LAW ON Agency Notes PDF

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CHAPTER 1: NATURE, FORM & KINDSARTICLE 1868By 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- relationship which implies a power in an agent to contract with third...

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LAW ON AGENCY CHAPTER 1: NATURE, FORM & KINDS 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 - relationship which implies a power in an agent to contract with third person on behalf of a principal - Place of business - Instrumentality by which a thing is done - Exclusive right of a person to sell a product of another in a specific territory - Implies the contemporaneous existence of both the principal and agent - There is no agency unless one is acting for and in behalf of another with the principals authorization Characteristics: a. Consensual - perfected by mere consent b. Principal - it can stand by itself w/o the need of another contract c. Nominate - it has its own name d. Unilateral - if gratuitous, it creates obligation for only of the parties e. Bilateral - if for compensation, it gives to reciprocal rights and obligation f. Preparatory - entered into a means to an end; creation of other contracts Essential elements: a. Consent to establish the relationship (express of implied) b. Object - execution of a juridical act in relation to third person c. Agent acts as a representative & not for himself d. Agent acts w/in the scope of his authority - Parties must be competent under the law to acts as principal and agent Nature: agency as 1. Contract a. Consent of contracting parties b. Object - subject matter c. Cause w/c is established 2. Representative relation Purpose: - Extend the personality of the principal through the acts of the agent Parties: 1. Principal - One whom the agent represents and from whim he derives his authority (person represented) - May be either a natural person or a juridical entity

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Agent - One who acts for and represents another - The person acting in a representative capacity - May be performing his tasks as attorney, proxy, delegate, representative

Capacity: a. Any person who is capacitated under the law to act in his own right may be a principal b. Since no personal liability, agent does not have to possess full capacity to act insofar as third persons are concerned c. Persons who are absolutely incapacitated (insane person) cannot be agents d. Agent must be competent to bind himself Acts that may/may not be delegated to agent: 1. General Rule: what a man may do in person, he may do through another 2. Exceptions a. Personal acts i. Right to vote ii. Making of a will iii. Attend board meetings (corporate law) iv. Acts to perform in person b. Criminal acts (void) i. Aliens cannot purchase private land Nature of relations bet. principal and agent 1. Fiduciary - Based on trust, on a degree w/c varies considerably from situation to situation 2. Agent estopped from asserting interest adverse to his principal - Seeks to remove temptation that might arise out of such relation to serve one’s self-interest at the expense of one’s integrity 3. Agent must not act for an adverse party - An agent cannot serve 2 masters, unless both consent, or mere middleman w/ no independent initiative - An agent cannot act as such for both parties to the same transaction 4. Agent must no use to disclose secret information Agency distinguished from similar contracts: 1. Loan 2. Lease of service 3. Independent Contract 4. Partnership 5. Negotiorium Gestio 6. Brokerage 7. Sale

LAW ON AGENCY 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. - No formal requirement Kinds: 1. As to manner of its creation a. Express b. Implied 2. As to its character a. Gratuitous b. Compensated or Onerous 3. As to extent of business covered a. General b. Special 4. As to authority conferred a. Couched in general term b. Couched in specific term 5. As to its nature and effects a. Ostensible or Representative b. Simple or Commission 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 Power of Attorney - “written authorization to an agent to perform specified acts in behalf of his principal w/s acts, when performed, shall have binding effect on the principal” 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 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;

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(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 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. 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 ARTICLE 1875 Agency is presumed to be for a compensation, unless there is proof to the contrary ARTICLE 1876 An agency is either general or special • General - comprises all the business of the principal • Special - one or more specific transactions Agents classified 1. Universal - One authorized to do al acts that the principal may personally do, and w/c he can lawfully delegate to another the power of doing 2. General - One authorized to transact all the business of his principal - To do all act connected to trade, business, employment 3. Special or Particular - One authorized to act in one or more specific transactions - To act upon a particular occasion a. Attorney at law b. Auctioneer c. Broker d. Factor e. Cashier in bank f. Attorney-in-fact ARTICLE 1877 An agency couched in general terms comprises only (1) acts of administration

LAW ON AGENCY (2) even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, (3) Even though the agency should authorize a general and unlimited management. Acts of Administration - Acts w/c do not imply the authority to alienate for exercise of w/c an express power is necessary - Ex : a person employed to sell goods in a retail store can sell without special power of attorney bc selling itself is an act of admin.

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(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration - Borrower - bound to pay the creditor an equal amount of the same kind & quality - Borrow only, not loan - Money only, not other fungible things (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

ARTICLE 1878 Special powers of attorney are necessary in the following cases: (1) To make such payments as are not usually considered as acts of administration; Payment - the delivery of money or the performance in any other manner of an obligation (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; Novation - the extinction of an obligation through the creation of a new one w/c substitutes it by changing the object or principal condition (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 Compromise - a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an en to one already commenced. Arbitration - where the parties submit their controversies to one or more arbitrators for decision - These are acts of ownership Prescription - one acquires ownership and other real rights the lapse of time (4) To waive any obligation gratuitously - Condonation or remission - Agent cannot waive a right belonging to the principal without valuable consideration (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration (or onerous) (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent (acts of administration) - Gifts or donation - Act of liberality - Agent w/o special power from the principal cannot make gifts

(10) To bind the principal in a contract of partnership (11) To obligate the principal as a guarantor or surety Contract of Guaranty - Guarantor binds himself to fulfill the obligation of the principal debtor in case the latter should fail to do so - Unenforceable unless made in writing Suretyship - If the person binds himself solidarity, he is surety and the contract - Power to create a contract of suretyship cannot be inferred; it must be expressed *Cannot be inferred from the isa of vague or general words (12) To create or convey real rights over immovable property belong to his principal w/o special power (strict ownership) (13) To accept or repudiate an inheritance - Strict of Dominion - any person having the free disposal of his property (14) To ratify or recognize obligations contracted before the agency (15) Any other act of strict dominion 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 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

LAW ON 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 Authority of an agent: - The power of the gent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestation of consent to him Authority distinguished form power: 1. As to existence • Authority - source or cause • Power - the effects 2. As between an agent and principal 3. As far as third persons are concerned Kinds/Types of authority: 1. Actual - when it is actually granted; express or implied 2. Express - when it is conferred by words 3. Implied - when it is incidental to the transaction or reasonably necessary to accomplish the purpose of the agency 4. Apparent or Ostensible - conferred by conduct or even by silence • Ostensible Authority - authority by estoppel; implied authority 5. General - refers to all business 6. Special - limited only to or more specific transactions 7. Authority by necessity - demanded by virtue of the existence of an emergency 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 Kinds of principal: 1. Disclosed - if at the time of the transaction contracted by the agent, the other party thereto has notice that the agent is acting for a principal or of the principal’s identity 2. Partially Disclosed - if the other party has noice that the agent is or may be acting for a principal but has not notice of the principal’s identity

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Undisclosed - if the other party has no notice that agent is acting for a principal

CHAPTER 2: OBLIGATIONS OF AGENT 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 Special obligations of agent to principal: 1. To carry out agency in accordance with its terms 2. To answer for damages w/c through his non-performance the principal may suffer 3. To finish the business already begun on the death of the principal, should delay detail any danger 4. To observe the diligence of a goof father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agent until an agent it appointed 5. To advance the necessary funds should there be a stipulation to that effect 6. To act in accordance w/ the instructions of the principal 7. Not to carry out the agency if the execution would manifestly result in loss or damage the principal 8. To answer for damages should he prefer in case of conflict, his own interests to those of the principal 9. Not to loan to himself w/o the consent of the principal when he has been authorized to lend at interest 10. To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency 11. To distinguish goods by countermarks and designate the merchandise respectively belonging to each principal in the case of a commission agent who handles goods of the same kind and marks , w/c belongs to different owners 12. To be responsible in certain areas for the acts of the substitute appointed by hum 13. To pay interest on funds he has applied to his own use 14. To inform the principal, where an authorized sale of credit has been made, of such sale 15. To bear the risk of collection, should he receive also a sale a guarantee commission 16. To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become due 17. To answer for his fraud and negligence ARTICLE 1885

LAW ON AGENCY 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. (n) ARTICLE 1886 Should there be a stipulation that the agent shall advance the necessary funds (contract of agency), he shall be bound to do so except when the principal is insolvent! ! 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 secret - if principal intended them not to be made known to such party Instructions distinguished from authority: • Instructions - private directions w/c the principal may give the agent to follow • authority - the extent or the limitation of the agent’s power to represent the principal ARTICLE 1888 An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal - Reason: duty of the agent is to render service for the benefit of the principal, not to act to his own detriment 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 1890 If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal 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

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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. ARTICLE 1893 In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution Subagent - a person to whom the agent delegates his agent, the performance of an act for the principal w/c the agent has been empowered to perform through his representative Effects of substitution: 1. Prohibited - agent exceeds the limit of his authority; all acts of substitution = void 2. Authorized - unless incompetent/insolvent 3. Not authorized, but not prohibited 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 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. 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

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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

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 - May ratify the sale on credit w/c case it will have all risks and advantages to him

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 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

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 A...