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Agency AK
Corporate Law (Kingfisher School of Business and Finance)
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Agency
1. If the agent contracts in the name of the principal exceeding the scope of his authority and the principal does not
ratify the contract, the contract shall be void if the party with whom the agent contracted is aware of the limits
of the powers granted by the principal.
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 agents acts.
a. Both are true
b. Only the second statement is true
c. Both are false
d. Only the first statement is true
2. To improve the financial condition of his principal, an agent with general powers of administration given to him
by the principal in writing, sold two parcels of land, one for less than the price appearing in the inventory
prepared by the principal and the other double the price that appeared in the aforesaid inventory. Which is
correct?
a. Both contracts are binding upon the principal
b. The sale for double the price appearing in the inventory is binding upon the principal
c. The sale for less than the price appearing in the inventory is binding upon the principal
d. Both contracts cannot be enforced against the principal
3. P authorized A in a special power of attorney to sell his parcel of land. A sold the land to C without having
knowledge that prior to sale to C, P had already been dead for a week. C also was not aware of the
extinguishment of the agency by the principal’s death. Decide:
a. The sale is void because the agent had no more authority to sell the land due to the principal’s death.
b. The sale is valid but annullable by the heirs of the principal because the death of the principal has
extinguished the agency.
c. The sale is valid but unenforceable because of the agent acting without authority from his principal who
has died.
d. The sale is valid although the principal has died before the contract was entered into by the agent in
the name of the principal.
4. If the agent contracts in the name of the principal exceeding the scope of his authority and the principal does not
ratify the contract, the contract shall be void if the party with whom the agent contracted is aware of the limits
of the powers granted by the principal.
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.
a. Only the second statement is true
b. Only the first statement is true
c. Both are false
d. Both are true
5. A special agency requires a special power of attorney.
An agent may withdraw from the agency but may be liable for damages, if the principal is prejudiced.
a. Both statements are false
b. First is true, second is false
c. First is false, second is true
d. Both are true
6. P leads B to believe that A is his (P’s) agent. However, A is not really the agent of P. Later, B transacted with A
believing that A is the agent of P. What kind of agency was created here?
a. Agency by appointment
b. Agency by estoppel
c. Agency by necessity
d. Agency by ratification
7. The following cases were presented to you for evaluation:
I. A bilateral contract depends upon the agency.
II. The agency is a means of fulfilling an obligation previously contracted.
III. The agency is one where the partner was appointed manager in the contract of partnership and the removal
of the partner from the management is unjustifiable.
Which of the above cases is the principal not allowed to revoke the agency?
a. I, II and III
b. I and III
c. I and II
d. II and III
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8. P, 25 years old, appointed A, 17 years old, as his agent to sell certain goods for P20,000.00. Thereafter, A sold
the goods to B for the said amount. P, however, learned that the price of the goods had increased to P22,000.00
so he sought to disaffirm the sale made by A to B, and brought an action to recover the goods from B on the
ground that A’s act was voidable, A being a minor, and hence, could not be an agent. Decide,
a. The sale is valid because the principal is capable.
b. The sale is void, because A is a minor and therefore, cannot be an agent.
c. The sale is voidable, because A is a minor.
d. The sale is unenforceable, because A exceeded his authority.
9. In agency, the agent represents
a. A person who is capacitated
b. the judicial court
c. Heirs and creditors of the estate
d. A person who is incapacitated
10. Not a mode of extinguishing an agency
a. Dissolution of the firm or corporation which entrusted or accepted the agency
b. Insanity of the principal or agent
c. Death of the principal, and the agency is for the interest of either the principal or agent
d. Accomplishment of agency
11. If the agent has been empowered to borrow money he may himself be the lender at the current rate of interest
and if he has been authorized to lend money at interest, he can borrow it.
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 agency even though it may not be owing to the principal.
a. Only the second statement is true
b. Only the first statement is true
c. Both are true
d. Both are false
12. This kind of agent merely makes the principal and the third person meet and when they arrive at an agreement
or contract becomes entitled to compensation.
a. Attorney at law
b. Commission agent
c. Broker
d. Factor
13. A contract whereby a person binds himself to render some service or to do something in representation or in
behalf of another, with the consent and authority of the latter is known:
a. Contract of agency
b. Contract for a piece of work
c. Contract for lease of service
d. Contract of agency to sell
14. It is a contract, whereby a person binds himself to render service or to something in representation or in behalf
of another, with the consent and authority of the latter.
a. Contract of Partnership
b. Contract of Agency
c. Contract of Sales
d. Contract of Pledge
15. It is a contract wherein a person binds himself to render some service in representation or on behalf of another,
with the consent or authority of the latter
a. Contract of service
b. Partnership
c. Agency
d. Contract of piece work
16. P authorized A to sell his car for P1M with 5% commission. A sold the car to B for P1.5M. for how much is A
accountable to P?
a. P1.5M
b. P1.25M
c. P.95M
d. P1M
17. An agency couched in general terms comprises:
a. Acts of ownership
b. Both acts of administration and ownership
c. Acts of management
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d. Acts of strict dominion
18. X, Y and Z, co-owners of a house and lot, appointed A to sell the house and lot at a price of not less P1,500,000
cash with A being entitled to a commission of 10% of the selling price. A was able to sell the house for
P1,800,000 cash. How much commission may A collect from X?
a. 150,000
b. 180,000
c. 60,000
d. 50,000
19. The agent is responsible for the acts of a substitute which he appoints in the following instances. Which is not
included?
a. When he is not given the power to appoint one.
b. When he was given the power to appoint one, but without designating the person, and he appointed
incompetent one in good faith.
c. When the principal designated the person to be appointed.
d. When he was prohibited from appointing one.
20. If both principal and agent sold the land of the principal to two buyers, which of the latter shall be the owner?
a. First possessor in good faith
b. Prior date contract
c. First registrant in good faith
d. Oldest title in good faith
21. C appointed S to sell the formers car for P200,000. S sold the car to P for P200,000 but S acted in her own
name. After delivery, P inspected the car and she found hidden defects in the car. Can P file an action against C
even when S acted in her own name?
a. No, under caveat emptor let the buyer beware.
b. Yes, because this is a contract involving property belonging to the principal.
c. Yes, because the contract of sale is already perfected.
d. No, because S acted in her own name not of the principal.
22. P authorized A, B, and C to sell his car with the agreement that the latter shall be solidarily liable. However,
after delivery of the car to them, it was lost through the fault of A only. P can claim damages from:
a. B and C because they are also liable for the fault of A.
b. Only from A because he was the only one at fault.
c. A, B, and C because of their solidary liability.
d. Only from A because he exceeded his authority when the car was lost.
23. Miguel appointed Michael as commission agent to sell Miguel’s goods for P10,000.00 cash. Michael, however,
sold the goods on credit for P11,000.00 without Miguel’s consent. Based on the foregoing facts, which of the
following options are available to Miguel?
I. Miguel may demand immediate payment in P11,000 cash.
II. Miguel may demand immediate payment in P10,000 cash. However, Michael shall be entitled to keep the
excess of P1,000 when he collects the price of P11,000
III. Miguel may ratify the sale on credit for P11,000 and wait for the amount to be collected.
a. Either I or II
b. I only
c. Either II or III
d. Either I or III
24. An agent acting in the name of the principal shall not be liable to third person with whom he contracts:
a. When the third person knew of the agent’s lack of authority but the agent did not undertake to get
the principal’s ratification.
b. When he exceeds the limit of his authority without giving the third person sufficient notice of his powers.
c. When he expressly binds himself.
d. When the third person knew of the agent’s lack of authority and the agent undertook to get the principal’s
ratification but failed to get the same.
25. Which of the following is a mode for the extinguishment of agency?
a. Partial accomplishment of the agency
b. Revocation by the agent
c. Death of the principal without the knowledge of the agent
d. Filing of a monetary claim by the agent against his principal
26. If an agent enters into a contract in the name of his principal, exceeding the scope of his authority, the contract
is
a. Voidable
b. Void
c. Rescissible
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d. Unenforceable
27. P and M appointed A to sell the land they own in common with the stipulation that A will advance the
necessary funds to execute the agency. Who is liable to A for reimbursement of all the funds?
a. Either or both shall be liable for the entire amount.
b. P and M will share equally and therefore A may demand one-half only from either.
c. P and M shall not be liable because the expenses were incurred as a consequence of the performance of the
agent’s obligation.
d. Neither shall be liable since it was stipulated that A shall advance the funds to execute the agency.
28. The following are modes of extinguishing an agency, except:
a. Expiration of the period for which the agency was constituted
b. Death, civil interdiction, insanity or insolvency of the principal or agent
c. Continued losses on the part of the principal or agent
d. Accomplishment of the purpose of the agency
29. This is a mode of extinguishing an agency
a. Death of the principal, but the agency is for the interest of the principal and agent.
b. Insanity of principal or agent.
c. Partial accomplishment of the agency.
d. Upon withdrawal of the principal.
30. Is there any instance when an agent must continue to act for his principal even after the agency has ceased to
exist?
a. yes, a person declining a agency must observe the diligence of a good father of a family custody and
preservation of the goods forwarded to him by the owner until the latter should appoint an agent or taken
charge of the goods
b. yes, only in the instance where the principal dies, in which case the agency is extinguished, but the agent
must commence whatever business he was instructed to carry out and which the agent has failed to
commence at the time of the death to the principal
c. no, because agency is representation, hence, once the agency ceases to exist with the authority to act in
representation and the corresponding obligation on the part of the agent to perform terminates
d. yes, the agent must continue to act for the principal until such time the principal has reasonable
opportunity to take the necessary steps to meet the situation if the agent withdraws from the agency,
regardless of whether the agent withdraws from the agency for a valid reason or invalid reason
31. A, a duly authorized agent of P, wrote a letter to X on March 1, 2013 offering to sell P’s car for P200,000.00
cash. On March 3, 2013, X wrote a letter to A stating that he accepted all the terms of the offer, which letter
was received by A on March 5, 2013. Before A could relay such acceptance to P. P died in a vehicular accident
on March 6, 2013.
a. The contract was not perfected because P, the real party to the sale, died before the acceptance came to his
knowledge.
b. The contract was perfected on March 5, 2013.
c. The contract was perfected on March 3, 2013.
d. The contract was perfected on March 1, 2013.
32. When two or more principals appoint an agent for a common transaction, neither may revoke the power
without the consent of the other.
If the principal fails to pay the agent his commission, the latter may retain pledge the things belonging to the
principal.
a. Both are false
b. Both are true
c. First is true, second is false
d. First is false, second is true
33. P appointed A as his agent orally to sell his parcel of land for P20,000. Ten days later, A sold the same property
for P300,000 through a public instrument executed between him and B. What is the effect and status of sale
between A and B?
a. The sale can be ratified although the appointment of A was done orally because the sale between A and B
was in a public instrument.
b. The sale is void because there was no valid appointment of A as agent of P.
c. The sale is valid because A was authorized and it was executed in a public instrument.
d. The sale is unenforceable because the agent went beyond the scope of his authority for selling the land for
a price higher than the price agreed upon.
34. The responsibility of two or more agents who have been appointed simultaneously is solidary.
When two or more principals have granted a power of attorney for a common transactions, any one of them
may revoke the same provided it is with the consent of the others.
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a.
b.
c.
d.
Both are true
Both are false
Only the second statement is true
Only the first statement is true
35. P, an authorized dealer of cars, appointed A as its agent to sell its cars. The authority of A includes the giving of
discount of P20,000.00 to customers who pay in cash. One day, C, a customer, went to the company’s car
center and told A that she wanted to buy a car if A agreed to a discount of P50,000.00. A agreed and sold the
car to C at P550,000.00 in behalf of the corporation. What is the status of the sale made by A to C?
a. Unenforceable against P, the principal, because A acted beyond the scope of the authority.
b. Voidable at the instance of P because it did not give its consent to the sale at the discount of P50,000.00.
c. Rescissible, because P suffered damage of P30,000.00.
d. Void, because the additional discount of P30,000.00 given by A was not authorized by P.
36. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in a
public instrument, otherwise the sale shall be void
Agency is presumed to be without compensation unless there is proof to the contrary.
a. Both are false
b. Only the first statement is true
c. Both are true
d. Only the second statement is true
37. P appointed A as his agent. The authority of P did not authorize A to appoint a substitute but it did not also
prohibit him from appointing one. In this case:
a. A may not appoint a substitute because there is no express provision in his appointment from P allowing
him to appoint one.
b. A may appoint a substitute but he shall be liable for the acts of the substitute only when the substitute is
notoriously incompetent or insolvent.
c. A may appoint a substitute only when the substitute is designated in the authority given by P to A.
d. A may appoint a substitute because he is not prohibited from doing so in his authority but he shall be
liable for the acts of the substitute.
38. P gave A a special power of attorney wherein it was written that A was being authorized to sell the two cars of
P. However, P and A had an understanding that A should sell only one of the cars. A sold the two cars to B who
was not aware of the instruction given by P to A.
a. P is not bound at all by the sale of either one or both cars because A violated the instructions given by P.
b. P is bound by the sale of the two cars because that it what is contained in the special power of
attorney.
c. P will be bound by the sale of one or both cars at his option.
d. P is bound by the sale of only one car in accordance with his understanding with A.
39. Consider the following statements:
I. An agency may be constituted in the common interest of the principal and the agent.
II. An agency may be constituted in the interest of the third person who has accepted the stipulation in his
favor.
The death of the principal extinguishes the agency, as a note. However, the death of the principal does not
extinguish and agency if the reason why the agency was created is:
a. Reason I only
b. Reason II only
c. Neither Reason I or Reason II
d. Either Reason I or Reason II
40. P, a singer, authorized A, also a singer, to look for a nightclub where P could sing. A presented herself, not P, as
a singer to the X club which engaged her services to sing nightly for two months. Based on the foregoing
information, which of the following statements is correct?
a. The contract is between A and X Club and is valid.
b. P has a right of action against X Club.
c. X Club has a right of action against P.
d. The contract between A and X Club is void because P was not a party thereto.
41. If the agent contracts in the name of the principal and the principal does not ratify the contract, the contract
shall be void if the party with whom the agent contracts is aware of the limits of the agents authority.
A third person cannot set up the fact that the agent exceeded his authority if the principal has ratified or has
signified his willingness to ratify the agent’s acts.
a. Both are false
b. Both statements are true
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c. Second is false, first is true
d. First is false, second is true
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