Mark Alvin B.

Balase
BS- Accountancy 4

Chapter 1 (Agency)
I. Definitions
 General Agent – one authorized 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.
 Authority of an Agent – is the power of the agent to affect the legal relations of the
principal by acts done in accordance with the principal’s manifestation of consent to him.
 Contract of agency – the Civil Code of the Philippines is the governing law on agency.
Article 1868 of the Civil Code states that by the Contract of Agency, a person (agent)
binds himself to render some services or to do something in representation of on behalf of
another (principal), with the consent or authority of the latter.
 Power of Attorney – is a written authorization to an agent to perform specified acts in
behalf of his principal which acts, when performed, shall have binding effect on the
principal.

II. Discussions
 When principal bound by acts of agent beyond his power:
As a general rule, the principal is not bound by the acts of an agent beyond his limited powers. In
other words, third persons dealing with an agent do so at their peril and are bound to inquire as to
the extent of his powers. There are, however, qualifications whereby the principal is held bound:
 Where his (principal’s) acts have contributed to deceive a third person in good faith;
 Where the limitations upon the power created by him could not have been known by
the third person;
 Where the principal has placed in the hands of the agent instruments signed by him in
blank; and
 Where the principal has ratified the acts of the agent.
 Agency is a representative relation. The agent renders some service or does something
“in representation or on behalf of another”. Representation constitutes the basis of
agency:
 The acts of the agent on behalf of the principal within the scope of his authority
produce the same legal and binding effect as if they were personally done by the
principal. By this legal fiction of representation, the actual or real absence of the
principal is transformed into legal or juridical presence.
 The relation of an agent to his principal is fiduciary in character since it is based on
the trust and confidence.
  Special powers of attorney are necessary in the following cases:
 To make such payments as are not usually considered as acts of administration;
 To effect novations which put an end to obligations already in existence at the time
the agency was constituted;
 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;
 To waive any obligation gratuitously;
 To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration;
 To make gifts, except customary ones for charity or those made to employees in the
business managed by the agent;
 To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration;
 To create or convey real rights over immovable property;
 To accept or repudiate an inheritance;
 To ratify or recognize obligations contracted before the agency;
 Any other act of strict dominion.
 Essential Elements of an Agency:
 There is consent, express or implied , of the parties to established the relationship:
 The object is the execution of a juridical act in a relation to third persons;
 The agents acts as a representative and not for himself; and
 The agent acts within the scope of his authority.
In addition, the parties must be competent under the law to act as principal an agent.

III. Problems
1. Yes, because 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.
2. No,if the agent acts in his name, the principal has no right of action against the person with
whom the agent has contracted, neither have such persons against the principal.
3. Yes, friendship and all of those favors are different things from a contract of agency and
should not be included or be subjected as a deduction in terms of the compensation of A. Unless
otherwise stated that the case may be.
4. The client acted in bad faith. It is the obligation of the third party or in this case, of T to ask as
to the extent of the power of the agent. But T already know beforehand that the appointment has
been revoked. Therefore, T cannot make P liable or recover from the latter.
Chater 2 (Agency)
I. Definitions
 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.
 Subagent – a person to whom the agent delegates, as his agent, the performance of an act
for the principal which the agent has been empowered to perform through his
representation.
 Guarantee commission – one where, in consideration of an increased commission, the
commission agent guarantees to the principal the payment of debts arising through his
agency.

II. Discussions
 An agent who acts as such is not personally liable to the party with whom he contracts
because an agent who acts as such within the scope of his authority represent the
principal so that his contract is really the principal’s. Except:
 When the agent binds himself; or
 When he exceeds the limits of his authority without giving the third party sufficient
notice of his power.
 Right of the principal in case the commission agent sold goods on credit without
authority:
Two (2) alternatives:
 He may require payment in cash, in which case, any interest or benefit from the sale
on credit shall belong to the agent since the principal cannot be allowed to enrich
himself at the agent’s expense ; or
 He may ratify the sale on credit, in which case it will have all the risks and
advantages to him.
 Specific obligations of an Agent:
 To carry out the agency he has accepted.
 To answer for damages which through his non-performance the principal may suffer.
 To finish the business already begun on the death of the principal should delay entail
danger.
 To observed the diligence of a good father or a family 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.
 To advance the necessary funds should there be a stipulation to do so.
 To 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.
 Not to carry out the agency if its execution would manifestly result in loss or damage
to the principal.
  To answer for the damages if there be a conflict between his interests and those of the
principal, he should prefer his own.
 Not to loan to himself if he has been authorized to lend money at interest.
 Not to render an account of his transactions and to deliver to the principal whatever
he may have received by virtue of the agency.
 To be responsible in certain cases for the act of the substitute appointed by him.
 To pay interest on funds he has applied to his own use.

III. Problems
1.
a. Yes, as long as there is no prohibition stipulated.
b. Yes, A shall be responsible for all the sub-agent’s acts.
c. No, If there is authority to appoint and designated by principal, agent is released from any
liability from the acts of the sub-agent.
2. Yes, this is one of the specific obligations of an agent. It was also stated in Article 1891 to
deliver to the principal whatever he may received by the virtue of agency. As per as the
instruction of the principal the car should not be sold less than P500, 000.00.
3. Yes, A can buy the car for P500, 000.00 but it’s not a contract of agency anymore.