II. FORMS AND KINDS OF AGENCY

Question 1

GR: Contracts shall be obligatory in whatever form they may have been entered into, PROVIDED… (Art. 1356)

Answer 1

GR: All the essential requisites for their validity are present. (Art. 1356)

EXC:

(1) When the law requires that a contract be in some form in order that it may be valid/enforceable OR
(2) that a contract be proved in a certain way, that requirement is absolute and indispensable.

In such cases, the right of the parties stated in the following article cannot be exercised. (Art. 1356)

Question 2

ARTICLE 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article…

Answer 2

the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

Question 3

ARTICLE 1358. The following must appear in a public document (CARP: CPG, Administration, Real Property, Public Document)

GR and EXC to this provision

Answer 3

(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.

GR: All other contracts where the amount involved exceeds five hundred pesos (P500) must appear in writing, even a private one.

EXC:
But sales of goods, chattels or things in action are governed by articles 1403, No. 2 and 1405.

Question 4

ARTICLE 1874. When a sale of a piece of land or any interest therein is through an agent,

Answer 4

the authority of the latter shall be in writing; otherwise, the sale shall be void.

Question 5

ARTICLE 1878. Special powers of attorney are necessary in the following cases (Pay No[v] Compromise, Waive Contract Gifts, Loan Lease Service, Partners Guarantee Real Rights, Inherit Obligations Strictly)

Answer 5

(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; musawi
(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.

Question 6

Written contracts are:

Answer 6

(1) Those which must appear in a public document (Art. 1358)
(2) Contracts where the amount involved exceeds Php 500 EXCEPT for sales of goods, chattels or things in action (Art. 1358)
(3) Authority of agent to sell land or interest in land (Art. 1874)
(4) SPA (Art. 1878)
(5) Those under the Statute of Frauds (Art. 1878)

Question 7

ARTICLE 1874. When a sale of a piece of land or any interest therein is through an agent,

Answer 7

he authority of the latter shall be in writing; otherwise, the sale shall be void.

Question 8

For the principal to confer the right upon an agent to sell real estate, a power of attorney must

Answer 8

express the powers of the agent in clear and unmistakable language. Any reasonable doubt will not be construed in favor of the authority. [Cosmic Lumber v CA 265 SCRA 168 (1996)]

Question 9

What contractual form is required to allow an agent to lease a property for more than one (1) year?

Answer 9

Article 1878 of the New Civil Code. Special Powers of Attorney are necessary in the following cases: (8) To lease any real property to another person for more than one year.

Question 10

Can an agent compromise or renounce the right to an appeal of judgment?

Answer 10

SPA needed to compromise and renounce right to appeal a judgment: Special powers of attorney are necessary, among others, in the following: to compromise and to renounce the right to appeal from a judgment. Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority, compromise their clients’ litigation, or receive anything in discharge of their clients’ claims but the full amount in cash. [Vicente v Geraldez 52 SCRA 210 (1973)]

Question 11

What is the general rule when it comes to corporations acting through its agents?

Answer 11

GR: A corporation may act only through its board of directors. The acts of corporate officers within the scope of their authority are binding on the corporation

EXC: When they exceed their authority

ETE: UNLESS the corporation has ratified them or is estopped from disclaiming them.

A corporate officer or agent may represent and bind the corporation in transactions with third persons when:

(1) Authority was intentionally conferred
(2) He uses those powers in the usual course of particular business, incidental to or implied from No. 1
(3) He uses powers added by custom and usage as usually pertaining to the particular officer or agent
(4) He uses apparent powers as the corporation has caused persons dealing with him to believe it has conferred

Question 12

What is required of the buyer when purchasing conjugal property from one of the spouses?

Answer 12

Thus, the buyers of conjugal property must observe two kinds of requisite diligence, namely:

(a) the diligence in verifying the validity of the title covering the property; and
(b) the diligence in inquiring into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse.

Article 124 of the Family Code categorically requires the consent of both spouses before the conjugal property may be disposed of by sale, mortgage, or other modes of disposition. The power of administration does not include encumbrance and disposal. [Aggabao vs. Parulan Jr. 629 SCRA 562 (2010)
]

Question 13

Can a special power be included under a general power of attorney?

Answer 13

YES. The special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required.
[Veloso vs. Court of Appeals 260 SCRA 593 (1996)]

Question 14

Sale as distinguished from Agency

Answer 14

The essence of the contract of sale is transfer of title or agreement to transfer it for a price paid or promised. “If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale.” [Schmid and Oberly, Inc. vs. RJL Martinez 166 SCRA 493 (1988)]

Question 15

What is the rule when it comes to the acts of individual officers claiming to represent the corporation?

Answer 15

GR: Absent such valid delegation/authorization, ,the rule is that the declarations of an individual director relating to the affairs of the corporation are not binding on the corporation.

EXC: If done in the course of, or connected with, the performance of authorized duties of such director,

While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors.

Question 16

Commission merchant vs. broker

Answer 16

A commission merchant is one engaged in the purchase or sale for another of personal property which, for this purpose, is placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or vendors, but also with the property which is the subject matter of the transaction.

On the other hand, the broker, unlike the commission merchant, has no relation with the thing he sells or buys. He is merely an intermediary between the purchaser and the vendor. He acquires neither the possession nor the custody of the things sold. His only office is to bring together the parties to the transaction. [Pacific Commercial v Yatco 68 Phil 398 (1939)]

Question 17

Commercial Broker

Answer 17

Definition of commercial broker: A commercial broker “includes all persons, other than importers, manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases of merchandise for other persons or bring proposed buyers and sellers together, or negotiate freights or other business for owners of vessels or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants.”

The decisive test, as set forth in Commissioner of Internal Revenue v. Constantino, is the retention of the ownership of the goods delivered to the possession of the dealer, like herein petitioner, for resale to customers, the price and terms remaining subject to the control of the firm consigning such goods.

Question 18

Express agency vs. Implied agency

Answer 18

Express - one where the agent has been actually authorized by the principal, either orally or in writing (Art. 1869)

Implied - one which 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 (Ibid.), or from the acts of the agent which carry out the agency, or from his silence or inac­tion according to the circumstances. (Art. 1870.) An implied agency is an actual agency as much as an express agency.

NOTE: The enumeration for implied agency under 1870 is non-exclusive.

Question 19

Agency by Estoppel

Answer 19

Authority by estoppel arises in those cases where the principal, by his culpable negligence, permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent.

In these cases, the principal is bound by agency by estoppel:

1. ) If the agent’s acts are within the the terms of the written power of attorney even if he exceeds his limits according to his understanding with the principal (Art. 1900)
2. ) If the principal allowed the agent to act as if he had full powers even if in excess of the agent’s authority (Art. 1911)
3. ) If the agency was for the purpose of contracting with a specific person and it was revoked without to notice to the latter (Art. 1921)
4. ) If an agency with general powers was revoked without notice to a third person who contracted in good faith (Art. 1922)

Question 20

Agency by operation of law

Answer 20

1. ) When performed in a manner more advantageous to the principal, the agent’s authority is not deemed exceeded (Art. 1882)
2. ) To finish the business already begun on the death of the principal should delay entail danger (Art. 1884(2))
3. ) When the principal dies or the agency is extinguished without knowledge of the agent and he contracts with a third person, both in good faith (Art. 1931)

Question 21

Distinguish Universal, General, and Special Agency

Answer 21

Universal agent: A universal agent is one employed to do all acts that the principal may personally do, and which he can lawfully delegate to another the power of doing.

General agent: A general agent is one employed to transact all the business of his principal, or all business of a particular kind or in a particular place, or in other words, to do all acts, connected with a particular trade, business, or employment.

Special agent: A special or particular agent is one authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion.

Question 22

Who are the parties in an agency under group insurance?

Answer 22

Elfstrom doctrine, employer as agent of insurer in group insurance: “The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer, however, is that the employee has no knowledge of or control over the employer’s actions in handling the policy or its administration. An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control…The insurer directs the performance of the employer’s administrative acts, and if these duties are not undertaken properly the insurer is in a position to exercise more constricted control over the employer’s conduct.” [Pineda vs. Court of Appeals 226 SCRA 754 (1993)]

Question 23

Define Durable Agency

Answer 23

Refers to those exceptions when death does not terminate agency:

1. ) When constituted for common interest of principal and agent
2. ) When constituted for the interest of a third person who accepted the stipulation in his favor

Question 24

Agency couched in general terms vs. agency couched in specific terms

Answer 24

Article 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.

An agency couched in specific terms are those which require a SPA under Art. 1878.

Other examples of specific agency include the special power to mortgage, the special power to sell (which are not interchangeable), special power to compromise (which does not include arbitration).

Question 25

Can an agent who was granted a special power to loan use the proceeds of the loan for his own benefit?

Answer 25

NO. In the case of Manila Trading & Supply Co. v. Uy Tiepo, the court held that an agent who used the borrowed money for his personal gain or benefit is deemed to have exceeded the authority conferred upon him under the power of attorney in which case should have been specific and limited to a certain extent. [Hodges v Salas 63 Phil 567 (1936)]