AGENCY
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A person can do many juridical acts in his name at the same time through agents even if not
physically there
Agency is a contract
Agency, like Partnership and Trusts, is founded on trust and confidence. It is fiduciary in nature
Being contracts, all essential elements of contracts must be present (COC)
DEFINITION AND OBJECTIVES 1317 1403 1868
Article 1317. No one may contract in the name of another without being authorized by the latter,
or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation,
or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed, before it is revoked by the other
contracting party.
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Contract is valid but unenforceable (through a court action)***
Unenforceable against the person in whose name the contract was entered into without or in
excess of authority
Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the
making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to
marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less
than five hundred pesos, unless the buyer accept and receive part of such goods and
chattels, or the evidences, or some of them, of such things in action or pay at the
time some part of the purchase money; but when a sale is made by auction and entry
is made by the auctioneer in his sales book, at the time of the sale, of the amount
and kind of property sold, terms of sale, price, names of the purchasers and person
on whose account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of
real property or of an interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
(DEFINITION) 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.
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“Contract”: essential elements COC must be present
Definition is from viewpoint of agent (passive character)
Unilateral – obli is merely lodged on the agent to render service or do something in
representation of another
Doctrine of Representation – agent is acting for and in behalf of another person; not acting for
himself
PARTIES TO A CONTRACT OF AGENCY
1. Principal – person represented (Mandante)
2. Agent – person who acts for and in representation of another (Mandato); atty-in-fact, proxy,
delegate, representative
ELEMENTS OF CONTRACT OF AGENCY
1.
2.
3.
4.
Consent
Object
Agent acts as a representative of P and not for himself
Agent acts within scope of his authority
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Principal and agent must INTEND to enter into contract of agency
Principal intends agent to act for him
Agent must accept and must act only for principal
So long as agent acts (a) as a representative of principal and (b) within his authority, the effect is
as if principal entered into the contract himself; hence, P is the one liable on the contract
entered into by A for P***
CONSENT
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Meeting of minds between principal and agent necessary to form contract of agency
Nobody can compel one person to choose an agent
Nobody can compel one person to be an agent
XPN: Estoppel (person represented to be one’s agent becomes agent as to 3rd person in GF even
though there was no actual meeting of minds between P and A)
PRINCIPAL-AGENT RELATIONSHIP
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Personality of principal extended through agent
WHETHER AGENCY/SALE
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Depends on intention of parties shown by totality of circumstances regardless of what they call
their relationship to be
Consent means “intent”
“FOR AND IN BEHALF”
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This statement does not of itself establish agency if it was not intended to be formed
BASIS OF AGENCY
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Representation
Principal: Intention to appoint express or implied
Agent: Intention to accept appointment; or intention to act as agent
Absent intention, no agency
CAPACITY OF PARTIES***
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As to them/contract of agency, both P and A must be capacitated to enter into a contract so
that contract of agency is valid (P may be natural/juridical person)
Incapacity of either, voidable.
Incapacity of both after perfection and execution of agency will extinguish agency.
As to succeeding contracts/3rd persons, it is enough that it is only P is capacitated for the
succeeding contract’s validity regardless of agent’s incapacity (Reason: By the contract of
agency, it is as if it was P himself who directly entered into the contract with the 3rd person)
If P is incapacitated, contract with 3rd person is voidable
Article 1390. The following contracts are voidable or annullable, even though there may have been
no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or
fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are
susceptible of ratification.
ELEMENT OF SUBJECT MATTER
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Object of agency is SERVICE (the legal undertaking of agent to enter into juridical acts with 3rd
persons on behalf of principal)
Thus , the obligation created by agency: Unilateral obligation to do on the part of agent
ELEMENT OF CONSIDERATION
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Commission
Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary
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2nd phrase of 1875: there can be a valid agency supported by consideration of LIBERALITY on the
part of agent
Agent’s entitlement of commission grounded on rendering of service for P
XPN: If basis of commission is results to be achieved, then mere rendering of service without
achievement of the results agreed upon would not entitle agent to the compensation agreed
upon
HENCE, GRANTING OF COMMISSION DEPENDING ON THEIR AGREEMENT IN THE CONTRACT
(Autonomy of contract)
CHARACTERISTICS OF AGENCY N-CUP-FP
1.
2.
3.
4.
5.
6.
Nominate and principal
Consensual
Unilateral and primarily onerous
Personal, representative and derivative
Fiduciary and revocable
Preparatory and progressive
NOMINATE AND PRINCIPAL
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Has a name designated by law
Can stand on its own
Whatever the parties name the contractual relationship, when it has the (four) essential
elements of a contract of agency, then it will be governed by law on agency*
CONSENSUAL
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Perfected by consent
Actually means “intent”
In this context, intent to create agency
No form required
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.
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FORMAL REQUIREMENTS IN APPOINTING AGENT
GR: No form required to appoint agent
XPN: Law requires form
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.
UNILATERAL AND PRIMARILY ONEROUS
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Compensation arises only after rendition of service
Contract of agency presumed for compensation unless there is contrary proof
Unilateral obligation on the part of agent to perform service for P
PERSONAL, REPRESENTATIVE AND DERIVATIVE
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Personal: between P and A (No delegation, but may appoint substitute)
If one of them withdraws, agency extinguished because agency fiduciary in nature
Representative: A acts for P
Derivative: Authority of A derived from another person, P
2 reqs for A to bind P
1. Authority (Act for P)
2. Act within scope of authority
Qui facit per alim facit per se
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He who acts through another acts himself
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
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If 3rd party has notice of A’s powers and A exceeded his authority, A’s acts are VOID
FIDUCIARY AND REVOCABLE
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Neither the principal nor agent can be legally made to remain in the relationship when they
choose to have it terminated
Consequences of this characteristic:
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Agent estopped from asserting or acquiring title to property adverse to P
In case of conflict of interest, A cannot favor his interest. He must favor interest of P
A cannot buy for himself prop of P given to A’s mgt for disposition UNLESS:
1. P expressly consents or
2. A buys after agency is terminated
PREPARATORY AND PROGRESSIVE
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One contract can lead to succeeding contracts
Agency does not exist for its own purpose; it is preparatory contract entered into for other
purposes that deal with the public in a particular manner – for A to enter into juridical acts in
the name of P
Tool or medium resorted to achieve greater objective of being able to enter into juridical
relations for P
ACTS THAT CAN BE DELEGATED
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Any act which one may lawfully do personally may be delegated
XPNs:
1. Acts which are personal in nature
2. Acts that are prohibited by law to be delegated
KINDS OF AGENCY
1. Based on business or transactions covered:
a. General agency
b. Special agency
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.
General agency
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Universal agency: Encompasses all business of P
SC: Appointment of agent is addressed for everyone/public
Agent may conduct business of P for anyone/public
Special agency
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Particular Agency: One which covers only one or more specific transactions
SC: Agency is addressed to specific persons
Agent may conduct only specified transactions of P to specific persons
Universal v General v Special agent
Universal Agent
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One employed to do all acts that P may personally do, and which he can lawfully delegate to
another the power of doing
Addressed to public and encompasses all P’s business
General Agent
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One employed to transact all business of P, or all business of a particular kind or in a particular
place, or In other wirds to all acts connected with a particular trade, business or employment
Addressed to the public but transaction specified
Special Agent
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One authorized to act in one or more specific transactions or to do one or more specific acts or
to act upon a particular occasion
2. Express or implied
a. On the part of P – actual appointment by P of another as his agent or from:
i.
Acts of P
ii.
P’s silence or lack of action
iii.
P’s failure to repudiate the agency knowing that another person is acting on his
behalf without authority
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.
b. On the part of A – acceptance by A may be express (Accepted appointment) or implied:
i.
From his acts which carry out the agency
ii.
From his silence or inaction accdg to the circumstances
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.
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c. Implied acceptance of agency between persons who are present*
If P delivers his power of atty to A and A recvs it without objection
They are together face to face, acceptance may be implied from silence
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.
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d. Acceptance of agency between persons who are absent
They are not together
Acceptance cannot be implied from silence
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.
“Announcement of appointment of an agent”
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Through any medium
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.
1.
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By special information
May be through a letter addressed to specific person
Person appointed will be considered an agent with respect to the persons who recvd special info
Power may be rescinded by specially informing that person that the agency is rescinded
2.
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By public advertisement
By publication in any medium
Person appointed will be considered as A with regard to any person/public
Power may be rescinded by publicly advertising that agency is rescinded
*Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are
bound at their peril. If they would hold the principal, to ascertain not only the fact of the agency but the
nature and extent of the authority, and in case either is controverted, the burden of proof is upon them
to establish (that there is indeed an agency so as to hold the principal liable on the contract made by
the assumed agent with 3rd persons)
*In approaching the consideration of the inquiry whether an assumed authority exist in a given case,
there are certain fundamental principles which must not be overlooked. Among these are:
(1) that the law indulges in no bare presumptions that an agency exists: it must be proved or presumed
from facts;
(2) that the agent cannot establish his own authority, either by his representations or by assuming to
exercise it;
(3) that an authority cannot be established by mere rumor or general reputation;
(4) that even a general authority is not an unlimited one; and
(5) that every authority must find its ultimate source in some act or omission of the principal***.
3. Oral or Written
a. Agency may be oral, unless the law requires specific form
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.
b. 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.
c. *Where the owner of real property desires to confer upon an attorney in fact
authority to sell the same, it is necessary that the authority should be
expressed in writing; but it is not necessary that the property to be sold
should be precisely described. It is sufficient if the authority is so
expressed as to determine without doubt the limits of the agent’s
authority.
4. Onerous or Gratuitous
- Agency is presumed to be for compensation, unless there is proof to the contrary
- Liberality may be valid consi for creation of agency
Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary.
5. Couched in General Terms (GPA) or SPA
a. GPA – Article 1877. An agency couched in general terms comprises only acts of
administration, even if: WAG
i.
the principal should state that he withholds no power or
ii.
that the agent may execute such acts as he may consider appropriate, or
iii.
even though the agency should authorize a general and unlimited management.
b. SPA – Article 1878. Special powers of attorney are necessary in the following cases (acts of
dominion):
(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;
(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.
AGENCY V. BROKERAGE
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Real estate broker – job is only to let buyer and seller come together and agree on the sale; SPA
not needed because not an agent of P
Agent – needs SPA for sale of immovable
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.
Article 1880. A special power to compromise does not authorize submission to arbitration.
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They are different processes having different results
Arbitration: Submit case to a 3rd person whose decision is binding upon the parties
*The right to commence action for collection of debts owing to P is not an incident of strict ownership
which must be conferred upon express terms
*Unless the contrary appears, the authority of A must be presumed to include all necessary and usual
means of carrying the agency into effect
*One who clothes another apparent authority as his agent, and holds him out to the public as such,
cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person in good faith and in the honest belief that he is
what he appears to be
*A power of atty to loan and borrow money and to mgage P’s prop does not carry with it or imply that A
has a legal right to make P liable for the personal debts of A even if A is spouse of P
*It is neither accurate nor correct to conclude that in the absence of SPA (where one is required by
law) renders the compromise agreement void. In such a case, the compromise is merely
unenforceable. This results from its nature is a contract. It must be governed by the rules and the
law on contracts. (XPN: Sale of piece of land through agent – void if no SPA by express statutory
declaration)
- Reason: ***REMEMBER THE GENERAL PRINCIPLE*** - ART. 1403. The following contracts are
unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers
*When it appears that the client, on becoming aware of the compromise and the judgment thereon,
fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest its
validity (Compromise is now valid, not unenforceable)
*The grantor of SPA to mgage is liable only to the extent that the property authorized by him to be
mgaged would be subject to foreclosure and sale to respond for the oblis contracted by the
grantee of the power but the grantor cannot be held personally liable for the payment of such
oblis, in the absence of any ratification or other similar act that would estop the grantor
*A special power of attorney to mortgage real estate is limited to such authority to
mortgage and does not bind the grantor personally to other obligations
contracted by the grantee in the absence of any ratification or other similar act that
would estop the grantor from questioning or disowning such other obligations
contracted by the grantee
*Article 1878 refers to the nature of the authorization, not to its form.22 Even if a document is titled as
a GPA, the requirement of a SPA is met if there is a clear mandate from the principal
*specifically* authorizing the performance of the act.2
6. AGENCY BY ESTOPPEL
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.
*The scope of the agent’s authority is what appears in the written terms of the
power of attorney. While third persons are bound to inquire into the extent or scope
of the agent’s authority, they are not required to go beyond the terms of the written
power of attorney. Third persons cannot be adversely affected by an understanding
between the principal and his agent as to the limits of the latter’s authority. In the
same way, third persons need not concern themselves with instructions given by the
principal to his agent outside of the written power of attorney.
- 3rd person confined within contents of the power of atty as written
- Not bound with the personal and separate instructions of P to A as to A’s authority
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.
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)
Article 1911. Even when the agent has exceeded his authority, the principal is solidarily liable
with the agent if the former (P) allowed the latter (A) to act as though he had full powers.
GR: P is not bound by act of A if A exceeds authority
*XPN: A banking institution is liable to innocent 3rd persons where the representation is made in the
course of its business by an A acting within the general scope of his authority even though the A is
secretly abusing his authority and attempting to perpertrate a fraud upon his principal or some other
person for his own ultimate benefit (Hence, cannot charge account of its client)
*In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether
such account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if
the account is to reflect at any given time the amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of
bank, such as the dishonor of a check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.
*The paint is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship
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Banks must observe highest degree of diligence
Banking industry is imbued with public interest
Banks are bestowed highest trust and confidence by client-depositors
BASIC PRINCIPLES OF AGENCY; TO BIND THE PRINCIPAL
1. Agent must act within scope of his authority
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.
2. Agent must act in behalf of his principal
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.
EFFECTS OF AGENCY
1. A acts within scope of his authority and in behalf of P (Disclosed P); both principles present
a. Act is valid; and
b. P alone is liable unless A expressly bound himself
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.
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It is as if P transacted personally with the 3rd person
2. One or both of the basic principles are absent
a. A acts within scope of authority but acted for himself (Undisclosed P); with authority but
acting for himself
i.
P has no right of action against person whom A has contracted; and
ii.
Vice versa (Relativity of contracts)
iii.
A is directly bound with the person with whom he has contracted as if the
transaction were his own except when the contract involves things belonging to P
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.
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If contract involves things belonging to P, P has right of action against 3 rd person and the 3rd
persons against P as if both principles of agency were met
* According to this exception (when things belonging to the principal are dealt with) the
agent is bound to the principal although he does not assume the character of such
agent and appears acting on his own name. This means that in the case of this
exception, the agent’s apparent representation yields to the principal’s true
representation and that, in reality and in effect, the contract must be considered as
entered into between the principal and the third person; and, consequently, if the
obligations belong to the principal, to him alone must also belong the rights arising
from the contract.
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b. A acts in excess of authority of P but in P’s behalf or a person acts without authority of
another but in the latter’s behalf (No authority, but acted for someone’s name)
Act of A is unenforceable against P or person in whose name contract was entered into unless P
ratifies the same
The contract entered into by A is unenforceable
Reason: REMEMBER THE GENERAL PRINCIPLE OF CONTRACTS, viz:
Article 1317. No one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by
the other contracting party.
Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
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c. A acts in excess of authority of P and in A’s behalf or a person acts without authority of
another but in his own behalf (Both principles absent); no authority and acting in A’s name
Act is deemed to be that of A himself or person acting without authority
Act is valid between A and 3rd person
If A cannot perform his part of the contract, A shall be liable in his personal capacity
Just remove P out of the picture
AGENCY BY OPERATION OF LAW
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Need not be agreed upon because agency in this case is by operation of law
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.
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.
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.
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.
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)
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If P had reasonable opportunity to take steps to meet the situation BUT still did nothing, agency
is terminated and A may choose to stop acting for P’s behalf
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. (Hence, BOTH A and 3rd person
must have no knowledge of cause of extinguishment of agency)
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.
DETERMINATION OF THE NATURE OF THE CONTRACT; HOW TO DETERMINE IF THERE IS AGENCY
*To determine the nature of a contracts, courts do not have or are not bound to rely
upon the name or title given it by the contracting parties, should there be a controversy
as to what they really had intended to enter into, but the way the contracting
parties do or perform their respective obligations stipulated or agreed upon may
be shown and inquired into, and should such performance conflict with the name or title
given the contract by the parties, the former must prevail over the later.
*As a general rule the essence of a contract determines what law should apply to the
relation between the parties and not what the parties prefer to call that relationship.
However, only the acts of the contracting parties, subsequent to and in
connection with the execution of the contract, must be considered for the purpose
of interpreting the same.
*Only the acts of the contracting parties, subsequent to and in connection with, the
performance of the contract must be considered in the interpretation of the contract
when such interpretation is necessary, but not when its essential agreements are
clearly set forth and plainly show that the contract belongs to a certain kind
and not to another
AGENCY vs OTHER CONTRACTS
1. vs Partnership
- FOR WHOSE BENEFIT: A acts not for himself but for P (Doctrine of Representation); pp can
act for himself, for his firm, and for his partners
- CONTROL/STATUS: A joint venture, including a partnership, presupposes generally a
parity of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed and where each party
exercises equal rights in the conduct of the business; A and P have no parity of standing
as P essentially controls A and property belongs to P
2. vs. Lease of services
- ARTICLE 1644. In the lease of work or service, one of the parties binds himself to
execute a piece of work or to render to the other some service for a price certain, but the
relation of principal and agent does not exist between them.
- In both agency and lease of services, one of the parties binds himself to render some service
to the other party
- BASIS: Agency, however, is distinguished from lease of work or services in that
the basis of agency is representation, while in the lease of work or services
the basis is employment. The lessor of services does not represent his
employer while the agent represents his principal.
- NATURE OF CONTRACT: Agency is a preparatory contract as agency "does
not stop with the agency because the purpose is to enter into other
contracts; Lease of services is a principal contract
- ACTS CONTEMPLATED: The most characteristic feature of an agency
relationship is the agent’s power to bring about business relations between
his principal and third persons. "The agent is destined to execute juridical
acts (creation, modification or extinction of relations with third parties). Lease
services contemplate only material (non-juridical) acts."
c
3. vs. Independent contractorship
- CONTROL: IC authorized to do the work accdg to his own method, without being subject to
the other party’s control, except insofar as the result of the work concerned; A acts under
control of P
- SUB-AGENTS: Ees of IC not ees of er of IC; agents of A can be controlled by P
- BINDING POWER: IC cannot bind er by tort; A can bind P by tort because A is extension of P’s
personality as long as the two basic principles of agency are present
- NEGLIGENCE: IC’s negligence not imputable to his er; A’s negligence imputable to P
4. Agency TO SELL vs. Sale
Article 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
- OWNERSHIP OF GOODS: A recvs goods as goods of P; B recvs goods as owner from S
- PAYMENT: A delivers proceeds of sale to P; B pays price to S
- RETURN: A can return object in case he is unable to sell to a 3 rd person; B cannot return
object sold to S because there is already transfer of ownership by virtue of delivery
- DISCRETION: A bound to act accdg to P’s instructions; B can deal with the thing as he pleases
being the owner
5. vs. Brokerage
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)
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)
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)
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.
-
CA engaged in purchase and sale for a personal prop of P which for this purpose has to be
placed in CA’s possession and at his disposal. He has a relation not only with his P, and the B
and S, but also with the prop which constitutes the object of the transaction
-
A broker on the other hand maintains no relation with the thing he buys or sells. He is
supposed to be merely a go-between, an intermediary or middleman between the B and S.
As such, he does not have either the custody of or the possession of the thing that he
disposes of. His only function is to bring the parties to the transaction together
-
FIDUCIARY RELATION
-
SPA REQUIREMENT
-
POWER TO BUY PROPERTY
-
COMPENSATION
-
RELATION TO THE PROPERTY
ASS: OBLIGATIONS OF THE AGENT
OBLIGATIONS OF THE AGENT
GENERAL OBLIS OF AGENT WHO ACCEPTS THE AGENCY
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. (2nd par: Agency by operation of law)
1. Carry out the agency
2. Liable for dmgs which, through his non-performance, the P may suffer
3. Finish the business already begun on the death of P, should delay entail any danger
GENERAL OBLIS OF AGENT WHO DECLINES THE AGENCY
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.
-
GR: When a person declines offer to make him A, no contract of agency and no obli is assumed
by such person to the offeror based on the absence of privity (and absence of meeting of minds)
XPN: 1885 – when goods are forwarded to A, becomes agent
GENERAL RULE ON A’s POWER AND AUTHORITY
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.
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.
Article 1888. An agent shall not carry out an agency if its execution would manifestly result in
loss or damage to the principal.
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.
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.
-
Prudence dictates that since P was aware of such circumstances, then P could have informed A
about them when A was discharging the orders of P
Moreover, A is extension of P’s personality
SPECIFIC OBLIS OF AGENT
I. ACT WITHIN THE SCOPE OF AUTHORITY
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.
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.
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.
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.
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.
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.
*ACTS OF AGENT BEYOND HIS LIMITED POWERS ARE VOID as to the 3rd person he has contracted with
and thus P is not bound (If 3rd person has knowledge of limits A’s powers or authority)
- XPN: 3 qualifications whereby P is held bound even if A exceeded powers:
1. Where P’s acts have contributed to deceive a person in GF; (Representation/estoppel)
2. Where the limitations upon the power created by P could not have been known by a 3 rd
person***; (Innocent 3rd person no knowledge of limits of A’s authority) or
3. Where P has placed in the hands of A instruments signed by P in blank (Blank instrument)
-
Reason for no. 3: P is negligent
If A acted for P but exceeded authority and 3rd person has no knowledge of powers of A,
contract is UNENFORCEABLE against P
II. CARRY OUT THE AGENCY (OR NOT)
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.
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.
Article 1888. An agent shall not carry out an agency if its execution would manifestly result in
loss or damage to the principal.
*When an A in executing the orders and commissions of his P carries out the instructions he has recvd
from his P, and does not appear to have exceeded his authority or to have acted with negligence, deceit
or fraud, he cannot be held responsible for the failure of his P to accomplish the object of agency
(Reason: Since A acted within scope of authority and for P, then it is as if it was P himself who directly
entered into the contract with the 3rd person. Hence, P is the proper party)
III. ACT WITH DILIGENCE
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.
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.
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.
IV. ADVANCE FUNDS
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.
-
This obligation is not automatic; there must first be a stipulation
But P must reimburse A even if business was not successful provided that A is free from fault
Reimbursement shall include interest on the sums advanced from the day on which the advance
was made
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.
V. PREFER INTEREST OF P OVER HIS PERSONAL INTEREST
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.
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.
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Article 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good faith,
if it should be movable property. (1st possessor in GF)
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property. (1st registrant in GF)
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession (1st possessor in GF); and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith (Oldest title in GF).
-
MOVABLE:
X sells car to A on January 1 and then Y sells same car to P on January 2 = sale to A preferred
XPN: P first took possession of the car in GF = ownership is vested in P
-
IMMOVABLE:
X sells land to A on January 1 and then Y sells same land to P on January 2 = sale to A preferred
XPN: P was the first to register ownership in GF; or P was the first to possess in GF; or P presents
the oldest title in GF
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.
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A in GF: P liable for dmgs to 3rd person
A in BF: A liable for dmgs to 3rd person
Article 1491. The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to them,
unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or
of any government-owned or controlled corporation, or institution, the administration of which
has been intrusted to them; this provision shall apply to judges and government experts who,
in any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights
in litigation or levied upon an execution before the court within whose jurisdiction or territory
they exercise their respective functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the property and rights which may be
the object of any litigation in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law.
*A person who acts as a go-between or middleman between the vendor and the
vendee, such as a broker, bringing them together to make the contract themselves,
without any power or discretion whatsoever which he could abuse to his advantage and
to the owner’s prejudice, is not an agent within the meaning of article 1491 of the Civil
Code.
- The ban in 1491 connotes the idea of trust and confidence; and so, where the
relationship does not involve considerations of GF and integrity, the prohibition does
not apply. To come under this prohibition, the A must be in a fiduciary relation with his
P
- Hence, broker may buy the real estate from seller for himself (Unlike A who cannot
buy property of P for himself without P’s consent or after agency is terminated)
VI. TO RENDER ACCOUNT AND TO DELIVER
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.
*The agent has an absolute obligation to make a full disclosure or complete account
to his principal of all his transactions and other material facts relevant to the agency, so
much so that the law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as void.
- Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or
personal benefit from the vendee, without revealing the same to his principal, the
vendor-agent is guilty of a breach of his loyalty to the principal and forfeits his right
to collect the commission from his principal, even if the principal does not suffer
any injury by reason of such breach of fidelity, or that he obtained better results or that
the agency is a gratuitous one, or that usage or custom allows it; because the rule is to
prevent the possibility of any wrong, not to remedy or repair an actual damage.
- The duty embodied in Article 1891 (Render account and Deliver receivables) of the
New Civil Code will not apply if the agent or broker acted only as a middleman with
the task of merely bringing together the vendor and vendee, who themselves thereafter
will negotiate on the terms and conditions of the transaction (Broker is not an agent.
Hence, no duty to render account and deliver what he may have received)
VII. TO BE SOLIDARILY OR PERSONALLY LIABLE
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.
Article 1895. If solidarity has been agreed upon, each of the agents is responsible for the nonfulfillment 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.
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.
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.
AGENT EXCEEDED SCOPE OF AUTHORITY WHILE ACTING FOR P
- If 3rd person has no knowledge of limits of A’s authority, contract is UNENFORCEABLE against P but A
personally liable to 3rd person. But if P ratifies, P is now liable on the contract
- If 3rd person has knowledge of limits of A’s authority, contract is VOID and A not personally liable. But if
A secured ratification of P, A now liable
*3rd person is chargeable with knowledge of A’s authority if he does not inquire as to limits of A’s power
*The acts of the agent beyond the scope of his authority do not bind the principal unless the latter
ratifies the same. It also bears emphasis that when the third person knows that the agent was
acting beyond his power or authority, the principal cannot be held liable for the acts of the agent.
If the said third person was aware of such limits of authority, he is to blame and is not entitled to
recover damages from the agent (because contract is void), unless the agent undertook to
secure the principal's ratification.
*A person who acts as an agent without authority or without a principal is himself
regarded as the principal, possessed of all the rights and subject to all the liabilities
of a principal; a person acting or purporting to act on behalf of a corporation which has
no valid existence assumes such privileges and obligations and becomes personally
liable for contracts entered into or for other acts performed as such agent
VIII. TO PAY INTEREST
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.
RIGHTS OF THE AGENT
I. APPOINT A SUBSTITUTE
-
Not delegation because agency involves trust and confidence between P and A
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.
-
No prohibition, act of substitute valid but A responsible for act of substitute
There is prohibition, act of substitute void
If person to be appointed as substitute was designated by P, A will not be liable for acts of S
even if S be notoriously incompetent or insolvent
*The legal maxim potestas delegata non delegare potest; a power once delegated cannot be
re-delegated, while applied primarily in political law to the exercise of legislative power, is a
principle of agency.36 For another, a re-delegation of the agency would be detrimental to the
principal as the second agent has no privity of contract with the principal.
*What is allowed is a substitute and not a delegation of the agency
*Applying Article 1892 to the special power of attorney executed by Ignacio Rubio in favor
of his daughter Patricia Llamas, it is clear that she is not prohibited from appointing a
substitute. By authorizing Virginia Lim to sell the subject properties, Patricia merely acted
within the limits of the authority given by her father, but she will have to be "responsible for
the acts of the sub-agent (or substitute),"19 among which is precisely the sale of the subject
properties in favor of respondent.
II. TO RETAIN IN PLEDGE OBJECTS OF AGENCY
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.
(Right of retention)
-
XPN: If A is at fault, no right of retention since A has no right to be reimbursed or be indemnified
in the first place
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)
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.
*Liability of P for dmgs limited only to that which the execution of agency has caused to A. Thus, no
implied promise to indemnify will be implied for losses or dmgs caused by the independent and
unexpected wrongful acts of 3rd persons for which the P is in no way responsible
OBLIGATIONS OF THE PRINCIPAL
I. TO COMPLY WITH HIS OBLIGATION (contracted by A or ratified by him)
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.
Article 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit
ratification if, with knowledge of the reason which renders the contract voidable and such reason
having ceased, the person who has a right to invoke it should execute an act which
necessarily implies an intention to waive his right.
*For an act of the principal to be considered as an implied ratification of an
unauthorized act of an agent, such act must be inconsistent with any other hypothesis
than that he approved and intended to adopt what had been done in his
name.36 Ratification is based on waiver - the intentional relinquishment of a known
right. Ratification cannot be inferred from acts that a principal has a right to do
independently of the unauthorized act of the agent. Moreover, if a writing is
required to grant an authority to do a particular act, ratification of that act must
also be in writing.
*For the principle of apparent authority to apply, the third person-claimant was burdened to prove the
following:
(a) the acts of P justifying belief in the agency by the third person-claimant
(b) knowledge thereof by P which is sought to be held;
(c) reliance thereon by the third person-claimant consistent with ordinary care and prudence.
- Implied ratification not presumed; not hypothetical. Must be proved
- There can be no apparent authority of an agent without acts or conduct on the part of the principal
and such acts or conduct of the principal must have been known and relied upon in good faith and
as a result of the exercise of reasonable prudence by a third person as claimant and such must have
produced a change of position to its detriment. The apparent power of an agent is to be determined
by the acts of the principal and not by the acts of the agent.
*Conditions for ratification: CK-RCD
1. P must have capacity and power to ratify
2. P has knowledge of material facts***
3. P must ratify acts in entirety (No partial ratification of acts of agent)
4. Act capable of ratification
5. Act done in behalf of P***
II. TO BE SOLIDARILY LIABLE
Article 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with
the agent if the former (P) allowed the latter (A) to act as though he (A) had full powers.
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During the execution of the contract with the 3rd person, P and A solidarily liable
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.
III. TO ADVANCE OR TO REIMBURSE
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
XPN: 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.
Article 1236. The creditor is not bound to accept payment or performance by a third person who has
no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the
payment has been beneficial to the debtor.
ILLUSTRATION:
-
A advances necessary sums for the execution of agency without knowledge or against will of P
A may recover from P what he has advanced but only insofar as P was benefited by such
advances
BUT if A advanced with knowledge or with consent of P, then A may recover entirety of
advances
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.
IV. TO COMPENSATE (the agent)
Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary.
*Since the broker’s only job is to bring together the parties to a transaction, if the broker does not
succeed in bringing the mind of B and S to an agreement with reference to the terms of a sale, he is
not entitled to a commission/compensation
*When a party is not the efficient procuring cause in bringing about a sale, he is not entitled to the
stipulated broker’s commission
- Different from AGENT, entitled to compensation regardless if transaction successful or not
EXTINGUISHMENT OF AGENCY
Article 1919. Agency is extinguished: RWD-DAE
(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.
EXPIRATION
-
Agency automatically terminated upon expiration of period for which agency was created
DCII OF P OR A
-
GR: Extinguishes agency
XPNs: INU
1. 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. (Agency
coupled with interest)
2. 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.(A
and 3rd person no knowledge of cause of extinguishment of agency)
3. 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. (Unfinished business at P’s death)
WITHDRAWAL OF AGENT***
-
If A withdraws with no justifiable reason, liable for damages arising from breach of contract
GR: Article 1928. The agent may withdraw from the agency by giving due notice to the
principal.
XPNs:
1. Article 1928 par 2. If the principal 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. (Agency is nevertheless extinguished only that A is
liable for dmgs for unjustified withdrawal amounting to breach of contract of agency)
2. 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.
ACCOMPLISHMENT OF OBJECT OR PURPOSE
REVOCATION BY PRINCIPAL***
-
-
-
-
GR: 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.
XPN: But revocation by P not absolute. Must have justifiable basis for revocation. If done in BF,
liable for dmgs to A.
Express revocation: P actually and clearly cancels authority of A in writing or orally
Implied revocation/By operation of law: 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.
XPNs to 1923: (In sum, so that there may be a true implied revocation of agency, notice of
revocation must be given BOTH to A and to 3rd person)
1. 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.
2. 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.
Other forms of implied revocation:
Article 1924. The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons.
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.
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.
INSTANCES WHEN AGENCY CANNOT BE REVOKED BMP
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.
*Powers of atty cannot be revoked at P’s pleasure but may be revoked only for a just cause, such as
when A betrays interest of P (Otherwise, P liable for dmgs)
*Mere statement in the power of atty that it is coupled with an interest is not enough (so as to make it
irrevocable). In what does such interest consist must be stated in the power of atty
*The fact that the principal had mortgaged the improvements of a parcel of land to the
agent is not such an interest as could render irrevocable the power of attorney
executed by the principal in favor of the agent. In fact no mention of it is made in the
power of attorney. The mortgage on the improvements of the parcel of land has
nothing to do with the power of attorney and may be foreclosed by the mortgageeA upon failure of the mortgagor-P to comply with his obligation. As the agency was
not coupled with an interest, it was terminated upon the death of the principal
and the agent could no longer validly convey the parcel of land to another.
- Deed of sale to 3rd person is Void because P already dead when sale was made
(except if A had no knowledge of death of P at the time of sale)
- If agency coupled with interest, agency IRREVOCABLE. If not, REVOCABLE.
*If there is a period stipulated in the agency contract, P may still revoke A’s authority
at will; but P will be liable for dmgs
DISSOLUTION OF FIRM OR CORPORATION WHICH ENTRUSTED (P) OR ACCEPTED (A) THE AGENCY
TRUSTS
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Relationship where 2 persons involved over one property but sense/nature of ownership
different from each other
One person has legal title
One persons has only beneficial or equitable title
Property entrusted to another for management for the benefit of another person
Article 1442. The principles of the general law of trusts, insofar as they are not in conflict with this
Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.
*As the law of trusts has been much more frequently applied in England and in the
United States than it has in Spain, we may draw freely upon American precedents
in determining the effect of the testamentary trust here under consideration,
especially so as the trusts known to American and English equity jurisprudence are
derived from the fidei commissa of the Roman law and are based entirely upon Civil
Law principles.
DEFINITION AND CONCEPT
Article 1440. A person who establishes a trust is called the trustor; one in whom confidence is
reposed as regards property for the benefit of another person is known as the trustee; and the
person for whose benefit the trust has been created is referred to as the beneficiary.
Article 1441. Trusts are either express or implied. Express trusts are created by the intention of the
trustor or of the parties. Implied trusts come into being by operation of law.
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It is the legal relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and exercise of certain powers by the latter
(Tolentino)
It is a legal arrangement whereby a person transfers his legal title to property to another to be
administered by the latter for the benefit of a third party. It is a right of property held by one
party for the benefit of another. Thus, in a trust, legal title and equitable ownership are split
between two or more people. (De Leon)
*Trust is known as fedeicomiso under Spanish legal system, trustee as fiduciario, beneficiary as
fidecomisario or the cestui que trustant
TRUSTOR (Tor)
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Person who establishes a trust
In common law, grantor/settlor/founder
TRUSTEE (Tee)
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Person in whom confidence is reposed as regards property placed in trust for benefit of another
Property place in trust = “Corpus”; Trust property
It is Tee who assumes certain duties relating to the res or the trust property with respect to the
person for whose benefit the trust is created
Money can be entrusted
BENEFICIARY (Bry)
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Person for whose benefit the trust has been created
Cestui que trust
TRUST PROPERTY (TP)***
1. Subject matter of trust
- May be any property of value (real,personal,funds,money,choses in action)
- Trust res; corpus
2. Must consist of property actually in existence in which Tor has transferable interest or title
although it may, as a rule, be any kind of transferable property
- Trust res cannot be mere expectancy
CHARACTER OF OFFICE OF TRUSTEE
1. Principal
- Tee not agent of Tor or of the Bry, but he acts for himself in the administration of the TP,
although subject to the terms of the trust and the law of trusts
2. Agent
- Tee may also be regarded as agent of Bry of trust such as imputing to Bry of the trust notice
given to Tee
3. Fiduciary
- It is Tee, not Tor, who owes fiduciary duty to the beneficiary which imposes upon him the duty
to act with utmost GF and loyalty in all matter affecting the TP
CLASSIFICATION OF TRUSTS
1. As to creation
a. Express – execution of intention to create trust by Tor or the parties
b. Implied – comes into being by operation of law
i.
Resulting trust - execution of intention to create trust by Tor or the parties (No
express intention but intention is merely drawn or deduced from the transaction)
ii.
Constructive trust – imposed by law regardless of intention to create trust to
promote justice (Trust ex maleficio, trust ex delictio, de son tort)
2. As to effectivity
a. Testamentary trust – takes effect upon Tor’s death; included part of will does not have
separate trust deed
b. Inter vivos trust (living trust) – during Tor’s life
3. As to revocability
a. Revocable
b. Irrevocable
EXPRESS TRUST
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Characteristics:
1. It is a relationship
2. Relationship of fiduciary character
3. Relationship with respect to prop, not one involving merely personal duties
4. Involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another
5. Arises as a result of a manifestation of intention to create the relationship
Trust cannot be presumed
TRUST RELATIONSHIP
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Does not create juridical personality
EXPRESS TRUSTS ESSENTIALLY CONTRACTUAL IN CHARACTER
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Because it can only be constituted through contractual intention on the part of Tor to dispose of
his property by dividing its full ownership beween the Tee and Bry, and requires generally full
acceptance of the naked title and fiduciary obligations on the part of Tee
Article 1445. No trust shall fail because the trustee appointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.
Article 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no
onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to
the contrary.
ESSENTIAL ELEMENTS OF EXPRESS TRUST TBR
1. Trustee (Tee) – holds trust prop (TP) and is subject to equitable duties to deal with it for
another’s benefit (diff from stipulation pour autrui)
2. Beneficiary (Bry) – to whom the Tee owes equitable duties to deal with the TP for him
3. Res – TP which Tee manages for the sake or interest of Bry which can be created in anything
that the law recognizes to be property
CHARACTERISTICS
1. Nominate and principal, yet governed by equity principles
- The equity nature of a trust supports the proposition that the intention of Tor to create trust for
benefit of intended Bry should as much as possible be realized
- Thus – Article 1444. No particular words are required for the creation of an express trust, it
being sufficient that a trust is clearly intended (How? By looking into the essential elements of
trust).
- Application of implied trust principles on given transactions covering proprietary relations are
mandated not by specific reference to statutory provisions but by seeking equitable solutions to
render justice to the parties involved or affected by the transaction
2.
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Unilateral and gratuitous
Tee need not be paid
Only that Tee assumes obli to carry on the trust for the benefit of Bry
Article 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes
no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no
proof to the contrary.
3. Preparatory contract
- Trust relationship that is created is merely preparatory for succeeding contracts that Tee may
enter into to fulfill his obligation for the benefit of Bry
- Express Trust not created for its own sake in that the trust relationship is essentially a medium
established by Tor to allow full authority and discretion on the part of Tee to enter into juridicial
acts on the corpus to earn income or achieve other goals given for benefit of Bry
4. Fiduciary duties created on part of Tee
- Article 1440. A person who establishes a trust is called the trustor; one in whom confidence
is reposed as regards property for the benefit of another person is known as the trustee; and
the person for whose benefit the trust has been created is referred to as the beneficiary.
- Express trust creates a fiduciary obli in the Tee by virtue of his having assumed naked or legal
title to the props constituting the corpus, under express provisions to use, control, administer
and manage them for the benefit of Bry
RULES ON ENFORCEABILITY OF EXPRESS TRUST
1. ET is essentially a real contract, not merely consensual
- There must be delivery for perfection
- No trust relationship exists, unless prop constituting the res is conveyed/delivered to Tee
Article 1443. No express trusts concerning an immovable or any interest therein may be proved by
parol evidence.
Article 1444. No particular words are required for the creation of an express trust, it being sufficient
that a trust is clearly intended.
2. ET must nevertheless be clearly shown to have been intended
- Article 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
- ET will never be presumed to exist; must be intended to exist
- Trust must be proven by clear and convincing evidence. ET cannot be proven by parol evidence
3. Essence of relationship between Tor and Tee prior to conveyance of res
- A private deed of trust setting up trust relationship, constituting the trustee, providing for his
duties and responsibilities and designating the Bry, would not give rise to a true trust
relationship even with the formal acceptance of designated Tee, unless and until the prop that
would constitute the corpus of the trust rel is actually conveyed to the trust rel
- ET is real contract
4. ET over immovable must be in writing
- If not in writing, merely unenforceable (not void as in sale of land in agency through agent)
IMPLIED TRUST
Article 1441. Trusts are either express or implied. Express trusts are created by the intention of the
trustor or of the parties. Implied trusts come into being by operation of law.
Article 1442. The principles of the general law of trusts, insofar as they are not in conflict with this
Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.
*The underlying doctrine of implied trusts is founded in equity, derived from American decisions under a
legal system where injustice would result in which the legal estate or title were to prevail over the
equitable right of Bry
*In essence, the system of implied trusts applies in situations where the prop that ought to be owned
and enjoyed by one party has ended up in the hands of or registered with another party, and equity
demands that the latter ought to reconvey such prop to the former, or at least acknowledge formally
that he holds it for the benefit of the former
*Under 1441, as distinguished from ET which are created by the intention of parties, IT come into
existence by operation of law – by application of equity principles that mandate the application of IT
principles
*IT defined – those that come into being by operation of law, either through implication of an intention
to create a trust as a matter of law or through the imposition of the trust irrespective of, and even
contrary to, any such intention
TWO TYPES OF ITs
1. Resulting trust
2. Constructive trust
RESULTING TRUST
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Deductible (resulting) from the nature of transactions as a matter of intent
No express intention but an intention to create trust is drawn from the transaction
CONSTRUCTUVE TRUST
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Superinduced by operation of law as matters of equity (No intention deduced from transaction)
“Superinduced” – in addition
Those which are created by the construction of equity in order to satisfy demands of justice and
prevent unjust enrichment. They arise contrary to intention and against one who, by fraud,
duress, or abuse of confidence, obtains or holds the legal right to property which he ought not,
in equity and good conscience, to hold
ET v IT
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ET: Proceeds from a clear contractual intention to dispose of prop to Tee for Bry
RT: No intention apparent but merely presumed by law from the nature of transaction
CT: No such intention at all is drawn from the nature of transaction, and the purpose of the law
in imbuing relationship with trust characteristics is to achieve the demands of equity – prevent
fraud, duress etc
NATURE OF EVIDENCE TO PROVE IMPLIED TRUST
Article 1457. An implied trust may be proved by oral evidence.
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ET cannot be proved by parol evidence if involving immovable