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7/30/2019 Nature, Form and Kinds of Agency
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Agency:A relationship which implies a power in an agent to
contract with a 3rd person on behalf of a principal.
The basis is representation not form of service or
employment.Phrase for or in our behalf does not necessarily
establish an agency. What is decisive is the intention of
the parties.
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Kind of Contract:
It is a preparatory contract. It is a contract entered not for
its own end but to be able to enter into other contracts.
Essential Elements of Agency:
1.) Consent, express or implied;
2.) Objectof the contract is the execution of a juridical act inrelation to 3rd persons;
3.) The agent acts as a representativeand not for himself;
4.) The agent acts within the scope of his authority.
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Characteristics:
1.) Consensual: perfected by mere consent;
2.) Nominate: it has its own name;
3.) Principal: does not depend on another contract for its existence and validity;
4.) Preparatory: entered into as a means to an end;
5.) Unilateral/Bilateral:
a.) Unilateral: if contract is gratuitous, it creates obligations for only one of theparties, i.e. agent.
b.) Bilateral: if for compensation, it gives rise to reciprocal rights and obligations.
6.) Generally Onerous (Art. 1875)
7.) Fiduciary: as it is based on trust and confidence
8.) Representative Relation: not a personal one in relation to third person
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Basis:
Representation-The acts of the agent on behalf of the principal
within the scope of his authority produce the same legal and bindingeffects as if the principal personally did them.
Distinguishing Features:
1.) Representative character; and
2.) Derivative authority.
Purpose:
To extend the personality of the principal through the
facility of the agent (constructive representation)
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Parties:
1.) Principal the party represented
2.) Agent the party who represents the principal
3.) Sub-agent agent of the agent; the contract of agency may prohibitthe agent from appointing a sub-agent
Who can be principal?
The principal may be a natural person or a juridical person. He must be
capacitated.
The rule is if a person is capacitated to act for himself or in his own right,
he can act through an agent.
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Must the agent have capacity?
Insofar as 3rd persons are concerned, it is enough that the principal is
capacitated; but insofar as his obligations to his principal are
concerned, the agent must be able to bind himself.
Acts that cannot be done through an agent:
1.) Personal acts: if personal performance is required by lawor public policy or agreement;
2.) Criminal or illegal acts: attempt to delegate anotherauthority to do an act which, if done by the principal would be
illegal, is void.
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Agency v. Lease of Work or Service
Agency Lease of Work/Service
Basis is representation. Basis is employment
Agent exercises discretionary
powers.
Lessor only performs ministerial
functions.
3 persons are involved:
principal, agent & 3rd person.
Only 2 persons involved: lessor
and lessee
Commercial or business
transactions.
Matters of mere manual or
mechanical execution.
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Agency v. Guardianship
Agency Guardianship
Agent represents a capacitated
person.
Guardian represents an
incapacitated person.
Agent appointed by principal
and can be removed by him.
Agent appointed by principal
and can be removed by him.
Agent subject to directions of
principal.
Guardian not subject to
directions of ward but must actfor his benefit.
Agent can make principal
personally liable.
Guardian has no power to
impose personal liability on his
ward.
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Agency to sell Sale
Agent receives the goods as
the goods of the principal.
Buyer receives the goods as
owner.
Agent delivers proceeds of thesale.
Buyer pays the price.
Agent can return object in case
he is unable to sell to a 3rd
person.
Generally, buyer cannot return
the object sold.
Agent in dealing with the thing
received is bound to act accdg
to the instructions of his
principal
Buyer can deal with the thing
as he pleases, being the
owner.
Agency to Sell v. Sale
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Agent Independent Contractor
Represents the principal. Employed by employer.
Acts under the control and
instructions of the principal
Acts according to his own
method.
Principal liable for torts
committed by agent w/in scope
of authority.
Employer not liable for torts
committed by independent
contractor.
Agent v. Independent Contractor
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Agent Partner
Acts for the principal nor for
himself
Acts for himself, the firm and
co-partners.
Partnership is a branch on the
law on agency
Agency v. Partnership
Agency v. Negotiorium Gestio
There is meeting of the minds No meeting of the minds
Agent is under the control of
the principal
Acts according to his own
sound discretion
Created by agreement Created by law
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Arises from contract May be generated by contract
or not, or by law
Agent holds no title over theproperty
Trustee may hold title over theproperty
May be revoked anytime Terminated upon the
accomplishment of the purpose
to which it was formed orestablished
Agency v. Trust
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Art. 1869. Agency must be express, or implied fromthe acts of the principal, from his silence or lack ofaction, or his failure to repudiate the agency,knowing that another person is acting on his behalfwithout authority.
Agency may be oral, unless the law requires aspecific form.
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Classifications of Agency:as to
a) Express: actually authorized, either (i.) orally or in( ii.)writing.
b.) Implied: implied from (i.) acts of principal,(ii.) from his
silence or lack of action or (iii.) his failure to repudiatethe agency knowing that another person is acting on his
behalf w/o authority. The enumeration is not exclusive,
there may be other situation of implied agency
1.) Manner of Creation:
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2.) Character or Consideration:
a.) Gratuitous: agent receives no compensation for hisservices.
b.) Onerous: agent does receive compensation.
3.) Extent of business covered:
a.) General: comprises all the business of the principal.
b.) Special: comprises one or more specific transactions.
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a.) Couched in general terms: deemed to comprise
only acts of administration.
b.) Couched in specific terms: authorizes only theperformance of a specific act/s.
4.) Authority conferred or Management
5.) Nature and effects:
a.) Representative: agent acts in name and representation
of principal.
b.) Simple/Commission: agent acts in his own name butfor the account of the principal.
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c. ) Conventional: created by agreement of the parties
d.) Legal: formed by operation of law (Art. 1803, 1884par 2,1885, 1929 and 1932)
6.) As to manner of Appointment
a.) Direct:the principal appointed the agentdirectly
b.) Indirect:appointment is through anotherperson (Art. 381)
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Can agency be presumed?
Generally NO. Because the relationship between the principal and
agent must exist as a fact. The only exceptions to this rule are
when agency arises by operation of law or agency is presumed to
prevent unjust enrichment.
Form:
Generally NO formal requirements. Agents authority may be
oral or written; it may be in public or private writings. The only
exception is when the law requires a specific form (e.g. sale of
real property or any interest therein by an agent.)
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Art. 1870. Acceptance by the agent may also beexpress, or implied from his acts which carry out theagency, or from his silence or inaction according tothe circumstances.
Acceptance:
A person has a right to represent or reject his appointment as anagent. It is only in legal agency where he cannot refuse the
creation of the agency because the law dictates.
Form of Acceptance by Agent:
Acceptance may be express or implied; express when it is oral orwritten; implied when it can be inferred from the acts of the agentwhich carry out the agency, or from his silence or inaction according
to the circumstances.
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Art. 1871. Between persons who are present, theacceptance of the agency may also be implied if theprincipal delivers his power of attorney to the agent
and the latter receives it without any objection.
Between 2 persons who are present, when itacceptance deemed implied?
When the agent receives a power of attorney from the principal
himself personally without objection.
Is this presumption conclusive?
NO, it can be rebutted by contrary proof.
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Power of attorney: An instrument in writing by which one
person, as principal, appoints another as his agent and confers
upon him the authority to perform certain specified acts or kinds of
acts on behalf of the principal. Its primary purpose is to evidence
the authority of the agent to 3rd parties w/ whom the agent deals.
Construction:
A power of attorney is strictly construed and strictly pursued. The
instrument will be held to grant only those powers which arespecified, and the agent may neither go beyond nor deviate from the
power of atty. The only exception is when strict construction will
destroy the very purpose of the power.
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Except as may be required by statute, a power of attorney is valid
although no notary public intervened in its execution (Lim Pin v. Liao
Tan, 115 SCRA 296)
Art. 1872. Between persons who are absent, theacceptance of the agency cannot be implied from thesilence of the agent, except:
1.) When the principal transmits his power of attorney tothe agent, who receives it without any objection;
2.) When the principal entrusts to him by letter or telegrama power of attorney with respect to the business in whichhe is habitually engaged as an agent, and he did not replyto the letter or telegram.
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Distinction between Article 1871 and 1872
Basis 1871 1872
Condition of
creation
Both the principal and agent
are present
Both the principal and
the agent are absent
Manner of
delivery
The Power of attorney is
personally delivered by the
principal to the agent
The Power of
Attorney is not
personally delivered.
There is transmission
by messenger, letter
or telephone
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Art. 1873. If a person specially informs another orstates by public advertisement that he has given apower of attorney to a third person, the latter therebybecomes a duly authorized agent, in the former casewith respect to the person who received the specialinformation, and in the latter case with regard to any
person.
The power shall continue to be in full force until thenotice is rescinded in the same manner in which it wasgiven.
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2 Ways of Giving Notice of Agency
1.) By special information; or
2.) By public advertisement.
Effects:
1.) Special information: the person appointed as agent is
considered such with respect to the person to whom it was
given.
2.) Public advertisement: Agent is considered such with
regard to any person.
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Revocation An agency is revoked in the same manner as itwas given.
General rule: Special information needs special informationof revocation.
Except: if you can prove that the 3rd person read the noticein the newspaper.
There is really no agency at all, but the alleged agentseemed to have apparent or ostensible, although no realauthority to represent another.
Agency by Estoppel:
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One professing to act as agent for another may be estopped
to deny his agency both as against his asserted principal
and the 3rd persons interested in the transaction in which he
is engaged.
2.) Estoppel of Principal
a.) As to Agent One who knows that another is acting as his
agent and fails to repudiate his acts, or accept the benefits
of them, will be estopped to deny the agency as against
such other.
1.) Estoppel of Agent
b.) As to sub-agentTo estop the principal from denying hisliability to a 3rd person, he must have known or be charged
with knowledge of the fact of the transmission and the
terms of the agreement between the agent and sub-agent.
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c.) As to 3rdpersons One who knows that another is actingas his agent or permitted another to appear as his agent,
to the injury of 3rd persons who have dealt with theapparent agent as such in good faith and in the exercise
of reasonable prudence, is estopped to deny the agency.
A 3rd person, having dealt with one as an agent may be estopped
to deny the agency as against the principal, agent or 3rd personsin interest.
3.) Estoppel of 3rdPersons
A 3rd person, having dealt with one as an agent may beestopped to deny the agency as against the principal,
agent or 3rd persons in interest.
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4.) Estoppel of the governmentThe government isneither estopped by the mistake or error on the part of its
agents. But it may be estopped through affirmative acts ofits officers acting within the scope of their authority.
Distinction between Implied agency and Agency by
estoppelImplied Agency Agency by Estoppel
There is actual agency.
Hence, he has rights and
duties as agent
There is no actual agency. Hence, he
has no rights and duties as an agent
The principal is liable alone,
not the agent
The one who caused (either the
principal or agent) is the one
responsible. In both cases, the third
person must have acted in good faith.
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Art. 1874. When a sale of a piece of land or any interesttherein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void.
Sale, How effected:
1. Through the owner himself: if not made in writing thecontract of sale is unenforceable not void. It is however
subject to ratification.
2. Through an agent of the owner:if not in writing thecontract of sale is not unenforceable but void. It is not
therefore subject to ratification.The authority of theagent to sell must be in writing, otherwise the sale is
void.
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A letter is sufficient authorization to an agent [Jimenezv. Rabot].
Is Repurchase Included Within the Contemplation of Law?
The law speaks of Sale. Repurchase, however, through an agent,
partakes of the nature of sale, which when effected through an
agent, the agency should be in writing to be valid (Fernandez v.
Rabot, 4 CAR 221)
Art. 1875. Agency is presumed to be for a compensation, unlessthere is proof to the contrary.
The presumption is rebuttable.
Gratuitous Agency: when the service rendered is undertaken to begratuitous, the law does not raise an implied promise to pay therefor,
though the service be valuable (Robinson v. Lincoln Trust, 95 NJL 445)
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When is an Agent Entitled to Compensation?
In the absence of a specific agreement, an agent is entitled to
compensation only after he has completely or substantiallycompleted his obligation as an agent.
Broker: One who in behalf of others, and for compensation or fee,negotiate contracts relative to property. He is the negotiator between
the parties, never acting in his own name, but in the name of those who
employ him. He is strictly a middleman and for some purposes, the
agent of both parties.
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When is a broker entitled to compensation?
A broker is entitled to commission whenever he rings to his principala party who is able and willing to take the property, and enter into a
valid contract upon the terms named by the principal, although the
particulars may be arranged and the matter negotiated and
completed between the principal and the purchaser directly.
A broker is never entitled to commission for unsuccessful efforts. It
is only after the transaction has been concluded that the broker
acquires vested interest in or right to his commission.
Furthermore, the transaction need not only be perfected but also
consummated to justify brokers oragents commission.
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Measure of Compensation
Compensation depends upon the specific stipulation of the parties.
In the absence of such, compensation shall be based on quantum
meruit basis.
Efficient Procuring Cause
The broker must be the efficient agent. The means employed by him
must result in the sale. He must find the purchaser and the sale
must proceed from his efforts acting as a broker.
Does the law allow double agency?
Double Agency: when the agent is acting simultaneously forboth the seller and the buyer.
Such agency is disapproved by law for being against public policy
and sound morality.
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The exception is where the agent acted with full knowledge andfree consent of the principals.
In case the agent assumes a double agency, what ishis right to compensation?
1.) If with knowledge of both principals recovery can be had fromboth.
2.) If without knowledge of both agent can recover from neither.
3.) If with knowledge of only one as to the principal who knew ofthat fact and as to the agent, they are in pari delicto and the courts
shall leave them as they were, the contract between them being
void as against public policy and good morals.
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Art. 1876. An agency is either general or special. Theformer comprises all the business of the principal.
The latter, one or more specific transactions.
Classification of Agents:
1.) Universal agent: One employed to do all acts that the principalmay personally do, and which the principal can lawfully delegate to
another the power of doing.
2.) General agent: One employed to transact all the business of
his principal, or all business of a particular kind or in a particularplace, or in other words, to do all acts connected with a
particular trade, business, or employment.
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3.) Special/Particular agent: One authorized to act in one or morespecific transactions, or to do one or more specific acts, or to act upon
a particular occasion. e.g.:
a.) Attorney at law: One whose business is to representclients in legal proceedings.
b.) Auctioneer: One whose business is to sell property forothers to the highest bidder at a public sale.
c.) Broker: One whose business is to act as intermediarybetween 2 other parties.
d.) Factor: One whose business is to receive and sell goods
for a commission, being entrusted with the possession ofthe goods involved in the transaction.
f. Attorney-in-fact: One who is given authority by his principal
to do a particular act not of a legal character.
General Agent v. Special Agent
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General Agent v. Special Agent
As to General agent Special agent
Scope of
authority
All acts connected w/
the business in which
he is engaged.
Only one or more specific
acts in pursuance of particular
instructions or w/ restrictionsnecessarily implied from the
act to be done.
Nature of
serviceauthorized
Series a transactions
involving a continuity ofservice.
Single transaction or a series
of transactions not involvingcontinuity of service.
Extent to whichagent may bind
principal
By an act within the
scope of his authority
although it may be
contrary to his specialinstructions
Cannot in a manner beyond
or outside the specific acts
w/c he is authorized to
perform
Termination ofauthority
Apparent authority does
not terminate by mere
revocation of authority
w/o notice to 3rd
parties.
Termination effective as to 3rd
party unless agency was for
purpose of contracting w/ that
3rd
party.
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Construction of Merely Strictly construed.
instructions ofprincipal
advisory. Limits the authority of agent.
Art. 1877. An agency couched in general terms comprises onlyacts of administration, even if the principal should state that hewithholds no power or that the agent may execute such acts as
he may consider appropriate, or even though the agency shouldauthorize a general or unlimited management.
Agency couched in general terms covers only acts of
administration.
A general power permits an agent to do all acts for which the law
does not require a special power (Dominion Insurance Corp v.
CA, 376 SCRA 244).
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Examples of acts of mere administration:
1.) To sue for collection of debts;
2.) To employ workers or servants and employees needed for theconduct of business;
3.) To engage counsel to preserve the ownership and
possession of the principals property;
4.) To lease real property to another person for 1 year or less,
provided the lease is not registered;
5.) To make customary gifts for charity or to employees in the
business managed by the agent
6.) To borrow money if it be urgent and indispensable for the
preservation of the things under administration.
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Exception: power of managing partner, he may perform actsaffecting the ownership if the same are necessary to promote or
accomplish a declared object of the partnership.
How are contracts of agency construed?
Contracts of agency as well as general powers of attorney must be
interpreted in accordance with the language used by the parties.
The real intention of the parties is primarily determined from thelanguage used and gathered from the whole instrument.
In case of doubt, resort must be had to the situation, surroundings
and relations of the parties. The intention of the parties must be
sustained rather than defeated. So if the contract be open to 2
constructions, one of which would uphold the intention while the
other would overthrow it, the former is to be chosen.
Art 1878 Special powers of attorney are necessary in
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Art. 1878. Special powers of attorney are necessary inthe following cases:
1.) To make such payments as are not usually considered as
acts of administration;
2.) To effect novations which put an end to obligationsalready in existence at the time the agency wasconstituted;
3.) To compromise, to submit questions to arbitration, torenounce the right to appeal from a judgment, to waiveobjections to the venue of an action or to abandon aprescription already acquired;
4.) To waive any obligation gratuitously;
5.) To enter into any contract by which the ownership of animmovable is transmitted or acquired either gratuitously or fora valuable consideration;
6 ) T k ift t t f h it
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6.) To make gifts, except customary ones for charity orthose made to employees in the business managed by theagent;
7.) To loan or borrow money, unless the latter act be urgentand indispensable for the preservation of the things whichare under administration;
8.) To lease any real property to another person for more thanone year;
9.) To bind the principal to render some service withoutcompensation;
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 ) T t di t i h it
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13.) To accept or repudiate an inheritance;
14.) To ratify or recognize obligations contracted beforethe agency;
15.) Any other act of strict dominion.
Special Power of Attorney
It is an authority granted by the principal to the agent wherethe act for which it is drawn is expressly mentioned.
General Power of Attorney
It is an authority granted to the agent to do all acts of aparticular character. Special power can be included in a
general power, either by giving authority for all acts of a
particular character or by specifying therein the act or
transaction for which a special power is needed.
S f G l A th it t P h
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Scope of General Authority to Purchase
Where an agents power to purchase is general and unrestricted, he has
implied authority to do whatever is usual and necessary in the exercise of
such power. He may:
1.) Determine the usual and necessary details of
the contract,
2.) agree upon the price,
3.) modify or rescind the contract of purchase,
4.) accept delivery for his principal,
5.) give directions for the delivery of the propertypurchased, and
6.) may borrow money to pay for the care and
preservation of the property purchased.
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But he has nospecial power to
1.) Settle a contest between the principal and a 3rd person
regarding the ownership of goods purchased, or
2.) Agree to an account stated, or
3.) Do anything not usual or necessary to the exercise of
such authority.
Scope of Special Authority to PurchaseWhere the agency is a special one, or is restricted to purchases
upon certain terms and conditions, the agent has noauthority to
1.) Purchase upon different terms and conditions fromthose authorized, or
2.) Modify or rescind a contract of purchase made by the
principal.
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Art. 1879. A special power to sell excludes the power tomortgage; and a special power to mortgage does not include thepower to sell.
The power to sell is different from the power to mortgage in same way
that the latter is different from the power to contract loans.
The following are included in a Power to Sell:
The power to:
1.) Find a purchaser or to sell directly;
2.) Deliver the property;
3.) Make the usual representation and warranty;
4.) Execute the necessary transfer documents;
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5.) Fix the terms of the sale unless there be set
conditions stipulated by the principal;
6.) Sell only for cash;
7.) Receive the price unless he was
authorized only to solicit orders.
The following are notincluded in a Power to Mortgage
The power to:
1.) Sell;
2.) Execute a 2nd mortgage;
3.) Mortgage for the agents personal benefit or for the
benefit of any 3rd person, unless the contrary has been
clearly indicated.
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Does the principal have the power to revoke a contractgiving an agent exclusive authority to sell?
YES. But he may not have the right to use such power if he
has agreed not to exercise such power during a certain
period.
In case he fails to comply with this obligation-not-to-do, he
will be liable for damages.
Art. 1880. A special power to compromise does notauthorize submission to arbitration.
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Rationale:
A principal may authorize his agent to compromise because of
absolute confidence in the latters judgment and discretion toprotect the formers rights and obtain for him the best bargain
in the transaction. If the transaction would be left in the hands
of an arbitrator, said arbitrator may not enjoy the trust of the
principal.
What happens if the agent is specifically authorized tosubmit to arbitration?
Then the arbitration award binds the principal, provided, of course,
that the agent acted within the scope of his authority.
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Art. 1881. The agent must act within the scope of hisauthority. He may do such acts as may be conducive
to the accomplishment of the purpose of the agency.
Authority: The power of the agent to affect the legal relations of theprincipal by acts done in accordance with the principals manifestation
of consent to him.
It is the power of the agent to act within the scope of his assignment
on behalf of his principal with binding effect on the latter.
The authority of the agent is the very essence sine qua non ofthe principal and agent relationship. This authority, unless it is
otherwise agreed, includes only the authority to act for the benefit of
the principal, and the source of the authority is the principal and
never the agent.
Ki d f A h i
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Kinds of Authority:
1.) Actual: when it is actually granted, and it may be express orimplied. It results from what the principal indicates to the agent.
2.) Express: when it is directly conferred by words.
3.) Implied: when it is incidental to the transaction or
reasonably necessary to accomplish the purpose of theagency, and therefore, the principal is deemed to have actually
intended the agent to possess.
4.) Apparent or Ostensible: when it is conferred by words,conduct or even by the silence of the principal which causes a 3rd
person reasonably to believe that a particular person, who may
or may not be the principals agent, has actual authority to act for
the principal. Ostensible authority is another name forauthorityby estoppel.
5 ) G l h it f t ll th b i f th
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5.) General: when it refers to all the business of theprincipal.
6.) Special: when it is limited only to one or more specific
transactions.
7.) By necessity or by operation of law: when it is demandedby virtue of the existence of an emergency; it terminates when
the emergency has passed.
Requisites of Agency by necessity:
a.) An emergency actually exist
b.) Agent cannot timely communicate with the principal
c.) Exercise of additional authority is forprincipals own
protection
d.) Adoption of reasonable means to cope with the
situation
e.) Stoppage of authority from the moment the
emergency ceases
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Requisites for Principal to be Bound by Act ofAgent:
1.) The agent must act in behalf of the principal;
2.) The agent must act within the scope of his
authority.
When is a principal notbound by the act of his agent?
When the agent acts without or beyond the scope of his authority; or
when the agent acts within the scope of his authority but in his own
name except when the transaction involves things belonging to the
principal.
Technical difference between Authority andPower
Authority is the cause, while power is the effect. The former springs
from the principal and is delegated to the agent and by reason thereof,
th t i d t f th t th i d t b
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the agent is empowered to perform the act authorized to be
done.
Authority? Whose behalf? Status of
Transaction
With authority Principals Valid
With authority Own Depends. [1883 ]
Without Principals Unenforceable
Without Own Valid
Who to sue?In case the agent acts in the name of the principal and within his
scope of authority, you must name the principalas the defendant.
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Note: The authority to look for buyers does not carry with it theauthority to sell.
Special prohibited acts in Agency
1.) The agent is prohibited from buying, even at a public or judicialauction, property entrusted to him by the principal for sale or
administration, without the consent of the principal.
2.) The agent cannot be a lessee of said property
3.) By analogy, he cannot also be a mortgagee of the
principals property.
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Art. 1882. The limits of the agents authority shall not beconsidered exceeded should it have been performed in amanner more advantageous to the principal than that specifiedby him.
What happens if the agent exceeds his authority but heperforms the agency in a manner more advantageous to theprincipal?
It will be as if he did not exceed the limits of his authority since he
must do such acts as may be conducive to the accomplishment of
the purpose of the agency.
Article 1882 presupposes sufficient authority to fulfilthe agency.
Test: Would the principal enter into this transaction?
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Example: the agent is authorized to sell cell phones by
instalment, but he was able to sell it in cash.
Art. 1883. If an agent acts in his own name, the principalhas no right of action against the persons with whomthe agent contracted; neither have such persons against
the principal.
In such case the agent is the one directly bound in favor of theperson with whom he has contracted, as if the transaction were
his own, except when the contract involves things belonging tothe principal.
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The provisions of this article shall be understood to bewithout prejudice to the actions between the principaland agent.
Kinds of Principals:
1.) Disclosed: if at the time of the transaction contracted by the
agent, the other party thereto has known that the agent is acting fora principal and has known the principals identity.
2.) Partially disclosed: if the other party knows or has reason toknow that the agent is or may be acting for a principal but is
unaware of the principals identity. The partially disclosed principalmay enforce against the 3rd person the contract of the agent like any
disclosed principal. Similarly, the 3rd person has a right of action
against the principal.
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3.) Undisclosed: if the party has no notice of the fact that theagent is acting as such for a principal.
General Rule in 1883: If the agent is authorized to act on behalf ofthe principal but instead acts in his own name, the agent is the one
directly liable to the person with whom he had contracted as if the
transaction were his own.
Reason why the agent is personally liable:
1.) He did not act within the scope of his authority
2.) He act in his own name not in the name or representation
of the principal
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Exception: If the contract involves something belonging to theprincipal. This exception applies only when the agent has in fact
been authorized by the principal.
Remedy of the Principal if this situation arises:He can demand from the agent damages for his failure to
comply with the agency.
May the agent who is directly bound sue on hisown name?
When the agent transact business in his own name for the benefit
of an undisclosed principal, he may sue or be sued, in hisindividual capacity there being no action for or against the
undisclosed principal.
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When the principal is disclosed, action must be filedby or against him
An action on behalf and for the benefit of the principal cannot be
brought in the name of the agent or attorney-in-fact. It must
brought in the name of the real party in interest.
Remedy of the 3rd person with whom the agentcontracted in case the obligation is not complied with:
If the case falls under the general rule, he can sue the agent.
But when the contract involves things belonging to theprincipal, he can sue the principal. But if it cannot be
determined w/o litigation who is liable, he can sue both.
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Remedy of 3rd person in case authority of the agent isdoubtful
The agent should be included in the case as party defendant.
This is a suit against alternative defendants.
Effects when an agent becomes the assignee
The agent may in his own behalf bring an action founded
on a contract made for his principal, as an assignee of
such contract.
Prepared by:
Lizglen L. GliponeoG