, the nature of their liability isjointexcept 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.
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 Two or more principals, solidarily liable.

ART. 1869. Agency may be express, or implied fromthe acts of the principal, from his silence or lack ofaction, or his
failure to repudiate the agency, knowingthat another person is acting on his behalf withoutauthority.
Agency may be oral, unless the law requires a specific form. (1710a)

Insofar as creation of agency is concerned, agency may be created expressly or impliedly.

As to manner of its creation:

(a) express. — one where the agent has been actuallyauthorized by the principal, either orally or in;
(b) implied. — one which is implied from the acts of theprincipal, from his silence or lack of action, or his failure
torepudiate the agency

To bind the principal:

1. There must be authority
2. Agent must act within the limit of the authority
3. Agent must act as an agent.
4. Agent must disclose the principal

The rule is that the agent must act strictly within the authority but that authority could be expanded in the following
instances:
 By necessity- beyond but necessary to preserve the object
 When the principal ratifies acts
 When the principal is bound by estoppel

Insofar as the principal is concerned, the principal is still bound with the circumstances if these are present.
Insofar as the agent is concerned, he cannot be made personally liable.

Even if authority is not strictly complied with, if the circumstances are not present, proven or established, acts of agent
will not be binding and the agent may be held personally liable.

Famor 31:00-43:00

There are Circumstances where the agent will also be personally liable other than the failure to establish the instances
where authority is considered expanded. What are they?

1. If he expressly states that he binds himself personally

2. The acts of the agent prevents the performance of the principal
3. He acts without any authority or with no principal
4. The agent acts in behalf of an incapacitated principal

Illustrate one instance where the agent becomes personally liable because he performed an act which prevented the
principal from carrying out his obligation.

There is a contract to sell a specific car and while the car was in the custody of the agent, on his way to deliver the car to
the buyer, he bumped it recklessly. The car was totally destroyed. Because it was a specific obligation to deliver a
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specific car, the principal can no longer perform his obligation to deliver the specific thing to the buyer. In that case, the
agent’s act of bumping it intentionally will now make him personally liable.

***NOTE: The agent intentionally bumped the car because of “small commission”.Tihikdawmuhatagug
commission ang principal.

Principal authorized the agent to sell his land at 12M. After days of looking for a buyer, he cannot find one. He
eventually sold it to one buyer and said,”Dugaykopinangitamupalitaningyuta, wala man mupalit. Palitanalang nag 10M
uy.” So the buyer happily bought it. The agent reported it to the principal. What do you think the principal will do? The
principal will get Angry.

The buyer called up the principal.”Principal, I know. I learned that you authorized your agent to sell it at 12M and he sold
it to me at 10M. Don’t worry. I will cancel the sale because your agent acted beyond the scope of his authority and
therefore he was not authorized to sell it to me. So I’ll just return your land and give me back my 10M.”Can he(buyer) ask
for the cancellation of the sale? What could be the buyer’s reason for returning the land?

The reason of the buyer for returning the land: maybe he has another purpose for the money which is more beneficial to
him. He must have learned that the ADJACENT LOT IN EXACTLY THE SAME LOCATION WILL BE SOLD TO HIM FOR 5M
ONLY.

However, the buyer CANNOT cancel the sale. There was no more possibility because the defect has been cured. The
principal already ratified the sale. Whatever defect there was, it has been cured by RATIFICATION. So he(buyer) can do it
only BEFORE ratification.

Mayang 43:00- 55:00

COMMISSION AGENT VS GUARANTEE AGENT

Commission Agent – Goods are delivered to his custody and he is authorized to sell the said goods of the
principal
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.

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

Gesah 55:00- 1:07:00

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

Generally, acts of the agent is act of the principal. So, the principal is bound by acts of the agent as long as it is within the
scope of his authority. Unless when such agent acts without or outside the scope of his authority when the agent acted
by necessity, customs, by doctrines of apparent authority, estoppels, and ratification.

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

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…

Nori 1:07:00- 1:19:00

Situation:JewelryAgentvs.Robber

Thesameagent(feelingDr.)wasauthorizedtoselljewelry.WhilewalkinginColonSt.,beforesaidagentcouldtalktoaclosefriendw
hocouldbeapotentialbuyer,hewasconfrontedbyarobberwhoaskedhimtogivethejewelryatgunpoint.Althoughtherewasnos
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ufficientprovocation,theagent,whoalsocarriedagunwithhim,countereditbyshootingtherobberwhichthenledtothelatter'sd
eath.Theheirsofthekilledrobberarenowsuing.Cantheprincipalbeheldliableforthetortiousactsofhisagent?

Answer:Yes.Theprincipalmaybeheldliableforhisagent'stortiousactsgrantingthefollowingaresatisfied:

Motivation-DeviationTest

(a)Theagent,indoingsuchact,wasmotivatedtoservehisprincipal.Itmustnotbeforpersonalreasonsortosatisfyhisowninterest;
and

(b)Theagentmustnothaveextremelydeviatedfromtheauthoritygiven.

Q1:Cantheagentaskforreimbursementorindemnityfromtheprincipalfordamagessufferedinthosecaseswhereheisobligedto
paythevictims?

A1:Yes,providedsaidagentactedwithoutfaultornegligence.

Iftheagentwasatfaultorwasnegligent,hecannotdemandforreimbursementorindemnityfromtheprincipal.

Differencebetweentheagentwhoplayeddoctorandtheagentwhokilledtherobber:

Althoughinbothcases,itwasevidentthattheagentactedwiththemotivationtoservehisprincipal,thedifferenceliesinthepresen
ceofextremedeviationfromtheauthoritygiventohim.

Inthe1stsituation,therewasanextremedeviation.Anagent,whowasonlyauthorizedtosellaparcelofland,extremelydeviatedfr
omsaidauthoritywhenheplayeddoctorwhenintruthandinfacthehadnoexperiencenorknowledgeinthefieldofmedicine.Hisac
tonlymademattersworse.Insuchcase,thepresenceofanextremedeviationfromtheauthoritygivenwillnotmaketheprincipalli
ableforhisagent'stortiousact.Theagentaloneispersonallyliable.

Whereasinthe2ndsituation,noextremedeviationcanbeinferredfromthefacts.Theagent'sactofkillingtherobber,wasprompte
dbyhisdesiretoservehisprincipalandtheintentiontoprotecttheproperty(jewelries)ofhisprincipal,fromthehandsofsaidrobbe
r.Theabsenceofextremedeviationinthiscasecanmaketheprincipalliablefortheagent'stortiousact.

Q2:Whenisadeviationconsideredextreme?

A2:Youhavetoconsidertheauthoritygivenasthelinefromwhichyoumeasurewhetherornottheactoftheagentisanextremedev
iationtherefrom.Itmayvarybasedonthefactualcircumstancessurroundingthecase.Agoodindicatorthereofwouldbeifsuchact
oftheagentisnotwithinhisnormaldutyorauthority.

Q3:Whatifthepersonwhomtheagentkilledwasnottherobberbutthe"otherman"ofhisgirlfriendwhomhesawHHWWwithher?

A3:Inthatcase,sincehismotivationisnolongertoservehisprincipalbutapersonalone,thatisrevengeduetojealousy,theagental
oneispersonallyliableforhisact,nottheprincipal.

Situation:TheVessel

AgentMwasauthorizedbyhisprincipaltosellavesselwhichwasanchoredandafloatintheMactanchannel.However,priortoitssa
le,astormcame.ThevesselhittheMactanbridge,gotdamaged,andthereaftersunk.Cantheagentbeheldliable?

Answer:No.Thecausethereofwasafortuitouseventthatisbeyondhiscontrol.However,hecanonlybefreefromliabilityifheexer
cisedthediligencerequiredofhimtopreserveandprotectthevesselfromthedamagesitmaysufferduetotheincomingstorm(i.e.
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secureoranchorthevessel).Itissufficientforhimtoexerthisbesteffortswithinhisreasonablemeanstoprotectandpreservethes
aidvessel.Thelawdoesnotrequirehimtodotheimpossible.

Meg 1:19:00-1:31:00
Meg Anthony M. Miralles

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.

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.

Q: Now, if Galia have incurred a lot of expenses 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.

Glace 1:31:00-beyond
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.
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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?

(Answer of the student): 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.”

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

***We will continue on Chapter 3 then Chapter 4. WHOOOO!