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Agency

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/authority of
another.

REQUISITES OF AGENCY
1. CONSENT (Art 1869)
a) express
b) implied

(1) From the acts of the principal


From his silence or lack of action
Or his failure to repudiate the agency, knowing that a person is acting on
his behalf w/o authority (1869);

(2) from the acts of the agent which carry out the agency
Or, from his silence or inaction according to the circumstances (Art 1870)

2. OBJECT
Execution of a juridical act in relation to a 3 rd person

3. CAUSE/CONSIDERATION
Presumed for compensation, unless proven to the contrary (1875)

4. AGENT
Acts as representative of the principal
Acts within the scope of his authority

AGENT MUST ACT:


1. Within the scope of his authority (1881)
a) acts conducive to the accomplishment of the purpose of the agency (1881)
b) Authority is NOT considered EXCEEDED if performed in a manner MORE
ADVANTAGEOUS to the principal than that specified by him (1882)

2. In behalf of his principal (1882)

3. in accordance with the instruction of his principal (1887)

ART 1873
If a person specially informs another, or states in a public advertisement that
he has given a power of attorney to a 3 rd person, the latter(3rd person) 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 (power of atty) shall continue in full force until the notice is
rescinded in the manner in w/c it was given. (SEE SLIDE)

ART 1874
Sale of land by agent---- authority of agent must be in writing. Otherwise, sale
is void

ART 1877
Agency couched in general terms---- comprises only acts of administration
EVEN if the principal states that:

1. he withholds NO power, OR
2. agent may EXECUTE acts as he may consider appropriate, OR
3. agency authorizes a GENERAL & UNLIMITED MANAGEMENT.

ART 1878
SPAs are necessary in the ff cases:
1. to make such payments as are not usually considered as acts of
administration

2. to effect novations w/c put an end to obligations already existing 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 venue of an action, or
To abandon prescription already acquired

4. to waive any obligation gratuitously

5. to enter into a contract by w/c ownership of an immovable is


acquired/transmitted, either gratuitously of for valuable considerations

6. to make gifts , except customary ones for charity or 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 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 w/o compensation

10. to bind the principal in the 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 b4 the agency


15. any other act of strict dominion

Q: Can an agent appoint a substitute?


A: YES, an agent MAY APPOINT a substitute/sub-agent.

EXCEPTION:
PROHIBITED by the principal (1892)
EFFECT:
Agent is responsible for the acts of the substitute WHEN:
1. he was not given the power to appoint one, or
2. he was given such power but W/O designating the person, and the person
appointed was NOTORIOUSLY INCOMPETENT OR INSOLVENT.

Note:
All acts of the substitute agent when prohibited by the principal----VOID

EFFECTS OF AGENTS ACTS:


1. WITH AUTHORITY OF THE PRINCIPAL
a. in principals behalf --- VALID; principal is bound

b. in agents behalf ---


GENERAL RULE: NOT binding on the principal
i. agent is directly bound in favor of the other person with whom he
contracted

ii. principal has no rt of action against the person with whom agent
transacted and vice-versa

EXCEPTION:
Contract involves things BELONGING to the principal (without prejudice to the
ACTIONS between the principal and agent)

2. WITHOUT AUTHORITY OF THE PRINCIPAL


a. in principals behalf --- UNAUTHORIZED and UNENFORCEABLE
EXCEPTION:
Ratified by the principal (1910)

b. in agents behalf --- VALID as between agent and 3 rd person.

OBLIGATIONS OF THE AGENT


1. bound by his acceptance to carry out the agency;
Liable for damages w/c thru his non-performance, the principal may suffer (1884)

2. in case he declines an agency--- bound to observe the DOAGFOAF in the custody


and preservation of the goods forwarded to him by the owner (1885)

3. if stipulated, agent shall advance the necessary funds; EXCEPTION: principal is


insolvent (1886)
4. act in accordance with the instructions of the principal; in default thereof--- do
what a GFOAF would do, as rqd by the nature of the business (1887)

5. not to carry the agency if its execution would manifestly result in loss or damage
to the principal (1888)

6. liable for damages, if there being a conflict of interests, agent prefers his own
over that of the principal (1889)

7. agent EMPOWERED TO BORROW MONEY--- he may be the lender


If authorized to Lend money at interest --- he CANNOT borrow it WITHOUT the
consent of the principal (1890)

8. render an account of his transaction;


Deliver to the principal whatever he may receive by virtue of the agency, even
though not owing to the principal
NOTE:
Stipulations exempting the agent to render an account---VOID(1891)

9. finish the business already begun on the death of the principal should delay
entail any danger (1884)

OBLIGATIONS OF THE PRINCIPAL


1. comply with the obligations which the agent may have contracted w/in the scope
of his authority (1910)

N.B. Principal NOT BOUND when agent EXCEEDED his power

EXCEPTIONS:
a. principal RATIFIES the contract expressly or tacitly
b. principal is SOLIDARILY LIABLE with agent if he allowed the latter to act as
though he had full powers (1911)

2. advance to agent amount necessary for the execution of agency;


Reimburse if agent advanced the amt, even if undertaking was NOT SUCCESSFUL
Note:
Reimbursement includes interest on the sums advanced by the agent (1912)

3. indemnify agent for all damages he may suffer, W?O fault or negligence on the
part of the agent (1913)

N.B.
Agent may retain in PLEDGE object of agency--- until
reimbursement/indemnification by principal based Arts 1912 and 1913

ART 1916
When two persons contract with regard to the same thing, one with the agent and
one with the principal and the 2 contracts are incompatible with each other
--- that of the PRIOR DATE shall be preferred
Note: principal to pay DAMAGES to po 3 rd person whose contract was
rejected
Note: if agent acted in bad faith, he alone shall be liable to the 3 rd
person (w/o prejudice to ART 1544-double sale)

COMMISSION AGENT
One engaged in the sale of goods for a principal on consignment, such
goods are placed in his possession and at his disposal

GUARANTY COMMISSIION OR del credere


Fee given to an agent for the risk he has to bear in the collection of credits for
the principal
Note:
Agent becomes an INSURER of the credit and the principal, the
INSURED

EXTINGUISHMENT OF AGENCY (EDWARD)


E EXPIRATION of the period

D DEATH, civil interdiction, insanity or insolvency of principal OR agent

W WITHDRAWAL of the agent

A Accomplishment of the object or purpose of the agency

R REVOCATION of the agency

D DISSOLUTION of the firm or corporation w/c entrusted or accepted the agency

ART 1927. AGENCY CANNOT BE REVOKED IF:

1. a BILATERAL contract DEPENDS upon it

2. it is the means of fulfilling an obligation already contracted

3. a partner is appointed manager of a partnership and his removal from the


management is unjustifiable
GUARANTY AND SURETY

GUARANTY
An accessory contract whereby a person called the guarantor binds himself to
the creditor to fulfill the obligation of the principal debtor in case the latter
shall fail to do so (2407 par 1)

SURETY
A contract whereby a person called the surety binds himself SOLIDARILY with
the principal debtor.

GUARANTOR AND SURETY, DISTINGUISHED


1. GUARANTOR
a. subsidiarily liable
b. pays if debtor cannot pay
c. insurer of debtors SOLVENCY

2. SURETY
a. primarily and absolutely liable
b. pays if debtor DOES NOT PAY
c. insurer of the DEBT

PRINCIPLES IN GUARANTY
ART 2048
A guaranty is GRATUITOUS, unless there is a stipulation to the contrary

ART 2052
A guaranty CANNOT EXIST W/O A VALID OBLIGATION;
Guaranty may be constituted to guarantee the performance of a VOIDABLE or
UNENFORCEABLE contract or a NATURAL OBLIGATION.

ART 2053
A guaranty may also be given as security for FUTURE debts, the amt of which
is NOT YET KNOWN but there can be no claim against the guarantor until the
debt is LIQUIDATED. A conditional obligation may also be secured.

ART 2054
A guarantor may bind himself for LESS but not for MORE than the principal
debtor, BOTH as regards the AMOUNT and the ONEROUS NATURE of the
condition
NOTE:
Should he (guarantor) bound himself for MORE, his obligation shall b
REDUCED to that of the debtor.

ART 2055
A guaranty is NOT PRESUMED. It must be EXPRESS and CANNOT EXTEND to
more than what is stipulated therein.
ART 2056
QUALIFICATIONS OF GUARANTOR
1. possesses integrity;
2. has the capacity to bind himself;
3. has sufficient property to answer for the obligation which he guarantees;
4. is subject to the jurisdiction of the court of the place where the obligation
is to be complied with.

EXCUSSION
Right of the G to have the properties of the debtor exhausted first before the
G can be made liable to the creditor (2058)

Note:
For the benefit of excussion, G must:
1. SET IT UP against the creditor upon the latters demand for payment from
him, AND

2. point out to the creditor available property of the debtor in the Phils,
sufficient to cover the amount of the debt.
Note:
If the cr is NEGLIGENT in exhausting the property pointed out===
SUFFER THE LOSS to the extent of said property for the insolvency of
the dr resulting from such negligence. (2061)

WHEN IS G NOT ENTITLED TO EXCUSSION (2059)


R 1. Guarantor has expressly Renounced the benefit of excussion

U 2. It would be Useless if it may be presumed that an execution on the


principal debtors property would not result in the satisfaction of the
obligation.

S 3. G has bound himself Solidarily with the principal debtor.

I 4. Principal debtor has become Insolvent

A 5. Principal debtor has Absconded or cannot be sued w/in the Phils unless he
has left a manager or representative

CONTINUING GUARANTY:
-NOT limited to a single transaction

-contemplates a future course of dealing covering a series of transactions,


generally for an indefinite time or until revoked

-prospective in application;
generally intended to provide security with respect to future transactions
w/in certain limits;
contemplates a succession of liabilities for w/c as they accrue, the guarantor
becomes liable.

ART 2066
GUARANTOR WHO PAYS FOR THE DEBTOR MUST BE INDEMNIFIED by the
latter:
T 1. Total amount of the debt;

I 2. Interests (legal) from the time the payment was made known to the
DEBTOR, even though it did not earn interest for the creditor;

E 3. Expenses incurred by the G after having notified the debtor that payment
had been demanded from him;

D 4. Damages, if they are due.

EXTINGUISHMENT OF GUARANTY
1. Same grounds as extinguishment of ordinary obligations
(PaLoConMerComNo) (2076)

2. principal debt is extinguished

3. Creditor VOLUNTARILY accepts immovable or other property in payment of


the debt, even if the cr should afterwards lose the same thru eviction (2077);

4. creditor grants an EXTENSION to the debtor WITHOUT THE CONSENT of the


G;
N.B.
Mere failure of the cr to demand payment from the debtor after the debt
became due DOES NOT of itself constitute any EXTENSION OF TIME referred
to herein (2019)

5. when by any act of the cr, the Gs CANNOT be subrogated to the rights,
mortgages and preferences of the latter.

ART 2084
A judicial bondsman CANNOT DEMAND the exhaustion of the property of the
principal debtor.
NEGOTIORUM GESTIO
Whoever VOLUNTARILY TAKES CHARGE of the agency or management of the
business or property of another, WITHOUT any power from the latter, is
obliged to CONTINUE the same until the TERMINATION of the affair and its
incidents, or to require the person concerned to SUBSTITUTE him , if the
OWNER is in a position to do so (2144)

ART 2144
This juridical relation DOES NOT ARISE WHEN:
1. the property or business is NOT neglected or abandoned===
UNAUTHORIZED CONTRACT

2. in fact, the manager has been tacitly authorized by the owner===AGENCY

*ratification of the management by the owner of the business===EXPRESS


AGENCY, even if the business may not have been successful (2149)

OBLIGATIONS OF OFFICIOUS MANAGER:


1. perform his duties with the DGFOF;

2. pay the damages w/c thru his fault or negligence may be suffered by the
owner of the prop or business under mgt.
*court=== may increase or moderate indemnity according to circumstances.

3. CANNOT delegate his duties to another person, otherwise=== he shall be


liable for the acts of the delegate, W/O prejudice to the direct obligation of
the delegate to the owner of the business.
**RESPONSIBILTY of2 or more officious managers=== SOLIDARY, UNLESS the
mgt was assumed to save the thing or business from imminent danger (2146)

4. officious manager LIABLE FOR FORTUITOUS EVENT IF he (2147):


a. undertakes risky operations w/c the owner was not accustomed to
embark upon;

b. preferred his interest to that of the owner;

c. fails to return the property or business after demand by the owner;

d. assumed the mgt in BF

5. EXCEPT when the mgt was assumed to SAVE the prop or business from
IMMINENT DANGER, officious mgr shall be liable for FORTUITOUS EVENT IF:
a. he is MANIFESTLY UNFIT to carry on the mgt

b. by his intervention, he PREVENTED a more COMPETENT person from


taking up the mgt

6. personally LIABLE for contracts w/c he has entered into with 3 rd persons,
EVEN THOUGH he acted in the name of the owner; NO RIGHT OF ACTION
between owner and 3rd persons; these provisions shall NOT APPLY IF: (1252)
a. owner expressly or tacitly ratified the mgt
b. contract refers to things owned by the owner of the business

OBLIGATIONS OF THE OWNER (2150)


1. liable for obligations incurred in his interest;

2. reimbursement of the officious mgr for the necessary and useful expenses
and for the damages suffered by the latter in the performance of his duties.

OBLIGATIONS OF OWNER APPLY:


1. although officious mgt NOT expressly ratified BUT the owner of the
property or business enjoys advantages of the same;

2. mgt had for its purpose the prevention of an imminent and manifest loss
although NO benefit may have been derived;

3. NO benefit has been derived and there has been NO imminent and
manifest danger to the property or business PROVIDED:
a. officious mgr has acted in GF;
b. prop. or business is intact, ready to be returned to the owner

EXTINGUISHMENT OF MGT (2153)


1. OWNER REPUDIATES IT or puts an end thereto

2. officious mgr withdraws from the mgt

3. death, civ interdiction, insanity or insolvency of owner or off mgr

SOLUTIO INDEBITI(2154)
-if something is RECEIVED when there is NO RIGHT TO DEMAND it, and it was
unduly delivered thru MISTAKE, the obligation to RETURN it arises.

-payment by reason of a MISTAKE in the construction or application of a


doubtful or difficult question of law.

-payer was in DOUBT whether debt was DUE, he may recover if he proves
that it was not due.

ART 2157
Responsibility of 2 or more payees of payment NOT DUE=== SOLIDARY

ART 2159
He who in BF accepts an UNDUE PAYMENT=== SHALL:
1. pay legal interest if money is involved;

2. liable for fruits received/should have been received if thing produces


fruits

3. answerable for loss/impairment of the thing from any causes

4. liable for damages to the person who delivered the thing, until it is
recovered
ART 2171
FINDER OF LOST PERSONAL PROPERTY=== ARTS 719 and 720
1. Finder of movable=== return to previous possessor;

2. if previous possessor is unknown=== deposit with the mayor of the city or


municipality where it was found;

3. mayor shall cause its publication for 2 consecutive weeks in the way he
deems best;
a. If thing is perishable== shall be sold at public auction eight days
after publication
b. if not perishable=== 6 months after publication:
i. owner DID NOT appear== thing/value awarded to finder
ii. owner appeared==1/10 of the price of thing shall be given as
reward to finder
iii. finder/owner (as the case may be)== obliged to reimburse
the expenses
PLEDGE
Is a contract by virtue of which the debtor delivers to the creditor or to a 3 rd
person (2093) a MOVABLE (2094) 0r documents evidencing incorporeal rights
such as negotiable instruments, bills of ladings, bonds, or WH receipt (2095)
for the purpose of securing the fulfillment of a principal obligation (2085),
with the understanding that when the oblig is fulfilled, the thing delivered
shall be returned with all its fruits and accessions.

CHARACTERISTICS OF PLEDGE:
1. REAL
Perfected not merely by consent but by the delivery of the thing
pledged.

2. ACCESSORY
Has no independent existence on its own and is dependent on a
principal obligation

3. UNILATERAL
Creates an obligation on the cr to return the thing pledged after the
fulfillment of the principal obligation

4. SUBSIDIARY
Obligation incurred does not arise until the fulfillment of the principal
obligation secured

KINDS OF PLEDGE
1. VOLUNTARY or CONVENTIONAL
Created by the agreement of the parties

2. LEGAL
Created by operation of law (2121)

ART 1731
He who has executed work upon a movable has a rt to retain it by way of
pledge until he is paid

ART 1994
The depositary may retain the thing in pledge until the full payment of what
may be due him by reason of the deposit

ART 1944
The bailee cannot retain thee thing loaned on the ground that the bailor
owes him something even though it may be by reason of expenses. However,
the bailee has a rt of retention for damages mentioned in ART 1951
(concealment of flaws by bailor)

ESSENTIAL REQUISITES OF PLEDGE AND MORTGAGE (2085): THAT


1. they be constituted to secure the fulfillment of a principal obligation

2. he pledgor or mortgagor be the absolute owner of the thing


pledged/mortgaged

3. the persons constituting the pledge or mortgage have the free disposal of
their property, and in the absence thereof, that they be legally authorized for
the purpose

4. when the principal obligation becomes due, the thing given by way of
pledge or mortgage may be alienated for payment to the creditor (2087)

DISTINCTIONS BETWEEN PLEDGE AND MORTGAGE


1. PLEDGE
a. constituted on movables (2094)
b. ploperty pledged is placed in the possession of the creditor or of a 3 rd
person by common agreement
c. NOT VALID AGAINST 3RD persons unless a description of the thing pledged
and the date of the pledge appear in a public instrument (2096)

2. MORTGAGE
a. constituted on immovable and alienable real rights upon immovable (2124)
b. delivery of the property mortgaged to cr is NOT necessary
c. NOT VALID against 3constituted on immovable and alienable real rights
upon immovable (2124)
b. delivery of the property mortgaged to cr is NOT necessary
c. NOT VALID against 3rd persons if not registered in the Registry of Property;
VALID and BINDING between the parties even if the instrument is not
recorded in RD

PACTUM COMMISORIUM
A stipulation whereby the thing pledged/mortgaged or under antichresis shall
AUTOMATICALLY become the property of the creditor in case of default in the
payment of the debt w/in the agreed period; FORBIDDEN BY LAW and
considered NULL AND VOID

ART 2097
With the consent of the pledgee, the thing pledged may be alienated by the
pledger or owner, SUBJECT to the pledge;
Ownership of the thing pledged===transmitted to the vendee or transferee
as soon as pledgee consents to the alienation, but pledgee shall continue in
possession of the thing pledged

OBLIGATIONS OF THE PLEDGEE:


1. take care of the thing pledged with the DOAGFOAF;
has a rt to reimbursement of expenses for preservation;
liable for its loss or deterioration.

2. cannot deposit the thing pledged with a 3 rd person (2100)


EXCEPTION:
stipulation authorizing him to do so

EFFECT:
Pledgee is responsible for acts of his agents/employees w/ respect to
the thing pledged

3. bring any action w/c pertain to the owner of the thing pledged in order to
recover it from, or defend it against a 3rd person (2103)

4. CANNNOT USE THE THING PLEDGED w//o authority of the owner


EXCEPTION:
Preservation n of the thing requires its use, but for that purpose only
(2104)
NOTE:
Use/misuse of the thing by pledgee== owner may ask that it be
judicially or extra-judicially deposited.

5. bound to advise the pledger w/o delay, of any danger to the thing pledged
(2107)

6. W/O fault of the pledgee and there is danger of destruction, impairment or


diminution in value of the thing pledged == he may cause the thing to be
sold at a public sale, proceeds of which shall be the security for the principal
obligation

OBLIGATION OF THE PLEDGOR


1. pay the principal obligation, including interest therein (2105)

2. pay the expenses incurred by the pledgee for the preservation of the thing
(2105)

3. pay for damages incurred by the pledgee for flaws of the thing and its
deterioration for w/c pledgee has not been advised of

REQUISITES FOR THE SALE OF THE THING PLEDGED (2112)


1. credit has not been satisfied in due time

2. creditor/pledgee proceeds bfore a NP for the sale in a PA


3. dr is notified of the place, date and time of the public sale and the amount
for which the sale is to be held

4. 1st AUCTION, NO SALE== 2nd AUCTION SALE w/ the same formalities as 1st
sale

5. 2nd auction, NO SALE==creditor/pledgee may appropriate the thing


pledged and give debtor an acquittance for his ENTIRE DEBT

ART 2113
At the public auction,
1. pledger/owner may bid
Note:
He has a BETTER RIGHT if he should offer the same terms as the highest
bidder

2. Pledgee may also bid


Note:
Offer is NOT VALID if he is the only bidder

ART 2114
All bids at the public auction shall offer to pay the purchase price AT ONCE

ART 2115
Sale of the thing pledged==extinguishes the principal obligation, whether or
not the proceeds of the sale are EQUAL to the amt of the principal obligation

1. Proceeds of the sale>the amt of obligation== dr not entitled to the excess;

2. Proceeds of the sale<the amt of obligation==cr not entitled to RECOVER


the deficiency.

EXTINGUISHMENT OF THE PLEDGE


1. thing pledged is returned by the pledgee to the pledger/owner== any
stipulation to the contrary is void (2110)

2. statement in writing by the pledgee that he renounces/abandons the


pledge(2111)
Note:
Acceptance by the pledger/owner or return of the thing pledged to
pledger==NOT NECESSARY
Pledgee
bcomes a
depositary

3. sale of the thing pledged in a public auction based on ARTs 2112 and 2122

4. payment of the principal obligation by pledger/owner or 3 rd person before


redemption of the thing pledged (2118)
ART 2122
A thing under pledge by operation of law may be SOLD only after demand of
the amount for which the thing is retained. The PUBLIC AUCTION shall take
place w/in ONE MONTH after such demand. If W/O just ground, the cr does
NOT cause the public sale to be held w/in such period, the debtor may require
the RETURN of the thing