AGENCY CHAPTER 1: NATURE, FORM AND KINDS OF AGENCY
Contract of Agency is a contract whereby a person binds himself to render some service or to do something in representation or on behalf of another , with the consent or authority of the latter. ( Art. 1868)
Characteristics: 1. Consensual 2. Nominate 3. Preparatory 4. Principal 5. Unilateral; Bilateral (if agency is for compensation) Nature: Since it is a contract there must be a meeting of the minds as to consent, object, and cause. Exception to contractual nature: by operation of law a. When the agency is created by operation Ex: Agency by Estoppel
Basis: • Representation: The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if they were personally done by the principal. • Hence, the distinguishing features of agency are its & its derivative authority. representative character & Purpose: Extend the personality of the principal through the facility of the agent Capacity of the Parties: 1.
Principal a. He may be a natural or a juridical person b. He must be capacitated. capacitated. The rule is if a person is capacitated to act for himself or his own right, he can act through an agent. i. The agent is not liable where he was ignorant of the principal’s incapacity
2.
Agent a. Insofar as the third persons are concerned, it is enough that the principal is capacitated. b. Insofar as his obligations to his principal are concerned, the agent must be able to bind himself. c. But as an agent, some mental capacity is necessary, so, those who are absolutely incapacitated ( ex. Insane persons ) cannot be agents.
Essential Elements: 1. Consent of the parties to establish the relationship; 2. Object of the contract is the execution of a juridical act in relation to third persons; 3. Agent acts as a representative and not for himself; and 4. Agent acts within the scope of his authority. Acts That Cannot Be Done By Agent: 1. Personal Acts – ex. Making of a will 2. Criminal or Illegal Acts Nature of Relationship between Principal and Agent: Fiduciary - based on trust & confidence 1. Agent is estopped from asserting interest adverse to his principal 2. Agent must not act as an adverse party 3. Agent must not act for an adverse party 4. Agent must not use or disclose secret information 5. Agent must give notice of material facts Knowledge of the agent is imputed to the • principal even though the agent never communicated Exceptions: a. Where the interests of the agent are adverse to those of the principal; b. Where the person claiming the benefit of the rule colludes with the agent to defraud the principal.
Distinction between Agency & Lease of Service Agency Representation Agent exercises discretionary powers
3 persons are involved: principal, agent and the 3rd person with whom the agent contracts Relates to commercial or business transactions
Lease of Service Employment Lessor ordinarily performs only ministerial Functions 2 persons are involved: lessor and lessee
Relates more to the matters of mere manual or mechanical Execution
Distinction between Agency & Guardianship Agency Agent represents a capacitated person Agent is appointed by the principal and can be removed by the latter. Agent is subject to the directions of the principal.
Agent can make the principal personally liable.
Guardianship A guardian represents an incapacitated person. Guardian is appointed by the court and stands in loco parentis . Guardian is not subject to the directions of the ward but must act for the benefit of the latter Guardian has no power to impose personal liability on the ward.
Distinction between Agency & Lease of Property Agency Agent is controlled by the principal. Agency may involve things other than property. Agent can bind the principal.
Lease of property Lessee is not controlled by the lessor. Lease of property involves property.
Lessee cannot bind the lessor.
Distinction between Agency to Sell & Sale Agency to Sell Agent receives the goods as the principal’s goods Agent delivers the proceeds of the sale Agent can return the object in case he is unable to sell the same to a third person Agent in dealing with the thing received is bound to act according to the instructions of his Principal
Sale Buyer receives the goods as owner Buyer pays the price
Buyer, as a general rule, cannot return the object Sold Buyer can deal with the thing as he pleases, being the owner
Distinction between Agent & Contractor Agent Represents his principal Acts under the principal’s control and instruction Principal is liable for torts committed by the agent within the scope of his Authority
Independent Contractor Employed by the Employer Acts according to his own Method Employer not liable for torts committed by the independent contractor.
Distinction between Agency and Partnership Agency An agent must submit to the principal’s right to Control
The agent assumes no personal liability where he acts within the scope of his authority The agent takes his agreed share of profits not as owner but as an agreed measure of compensation for his Services
Partnership A co-partner is not subject to co- partner’s right to control, unless there is an agreement to that effect The partner binds not only the firm members but himself as well
The profits belong to all the partners as common proprietors in agreed Proportions
Art. 1869. Agency may be express, or implied from 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)
Classifications of Agency 1. As to manner of creation a. Express – agent has been actually authorized by the principal, either orally or in writing b. Implied – agency is 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, or from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances.
2.
3.
4.
As to character a. Gratuitous – agent receives no compensation for his services b. Onerous – agent receives compensation for his services As to extent of business of the principal a. General – agency comprises all the business of the principal b. Special – agency comprises one or more specific transactions As to authority conferred a. Couched in general terms – agency is created in general terms and is deemed to comprise only acts in the name and representation of the principal. b. Simple or Commission – agent acts in his own name but for the account of the principal.
Forms of Agency: General Rule: Appointment of an agent may be oral or written; no formal requirements Exception: When the law requires a specific form (ex. agent’s sale of real property or any interest therein)
Right of agent to compensation in case of double agency: 1. With knowledge of both principals - recovery can be had from both principals 2. Without the knowledge of both principals - the agent can recover from neither 3. With knowledge of one principal - as to the principal who knew of that 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 Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. (n) Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the th e agent and the latter receives it without any objection. (n) Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except:
1.
Art. 1875. Agency is presumed to be for a compensation,
unless there is proof to the contrary. (n) When Broker Entitled to Compensation: Whenever he brings to his principal a 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. However, a broker is never entitled to commission
•
for unsuccessful efforts. Manotoc Brothers, Inc. v. CA , 221 SCRA 224 [1993] The broker should be paid his commission where he is the efficient procuring cause in bringing the sale. Efficient procuring cause: when there is a close proximate and causal connection between the efforts and labor of the agent and the principal’s sale of property.
2.
When the principal transmits his power of attorney to the agent, who receives it without any objection; 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. (n)
Forms of Acceptance by Agent: 1. Express - when it is oral or written 2. Implied -when it can be inferred from the acts of the agent which carry out the agency, or from his silence of inaction according to the circumstances a. Between persons who are present – implied acceptance if the principal delivers his power of attorney to the agent and the latter receives it without any objection b. Between persons who are absent – acceptance not deemed implied from the silence of the agent.
Law on Double Agency: Disapproved by law for being against public policy • and sound morality EXCEPT where the agent acted with full knowledge and consent of the principals
•
ut, the prima facie presumption that the
is for a compensation may be
Exceptions: i. When the principal transmits his power of attorney to the agent who receives it without any objection ii. 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 What is meant by “present”? Generally, “face to face”, but includes people conversing directly through technology ( ex. over the telephone ).
Power of Attorney: 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; primary purpose is to evidence agent’s authority to third parties within whom the agent deals Construction of Power of Attorney: General Rule: Strictly construed and strictly pursued; held to grant only those specified powers Exception: when strict construction will destroy the very purpose of the power. Art. 1873. If a person specially informs another or states 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. (n)
Way of Giving Notice of Agency & Its Effect: 1. By special information - the person appointed as agent is considered such with respect to the person to whom it was given. 2. By public advertisement - the agent is considered such with regard to any p erson
Distinctions between Agency by Estoppel and Implied Agency Agency by Estoppel
Existence of actual agency
Reliance by 3r persons
Nature of Authority
No agency at all Can be invoked rd only by a 3 person who in good faith relied on the conduct of the principal in holding the agent out as being authorized An agent by estoppel has none of the rights of an agent, except where the principal’s conduct are such that the agent reasonably believed that the principal intended him to act as an agent
Implied Agency
There is an actual agency
Such reliance in not needed, since
the agent is a real agent
An agent by implied appointment has all the rights and liabilities of an agent, i.e. has actual authority to act on behalf of the principal
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (n) Art. 1876. An agency is either general or special.
The former comprises all the business of the principal. The latter, one or more specific transactions. (1712) Art. 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. (n)
How do you revoke an agency? In the same manner as it was constituted. However, constitution by Special Information may be revoked by notice in a daily newspaper, provided it can be proven
Will an authority embodied in a letter be sufficient? Yes. (Jimenez v. Rabot, 38 Phil 387 [1918])
that 3 rd persons in question read the revocation.
Attorney-In-Fact: • One who is given authority by his principal to do a particular act not of a legal character • The term is, in loose language, used to include agents of all kinds, but in its strict sense, it means an agent having a special authority created by a deed.
What is an agency by estoppel? There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another.
Distinctions between a General Agent and a Special Agent
Scope of Authority
Nature of Service Extent to Which Agent May Bind the Principal
Termination of Authority
Construction of Principal’s Instructions
General Agent All acts connected with the business or employment in which he is engaged
Involves service. May bind his principal by an act within the scope of his authority although it may be contrary to the latter’s special instruction.
Special Agent
a
Specific acts in pursuance of particular instructions or with restrictions necessarily implied from the act to be done No continuity of services Can not bind his principal in a manner beyond or outside the specific acts which he is authorized to perform
Apparent authority does not terminate by the mere revocation of his authority without notice to the third Party
Duty imposed upon the third party to inquire makes termination of the relationship as between the principal and agent effective as to such third party unless the agency has been entrusted for the purpose of contracting with such third party
Merely advisory in nature
Strictly construed as they limit the agent’s authority
Agency Couched in General Terms: Covers only MERE ACTS OF ADMINISTRATION even if: a. The principal should state that he withholds no power b. The agent may execute such acts as he may consider appropriate c. The agency should authorize a general and unlimited management
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 the language used and gathered from the whole instrument. In case of doubt, resort must be had to the • situation, surroundings ad relations of the parties. The intention of the parties must be sustained rather than defeated. So if the contract be open to 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
the 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 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. (n)
Art. 1879. A special spec ial power to sell excludes ex cludes the power the power to
mortgage; and a special power to mortgage does not include the power to sell. (n) Art. 1880. A special power to compromise does not authorize submission to arbitration. (1713a) Special 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. • The special power of attorney can be included in the general power when it specifies therein the act or transaction for which the special power is required. Powers Not Included in the Power to Mortgage: 1. To sell 2. To execute a second mortgage 3. To mortgage for the agent’s or any 3 rd persons’ benefit, UNLESS clearly indicated Powers Not Included in the Power to Compromise Submission to Arbitration Rationale: A principal may authorize his agent to • compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s 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.
Art. 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) Art. 1882. The limits of the agent's authority shall not shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715) Art. 1883 . If an agent acts in his own name, the principal 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. (1717)
Requisites for Principal to be Bound by Act of Agent: 1. The agent must act in behalf of the principal 2. The agent must act within the scope of his authority When a principal NOT BOUND by act of agent: 1. The latter acts without or beyond the scope of his authority in the former’s name Exceptions: a.
2.
Where the acts of the principal have contributed to deceive a 3 rd person in good faith; b. Where the limitations upon the power created by the principal could not have been known by the 3 rd person; c. Where the principal has placed in the hands of the agent instruments signed by him in blank; d. Where the principal has ratified the acts of the agent The latter acts within the scope of his authority but in his own name, EXCEPT when the transaction involves things belonging to the principal
Jesus M. Gozun v. Jose Teofilo T. Mercado a.k.a. ‘Don
Pepito Mercado,’ G.R. No. 167812 (19 December 2006) Facts: In the 1995 elections, Don Pepito vied for the gubernatorial post in Pampanga. The latter’s wife transacted with Gozun, the owner of JMG Publishing House, for the printing of campaign paraphernalia. Don Pepito’s wife had told Gozun that the former has already given his approval and that the latter could already start printing. Gozun thereafter availed of the services of two other publishing houses to be able to meet the deadline. The printed material s were then delivered to Don Pepito’s headquarters. Meanwhile, Don Pepito’s sister -in-law, Lilian Soriano, obtained from Gozun a “cash advance” allegedly for the allowances of poll watchers. Lilian acknowledged on petitioner’s 1995 Diary receipt of the amo unt without thereby indicating that she was obataining such amount on behalf of Don Pepito. Gozun sent a Statement of Account for the printing, including the amount due the other publishing houses plus the amount of the loan giv en to Lilia. Don Pepito’s wife made a partial payment to Gozun. Despite repeated demands, respondent failed to settle the balance. Hence, a collection case was instituted by Gozun.
Issue: Whether or not Don Pepito should be held liable for the amount? Held: The loan obtained by Lilia cannot be collected from Don Pepito, but the cost of campaign materials is properly collectible. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of
the latter. Contracts entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers are classified as unauthorized contracts and are declared unenforceable, unless ratified. Generally, the agency may be oral, unless the law requires a specific form. A special power of attorney is necessary for an agent to, as in this case, borrow money, unless it is urgent and indispensable for the preservation of the things which are under administration. Since nothing in this case involves the preservation of things under administration, a determination of whether Soriano had the special authority to borrow money on behalf of respondent is in order. In the case at bar, there was not enough evidence establishing that the loan was made on behalf of Don Pepito. Gozun’s testimony, during trial, failed to categorically state whether the loan was on behalf of the respondent or his wife. The receipt signed by Lilian was also in her name alone , without indicating that she was acting on behalf of Don Pepito; she thus bound herself in her personal capacity and not as an agent of the respondent or anyone for that matter. As to the issue on whether or not Gozun can collect the cost of the printing due to the other publishing houses, the Court held that Gozun is the real party in interest insofar as the recovery of the cost of campaign materials is concerned. The Court was not persuaded by Don Pepito’s theory that th e campaign materials delivered to him were donations from his friends and supporters; if so, such fact should have been printed on the face of the materials as required by the Comelec rules. NOTE: The agent is not deemed to have exceeded the limits of his authority should he perform the agency in a manner more advantageous to the principal than that indicated by him, since he is authorized to do such acts as may be conducive to the accomplishment of the purpose of the agency.
CHAPTER 2: OBLIGATIONS OF THE AGENT Art. 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. (1718) Art. 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. (n) Art. 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. (n) Art. 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. (1719) Art. 1888. An agent shall not carry out an agency if its
execution would manifestly result in loss or damage to the principal. (n) Art. 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. (n) Art. 1890. If the agent has been empowered 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. (n) Art. 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. (1720a) Art. 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 and on those which he still owes after the extinguishment of the agency. (1724a) Art. 1897. The agent who acts as such is not personally not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. (1725)
Obligations of the Agent to the Principal 1. General: a. Act with utmost good faith & loyalty for the furtherance of principal’s interests b. Obey principal’s instructions c. Exercise reasonable care 2.
Specific: a. Carry out the agency b. Answer for damages which through his nonperformance the principal may suffer c. Finish the business already begun on the death of the principal should delay entail any danger ( exception to the rule that death extinguishes agency) d. Observe the diligence of a good father in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed. e. Advance necessary funds if there be a stipulation to do so ( except when the principal is insolvent) f. Act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do Exceptions (to the rule that the agent must not depart from the instructions of principal) : 1. There’s a sudden emergency 2. If the instructions are ambiguous 3. If the departure is so insubstantial that it does not affect the result and the principal suffers no damage thereby g. Not to carry out the agency if it would manifestly result in loss or damage to the principal h. Answer for damages if there being a conflict between his & principal’s interests, he prefers his own i. Not to loan to himself if he has been authorized to loan money at interest render an account of his transactions and deliver to the principal whatever he may have received by virtue of the agency (If the agent fails to deliver and instead converts orappropriates for his own use the money or property belonging to his principal, he may be charged with ESTAFA. j. Be responsible in certain cases for the act of the substitute appointed by him. k. Pay interest on funds he has applied to his own use. l. Be responsible in certain cases for the act of the substitute appointed by him. m. Pay interest on funds he has applied to his own use.
When agent has a right to disobey the principal’s instructions: 1. When the instruction calls for the performance of illegal acts. 2. Where he is privileged to do so to protect his security in the subject matter of the agency When agent may incur personal liability? 1. When the agent expressly binds himself. 2. When the agent exceeds his authority. 3. When an agent by his act prevents performance on the part of the principal. 4. When a person acts as an agent without authority or without a principal. 5. A person who purports to act as agents of an incapacitated principal.
Art. 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. (1721) Art. 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. (1722a) Appointment of Sub-agent: 1. If the principal has not prohibited the agent from
2.
3.
4.
5.
appointing a substitute, he will be liable to 3rd persons for the acts of the sub-agent within the scope of his authority If there is a prohibition but nevertheless the agent appoints a subagent, a ll the subagent’s acts are void as to the principal . If there is authority to appoint and subagent is not designated by the principal, the agent will be liable for all the acts of the subagent if the subagent is notoriously incompetent or insolvent. If there is authority to appoint and subagent is designated by the principal, the agent is released from any liability from the acts of the subagent. If the appointment of a sub-agent is not authorized but not prohibited, it shall be valid if it is beneficial to the principal. But, should the principal incur damage due to such appointment, the agent shall be primarily responsible for the acts of the substitute.
Art. 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. (1723) Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfilment of agency, and for the fault or negligence of his fellow agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (n)
Responsibility of 2 or More Agents Appointed Simultaneously: General Rule: Liable jointly Exception: Solidarity has been expressly stipulated; each of the agents becomes solidarily liable for (1) the non-fulfilment of the agency; of for (2) the fault or negligence of his fellow agent Exception to the exception: when one of the other agent/s acts beyond the scope of his authority – innocent agent is NOT liable. Art. 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. (n) Art. 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. (n) Art. 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. (n). Art. 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) Art. 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. (n) Art. 1909. The agent is responsible not only for fraud, 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. (1726)
rd
Effect where 3 person aware of limits of agent’s power: If the agent exceeds his authority, it shall be VOID unless the principal ratifies it. DOCTRINE OF AGENCY BY NECESSITY: actually, an agency can never be created by necessity; what is created is additional authority in an agent appointed and authorized before the emergency arose. The existence of emergency or other unusual conditions may operate to invest in an agent authority to meet the emergency, provided: (PURE) 1. The agent’s enlarged authority is exercised for the principal’s protection 2. The agent is unable to communicate with principal; 3. The means adopted are reasonable under the circumstances; 4. The emergency really exists. rd
When 3 person repudiate the contract • Before actual ratification by the principal, or before the principal has signified his willingness to ratify the agent’s acts. Effect of the principal receiving the benefits of the transaction: • He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens Conditions for Ratification 1. The principal must have capacity and power to ratify 2. He must have had knowledge of material facts 3. He must ratify the acts in its entirety 4. The act must be capable of ratification 5. The act must be done in behalf of the principal To be effective, ratification need not be communicated or made known to the agent or the third party. The act or conduct of the principal rather than his communication is the key. But before ratification, the third party is free to revoke the unauthorized contract. Effects of Ratification 1. With respect to agent - relieves the agent from liability to the third party for the unauthorized transaction, and to his principal for acting without authority; may recover compensation. 2. With respect to principal – assumes responsibility for the unauthorized act, as fully as if the agent had acted under original authority but not liable for acts outside the authority approved by his ratification 3. With respect to 3 rd persons - bound by ratification to the same extent as if the ratified act had been authorized; cannot raise the question of the agent’s authority to do the ratified act.
Acts of the Agent
Effect
Exception(s)
In behalf of the principal, within the scope of authority
1.Binds principal; 2.Agent not personally liable
Without or beyond scope of Authority
Contract is unenforceable as against the principal but binds the agent to the third person
Agent liable if he: 1.Expressly makes himself liable 2.Exceeds the limits of his authority without giving the parties sufficient notice of his powers Binding on the principal when: 1.Ratified or 2.The principal allowed the agent to act as though he had full powers
Within the scope of authority but in the agent’s name
1.. Not binding on the principal; principal; 2. Principal has no cause of action against the 3 rd parties and vice versa versa
Within the scope of the written p ower of attorney but agent has actually exceeded his authority to an understanding between him and the principal
1.Insofar as 3 rd persons are concerned ( not required to inquire further than the terms of the written power, a gent acted within scope of his authority; 2.Principal estopped
With improper motives
Motive is immaterial; as long as within the scope of authority, valid
With misrepresentations by the agent
1. Authorized - principal principal still liable 2. Beyond the scope of the agent’s authority General Rule: Principal not liable Exception: Principal takes advantage of a contract or receives benefits made under false representation of his agent 3. For the agent’s own benefit – principal still liable; agent’s motive Immaterial 1.Principal still responsible for the acts contracted by the agent with respect to 3 rd persons; 2.Principal, however, may seek recourse from the agent
Mismanagement of the business by the agent
Tort committed by the agent
Principal civilly liable so long as the tort is committed by the agent while performing his duties in furtherance of the principal’s business
Agent in good faith but prejudices 3 rd parties Agent in bad faith and prejudices 3 rd persons
Principal is liable for damages Only the agent is liable for damages
When the transaction involves things belonging to the principal: 1.Remedy of the principal - damages for agent’s failure to comply with the agency 2. Remedies of the third person •If the case falls under the general rule, he can sue the agent. •But when the contract involves things belonging to the principal, he can sue the principal. •But if it cannot b e determined without litigation who is liable, he can sue both.
1.Third person knew agent was acting for his own benefit: principal is not liable to 3 rd third person 2.Owner is seeking recovery of personal property of which he has been unlawfully deprived.
Art. 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. (n) Art. 1904 . The commission agent who 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) Art. 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)
Ordinary Agent Acts for and in behalf of his principal. Need not have possession of the principal’s goods
Art. 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash
Commission Agent: One whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold, and usually selling in his own name.
Obligations of a Commission Agent: 1.
2.
3.
4.
Responsible for the goods received by him, as described in the consignment, UNLESS upon receiving them he should make a written statement of the damage and deterioration suffered by the same. If goods are of the same kind and mark but belonging to different owners, make a distinction by counter marks and designate the merchandise respectively belonging to each principal cannot, without consent of the principal, sell on credit; should he do, principal may demand payment in cash, but the commission agent entitled to any interest/benefit which may result from such sale if an agent receiving guarantee commission (a del credere agent), bears the risk of collection and pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser liable for damages if agent does not collect the credits of his principal at the time when they become due and demandable, UNLESS he proves, that he exercised due diligence for that purpose.
Commission Agent Engaged in the purchase and sale for a principal of personal property which has to be placed in his possession and disposal
Has a relation with principal, buyer or seller, and property which is the object of the transaction
Commission Agent May act in his own name or in that of the principal Must be in possession of the thing he disposes
Broker No custody or possession of the thing he disposes; merely a gobetween, an intermediary between the seller and the buyer Maintains no relation with the thing which he purchases or sells
CHAPTER 3: OBLIGATIONS OF THE PRINCIPAL Art. 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) Art. 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) Art. 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. (1729) Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. (1731) Art. 1916. When two persons contract with regard to 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. (n) Art. 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. (n)
Obligations of the Principal to the Agent: 1. Comply with all the obligations agent contracted in representation of the principal 2. Advance sums necessary for the execution of the agency, when agent so requests; liable for reimbursement regardless of the undertaking’s success whenever agent had advanced & has no fault; includes interest 3. Reimburse the agent for all advances made by him provided the agent is free from fault 4. 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 5. Pay the agent the compensation agreed upon or the reasonable value of the latter’s services
rd
Liability of 3 persons to the Principal: 1.
rd In Contract – a 3 person is liable to the principal upon contracts entered into by his agent, as if the contract has been entered into by the principal.
2.
In Tort – the 3 person’s tort liability to the principal, insofar as the agent is involved in the tort, arises in 3 situations:
rd
a. Where the 3 rd person damages or injures property or interest of the principal in the possession of the agent b. Where the 3 rd person colludes with the agent to injure/defraud the principal c. Where the 3 rd person induces the agent to violate his contract with the principal to betray the trust reposed upon him by the principal. Requisites for solidary liability of principals: 1. There are 2 or more principals 2. The principals have all concurred in the appointment of the same agent 3. The agent is appointed for a common transaction or undertaking Note: The rule in Art. 1915 applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. The solidarity arises from the common interest of the principals and not from the act of constituting the agency.
Rule where 2 persons contract separately with agent and principal Two persons may contract separately with the agent and the principal with regard to the same thing. If the two contracts are incompatible with each other, the one of prior date shall be preferred. This is subject, however, to the rules under Article 1544 of the Civil Code (Double Sale). Art. 1914. The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles. (1730)
Agent’s Right of Retention: Retention: 1. Specific (only for those goods connected with the agency) and 2. Until the principal effects the reimbursement and
pays the indemnity Art. 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. (n)
Principal’s Liability for Expenses: General Rule: Principal is liable for the expenses incurred by the agent Exceptions: (AFUS) a. If the agent acted in contravention of the principal's instructions, unless principal derives benefits from the contract b. When the expenses were due to the f ault ault of the agent c. When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof d. When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. (n)
Who can be estopped to deny agency? 1. Estoppel of Agent- one professing to act as agent estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he is engaged. 2. Estoppel by the Principal a. As to agent – agent – one knowing 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. b. As to sub-agent – for the principal to be estopped from denying his liability to a third person, he must have known or be charged with knowledge of the transaction and the terms of the agreement between the agent and sub-agent. c. As to third persons – one who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, estopped to deny the agency. 3. Estoppel of Third Persons – a third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3 rd persons in interest 4. Estoppel of the Government – government neither estopped by the
mistake/error of its agents agents may be estopped estopped through affirmative acts of its officers the scope of their authority. Distinction between Ratification and Estoppel Ratification Rests on intention Affects the entire transaction from the
Estoppel Rests on prejudice Affects only relevant parts of the transaction
CHAPTER 4: MODES OF EXTINGUISHING AGENCY Agency is Extinguished: (EDWARD) 1. By the expiration of the period for which the agency was constituted. 2. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; 3. By the withdrawal of the agent; 4. By the accomplishment of the object or purpose of the agency; 5. By its revocation; 6. By the dissolution of the firm or corporation which entrusted or accepted the agency (Art. 1919) •
•
The list not exclusive; causes particular only to agency; may be extinguished by the modes of extinguishment of obligations in general whenever they are applicable, like loss of the thing and novation Agency is TERMINATED, as a matter of law, upon the outbreak of war.
Presumption of Continuance of Agency • It means that when once shown to have existed, an agency relation will be presumed to have continued, in the absence of anything to show its termination. Continuance of Agency Parties must be 1. Present, 2. Capacitated and 3. Solvent Modes of extinguishing an agency, generally: 1. Agreement 2. Subsequent acts of the parties which may be either: a. By the act of both parties or by mutual consent b. By the unilateral act of one of them 3. By operation of law
Note: Even if the reason for extinguishing the agency is not true, the agent cannot insist on reinstatement. The agent can only demand damages.
What happens of the subject matter of the agency is lost or destroyed? In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the agency terminates the agent‘s authority to deal with reference to it Exceptions: 1. if it is possible to substitute other material for that which was destroyed without substantial detriment to either party 2. if the destroyed subject matter was not in fact essential to the contract 3. a partial loss or destruction Form of renunciation: It is not always necessary for the agent to renounce the agency expressly. He can do so impliedly, such as: 1. where he has conducted himself in a manner incompatible with his duties as agent 2. when he abandons the object of his a gency and acts for himself in committing a fraud upon his principals 3. when he files a complaint against the principal and adopts an antagonistic attitude towards him. Art. 1930. The agency shall remain in full 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) Art. 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. (1738)
Exceptions to Extinguishment by Death 1. If the agency is coupled with an interest 2. If the act of the agent was executed without the knowledge of the death of the principal and the third person who contracted with the agent acted in good faith 3. To avoid damage 4. If it has been constituted in the common interest of the principal and of the agent, or in the interest of a third person who has accepted the stipulation in his favour.
Art. 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. (1739)
Can the heirs continue the agency? General Rule: agency calls for personal services on the part of the agent; rights & obligations are not transmissible Exceptions: a. Agency by operation of law, or a presumed or tacit agency b. Agency is coupled with an interest in the subject matter of the agency ( ex. power ex. power of sale in a mortgage ).
Exceptions to Extinguishment Upon Loss or Destruction of Subject Matter 1) If it is possible to substitute other material for that which was destroyed without substantial detriment to either party or if the destroyed subject matter was not in fact essential to the contract; 2) A partial loss or destruction does not always result in a complete termination of the agency, and under such circumstances, while the agency may be ended in so far as the destroyed property is concerned, it may continue in existence as to other property not affected i) If the loss brought about by the principal (ex.. principal sells subject matter to another party even if an agent has been constituted in reference to it ), principal liable for damages for his wrongful terminating act; if subject matter is lost without princi pal’s fault, no liability assumed by him Change of Circumstance: General Rule: when there is a basic change in the circumstances surrounding the transaction, which as not contemplated by the parties and which would reasonably lead the agent to believe that the principal would not desire him to act, the authority of the agent is terminated.
Exceptions: a. If the original circumstances are restored within a reasonable period of time, the agent's authority may be revived b. Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably c. Where the principal and agent are in close daily contact, the agent's authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions.
Art. 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied. (1733a) Art.1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (1734) Art. 1922. If the agent had general powers, 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. (n) Art. 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. (1735a) Art. 1924. The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third persons. (n) Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others. (n) Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. (n) Art. 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. (n) Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter 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. (1736a) Art. 1929. The agent, even if he should withdraw from 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)
Revocation: Termination of the agency by the subsequent act of the principal Renunciation/Withdrawal : Termination of the agency by the subsequent act of the agent
May the agency be extinguished at will?
A.
AGENT may do so but subject to the contractual obligations owing the principal ( i.e. fixed period of time for the agency or purpose not yet accomplished); 1. Expressly or impliedly a. conducted himself in a manner incompatible with his duties; b. abandons the object of agency and acts for himself in committing a fraud upon his principal; c. he files a complaint against the principal and adopts an antagonistic attitude towards him ƒ with just cause - give due notice ƒ without just cause - liable for damages if agent suffers damages thereby UNLESS the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. 2. The mere fact that the agent violates his instructions does not amount to renunciation, and although he may thus render himself liable to the principal, he does not cease to become an agent.
B.
PRINCIPAL may also revoke the agency at will Exception: agency coupled with interest a. When a bilateral contract depends upon the agency b. When the agency is the means of fulfilling an obligation already contracted c. When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Exception to the exception: when the agent acts to defraud the principal
Implied Revocation of Agency 1. Principal appoints a new agent for the same business or transaction, only if there is incompatibility); effective as between the principal and the agent only if communicated to the agent; does not prejudice rights of third persons acting in good faith without knowledge of the revocation 2. Principal directly manages the business entrusted to
the agent, dealing directly with 3 rd persons
Effect of Issuance of a Special Power of Attorney: • The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. Principal’s Liability for Damages despite Revocation:
1.
If the agency was constituted for a fixed period, the principal shall be liable for damages occasioned by the wrongful discharge of the agent before the expiration of the period fixed. 2. Even if there was no time fixed for the continuance of the agency, but the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid the payment of commission about to be earned, the principal can be held liable for damages. Necessity of Notice of Revocation 1. As to the agent - express notice always necessary; sufficient notice if the party to be notified actually knows, or has reason to know, a fact indicating that his authority has been terminated/suspended; revocation without notice to the agent will not render invalid an act done in pursuance of the authority rd 2. As to 3 persons – express notice necessary 3. As to former customers - actual notice must be given to them because they always assume the continuance of the agency relationship 4. As to other persons - notice by publication is enough Effect of Extinguishment Without Notice Act of agent deemed valid insofar • •
as 3rd parties acting in good faith and without knowledge of revocation.
AGENCY – DIAGNOSTIC EXERCISES 1.
A contract whereby one 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. a. Contract for lease of services b. Contract of agency c. Contract for a piece of work d. Contract to sell Answer: See Art. 1868.
2.
One of the following is not a characteristic of the contract of agency. a. Consensual b. Accessory c. Nominate d. Preparatory Answer: Characteristics of Agency: principal, preparatory , consensual , onerous, nominate, bilateral and commutative.
3.
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. Answer: The sale is valid because the principal is the party primarily and originally concerned in the contract of agency. Legal capacity is not required for the validity of the agent’s acts which are considered those of the principal since the agent is merely an extension of the personality of the principal.
4.
Pantaleon appointed Arturo as the manager of his coconut plantation in Quezon Province. After managing the plantation for 10 years, Artuto informed Pantaleon that on account of failing health, he, Arturo, was turning over the administration of the plantation to Bartolome, an experienced coconut planation administrator. Arturo also informed Pantaleon that he had given a general power of attorney to Bartolome and that if such authority were not sufficient, Pantaleon could send Bartolome a new power of attorney or appoint a manager of his choice. Pantaleon neither repudiated the designation of Bartolome nor appointed a new agent. Instead, he allowed Bartolome to manage the plantation and continued to receive the reports on the plantation from the latter without any protest. Was Bartolome an agent of Pantaleon? a. No, because Pantaleon himself, did not give a general power of attorney to Bartolome. b. No, because the designation of Bartolome as manager by Arturo was without Pantaleon’s authority. c. Yes, Bartolome became an agent of Pan taleon because of Pantaleon’s failure to repudiate the agency. d. Yes, because Bartolome was highly qualified to administer the plantation. Answer: Bartolome was an agent of Pantaleon because consent may be implied. An agency may be implied from the following: (1) acts of the principal, (2) silence of the principal, (3) lack of action of the principal, (4) failure of the principal to repudiate agency knowing that another person is acting in his behalf without authority.
5.
One of the following acts may be delegated by a principal to his agent. Which is it? a. Vote during the meeting of stockholders of a corporation where the principal is a stockholder.
b. c. d.
Attend meetings of the board of directors of a corporation where the principal is a director. Purchase land in the Philippines of which the principal is an alien. Represent the principal in a marriage ceremony where the principal is a party to the marriage contract.
Answer: The right of a stockholder to vote during stockholders’ meetings may be delegated since this is that one can lawfully do. (Sec. 58, Corp. Code)
6.
something
One of the following acts requires a special power of attorney granted by the principal to his agent. Which is it? a. To make gifts to employees in the business managed by the agent. b. To borrow the money which is urgently needed to preserve then property of the principal under the administration of the agent. c. To make payments for purchases in the ordinary course of the business. d. To lease the real property of t he principal to another person for more t han one year. Answer: A special power of attorney is required for the performance of the specific acts mentioned in Article 1878.
7.
One of the following acts requires only a general power of attorney, not a special power of attorney, for the agent. Which is it? a. To bind the principal in a contract of partnership. b. To loan money of the principal. c. To enter into a contract by which the ownership of an immovable is transmitted or acquired gratuitously or for a valuable consideration. d. To make such payments as are usually considered acts of administration. Answer: Agency couched in general terms (general power of attorney) comprises only acts of administration.
8.
Pedro, a Filipino who was on a business trip in Timbuktu, learned that Federico, also a Filipino, was interested in buying his lot located in Fairview, Quezon City. To take advantage of the opportunity, he made an overseas call to Almario, his business associate who was in Manila, to sell the lot in his (Pedro’s) behalf, to Federico, for P1,000,000.00 cash. Almario thus sold the lot promptly to Federico. The contract of sale was in a public instrument which was signed by Almario in behalf of Pedro as seller, and Federico as buyer. The said contract of sale is: a. Valid, because it is in a public instrument and Almario was duly authorize to represent Pedro. b. Void, because the authority of Almario was not in the form required by law. c. Unenforceable, because Pedro did not sign the contract of sale and so he had no consent thereto. d. Rescissible, because the contract was entered into in the representation of an absentee. Answer: When the sale of a piece of land or an interest therein is made through an agent, the authority of the agent must be made in writing, otherwise the sale is void. (Art. 1874)
9.
P, the owner of a certain car, wanted to sell the car. A learned that P was selling the car. Without the authority of P, A sold the car in his (A’s) name to B. What is the status of the sale of the car? a. Valid between A and B but A must be able to transfer the ownership of the car to B at the time of delivery. b. Unenforceable against P because he did not authorize A to sell the car. c. Void because A was not the owner of the car at the time of sale. d. Voidable because the sale was without the consent of P. Answer: In the case of a contract of sale, a person may sell in his own name something belonging to another provided he can transfer its ownership thereof at the time of delivery. The act is therefore valid. If he cannot transfer such ownership, he can be liable for breach of warranty against eviction. (Arts. 1459, 1548)
10. Purefine Corporation published in the Manila Bulletin that it was appointing Armando Arcos as its duly authorized agent for the sale of “Purofino” flour, one of its products. With the authority, Armando sold the “Purofino” flour to various bakeshops all over Luzon. After three years, Purefine revoked Armando’s authority giving notice of revocation to Armando and publishing a notice of revocation to Armando and publishing a notice of revocation in the Philippine Star . Despite the revocation, Armando still sold 50 bags of “Purofino” flour to Barbie’s Bakeshop, a single proprietorship owned by Barbie Barredo now wants to have the flour she ordered delivered to her by Purefine but Purefine seeks to set aside the sale o f 50 bags of flour to Barbie’s Bakeshop.
a. b. c. d.
Purefine is not obliged to deliver 50 bags of flour because Barbie Barredo is deemed to have known of the revocation of Armando’s authority. Purefine is obliged to deliver 50 bags of flour to Barbie Barredo because the latter did not read the publication of the revocation of Armando’s authority. Purefine is obliged to deliver 50 bags of flour because the revocation was not binding upon Babie Barredo since it was published in another newspaper. Purefine is not obliged to deliver 50 bags of flour because the notice of revocation to Armando is sufficient.
Answer: Notice of revocation in a newspaper of general circulation is sufficient warning to third persons. (Art. 1922) Hence, the publication of the revocation of Armando ’s authority was binding on any person, whether or not they have read such publication. 11. Precision Appliances Corporation, which is based in Metro Manila, sent a letter with a special power of attorney, to Alberto Aguado, an agent dealing with appliances, in the latter’s office in Cebu, appointing Alberto as the agent of Precision to sell its new appliances. The letter, which was sent through LBC Courier Services, was duly received by Alberto Aguado, who signed in the logbook of LBC. Alberto, however, did not respond to the letter. Based on the foregoing data: a. An agency was created between Precision and Alberto by the implied acceptance of Alberto of the agency. b. No agency was created between Precision and Alberto because Alberto did not respond to the letter. c. An agency was created by the ratification of Alberto when he duly received the letter with a special power of attorney. d. No agency was created because of the inaction of Alberto. Answer: Acceptance by the agent may be implied from: (1) His acts which carry out the agency and (2) His silence or inaction according to the circumstances. (Art. 1870) 12. The following statements refer either to authority or instruction given by the principal to his agent. I. Relates to the kind of business or transaction upon which the agent is commissioned to act. II. Concerns the principal and the agent. III. Refers to the mode of action by the agent in carrying out the agency. IV. Third persons can require the agent to present it to them since they are chargeable with knowledge thereof. You are to determine whether the above statements pertain to authority or instruction. a. I and II refer to a uthority. b. I and IV refer to authority. c. II and IV refer to instruction. d. III and IV refer to instruction. Answer: Authority refers to the subject matter upon which the agent is commissioned to act. Third persons are bound to know whether an agent is acting within his authority or not. Accordingly, they have the right to require the agent to present his authority as written. (See Art. 1 900.) 13. Pamela, a professional singer based in Cebu, authorized Allona, also a professional singer, to go to Manila to look for a nightclub where Pamela could sing. When Allona arrived in Manila, she presented herself, not Pamela, as the singer, to the Twinkle Night Club which engaged her services to sing nightly for two months at the club. Ba sed on the foregoing information, which of the following statements is correct? a. Pamela has a right of action against Twinkle Night Club. b. Twinkle Night Club has a right of action against Pamela. c. The contract between Allona and Twinkle Night Club is valid contract between them, not between Pamela and Twinkle Night Club. d. The contract between Allona and Twinkle Night Club is void because Pamela was not the party thereto. Answer: The contract is between Allona and Twinkle Night Club. Pamela and the Twinkle Night Club have no right of action against each other. The agent is the one directly bound in favour of the one with whom he has contracted as if the transactions were his own except when the contract involves things belonging to the principal. (Art. 1883)
14. Paramount Auto Corporation, an authorized dealer of Honda cars, appointed Armando as its agent to sell the cars of the company. The authority of Armando includes giving of a discount of P20,000.00 to customers who pay in cash. One day, Carmina, a customer, went to the company’s car center and told Armando that she wanted to buy a car with a sales price of P600,000.00. However, as she only had P550,000.00, she told Armando that she would take the car if Armando agreed to discount of P50,000.00. Armando agreed and sold the car to Carmona at P550,000.00 in behalf of the corporation. What is the status of the sale made by Armando to Carmina? a. Voidable at the instance of Paramount because it did not give its consent to the sale at the discount of P50,000.00. b. Unenforceable against Paramount, the Principal, because Armando acted beyond the scope of his authority. c. Void, because the additional discount of P30,000.00 given by Armando was not authorized by Paramount. d. Rescissible, because Paramount suffered damage of P30,000.00. Answer: If agent acts in excess of the authority of his principal and in the principal’s behalf the act is unenforceable against the principal or the person in whose name the contract was entered into unless the latter ratifies the same. (See Arts. 1317 and 1403.) Armando alone will be liable to Carmina.
15. Perez gave Almendras a special power of attorney wherein it was written that Almendras was being authorized to sell the two cars of Perez. However, Perez and Almendras had an understanding that Almendras should sell only one of the cars. Almendras sold the two cars to Bernarte who was not aware of the instruction given by Perez to Almendras. a. Perez is bound by the sale of only one car in accordance with his understanding with Almendras. b. Perez is bound by the sale of two cars because that is what is contained in the special power of attorney as written. c. Perez is not bound at all by the sale of either one or both of the two cars because Almendras violated the instruction given by Perez. d. Perez will not be bound by the sale of one or both cars at his opinion. Answer: Power of attorney is a written instrument given by a principal to his agent authorizing the latter to perform specified acts in behalf of the former, which acts when performed, shall have a binding effect on the principal. 16. Ponciano gave a power of attorney to Alfonso for the sale of his 2 cars, a Toyota and a Lancer. Their agreement included, among other provisions, the following: (1) Alfonso shall be entitled to a commission of 10% based on the actual selling price of the cars which Ponciano fixed at a minimum of P400,000.00 for the Toyota; and P500,000.00 for the Lancer; and (2) Alfonso need not to render to Ponciano any accounting of his transaction as long as Alfonso turns over the actual selling price of the cars net of the commission of 10%. Alfonso was able to sell the Toyota to Teodolfo for P410,000.00; and the Lancer for P500,000.00 to Leoncio who gave Alfonso a tip of P20,000.00. After the sale, Ponciano demanded from Alfonso an accounting of the transactions that he had made but Alfonso refused claiming that it was enough that he turned over the net selling price of P810,000.00 (900,000 less 10% of 900,000.00 as commission) to Ponciano as agreed to by the two of them. Decide. a. Alfonso need not render an accounting to Ponciano because that was their agreement. b. Alfonso must account and deliver to Ponciano only the sum of P900,000.00. c. Alfonso must account and deliver to Ponciano P910,000.00. d. Alfonso must account and deliver to Ponciano P930,000.00. Answer: Any stipulation exempting the agent from the obligation to render an account shall be void. (Art. 1891) 17. The following statements pertain to either a commission agent or a broker. I. He has a relation not only with his principal, and the buyers or sellers, but also with the property which is the object of the transaction. II. Maintains no relation with the thing he purchases or sells. III. The goods are placed in his possession and disposal. IV. He is merely an intermediary whose function is to bring the parties to the transaction. Determine whether the above statements pertain to commission agent or broker. a. I and III pertains to a commission agent. b. I and IV pertains to a commission agent.
c. d.
II and III pertains to a broker. I and IV pertains to a broker.
Answer: A commission agent maintains a relation not only with his principal and the buyer or seller but also with the property subject matter of the transaction which is plac ed in his possession and at his disposal. 18. The principal is not liable for the expenses incurred by the agent in the following, except when: a. although the agent acted in contravention of the principal’s instructions, the principal wishes to avail himself of the benefits derived from the contract. b. it was stipulated that the agent would be allowed only a certain sum. c. the agent incurred them with the knowledge that an unfavorable result would ensue, if the principal was not aware thereof. d. the expenses were due to the fault of the agent. Answer: When the principal wishes to avail himself of the benefits derived from the contract although the agent acted in c ontravention of the principal’s instructions the principal is liable for the expenses incurred by agent. 19. When two persons contract with regard to the same immovable thing, one of them with the agent, and the other with the principal, and the contracts are incompatible with each other, ownership shall belong to the: a. first purchaser in good faith. b. one who first completed the payment of the price in good faith. c. one who first registered in good faith the transaction. d. one who presents the oldest title who must be in good faith. Answer: If the ting is an immovable – ownership shall belong to: (1) The first registrant in good faith (2) In the absence thereof, the first possessor in good faith. (3 ) In the absence of both, the one who presents the oldest title in good faith. 20. An agency is impliedly revoked in three of the following cases. Which is the exception? a. When a new agent is appointed for the same business or transaction. b. When the principal directly manages the business entrusted to the a gent, dealing directly with third p ersons. c. When a special power of attorney is granted to another agent pertaining to a special matter involved in a general power of attorney issued to a previous agent. d. When the desire of the principal is help the agent manage the business. Answer: Revocation can be inferred from the act of the principal (impliedly revoked) in choices a, b, and c except d . 21. Penelope appointed Alicia as her agent to sell a set of bakery equipment for P50,00 0.00 to Nicole N icole who issued a check dated ten days after the sale. On the tenth day, however, the check was dishonoured by the bank because Nicole did not have sufficient funds for it. a. Alicia is liable to Penelope because she must bear the risk of collecting the price from Nicole. b. Alicia is not liable to Penelope because the dishonour of the check was without Alicia’s fault. c. Alicia is not liable to Penelope because she is not the purchaser but Nicole. d. Alicia is liable to Penelope because she acted beyond the scope of her authority. Answer: To bear the risk of collection and to pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser if he receives on a sale, in addition to the ordinary commission, another called a guarantee commission. (Art. 1907) 22. 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 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. b. A may not appoint a substitute because there is no express provision in his appointment from P allowing him to appoint one. c. 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.
d.
A may appoint a substitute only when the substitute is designated in the authority given by P to A.
Answer: The agent may appoint a substitute. However, he shall be responsible for the acts of the substitute. (Art. 1892) 23. The following cases are presented to you for valuation: 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. In which of the above cases is the principal not allowed to revoke the agency? a. I and II. b. II and III. c. I and III. d. I, II and III. Answer: Principal is not allowed to revoke the agency in all of the following cases. 24. Which of the following is not a mode of extinguishing an agency? a. Death, civil interdiction, insanity or insolvency of the principal or agent. b. Accomplishment of the purpose of the agency. c. Expiration of the period for which the agency was constituted. d. Continued losses on the part of the principal or agent. Answer: All except d is a mode of extinguishing an agency. d is 25. 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 P1,500,000.00 cash with A being entitled to a commission of 10% of the selling price. A was able to sell the house for P1,800,000.00 cash. How much commission may A collect from X? a. P150,000.00. b. P180,000.00. c. P60,000.00. d. P50,000.00. Answer: b. P180,000 (10% of P1,800,000.00) 26. R, S and T, each one owning a separate lot, a ppointed A in one instrument to sell their respective lots. Under the agreement, A will receive a commission of 10% of the selling price of each lot. A was able to sell the lot of R for P100,000.00; the lot of S for P200,000 .00; and the lot of T for P300,000.00. How much commission may A collect from R? a. P60,000.00. b. P10,000.00. c. P20,000.00. d. P30,000.00. Answer: A may collect P10,000.00 from R as a commission for selling the lot owned by R. The P10,000.00 is computed as P100,000.00x10%. P100,000.00 being the selling price of R's lot and the 10% being the commission that A may receive from each lot.
1.
This is an agency that comprises one or more specific transaction of the principal. a. Special agency. b. General agency. c. Agency couched in general terms. d. Agency couched in specific terms. Answer: Refer to Article 1876.
2.
P, owner of a certain car, authorize A to sell the car for P100, 000.00 cash. A, however, sold the car in the name of P for P110,000.00 but on credit. B, the buyer, knew at the time of the transaction that A’s authority was to sell the car of P on cash basis. The contract entered into by A is: a. Void because B was aware of A’s limit of authority. In this case, A is not liable because he did not undertake to get P’s ratification. b. Valid because the transaction, although it was for credit, was more advantageous to P. Accordingly, P will be liable. c. Unenforceable against P because A acted in excess of his authority. Thus, A alone will be liable. d. Rescissible, because P will suffer damage if the sales price is not paid by B. Answer: Refer to Article 1898.
3.
Pentenio appointed Anzures as commission agent to sell Pentenio’s goods for P10,0 00.00 cash. Anzures, however,
sold the goods on credit for P11,0 00.00 without Pentinio’s consent. Based on the foregoing f acts, which of the following options are available to Pentinio? I. Pentinio may demand immediate payment in P11,000.00 cash. II. Pentinio may demand immediate payment in P10,000.00 cash. However, Anzures shall be entitled to keep the excess of P1,000.00 when he collects the price of P11,000.00. III. Pentinio may ratify the sale on credit for P11,000.00 and wait for the amount to be collected. a. Either I or III. b. Either II or III. c. Either I or II. d. I only. Answer: Refer to Article 1905.
4.
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 ratification. b. Agency by appointment. c. Agency by estoppel. d. Agency by necessity. Answer: For an agency by estoppel to exist, the following should be established: (1) The principal manifested a representation of the agent's authority or knowingly allowed the agent to assume such authority; (2) The third person, in good faith, relied upon such representation; (3) relying upon such representation, such third person has changed his position to his detriment. 5.
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 a third person who has accepted the stipulation in his favour. The death of the principal extinguishes the agency, as a rule. However, the death of the principal does not extinguish an agency if the reason if the reason why the agency was created is: a. Reason I only. b. Reason II only. c. Either Reason I or Reason II. d. Neither Reason I nor Reason II. Answer: Refer to Article 1930
6.
An agent who contracts in the name of the principal is not liable in one of the following cases. Which is it? a. If the agent expressly bound himself. b. If the agent acted beyond the limits o f his authority without giving the party he contracted with sufficient notice of his powers. c. If the other party knew that the agent exceeded his authority and the agent undertook to secure the principal’s ratification but the principal did not ratify the contract. d. If the other party knew that the agent acted in excess of his authority but the agent did not undertake to secure the principal’s ratification. Answer: Refer to Article 1898.
7.
A, a duly authorize agent of P, wrote a letter to X on May 1, 2015 offering to sell P’s only Mercedes Benz car for
P2,000,000.00 cash. On May 3, 2015, X wrote a letter to A stating that he accepted all the terms of the offer, which letter was received by A on May 5, 2015. Before A could relay such acceptance to P, P died in a vehicular accident on May 6, 2015. 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 May 1, 2015. c. The contract was perfected on May 3, 2015. d. The contract was perfected on May 5, 2015. Answer: The contract was perfected on May 5, 2015 because it was the dat e when A received the letter of acceptance from X, and which was before the death of P.
8.
P published the appointment of A as P’s agent in the Manila Bulletin. For 5 years, A, as P’s agent, dealt with the public including X. On June 1, 2015, P revoked A’s a uthority by giving the latter a notice of revocation. The revocation was published in the Philippine Star. A month later, X, who was ignorant of the revocation, sold goods to A as P’s
c.
agent. a. P is not obliged to pay for the goods because the publication of the revocation of A’s authority is sufficient notice. b. P is obliged to pay for the goods since X was not aware of the revocation of A’s authority. P is obliged to pay for the goods because the revocation should have been published in the same newspaper. d. P is not obliged to pay for the goods because the notice of revocation to A is sufficient. Answer: Refer to Article 1922.
9.
P appointed A as his agent to sell the appliance products of P. The agreement between P and A provides for the payment to A of a 5% ordinary commission and a 10% guarantee ( or del credere ) commission. A sold several appliances to B for P20,000.00 the same being payable after 30 days. When A went to B’s place to collect the price of the appliances, B, together with the appliances that were sold, was nowhere to be found: a. A is liable to P for the price of the appliances because A must bear the risk of collecting. b. A is not liable to P for the price of the appliances because it was not his fault that B should disappear. c. P must bear the risk of collection because he is the owner of the appliances. d. A is liable to P because A acted beyond the scope of his authority. Answer: Refer to Article 1907.
10. An agent acting in the name of the principal shall not be liable to the third person whom he contracts: a. When he expressly binds himself. b. When he exceeds the limit of his authority without giving the third person sufficient notice of his powers. c. When the third person knew of the agent’s lack of authority a nd the agent undertook to get the principal’s ratification but failed to get the same. d. When the third person knew the agent’s lack of authority but the agent did not undertake to get the principal’s ratification.
Answer: Refer to Article 1898. 11. P appointed A as his agent to sell the goods belonging to P for a commission of 10%. Thereafter, A sold the goods of P to B on 30-days credit term for P20,000.00 without authority from P. The goods have a cash price of P19,000.00. Which of the following is not an option available to P? a. P may demand immediate payment from A of the amount of P18,000. 00. (P20,000.00 less 10%) b. P may demand immediate payment from A the amount of P17,000.00. (P19,0 00.00 less 10%) c. P may demand immediate payment from A of the amount of P18,000.00 (P20,000.00 less 10%) when A collects from B after 30 days. d. P may choose not to ratify the sale. Answer: Refer to Articles 1905 and 1906. 12. Which of the following acts does not require a special power of attorney for the agent? a. To effect novations which put an end to obligations already in existence at the time the agency was constituted. b. To make gifts to the employees e mployees in the business managed by the a gent. c. To bind the principal in a contract of partnership. d. To lease any real property to another person for more than a year. Answer: Refer to Article 1878 no. 6. 13. P gave a general power of attorney to A to sell P’ s products all over the Philippines. After three years, P revoked A’s authority by giving notice of revocation to A. P also had the revocation published in the Manila Bulletin. Despite the revocation, A still sold P’s products to X who had been a regular customer for the past 3 years and who was also known to P. However, X did not read the notice of revocation in the Manila Bulletin. a. P is bound by the sale. b. The contract is unenforceable against P. c. A is not liable on the sale. d. X must be specially informed of the revocation. Answer: It is unenforceable against P because he had successfully gave the notice of revocation to A and have it published in a newspaper, which is a sufficient warning to third person. 14. P gave a special power of attorney to A to sell P’s house and lot. On May 1, 2014, A sold the house and lot to X through a deed of absolute sale which was duly acknowledged before a notary public. On May 5, 2014, P sold the house and lot to Y not knowing that A had already sold the same to X. Although the deed of sale in favour of Y had not yet been acknowledged before a notary public by P and Y, Y immediately took possession of the house and lot. X and Y were not aware of the sale made to the other. a. X is the owner of the house and lot. b. Y is the owner if the house and lot. c. X and Y will become co-owners of the house and lot. d. P remains the owner of the house and lot. Answer: Refer to Article 1916. 15. The principal may delegate to an agent the performance of one of the following acts: a. The power to attend and vote at the meetings of directors of a corporation of which the principal is a director. b. The power to represent the principal in a marriage ceremony where the principal is the groom. c. The power to vote in the election of officials for public office while the principal is abroad. d. The power to vote in the election of directors of a corporation of which the principal is a stockholder. Answer: An agent is a representative of another person called the principal. Given the fact that the latter gives authority to the former to be his agent. But being a representative doesn't mean you can do or perform all the things that your principal does. You cannot perform acts which are personal in character or annexed to public office. Attending the principal's wedding and voting for officials of public office are acts that only the principal can do as his right as a person. As to voting in a corporate election for directors, stockholders are the ones that appoint and elect the directors. 16. Which of the following statements pertaining to a contract of agency is incorrect?
a. b. c. d.
The death of the principal extinguishes the agency. An agent may be a natural person or an artificial person like a corporation. A guarantee commission agent is not liable to the principal if he cannot collect the price of sale from the buyers. A contract of agency is presumed to be for a compensation.
Answer: Refer to Article 1907. 17. P gave a general power of attorney to A. During the year, A entered into a lease contract involving two lots of P as follows: I. Lease of a lot located in Manila to X for a period of 5 years with an annual rental of P60,000.00. II. Lease of a lot located in Quezon City to Y on a month-to-month basis at a monthly rental of P5,000.00. Which of the two leases is valid and binding upon P? a. I only. b. II only. c. Both I and II. d. Neither I nor II. Answer: The first lease requires a special power of attorney. Refer to Article 1878 no. 8. 18. Which of the following is not a characteristic of the contract of agency? a. Onerous, which means that an agency is presumed to be for a compensation. b. Real, which means that the principal must deliver the object to the agent for the perfection of the contract. c. Principal, which means that a contract of agency can stand by itself. d. Preparatory, which means that a contract of agency is a means by which other contracts will be entered into. Answer: Characteristics of the contract of agency are the following: (1) Nominate and Principal (2) Consensual (3) Unilateral and primarily onerous (4) Preparatoy and Representative 19. P delivered to A a power of attorney authorizing A to sell goods for P10,000.00 on a cash basis. A was able to sell the goods for P10,500.00, also on cash basis, to X, who upon learning of A’ authority as regards the selling price, sought to annul the sale. a. X may successfully annul the sale because A exceeded his authority. b. X may not successfully annul the sale because A acted in a manner more advantageous to P. c. X may successfully annul the sale because there was no instruction given by P to A to sell more than P10,00 0.00 d. X may successfully annul the sale because no mention was made on A’s authority that he could sell only at the price of P10,000.00. Answer: Refer to Article 1882. 20. P appointed A as his agent. For more than 5 y ears, A transacted business with the general public including X. On the sixth year of the agency, P revoked the authority of A as his agent by giving a notice of revocation in the Manila Bulletin on the same day that P revoked A’s authority. Thr ee months thereafter, X, who was not aware of the revocation of A’s authority, in the course of his usual business transaction with A a s P’s agent, sold and delivered goods to A. X now sues P for the price of the goods. a. P is liable to X because X did not r ead the publication of the revocation of A’ s power. b. P is not liable because the revocation as published is binding upon any person including X although X has not read the publication. c. P is liable to X because P should have specially informed X that A’s aut hority had been revoked. d. P is liable because A was a customer of long standing and must be given the benefit of the doubt. Answer: Refer to Article 1922. 21. P gave a general power of attorney to A. During the year, A entered into two lease contracts involving properties belonging to P as follows.
I. II.
Lease of a drilling equipment located in Manila to X for a period of 2 years with an annual rental of P120,000.00. Lease of a lot located in Quezon City to Y on a month-to-month basis at a monthly rental of P5,000.00.
Which of the two leases is valid and binding upon P? a. I only. b. II only. c. Both I and II. d. Neither I nor II. Answer: Because on the first lease, it was a personal not a real property. 22. P appointed A as his exclusive agent to sell generators on cash basis in Davao City. As A had to leave for Europe for a one-month pleasure trip, he asked P to a llow him to appoint a substitute to take his place during his a bsence, to which P agreed. A selected S as his substitute. S sold generators on a term of 60 days. The accounts resulting from these sales later proved tp be uncollectible. Based on the foregoing, foregoing, which of the following statement/s are/is false? I. A will be liable to P if S is notoriously incompetent or insolvent without prejudice to the right of P to go after S. II. A will not be liable to P if S is not notoriously incompetent or insolvent. III. A will be liable to P whether or not S is notoriously incompetent or insolvent without prejudice to the r ight of P to go after S. a. I and II are false. b. I and III are false. c. II and III are false. d. Only III is false. Answer: Refer to Article 1892 no. 2. 23. P gave a special power of attorney to A to sell a piece of land belonging to P. On April 1, P w as able to sell the land to X. The sale was in public instrument with X taking immediate phy sical possession of the land. A learned of the sale made by P but nonetheless, he sold the same piece of land to Y. The sale was in a public instrument which was registered in the Register of Deeds. Neither X nor Y knew of the sale made to the other. a. The piece of land belong to X. b. The piece of land belong to Y. c. The piece of land shall be owned jointly by X and Y since no one was aware of the sale made to the other. d. The ownership of the piece of land remains with P since neither X nor Y is entitled to the land. Answer: Although, X was in possession of the land through his transaction w ith P, he cannot own the property because the sale, although in public instrument, was not registered in the Register of Deeds. 24. S sold a piece of land belonging to his father F, to B. In the deed of absolute sale which was acknowledged before a notary public, S signed as the agent of F. The fact, however, was that no power of attorney was executed in fav our of S by his father. Later, in the presence of two witnesses, F told B that he would abide by the sale executed by S. a. The sale was void at the start but was validated upon the ratification by F. b. The sale remained void despite the ratification by F. c. The sale was valid from the start since it was made in a public instrument and F, the owner, agreed to abide by the same. d. The sale was merely unenforceable at the start but was ratified when F agreed to abide by the same. Answer: The sale is void, because in the first place, S is not an agent of F. So, being void, it cannot be ratified, and therefore remains void.
