23322051 Ateneo Central Bar Operations 2007 Civil Law Summer Reviewer Agency

8/6/2019 23322051 Ateneo Central Bar Operations 2007 Civil Law Summer Reviewer Agency

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ATENEOCENTRAL BAROPERATIONS 2007

Civil Law

SUMMER REVIEWER

LAWONAGENCY

CHAPTER 1:NATURE, FORMAND KINDS OF

AGENC

Y

Contract of

Agency is a

contract whereby 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. (Art.

1868)

Characteristics:1. Consensual2. Nominate3. Preparatory4. Principal

5. Unilateral;Bilateral (ifagency isforcompensation)

Nature: Since it is a

contract there must

be ameeting of the

minds as to consent,

object, and cause.

Exception tocontractualnature: entheagencyiscreatedbyoperationoflaw

Ex:AgencybyEstoppel

Basis:

0 Representation: The acts ofthe agent onbehalf of theprincipal withinthe scope of hisauthorityproduce thesame legal andbinding effectsas if they werepersonally doneby the principal.

0 Hence, thedistinguishingfeatures of agency are itsrepresentativecharacter & itsderivativeauthority.

Purpose: Extend the

personality of the

principalthrough the

facility of the agent

Capacity of theParties:

Principal QuickTime and aTIFF (Uncompressed) decompressor

are needed to see this picture.a. He may be a natural or a juridical person

b. He must be capacitated. The rule is ifa

person is capacitated to act for himself orhis own right, he can act through an

agent.


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i.

2. Agent

1. Ins

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hirdpersons

areconcerned,

itisen


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oughthattheprinci

paliscapacit

ated.

2. Insofar

ashisob

ligationstohispri

ncipalareco

ncerned,the

agentmust


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beabletobindhim

self.

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EssentialElements:

1. Consentof theparties toestablish therelationship;

2. Object of thecontract is theexecution of a

juridical act inrelation to thirdpersons;

3. Agent acts as arepresentativeand not for himself; and

4. Agent actswithin thescope of hisauthority.

Orient Air Services v.

CA, G.R. No. 76931,May 29, 1991

An illegal terminationof agency does not

justify reinstatement ofthe agent as such. Theagency cannot becompelled by the courtsto be reinstated because suchrelationship can only beeffected with theconsent of the principal.

Acts That Cannot BeDone By Agent:1. Personal Acts ex. Making of awill

2. Criminal or Illegal Acts

Nature of Relationshipbetween Principal and

Agent:Fiduciary - based ontrust & confidence

1. Agent isestopped from

assertinginterest adverseto his principal2. Agent must notact as anadverse party

3. Agent must notact for anadverse party

4. Agent must notuse or disclosesecretinformation


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5. Agent mustgive noticeof materialfacts

0 Knowledgeofthe

agentisim

putedtothe

princ

ipaleven

though

theagent

nevercommunicated

Excepti

ons:1. W

heretheinterestsofthe

agentar


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Adviser: Dean Cynthia Roxas-Del Castillo; Heads:

Joy Marie Ponsaran, Eleanor Mateo ;

Understudies: Joy StephanieTajan, John Paul

Lim; Subject Head: Thea Jimenez; Pledgees:Naealla Rose Bainto, Sandra May Maclang


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Civil Law Summer Reviewer

ATENEO CENTRAL BAROPERATIONS2007

the rule colludes with theagent to defraud the

principal.

Distinction between Agency & Lease of Service

AgencyLease ofService

Representation EmploymentAgent exercises Lessor ordinarilydiscretionary powers performs only ministerial

functions3 persons are involved: 2 persons are involved:principal, agent and the lessor and lessee

3rd person with whom the

agent contractsRelates to commercial Relates more to theor business matters of mere manualtransactions or mechanical

execution

Distinction between Agency & Guardianship

Agency GuardianshipAgent represents a A guardian represents ancapacitated person incapacitated person.Agent is appointed by Guardian is appointedthe principal and can be by the court and standsremoved by the latter. in loco parentis.Agent is subject to the Guardian is not subject todirections of the principal. the directions of the ward

but must act for thebenefit of the latter

Agent can make the Guardian has no power principal personally to impose personalliable. liability on the ward.

Distinction between Agency & Lease of Property

Agency Lease of propertyAgent is controlled bythe Lessee is not controlledprincipal. by the lessor.Agency may involve Lease of propertythings other than involves property.property.Agent can bind the Lessee cannot bind theprincipal. lessor.

QuickTime and aDistinction between Agency to Sell & Sale

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areto this picture.

Agency to sell Sale

Agent receives thegoods Buyer receives the goodsas the principals goods as ownerAgent delivers the Buyer pays the priceproceeds of the saleAgent can return the Buyer, as a general rule,object in case he is cannot return the object

unable to sell the same sold

to a third person

Agent in dealing with the Buyer can deal with thething received is bound thing as he pleases,

to act according to the being the ownerinstructions of hisprincipal

Distinction between Agent & Contractor

Agent Independent Contractor Represents his principal Employed by the

employerActs under the principals Acts according to his owncontrol and instruction methodPrincipal is liable for torts Employer not liable forcommitted by the agent torts committed by thewithin the scope of his independent contractor.authority

Distinction between Agency and Partnership

Agency PartnershipAn agent must submit to A co-partner is notthe principals right to subject to co-partnerscontrol right to control, unless

there is an agreement tothat effect

The agent assumes no The partner binds notpersonal liability where only the firm membershe acts within the scope but himself as wellof his authorityThe agent takes his The profits belong to allagreed share of profits the partners as commonnot as owner but as an proprietors in agreedagreed measure of proportionscompensation for hisservices

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,knowing that another person is acting on his behalfwithout authority.

Agency may be oral, unless the law requires a

specific form. (1710a)

Classifications of Agency

1. As to manner of creation1. Express agent has been actually

authorized by the principal, either orallyor in writing

2. Implied agency is implied from the

acts of the principal, from his silence orlack of action or his failure to repudiate

the agency knowing that


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another person is acting on his behalfwithout authority, or from the acts of theagent which carry out the agency, or fromhis silence or inaction according to thecircumstances

2. As to character1. Gratuitous agent receives nocompensation for his services

2. Onerous agent receivescompensationfor his services

3. As to extent of business of the principal1. General agency comprises all the

business of the principal2. Special agency comprises one ormore

specific transactions4. As to authority conferred

1. Couched in general terms agency iscreated in general terms and is deemedto comprise only acts in the name and

representation of the principal.2. Simple or Commission agentacts in

his own name but for the account of the

principal.

Forms of Agency:

General Rule: Appointment of an agent may be oralorwritten; no formal requirements

Exception: When the law requires a specificform (ex. agents sale of real property or anyinterest therein)

Art. 1875. Agency is presumed to be for acompensation, unless there is proof to the contrary.

(n)

0 The agent does not have to prove that theagency is for compensation.

0 But, theprima facie presumption that the agency

is for a compensation may be contradicted by

contrary evidenceQuickTime and a

Broker: NegotiateTIFFcontracts(Uncompressed) decompressorrelative to property inare needed to see this picture.

behalf of others and for a compensation/fee

When Broker Entitled to Compensation:0 Whenever he brings to his principal a party who

is able and willing to take the property, and enterinto a valid contract upon the terms named by theprincipal, although the particulars may bearranged and the matter negotiated andcompleted between the principal and the

purchaser directly

However, a broker is never entitled to commission for

unsuccessful efforts.

Manotoc Brothers, Inc. v. CA,221 SCRA 224 [1993]

The broker should be paid his commission where he isthe efficient procuring cause in bringing the sale.Efficient procuring cause: when there is a closeproximate and causal connection between the efforts andlabor of the agent and the principals sale of property.

Law on Double Agency:

Disapproved by law for being against public policy andsound morality EXCEPTwhere the agent acted withfull knowledge and consent of the principals

Right of agent to compensation in case of doubleagency:

1. With knowledge of both principals -recoverycan be had from both principals

2. Without the knowledge of both principals- the agent can recover from neither

3. With knowledge of one principal - as to theprincipal who knew of that fact and as to theagent, they are inpari delicto and the courts shallleave them as they were, the contract betweenthem being void as against public policy andgood morals

Art. 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 tothe circumstances. (n)

Art. 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)

Art. 1872. Between persons who are absent, theacceptance of the agency cannot be implied from thesilence of the agent, except:1. When the principal transmits his power ofattorney to the agent, who receives it withoutany 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 habituallyengaged as an agent, and he

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did not reply to the letter or telegram. (n)

Forms of Acceptance by Agent:

1. Express - when it is oral or written

2. Implied -when it can be inferred from theacts ofthe agent which carry out the agency, or from hissilence of inaction according to thecircumstances

1. Between persons who are present implied acceptance if the principaldelivers his power of attorney to theagent and the latter receives it withoutany objection

2. Between persons who are absent acceptance not deemed impliedfrom thesilence of the agent.Exceptions:

1. Whentheprincipaltransmits hispowerofattorney totheagentwhoreceive

s itwithoutanyobjection

2. Whentheprincipalentrusts tohim byletter or

telegram apowerofattorney withrespectto thebusiness inwhichhe is

habituallyengagedas anagent,and he didnot replyto theletter ortelegram

What is meant by present?Generally, face to face, but includes people

conversing directly through technology (ex. over thetelephone).

Power of Attorney: Instrument in writing by which oneperson, as principal, appoints another as his agent andconfers upon him the authority to perform certain specifiedacts or kinds of acts on behalf of the principal; primarypurpose is to evidence agents authority to third partieswithin whom the agent deals

Construction of Power of Attorney:

General Rule:Strictly construed and strictly pursued;heldto grant only those specified powers

Exception: when strict construction will destroythe very purpose of the

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Art. 1873. If a person specially informs another orstates by public advertisement that he has given a

power of attorney to a third person, the latter therebybecomes a duly authorized agent, in the former casewith respect to the person who received the specialinformation, and in the latter case with regard to any

person.


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The power shall continue to be in full force

until the notice is rescinded in the same manner in

which it was given. (n)

Way of Giving Notice of Agency & Its Effect:1. By special information - the personappointed

as agent is considered such with respect tothe person to whom it was given.

2. By public advertisement - the agent is

considered such with regard to any person

How do you revoke an agency?

In the same manner as it was constituted.However, constitution by Special Information may berevoked by notice in a daily newspaper, provided it

can be proven that 3rd persons in question read therevocation

What is an agency by estoppel?

There is really no agency at all, but the alleged

agent seemed to have apparent or ostensible,

although no real authority to represent another.

Distinction between Agency by Estoppel and

Implied Agency

y Implied Agency

Estoppel

Existence There is an actual

of actual No agency at all

agencyagency

Can be invoked

only by a 3rd

Reliance by person who in Such reliance in3rd persons good faith relied

on the conduct of not needed, sincethe agent is a real

the principal in

agentholding the agent

out as being

authorized

An agent byestoppel has

none of the rights An agent byNature of of an agent, implied

Authority except where the appointment has

principals all the rights andconduct are such liabilities of an

that the agent agent, i.e. has

reasonably actual authority to

believed that the act on behalf of

principal intended the principal

him to act as an

agent

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Art. 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)

Art. 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)

Art. 1877. An agency couched in general termscomprises only acts of administration, even if the

principal should state that he withholds no power orthat the agent may execute such acts as he mayconsider appropriate, or even though the agencyshould authorize a general and unlimitedmanagement. (n)

Will an authority embodied in a letter be sufficient?Yes. (Jimenez v. Rabot, 38 Phil 387 [1918])

Attorney-In-Fact:0 One who is given authority by his principal to do

a particular act not of a legal character

0 The term is, in loose language, used to includeagents of all kinds, but in its strict sense, itmeans an agent having a special authoritycreated by a deed.

Distinctions between a General Agent and a SpecialAgent

General Agent Special AgentScope of All acts Specific acts in

connected with pursuance of Authority the business or particular

employment in instructions or which he is with restrictionsengaged necessarily

implied from theact to be done

Nature of Involves No continuity of QuickTime

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Authorized serviceMay bind his Can not bind his

principal by an principal in aExtent to act within the manner beyond orWhich scope of his outside theAgent May authority specific actsBind the although it may which he isPrincipal be contrary to the authorized to

latters special perform

instructions

Apparent Duty imposedauthority does upon the third

not terminate by party to inquireTermination the mere makesof Authority revocation of his termination of the

authority without relationship asnotice to the third between the

party principal and

agent effective asto such third partyunless the agency

has beenentrusted for the

purpose ofcontracting withsuch third party

Construction Merely advisory Strictly construedof in nature as they limit thePrincipals agents authorityInstructions

Agency Couched in General Terms: Covers only

MERE ACTS OF ADMINISTRATION even if:

1. The principal should state that he withholds nopower

2. The agent may execute such acts as he mayconsider appropriate

3. The agency should authorize a general and

unlimited management

How are contracts of agency construed?

Contracts of agency, as well as general powers ofattorney, must be interpreted in accordance with

the language used by the parties.0 The real intention of the parties is primarilydetermined from the language used andgathered from the whole instrument.

0 In case of doubt, resort must be had to thesituation, surroundings ad relations of theparties. The intention of the parties must besustained rather than defeated.

0 So if the contract be open to constructions, oneof which would uphold the intention while theother would overthrow it, the former is to bechosen.

Art. 1878 .Special powers of attorney arenecessary

in the following cases:

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1. To make such payments as are not usually

considered as acts of administration;

2. To effect novations which put an end toobligations already in existence at the time

the agency was constituted;3. To compromise, to submit questions toarbitration, to renounce the right to appealfrom a judgment, to waive objections to thevenue 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 forcharity or those made to employees in thebusiness managed by the agent;

7. To loan or borrow money, unless the latteract be urgent and indispensable for the

preservation of the things which are underadministration;

8. To lease any real property to anotherperson for more than one year;

9. To bind the principal to render someservice without compensation;

10. To bind the principal in a contract ofpartnership;

11. To obligate the principal as a guarantor orsurety;

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)

Art. 1879.A special power to sell excludes thepower

to mortgage; and a special power to mortgage does

not include the power to sell. (n)

Art. 1880.A special power to compromise doesnot

authorize submission to arbitration. (1713a)

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Special Power of Attorney: an instrument in writingbywhich one person, as principal, appoints another as hisagent and confers upon him the authority to performcertain specified acts or kinds of acts on behalf of theprincipal.

The special power of attorney can be included inthe general power when it specifies therein theact or transaction for which the special power isrequired.

Powers Not Included in the Power to Mortgage:1. To sell2. To execute a second mortgage

3. To mortgage for the agents or any 3rd personsbenefit, UNLESS clearly indicated

Powers Not Included in the Power to Compromise

Submission to Arbitration

Rationale: A principal may authorize his agent to compromise

because of absolute confidence in the latters judgment and discretion to protect the formersrights and obtain for him the best bargain in thetransaction.

0 If the transaction would be left in the hands of an

arbitrator, said arbitrator may not enjoy the trust

of the principal.

Art. 1881.The agent must act within the scope ofhis

authority. He may do such acts as may be conducive

to the accomplishment of the purpose of the agency.(1714a)

Art. 1882.The limits of the agent's authority shallnot

be considered exceeded should it have been

performed in a manner more advantageous to the

principal than that specified by him. (1715)

Art. 1883 . If an agent acts in his own name, theprincipal has no right of action against the personswith whom the agent has contracted; neither havesuch persons against the principal.

In such case the agent is the one directly boundin favor of the person with whom he has contracted,as if the transaction were his own, except when thecontract 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)

Requisites for Principal to be Bound by Act of Agent:1. The agent must act in behalf of the principal2. The agent must act within the scope of his

authority

When a principal NOT BOUND by act of agent:1. The latter acts without or beyond the scope of hisauthority in the formers nameExceptions:

1. Where the acts of the principal have

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contributed to deceive a 3rd person ingood faith;

2. Where the limitations upon the powercreated by the principal could not havebeen known by the 3rd person;

3. Where the principal has placed in thehands of the agent instruments signed byhim in blank;

4. Where the principal has ratified the actsof the agent

2. The latter acts within the scope of his authority

but in his own name, EXCEPT when the

transaction involves things belonging to the

principal

Jesus M. Gozun v. Jose Teofilo T. Mercado a.k.a.Don Pepito Mercado, G.R. No. 167812 (19

December 2006)

Facts:In the 1995 elections, Don Pepito vied for thegubernatorial post in Pampanga. The latters wifetransacted with Gozun, the owner of JMG PublishingHouse, for the printing of campaign paraphernalia. DonPepitos wife had told Gozun that the former has alreadygiven his approval and that the latter could already startprinting. Gozun thereafter availed of the services of twoother publishing houses to be able to meet the deadline.The printed materials were then delivered to Don Pepitosheadquarters.

Meanwhile, Don Pepitos sister-in-law, Lilian Soriano,obtained from Gozun a cash advance allegedly for theallowances of poll watchers. Lilian acknowledged onpetitioners 1995 Diary receipt of the amount withoutthereby indicating that she was obataining such amounton behalf of Don Pepito.

Gozun sent a Statement of Account for the printing,including the amount due the other publishing housesplus the amount of the loan given to Lilia. Don Pepitoswife made a partial payment to Gozun. Despite repeateddemands, respondent failed to settle the balance. Hence,a collection case was instituted by Gozun.Issue: Whether or not Don Pepito should be held

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Held: The loan obtained by Lilia cannot be collectedfromDon Pepito, but the cost of campaign materials is

properly collectible.

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. Contracts entered into inthe name of another person by one who has been givenno authority or legal representation or who has actedbeyond his powers are classified as unauthorizedcontracts and are declared unenforceable, unless ratified.

Generally, the agency may be oral, unless the lawrequires a specific form. A special power of attorney isnecessary for an agent to, as in this case, borrow money,unless it is urgent and indispensable for the preservationof the things which are under administration. Sincenothing in this case involves the preservation of thingsunder administration, a determination of whether Sorianohad the special authority to borrow money on behalf ofrespondent is in order.

In the case at bar, there was not enough evidenceestablishing that the loan was made on behalf of DonPepito. Gozuns testimony, during trial, failed tocategorically state whether the loan was on behalf of the

respondent or his wife. The receipt signed by Lilianwas also in her name alone, withoutindicating that shewas acting on behalf of Don Pepito; she thus boundherself in her personalcapacity and not as an agent ofthe respondent oranyone for that matter.

As to the issue on whether or not Gozun can collect thecost of the printing due to the other publishing houses,the Court held that Gozun is the real party in interestinsofar as the recovery of the cost of campaign materialsis concerned. The Court was not persuaded by DonPepitos theory that the campaign materials delivered tohim were donations from his friends and supporters; if so,such fact should have been printed on the face of thematerials as required by the Comelec rules.

NOTE: The agent is not deemed to have exceeded thelimits of his authority should he perform the agency in amanner more advantageous to the principal than thatindicated by him, since he is authorized to do such actsas may be conducive to the accomplishment of thepurpose of the agency.

CHAPTER 2: OBLIGATIONS OF THE AGENT

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Art. 1884. The agent is bound by his acceptance tocarry out the agency, and is liable for the damageswhich, through his non-performance, the principalmay suffer.

He must also finish the business already begun

on the death of the principal, should delay entail anydanger. (1718)

Art. 1885. In case a person declines an agency,he isbound to observe the diligence of a good father of afamily in the custody and preservation of the goodsforwarded to him by the owner until the latter shouldappoint an agent or take charge of the goods. (n)

Art. 1886.Should there be a stipulation that theagent

shall advance the necessary funds, he shall be

bound to do so except when the principal is

insolvent. (n)

Art. 1887. In the execution of the agency, the agentshall 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)

Art. 1888. An agent shall not carry out an agency if

its execution would manifestly result in loss or

damage to the principal. (n)

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)

Art. 1890. If the agent has been empowered toborrow

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)

Art. 1891. Every agent is bound to render anaccountof his transactions and to deliver to the principalwhatever he may have received byvirtue of the agency, even

QuickTimethough

andait may not be


owingto the principalareneeded.to see this picture.Every stipulation exempting the agent from the

obligation to render an account shall be void. (1720a)

Art. 1896. The agent owes interest on the sumshe

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)

Art. 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)

Obligations of the Agent to the Principal

1. General:1. Act with utmost good faith &

loyalty for the furtherance ofprincipals interests

2. Obey principals instructions3. Exercise reasonable care

2. Specific:

1. Carry out the agency2. Answer for damages which

through his non-performance the

principal may suffer3. Finish the business already

begun on the death of theprincipal should delay entail anydanger (exception to the rule thatdeath extinguishes agency)

4. Observe the diligence of a goodfather in the custody andpreservation of the goodsforwarded to him by the owner incase he declines an agency, untilan agent is appointed

5. Advance necessary funds if there

be a stipulation to do so (exceptwhen the principal is insolvent)6. Act in accordance with the

instructions of the principal, andin default thereof, to do all that agood father of a family would do

Exceptions (to the rule that the agentmustnot depart from the instructions of principal):

1. Theres asuddenemergency

2. If the instructionsare ambiguous

3. If the departureis soinsubstantial thatit does not affectthe result andthe principalsuffers nodamage thereby

7. Not to carry out the agency if itwould manifestly result in lossor damage tothe principal

8. Answer for damages if therebeing a conflict between his &


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principals interests, he prefershis own

9. Not to loan to himself if he hasbeen authorized to loan moneyat interest

10. Render an account of his

transactions and deliver to the

principal whatever he

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mayhave

received byvirtueof theagency (If theagentfails todeliverandinstead

converts or appropriatesfor hisownusethemoneyorpropertybelong

ing tohisprincipal, hemaybechargedwithESTAFA.)

3. When an agent byhis act prevents

performance on

the part of the

principal

4. When aperson actsas an agentwithoutauthority orwithout aprincipal

5. A person whopurports to actas agents ofanincapacitatedprincipal

11. Be

responsible


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incertain

casesfortheactofthes

ubstituteappo

intedbyhim


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12. Pay interest on funds he hasapplied to Art. 1892. The agentmay appoint a substitute if

hisownuse

Distinctions

between

Authority and

the Principals

Instructions

thority InstructionsSum total of the powerscommitted to the agentby the principal

Relates to thesubject/business withwhich the agent isempowered to deal or actLimitations of authority

are operative as againstthose who have/chargedwith knowledge of themContemplated to bemade known to thirdpersons dealing with theagent

When agenthas a right todisobey the

principalsinstructions:

1. When theinstruction callsfor theperformance ofillegalacts

2. Where

he is

privilege

d to do

so to

protect

his

security

in the

subject

matter

of the

agency

When obligationto account not

applicable:1. If the agentacted onlyas amiddlemanwith thetask of merelybringingtogether thevendor andthevendees.2. If the agent

had informedthe principalof the

gift/bonus/profihe received from the

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purchaser and his pr incipal did not ob ject

thereto. areneeded to see this picture.3. Where a

right of lien

exists in

favor of the

agent.

When agent mayincur personal

liability?1. When theagentexpresslybinds himself2. When the

agentexceeds hisauthority


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the principal hasnot prohibitedhim from doingso; but he shallbe responsiblefor the acts ofthe substitute:

1. When hewas notgiven the

power toappointone;

2. When hewasgivensuch

power,butwithoutdesignating the

person,

and thepersonappointed wasnotoriouslyincompetent or insolvent.

All acts of the

substitute

appointed

against the

prohibition of theprincipal shall be

void. (1721)

Art. 1893. In the

cases mentioned

in Nos. 1 and 2of

the preceding

article, the

principal may

furthermore

bring an action

against the

substitute withrespect to the

obligations

which the latter

has contracted

under the

substitution.

(1722a)

Appointment ofSub-agent:

1. If the principalhas notprohibited theagent fromappointing asubstitute, hewill be liable

to 3rdpersons forthe acts of thesub-agent

within thescope of hisauthority

2. If there is aprohibition butneverthelessthe agentappoints asubagent, allthesubagentsacts are voidas to theprincipal.

3. If there isauthority toappoint andsubagent isnotdesignated bythe principal,the agent willbe liable for allthe acts of thesubagent if the subagentis notoriously

incompetentor insolvent.

4. If there isauthority toappoint andsubagent isdesignated bythe principal,the agent isreleased fromany liabilityfrom the actsof the

subagent.5. If theappointmentof a sub-agentis notauthorized butnot prohibited,it shall bevalid if it isbeneficial tothe principal.But, should


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theprincipalincurdamagedue tosuchappointment, theagent shallbeprimarilyresponsibl

e for the actsof thesubstitute.

Art. 1894. The

responsibility of two

or moreagents,even though they

have been appointed

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simultaneously, is not solidary, if solidarity has not

been expressly stipulated. (1723)

Art. 1895.If solidarity has been agreed upon,each ofthe agents is responsible for the non-fulfillment of

agency, and for the fault or negligence of his fellowsagents, except in the latter case when the fellowagents acted beyond the scope of their authority. (n)

Responsibility of 2 or More Agents AppointedSimultaneously:General Rule: Liable jointly

Exception: Solidarity has been expresslystipulated;each of the agents becomes solidarily liable for (1)the non-fulfillment of the agency; of for (2) the fault ornegligence of his fellow agent

Exception to the exception: when one of theother agent/s acts beyond the scope of hisauthority innocent agent is NOT liable

Art. 1898. If the agent contracts in the name of theprincipal, exceeding the scope of his authority, andthe principal does not ratify the contract, it shall bevoid if the party with whom the agent contracted isaware of the limits of the powers granted by the

principal. In this case, however, the agent is liable ifhe undertook to secure the principal's ratification. (n)

Art. 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 tocircumstances whereof he himself was, or ought to

have been, aware. (n)

Art. 1900 .So far as third persons are concerned,anact is deemed to have been performed within thescope of the agent's authority, if such act is withinthe terms of the power of attorney, as written, even ifthe agent has in fact exceeded the limits of hisauthority according to anunderstanding between the principal and the

QuickTime and a agent. (n)TIFF (Uncompressed) decompressor

are needed to see this picture.

Art. 1901.A third person cannot set up the fact thatthe agent has exceeded his powers, if the principal

has ratified, or has signified his willingness to ratify

the agent's acts. (n)

Art. 1902.A third person with whom the agentwishes

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)

Art. 1909. The agent is responsible not only forfraud,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)

Effect where 3rd person aware of limits of agents

power: If the agent exceeds his authority, it shall beVOID unless the principal ratifies it.

DOCTRINE OF AGENCY BY NECESSITY: actually,anagency can never be created by necessity; what iscreated is additional authority in an agent appointed andauthorized before the emergency arose. The existence ofemergency or other unusual conditions may operate toinvest in an agent authority to meet the emergency,provided: (PURE)

1. The agents enlarged authority is exercised forthe principals protection

2. The agent is unable to communicate withprincipal;

3. The means adopted are reasonable under thecircumstances;

4. The emergency really exists;

When 3rd person repudiate the contract

Before actual ratification by the principal, or before theprincipal has signified his willingness to ratify the

agents acts.

Effect of the principal receiving the benefits ofthe transaction:

0 He is deemed to have ratified it. A principal may

not accept the benefits of a transaction and at the

same time repudiate its burdens

Conditions for Ratification

1. The principal must have capacity and power toratify

2. He must have had knowledge of material facts3. He must ratify the acts in its entirety4. The act must be capable of ratification5. The act must be done in behalf of the principal

0 To be effective, ratification neednot be communicated or made

known to the agent or the thirdparty. The act or

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ATENEO

CENTRAL BAR

OPERATIONS

2007

cond

uct of

theprinci

pal

rather

than

his

com

muni

catio

n is

the

key.

Butbefor

e

ratific

ation,

the

third

party

is

free

to

revok

e the

unauthoriz

ed

contr

act.

Effects ofRatification1. Withrespectto agent- relievesthe agentfromliability tothe thirdparty fortheunauthorizedtransaction, and tohisprincipalfor actingwithoutauthority;mayrecovercompensation

2. Withrespecttoprincipal

-assumesresponsibility fortheunauthorized act,as fullyas if theagenthadacted

under originalauthority butnot liable foracts outsidethe authorityapproved byhis ratification

3. With respectto 3rd persons- bound byratification tothe sameextent as if theratified act hadbeenauthorized;cannot raisethe question

of the agentsauthority to do theratified act

4.


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Robinson v.Borse

Ratification isspelled out whenthe principal brings legal

proceedings toenforce thecontract enteredinto by theunauthorizedagent, subject toqualification,however, that thebringing of legal

proceedings is notdeemed ratificationwhere the principalsaction is undertaken toavert a greater lossrather than to assert again.

NOTE: Agent alwaysliable for fraudbut not

for negligence, which

shall be judged withmore or less rigor by

the courts, accordingto whether the agency

was or was not forcompensation.

Effect Exception(s)1. Binds principal; Agent liable if he:

In behalf of the principal, 2. Agent not personally liable 1. Expressly makes himself liablewithin the scope of authority 2. Exceeds the limits of his authority

without giving the parties sufficientnotice of his powers

Contract is unenforceable as against Binding on the principal when:Without or beyond scope of 1. Ratified or

the principal but binds the agent toauthority 2. The principal allowed the agent to act

the third personas though he had full powers

Within the scope of authority 1. Not binding on the principal; When the transaction involves thingsbelonging to the principal:

but in the agents name 2. Principal has no cause of action 1. Remedy of the principal - damages for

against the 3rd parties and vice agents failure to comply with theversa agency

2. Remedies of the third person If the case falls under the general rule,

he can sue the agent.

But when the contract involvesthingsbelonging to the principal, he cansuethe principal.

But if it cannot be determinedwithoutlitigation who is liable, he can sue both.

Within the scope of the 1. Insofar as 3rd persons areQuickTim awritten power of attorneyTIFF(Uncompressed)but sorconcerned (not required to

are needed to seepicture.

agent has actuallyexceeded inquire further than the terms of

his authority according to an the written power, agent acted

understanding between him &within scope of hisauthority;

the principal 2.Principalestopped

With improper motivesMotive is immaterial; as longas 1. Third person knew agent was acting for

his own benefit: principal is not liable towithin the scope of authority, valid 3rd third


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person

2. Owner is seeking recovery of personalproperty of which he has been

Page 182 of 297


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unlawfully deprived

1. Authorized - principal still liable2. Beyond the scope of the agents

With misrepresentations by authoritythe agent General Rule: Principal not

liable

Exception:principal takes

advantage of a contractorreceives benefits made underfalse representation of hisagent

3. For the agents own benefitprincipal still liable; agents motiveimmaterial

Mismanagement of the 1. Principal still responsible for theacts contracted by theagent

business by the agent with respect to 3rd persons;

2.Principal, however, may seekrecourse from the agent

Principal civilly liable so long as theTort committed by the agent tort is committed by the agent while

performing his duties in furtheranceof the principals business

Agent in good faith butPrincipal is liable fordamages

prejudices 3rd partiesAgent in bad faith and Only the agent is liable for damages

prejudices 3rd persons

Art. 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)

Art. 1904 .The commission agent who handlesgoods 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)

Art. 1905.The commission agent cannot, withoutthe express or impliedconsent of the principal,sell on credit. Should he do so, the principal may

QuickTime and a

demand from himTIFF(Uncompressed)

paymentdecompressor

incash, but theare needed to see this picture.

commission agent shall be entitled to any interest or benefit, which may

result from such sale. (n)

Art. 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

Commission Agent: One whosebusiness is toreceive and sell goodsfor a commission and who isentrusted by the principal with thepossession of goods to be sold, andusually selling in his own name.


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Page183 of297


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Distinction between Ordinary Agent &

CommissionAgent

Ordinary Agent Commission AgentActs for and in behalf

of May act in his own namehis principal or in that of the principalNeed not have Must be in possession ofpossession of the the thing he disposesprincipals goods

Distinctions between Commission Agent & Broker

Commission Agent Broker Engaged in the purchase No custody or and sale for a principal of possession of the thing

personal property which hedisposes;

merely a

has to be placed in his go-between, anpossession and disposal intermediary between the

seller and thebuyer

Has a relation with Maintains no relation withprincipal, buyer orseller,

the thing

which he

and property which is the purchases or sellsobject of the transaction

Obligations of a Commission Agent:

1. Responsible for the goods received by him, asdescribed in the consignment, UNLESSuponreceiving them he should make a writtenstatement of the damage and deteriorationsuffered by the same

2. If goods are of the same kind and mark butbelonging to different owners, make adistinction by counter marks and designatethe merchandise respectively belonging toeach principal cannot, without consent of theprincipal, sell on credit; should he do, principalmay demand payment in cash, but thecommission agent entitled to anyinterest/benefit which may result from such

sale3. If an agent receiving guarantee commission (a

del credere agent), bears the risk of collectionand pay the principal the proceeds of the sale

on the same terms agreed upon with theQuickTime and a

purchaser liableTIFF(Uncompressed)

fordamagesdecompressor

if agent does notare needed to see this picture.

collect the credits of his principal at the time whenthey become due and demandable, UNLESS heproves, that he exercised due diligence for thatpurpose.

CHAPTER 3: OBLIGATIONS OF THE PRINCIPAL


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Art. 1910. The principal must comply with all theobligations which the agent may have contractedwithin the scope of his authority.

As for any obligation wherein the agent hasexceeded his power, the principal is not bound except

when he ratifies it expressly or tacitly. (1727)

Art. 1912. The principal must advance to the agent,should the latter so request, the sums necessary forthe execution of the agency.

Should the agent have advanced them, the principal must reimburse him therefor, even if thebusiness or undertaking was not successful, providedthe 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)

Art. 1913 .The principal must also indemnify theagentfor all the damages which the execution of the agency

may have caused the latter, without fault or negligence

on his part. (1729)

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)

Art. 1916. When two persons contract with regard tothe same thing, one of them with the agent and theother with the principal, and the two contracts are

incompatible with each other, that of prior date shall bepreferred, without prejudice to the provisions of Article1544. (n)

Art. 1917. In the case referred to in the precedingarticle, if the agent has acted in good faith, the

principal shall be liable in damages to the third personwhose contract must be rejected. If the agent acted inbad faith, he alone shall be responsible. (n)

Obligations of the Principal to the Agent:

1. Comply with all the obligations agent contracted in

representation of the principal2. Advance sums necessary for the execution of theagency, when agent so requests; liable forreimbursement regardless of the undertakingssuccess whenever agent had advanced & has nofault; includes interest

3. Reimburse the agent for all advances made

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by him provided the agent is free from fault 4.Indemnify the agent for all the damages

which the execution of the agency may havecaused the latter without fault or negligence onhis part

5. Pay the agent the compensation agreed upon orthe reasonable value of the latters services

Liability of 3rd persons to the Principal:

1. In Contract a 3rd person is liable to the principal

upon contracts entered into by his agent, as if thecontract has been entered into by the principal.

2. In Tort the 3rdpersons tort liability to theprincipal,insofar as the agent is involved in the tort, arises in 3situations:

a. Where the 3rd person damages or injuresproperty or interest of the principal in thepossession of the agent

2. Where the 3rd person colludes with theagent to injure/defraud the principal

3. Where the 3rd person induces the agentto violate his contract with the principal tobetray the trust reposed upon him by theprincipal.

Requisites for solidary liability of principals:1. There are 2 or more principals2. The principals have all concurred in the

appointment of the same agent3. The agent is appointed for a common transaction

or undertaking

Note: The rule in Art. 1915 applies even when theappointments were made by the principals in separateacts, provided that they are for the same transaction. Thesolidarity arises from the common interest of theprincipals and not from the act of constituting the agency.

Rule where 2 persons contract separately with agentand principal

Two persons may contract separately with theagent and the principal with regard to the samething. If the two contractsQuickTimeareandincompatible with


each other, the oneareofneededpriortoseedatethispictureshall. be

preferred. This is subject, however, to the rules under Article

1544 of the Civil Code (Double Sale). 1

1Art. 1544. If the same thing should have been sold todifferentvendees, the ownership shall be transferred to the person whomay have first taken possession thereof in good faith, if it shouldbe a movable property.

Art. 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)

Agents Right of Retention:

1. Specific (only for those goods connected with the

agency) and2. Until the principal effects the reimbursement and

pays the indemnity

Art. 1918 .The principal is not liable for theexpensesincurred by the agent in the following cases:1. If the agent acted in contravention of the principal's instructions, unless the lattershould wish to avail himself of the benefitsderived from the contract;

2. When the expenses were due to the fault ofthe agent;

3. When the agent incurred them withknowledge that an unfavorable result wouldensue, 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)

Principals Liability for Expenses:

General Rule: Principal is liable for the expensesincurred by the agent

Exceptions: (AFUS)1. If the agent acted in contravention of the

principal's instructions, unless principalderives benefits from the contract

2. When the expenses were due to the fault ofthe agent

3. When the agent incurred them with

knowledge that an unfavorable result wouldensue, if the principal was not aware thereof

Should it be immovable property, the ownership shallbelong to the person acquiring it who in good faith first recordedit in the Registry of Property.

Should there be no inscription, the ownership shallpertain to the person who in good faith was first in thepossession; and, in the absence thereof, to the person whopresents the oldest title, provided there is good faith.

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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

Art. 1911. Even when the agent has exceeded hisauthority, the principal is solidarily liable with the

agent if the former allowed the latter to act as

though he had full powers. (n)

Who can be estopped to deny agency?1. Estoppel of Agent- one professing to act asagent estopped to deny his agency both asagainst his asserted principal and the thirdpersons interested in the transaction in which heis engaged2. Estoppel by the Principal

1. As to agent one knowinganother is acting as his agentand fails to repudiate his acts,or accept the benefits of them,will be estopped to deny the

agency as against such other2. As to sub-agent for the

principal to be estopped fromdenying his liability to a thirdperson, he must have known orbe charged with knowledge ofthe transaction and the terms ofthe agreement between theagent and sub-agent

3. As to third persons one whoknows thatanother is acting ashis agent or permitted anotherto appear as his agent, to theinjury of third persons who have

dealt with the apparent agent assuch in good faith and in theexercise of reasonableprudence, is estopped to denythe agency

3. Estoppel of Third Persons a third person,having dealt with one as an agent may beestopped to deny the agency as against the

principal, agent or 3rd persons in interest4. Estoppel of the Government - government

neither estopped by the mistake/error of itsagents; may be estopped

QuickTimethrough

andaaffirmative acts

TIFF (Uncompressed) decompressorare needed to seethis pict ure.

of its officers acting within the scope of their

authority

Distinction between Ratification and Estoppel

Ratification EstoppelRests on intention Rests on prejudice

Affects the entire Affects only relevanttransaction from the parts of the transaction

beginning

Substance of ratification Substance of estoppel isis confirmation of an the principalsauthorized acts or inducement to another toconduct after it has been act to his prejudice

done

Distinction between Apparent Authority & Authority

by Estoppel

Apparent Authority Authority by EstoppelThough not actually Where the principal, bygranted, principal his negligence, permitsknowingly permits/holds his agent to exerciseout the agent as powers not granted topossessing the him, even though thenecessary powers to act principal may have noin a certain way notice or knowledge of

the conduct of the agent

CHAPTER 4: MODES OF EXTINGUISHING

AGENCY

Agency is Extinguished: (EDWARD)1. By the expiration of the period forwhich the agency wasconstituted.2. By the death, civil interdiction,

insanity or insolvency of theprincipal or of the agent;

3. By the withdrawal of the agent;4. By the accomplishment of

the object or purpose of theagency;

5. By its revocation ;6. By the dissolution of the firm or

corporation which entrusted or

accepted the agency(Art.

1919)

0 The list not exclusive; causesparticularonly toagency; may be extinguished by the modes ofextinguishment of obligations in generalwhenever they are applicable, like loss of thething and novation

0 Agency is TERMINATED, as a matter of law,

upon the outbreak of war.

Presumption of Continuance of Agency

0 It means that when once shown to have existed,an agency relation will be presumed to havecontinued, in the absence of anything to showits termination.

Continuance of AgencyParties must be

1. Present,2. Capacitated and3. Solvent

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Modes of extinguishing an agency, generally:1. Agreement2. Subsequent acts of the parties which may be

either:1. By the act of both parties or by mutual

consent2. By the unilateral act of one of them3. By operation of law

Note: Even if the reason for extinguishing the agency is

not true, the agent cannot insist on reinstatement. The

agent can only demand damages.

What happens of the subject matter of the agency islost or destroyed?

In the absence of any agreement by the partiesto the contrary, the loss or destruction of the subjectmatter of the agency terminates the agents authority todeal with reference to itExceptions:that which was destroyed without substantialdetriment to either party

2. if the destroyed subject matter was not infact essential to the contract

3. a partial loss or destruction

Form of renunciation:

It is not always necessary for the agent torenounce the agency expressly. He can do soimpliedly, such as:

1. where he has conducted himself in a manner

incompatible with his duties as agent

2. when he abandons the object of his agency

and acts for himself in committing a fraud uponhis principals

3. when he files a complaint against the principal

and adopts an antagonistic attitude towards him

Art. 1930.The agency shall remain in full forceand

effect even after the death of the principal, ifit has been constituted

QuickTimeinthe

andcommon

ainterest of


the latter and of theareneededagent,tosee thisorpicturein.theinterest of a third person who has accepted thestipulation in his favor. (n)

Art. 1931. Anything done by the agent, withoutknowledge 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)

Exceptions to Extinguishment by Death

1. If the agency is coupled with an interest

2. If the act of the agent was executed without theknowledge of the death of the principal and thethird person who contracted with the agent actedin good faith

3. To avoid damage4. If it has been constituted in the common interest

of the principal and of the agent, or in the interest

of a third person who has accepted the

stipulation in his favor

Art. 1932. If the agent dies, his heirs must notifythe

principal thereof, and in the meantime adopt such

measures as the circumstances may demand in theinterest of the latter. (1739)

Can the heirs continue the agency?

General Rule: agency calls for personal services on thepart of the agent; rights & obligations are nottransmissible

Exceptions:a. Agency by operation of law, or a presumed

or tacit agency2. Agency is coupled with an interest in the

subject matter of the agency (ex.power

of sale in a mortgage).

Exceptions to Extinguishment Upon Loss orDestruction of Subject Matter

1) If it is possible to substitute other material for thatwhich was destroyed without substantialdetriment to either party or if the destroyedsubject matter was not in fact essential to thecontract;

2) A partial loss or destruction does not alwaysresult in a complete termination of the agency,and under such circumstances, while the agencymay be ended in so far as the destroyed propertyis concerned, it may continue in existence as to

other property not affected1) If the loss brought about by the

principal (ex.. principal sellssubject matter to another partyeven if an agent has beenconstituted in reference to it),principal liable for damages forhis wrongful terminating act; ifsubject matter is lost withoutprincipals fault, no liabilityassumed by him


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Change of Circumstance:

General Rule: when there is a basic change in thecircumstances surrounding the transaction, which as notcontemplated by the parties and which would reasonablylead the agent to believe that the principal would not

desire him to act, the authority of the agent is terminatedExceptions:1. If the original circumstances are restored

within a reasonable period of time, theagent's authority may be revived

2. Where the agent has reasonable doubts asto whether the principal would desire him toact, his authority will not be terminated if heacts reasonably

3. Where the principal and agent are in closedaily contact, the agent's authority to act willnot terminate upon a change of circumstances if the agent knows theprincipal is aware of the change and does notgive him new instructions

Art. 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)

Art. 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)

Art. 1922.If the agent had general powers,revocationof the agency does not prejudice third persons whoacted in good faith and without knowledge of therevocation. Notice of the revocation in a newspaperof general circulation is a sufficient warning to third

persons. (n)

Art. 1923. The appointment of a new agent for thesame business or transaction revokes the previousagency from the day on which notice thereof wasgiven to the former agent, without prejudice to the

provisions of the two precedingarticles. (1735a) QuickTime and a

TIFF (Uncompressed) decompressor areneeded to see this picture.

Art. 1924. The agency is revoked if the principal

directly manages the business entrusted to the

agent, dealing directly with third persons. (n)

Art. 1925.When two or more principals havegranted

a power of attorney for a common transaction, any

one of them may revoke the same without the

consent of the others. (n)

Art. 1926.A general power of attorney is revokedbya special one granted to another agent, as regardsthe special matter involved in the latter.(n)

Art. 1927.An agency cannot be revoked if abilateralcontract depends upon it, or if it is the means offulfilling an obligation already contracted, or if a

partner is appointed manager of a partnership in thecontract of partnership and his removal from themanagement is unjustifiable. (n)

Art. 1928.The agent may withdraw from theagencyby giving due notice to the principal. If the lattershould suffer any damage by reason of thewithdrawal, the agent must indemnify him therefor,unless the agent should base his withdrawal uponthe impossibility of continuing the performance ofthe agency without grave detriment to himself.(1736a)

Art. 1929.The agent, even if he should withdrawfromthe 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)

Revocation: Termination of the agency by the

subsequent act of the principal

Renunciation/Withdrawal:Termination of theagency by

the subsequent act of the agent

May the agency be extinguished at will?

1. AGENT may do so but subject to the contractualobligations owing the principal (i.e. fixed period oftime for the agency or purpose not yetaccomplished);

1. Expressly or impliedly1. conducted himself in a

manner incompatiblewith his duties;

2. abandons the object ofagency and acts forhimself in committing afraud upon his principal;

3. he files a complaintagainst the principal andadopts an antagonisticattitude towards him

with just cause - give due noticewithout just cause - liable for

damages if agent suffers damages

thereby UNLESS the

Page 188 of 297


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agent should base his withdrawalupon the impossibility of continuingthe performance of the agencywithout grave detriment to himself

2. The mere fact that the agent violates his

instructions does not amount to renunciation, andalthough he may thus render himself liable to theprincipal, he does not cease to become an agent.

2. PRINCIPAL may also revoke the agency at

will Exception: agency coupled with interest

1. When a bilateral contract depends uponthe agency

2. When the agency is the means of fulfilling an obligation already contracted

3. When a partner is appointed as managerof a partnership in the contract ofpartnership and hisremoval from the management is

unjustifiable.Exception to the exception:when theagent

acts to defraud the principal

Implied Revocation of Agency

1. Principal appoints a new agent for the same businessor transaction, only if there is incompatibility);effective as between the principal and the agent onlyif communicated to the agent; does not prejudicerights of third persons acting in good faith withoutknowledge of the revocation

2. Principal directly manages the business entrusted to

the agent, dealing directly with 3rd persons

Effect of Issuance of a Special Power of Attorney:

The general power is impliedly revoked as to matterscovered by the special power because a specialpower naturally prevails over a general power.

Principals Liability for Damages despite Revocation:QuickTime and a

1. If the agency was consti tuted for a fixedTIFF (Uncompressed) decompressor

are needed to see this picture.period, the principal shall be liable for

damages occasioned by the wrongfuldischarge of the agent before the expirationof the period fixed

2. Even if there was no time fixed for thecontinuance of the agency, but the agentcanprove that the principal acted in bad faith byrevoking the agency in order to avoidthepayment of commission about to beearned,

the principal can be held liable for damages

Necessity of Notice of Revocation

1. As to the agent - express notice always necessary;sufficient notice if the party to be notified actuallyknows, or has reason to know, a fact indicating thathis authority has been terminated/suspended;revocation without notice to the agent will not renderinvalid an act done in pursuance of the authority

2. As to 3rd persons express notice necessary

3. As to former customers - actual notice must begiven to them because they always assume thecontinuance of the agency relationship

4. As to other persons - notice by publication is

enough

Effect of Extinguishment Without Notice

0 Act of agent deemed valid insofar as 3rd parties

acting in good faith and without knowledge ofrevocation

Page 189 of 297

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23322051 Ateneo Central Bar Operations 2007 Civil Law Summer Reviewer Agency