Bar Exam Questions

PARTNERSHIP
AGENCY
Compiled by:
Berna Yabon | 2014 - 2010
Jem Sawal | 2009 - 2005
Myrna Santelices | 2004 - 2000
John Patrick Mallari | 1999 - 1995
Jasmine Diego | 1994 - 1990
Juan Miguel de Leon | 1989 - 1985
Nicole Bagtas | 1984 - 1980

BAR EXAM QUESTIONS YEAR 2015

Compiled by: Yabon, Bernadeth S.
Topic: Dissolution of Partnership, Joint Venture vs. Partnership
A. X and Y are partners in a shop offering portrait painting. Y provided the
capital and the marketing while X was the portrait artist. They accepted the PS0,000.00
payment of Kyla to do her portrait but X passed away without being able to do it. Can
Kyla demand that Y deliver the portrait she had paid for because she was dealing the
with business establishment and not with the artist personally? Why or why not? (3%)
B. In this jurisdiction, is a joint venture (i.e., a group of corporations contributing
resources for a specific project and sharing the profits therefrom) considered a
partnership? (3%)

SUGGESTED ANSWER:
a) No Kyla cannot demand that Y deliver the portrait. The death of X has the effect of
dissolving the partnership. (Article 1830, Civil Code) Also, while the obligation was
contracted by the partnership, it was X who was supposed to create the portrait for
Kyla. Since X died before creating the portrait, the obligation can no longer be
complied because of impossibility of performance. (Article 1266) In obligations to
do, the debtor shall be released when the prestation becomes legally or physically
impossible without the debtors fault.
b) Yes, under Philippine law, a joint venture is understood to mean an organization
formed for some temporary purpose and is hardly distinguishable form a
partnership since its elements are similar which are: community of interest in
business, sharing of profits, and losses, and a mutual right of control. (Primelink
Properties v. Lazatin June 27, 2006 citing Blackner v. Mcdermott, 176 F. 2d 498[1949])

BAR EXAM QUESTIONS YEAR 2014

Compiled by: Yabon, Bernadeth S.
Topic: 1767 (Contract of Partnership), 1843 (Limited Partnership)
Q: Timothy executed a Memorandum of Agreement (MOA) with Kristopher setting up
a business venture covering three (3) fastfood stores known as "Hungry Toppings" that
will be established at Mall Uno, Mall Dos, and Mall Tres.
The pertinent provisions of the MOA provides:
1. Timothy shall be considered a partner with thirty percent (30%) share in all of the
stores to be set up by Kristopher;
2. The proceeds of the business, after deducting expenses, shall be used to pay the
principal amount of P500,000.00 and the interest therein which is to be computed based
on the bank rate, representing the bank loan secured by Timothy;
3. The net profits, if any, after deducting the expenses and payments of the principal and
interest shall be divided as follows: seventy percent (70%) for Kristopher and thirty
percent (30%) for Timothy;
4. Kristopher shall have a free hand in running the business without any interference
from Timothy, his agents, representatives, or assigns , and should such interference
happen, Kristopher has the right to buy back the share of Timothy less the amounts
already paid on the principal and to dissolve the MOA; and
5. Kristopher shall submit his monthly sales report in connection with the business to
Timothy.
What is the contractual relationship between Timothy and Kristopher?

A:
SUGGESTED ANSWER:
The contractual relationship between Timothy and Kristopher is a contract of
partnership as defined under Article 1767 of the Civil Code, since they have bound
themselves to contribute money, property or industry to a common fund, with the
intention of dividing the profits of the partnership between them. With a seed money of
P500, 000.00 obtained by Timothy through a bank loan, they agreed to divide the
profits, 70% for Kristopher and 30% for Timothy.
However, to be more specific, theirs is a limited partnership as defined under Article
1843 of the Civil Code because Timothy does not take part in the control of the business
pursuant to Article 1848, Civil Code. Nevertheless, Timothy is entitled to monthly sales
reports in connection with the business, a right enshrined in Article 1851 of the Civil
Code.

BAR EXAM QUESTIONS YEAR 2010

Compiled by: Yabon, Bernadeth S.
Topic: Partnership liability, Remedies of Creditors to Partnership
Q: A, B and C entered into a partnership to operate a restaurant business. When the
restaurant had gone past break-even stage and started to gamer considerable profits, C
died. A and B continued business without dissolving the partnership. They in fact
opened a branch of the restaurant, incurring obligation in the process. Creditors started
demanding for the payment of their obligations.
a. Who are liable for the settlement of the partnerships obligations? Explain.
b. What are the creditors recourse/s? Explain.

A:
SUGGESTED ANSWERS
a. The two remaining partners, A and B, are liable. When any partner dies and the
business is continued without any settlement of accounts as between him or his estate,
the surviving partners are being held liable for continuing the business despite the
death of C.
b. Creditors can file the appropriate actions, for instance, an action for the collecting of
sum of money against the partnership at will and if there are no sufficient funds, the
creditors may go after the private properties of A and V. Creditors may also sue the
estate of C. The estate is not excused from the liabilities of the partnership even if C is
dead already but only up to the time that he remained a partner. However, the liability
of Cs individual property shall be subject first to the payment of his separate debts.

BAR EXAM QUESTIONS YEAR 2009

Compiled by: Sawal, John Erick M.

Topic: Articles 1771 and 1773

Q: TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is
false. Explain your answer in not more than two (2) sentences.
(C). An oral partnership is valid. (1%)

A:
TRUE. An oral is a consensual of the partnership is valid even though not in writing.
However, If it involves contribution of an immovable property or a real right, an oral
contract of partnership is void. In such a case, the contract of partnership to be valid,
must be in a public instrument ( Art. 1771 ,NCC ), and the inventory of said property
signed by the parties must be attached to said public instrument (Art. 1773, NCC).

BAR EXAM QUESTIONS YEAR 2009

Compiled by: Sawal, John Erick M.
Topic: Articles 1771 and 1773
Q: TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is
false. Explain your answer in not more than two (2) sentences.
(C). An oral partnership is valid. (1%)

A: TRUE. An oral is a consensual of the partnership is valid even though not in writing.
However, if it involves contribution of an immovable property or a real right, an oral
contract of partnership is void. In such a case, the contract of partnership to be valid,
must be in a public instrument (Art. 1771, NCC), and the inventory of said property
signed by the parties must be attached to said public instrument (Art. 1773, NCC).

BAR EXAM QUESTIONS YEAR 2001

Compiled by: Santelices, Myrna D.
TOPIC: OBLIGATIONS OF A PARTNER; INDUSTRIAL PARTNER
Q: Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe provided
the capital while Rudy contributed his labor and industry. On one side of their shop, Joe opened
and operated a coffee shop, while on the other side, Rudy put up a car accessories store. May
they engage in such separate businesses? Why? [5%]

SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the restaurant business because it is not the same kind
of business the partnership is engaged in. On the other hand, Rudy may not engage in any other
business unless their partnership expressly permits him to do so because as an industrial partner
he has to devote his full time to the business of the partnership [Art. 1789, CC).

BAR EXAM QUESTIONS YEAR 1998

Compiled by: Mallari, John Patrick S.
Topic: Conveyance of a Partners Share Dissolution
Q: Dielle, Karlo and Una are general partners in a merchandising firm. Having
contributed equal amounts to the capital, they also agree on equal distribution of
whatever net profit is realized per fiscal period. After two years of operation, however,
Una conveys her whole interest in the partnership to Justine, without the knowledge
and consent of Dielle and Karlo.
1. Is the partnership dissolved?
2. What are the rights of Justine, if any, should she desire to participate in the
management of the partnership and in the distribution of a net profit of P360.000.00
which was realized after her purchase of Una's interest?

SUGGESTED ANSWER:
1. No, a conveyance by a partner of his whole interest in a partnership does not of itself
dissolve the partnership in the absence of an agreement. (Art. 1813. Civil Code)
2. Justine cannot interfere or participate in the management or administration of the
partnership business or affairs. She may, however, receive the net profits to which Una
would have otherwise been entitled. In this case, P120.000 (Art. 1813, Civil Code)

BAR EXAM QUESTIONS YEAR 1997

Compiled by: Mallari, John Patrick S.
Topic: Effect of Death of Partner
Q: Stating briefly the thesis to support your answer to each of the following cases, will
the death - of a partner terminate the partnership?

SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by express provision of par.
5, Art. 1830 of the Civil Code.

BAR EXAM QUESTIONS YEAR 1995

Compiled by: Mallari, John Patrick S.
Topic: Dissolution of Partnership
Q: Pauline, Patricia and Priscilla formed a business partnership for the purpose of
engaging in neon advertising for a term of five (5) years. Pauline subsequently assigned
to Philip her interest in the partnership. When Patricia and Priscilla learned of the
assignment, they decided to dissolve the partnership before the expiration of its term as
they had an unproductive business relationship with Philip in the past. On the other
hand, unaware of the move of Patricia and Priscilla but sensing their negative reaction
to his acquisition of Pauline's interest, Philip simultaneously petitioned for the
dissolution of the partnership.
1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline or
Philip valid? Explain.
2. Does Philip have any right to petition for the dissolution of the partnership before the
expiration of its specified term? Explain.

SUGGESTED ANSWER:
1, Under Art. 1830 (1) (c) of the NCC, the dissolution by Patricia and Priscilla is valid
and did not violate the contract of partnership even though Pauline and Philip did not
consent thereto. The consent of Pauline is not necessary because she had already
assigned her interest to Philip. The consent of Philip is not also necessary because the
assignment to him of Pauline's interest did not make him a partner, under Art, 1813 of
the NCC.
2. No, Philip has no right to petition for dissolution because he does not have the
standing of a partner (Art. 1813 NCC).

BAR EXAM QUESTION YEAR 1994

Compiled by: Diego, Jasmine A.

Topic: Composition of Partnerships; Spouses; Corporations

Q: 1) Can a husband and wife form a limited partnership to engage in real estate
business, with the wife being a limited partner?
2) Can two corporations organize a general partnership under the Civil Code of the
Philippines?
3) Can a corporation and an individual form a general partnership?

A: 1) a. Yes. The Civil Code prohibits a husband and wife from constituting a universal
partnership. Since a limited partnership is not a universal partnership, a husband and
wife may validly form one.
b. Yes. While spouses cannot enter into a universal partnership, they can enter into
a limited partnership or be members thereof. (CIR vs. Suter, et.al. 27 SCRA 152).
2) a. No. A corporation is managed by its board of directors. If the corporation were
to become a partner, co-partners would have the power to make the corporation party to
transactions in an irregular manner since the partners are not agents subject to the
control of the Board of Directors. But a corporation may enter into a joint venture with
another corporation as long as the nature of the venture is in line with the business
authorized by its charter. ( Tuason & Co., Inc. vs. Bolano, 95 Phil 106).
b. As a general rule a corporation may not form a general partnership with another
corporation or an individual because a corporation may not be bound by persons who
are neither directors nor officers of the corporation.
However, a corporation may form a general partnership with another corporation or an
individual provided the following conditions are met:
1] The Articles of Incorporation of the corporation expressly allows the corporation to
enter into partnerships;
2] The Articles of Partnership must provide that all partners will manage the
partnership, and they shall be jointly and severally liable; and
3] In case of a foreign corporation, it must be licensed to do business in the Philippines.
c. No. A corporation may not be a general partner because the principle of mutual
agency in general partnership allowing the other general partner to bind the corporation
will violate the corporation law principle that only the board of directors may bind the
corporation.
3) No, for the same reasons given in the Answer to Number 2 above.

BAR EXAM QUESTION YEAR 1993

Compiled by: Diego, Jasmine A.

Topic: Dissolution of Partnership; Termination
Q: A, B and C formed a partnership for the purpose of contracting with the Government
in the construction of one of its bridges. On June 30, 1992, after completion of the
project, the bridge was turned over by the partners to the Government. On August 30,
1992, D, a supplier of materials used in the project sued A for collection of the
indebtedness to him. A moved to dismiss the complaint against him on the ground that
it was the ABC partnership that is liable for the debt. D replied that ABC partnership
was dissolved upon completion of the project for which purpose the partnership was
formed. Will you dismiss the complaint against A if you were the Judge?

A: As Judge, I would not dismiss the complaint against A because A is still liable as a
general partner for his pro rata share of 1/3 ( Art. 1816, C. C.J. Dissolution of a
partnership caused by the termination of the particular undertaking specified in the
agreement does not extinguish obligations, which must be liquidated during the
winding up of the partnership affairs.
(Articles 1829 and 1830, par.1-a, Civil Code).

BAR EXAM QUESTION YEAR 1992

Compiled by: Diego, Jasmine A.

Topic: Obligations of a Partner

Q: W, X, Y and Z organized a general partnership with W and X as industrial partners
and Y and Z as capitalist partners. Y contributed P50,000.00 and Z contributed

P20,000.00 to the common fund. By a unanimous vote of the partners, W and X were
appointed managing partners, without any specification of their respective powers and
duties.
A applied for the position of Secretary and B applied for the position of Accountant of
the partnership.
The hiring of A was decided upon by W and X, but was opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was opposed by X and Y.
Who of the applicants should be hired by the partnership? Explain and give your
reasons.

A: A should be hired as Secretary. The decision for the hiring of A prevails because it is
an act of administration which can be performed by the duly appointed managing
partners, W and X.
B cannot be hired, because in case of a tie in the decision of the managing partners, the
deadlock must be decided by the partners owning the controlling interest. In this case,
the opposition of X and Y prevails because Y owns the controlling interest (Art. 1801,
Civil Code).

BAR EXAM QUESTIONS YEAR 1989

Compiled by: Juan Miguel E. De Leon
Topic: Partnership
Q: X used his savings from his salaries amounting to a little more than
P2,000.00 as capital in establishing a restaurant. Y gave the amount of
P4,000.00 to X as financial assistance with the understanding that Y would
be entitled to 22% of the annual profits derived from the operation of the
restaurant. After the lapse of 22 years, Y filed a case demanding his share in
the said profits. X denied that there was a partnership and raised the issue of
prescription as Y did not assert his rights at anytime within ten (10) years
from the start of the operation of the restaurant. Is Y a partner of X in the
business? Why? What is the nature of the right to demand ones share in the
profits of a partnership? Does this right prescribe?

A: Yes, because there is an agreement to contribute to a common fund and

an intent to divide profits. It is founded upon an express trust. It is
imprescriptible unless repudiated.

BAR EXAM QUESTIONS YEAR 1988

Compiled by: Juan Miguel E. De Leon

Topic: Distinguishment of co-ownership from partnership

Q: Distinguish co-ownership from partnership.

A: Co-ownership is distinguished from an ordinary partnership in the

following ways:
1. As to creation: Whereas co-ownership may be created by law, contract,
succession, fortuitous event, or occupancy, partnership is always created by
contract.
2. As to purpose: Whereas the purpose of the co-owner is the common
enjoyment of the thing or right owned in common, the purpose of the
partnership is to obtain profits.
3. As to personality: Whereas a co-ownership has no juridical personality
which is separate and distinct from that of the owners, a partnership has.
4. As to duration: Whereas an agreement not to divide the community
property for more than ten years is not allowed by law, such an agreement
would be perfectly valid in the case of partnerships. This is so. Because
under the law, there is no limitation upon the duration of partnerships.
5. As to power of members: Whereas a co-owner has no power to represent
the co-ownership, unless there is an agreement to that effect, a partner has
the power to represent the partnership, unless there is a stipulation to the
contrary.
6. As to the effect of disposition of shares: If a co-owner transfer his share to
a third person, the latter becomes automatically a co-owner, but if a partner
transfers his share to a third person, the latter does not become a partner,
unless agreed upon by all of the partners.
7. As to division of profits: Whereas in co-ownership the division of the
benefits and charges is fixed by law, in a partnership the division of profits
and losses may be subject to the agreement of the partners.

8. As to effect of death: Whereas the death of a co-owner has no effect upon

the existence of the co-ownership, the death of a partner shall result in the
dissolution of the partnership.

BAR EXAM QUESTIONS YEAR 1987

Compiled by: Juan Miguel E. De Leon
Topic: Liability under partnership
Q: Tomas, Rene and Jose entered into a partnership under the firm name
Manila Lumber. Subsequently, upon mutual agreement, Tomas withdrew
from the partnership and the partnership was dissolved. However, the
remaining partners, Rene and Jose, did not terminate the business of Manila
Lumber apparently without objection from Tomas. The withdrawal of Tomas
from the partnership was not published in the newspapers. Could Tomas be
held liable for any obligation or indebtedness Rene and Jose might incur
while doing business in the name of Manila Lumber after his withdrawal
from one partnership? Explain.

A: Yes. Tomas can be held liable under the doctrine of estoppel. But as
regards the parties among themselves, only Rene and Jose are liable. Tomas
cannot be held liable since there was no proper notification or publication.
In the event that Tomas is made to pay the liability to third person, he has
the right to seek reimbursement from Rene and Jose.

BAR EXAM QUESTIONS YEAR 1981

Compiled by: Bagtas, Nicole Toni Raisa A
Topic: Appointment of Manager, Liability of partner, distribution of profits and
stipulations excluding a partner from profits or losses under Articles 1800, 1816, 1797,
1799.
Q: A, B and C formed a partnership under the following terms and conditions:
(a) Participation: A 40%; B 40%
C 20%.
(b) A and B would supply the entire capital. C would contribute his
management expertise and be manager for the first five years without
compensation.
(c) C shall not be liable for losses.
The partnership became bankrupt.

1. Could A alone, opposed by B and C, have C removed as manager?

Explain.
2. Could C be personally held liable for debts of the partnership not satisfied
with the assets of the partnership. Amplify.

A: (1) A, alone, opposed by B and C, cannot have C removed as manager of the

partnership. According to the Civil Code, the vote of the partners representing the
controlling interest shall be necessary for such revocation of power. Under the
partnership agreement, the vote of A does not represent the controlling interest.
(2) Yes, C can be held personally, although jointly, liable for debts of the partnership
not satisfied with the assets of the partnership.
Under our partnership law, as among themselves, the industrial partner is always
excluded from any participation in the losses in the absence of an agreement to the
contrary. Hence, the agreement that C, the industrial partner, shall not be liable for
losses is valid. The rule that a stipulation which excludes one or more partners in the
profits or losses is void, is applicable only to capitalist partners, not to industrial
partners. However, as far as third persons are concerned, the rule is different. An
industrial partner can be held personally liable. This is without prejudice to his right to
hold his co-partners proportionately liable for what he paid to creditors.
In this case, the liability of A, B, and C is joint and subsidiary. The facts
merely state that their participation is: A 40%; B 40%; C 20%. Therefore, since by
agreement C is excluded from any participation in the losses, the agreement that
Cs participation is 20% applies only to his participation in the profits. In the case of
A and B, the agreement applies to both profits and losses. Despite the exclusion of
C in the losses, such agreement is not applicable insofar as the partnership creditors
are concerned. Consequently, the liability of the three partners for partnerships debts
shall also be: 40% for A, 40% for B, and 20% for C. Hence, C can now be
compelled to pay 20% of the partnership debts. After payment, he can then proceed
against his co-partners A and B for reimbursement of the amount paid by him.

AGENCY
BAR EXAM QUESTIONS YEAR 2011
Compiled by: Yabon, Bernadeth S.
Topic: Special Power of Attorney
Q: An agent, authorized by a special power of attorney to sell a land belonging to the
principal succeeded in selling the same to a buyer according to the instructions given
the agent. The agent executed the deed of absolute sale on behalf of his principal two
days after the principal died, an event that neither the agent nor the buyer knew at the
time of the sale. What is the standing of the sale?
A. Voidable.
B. Valid.
C. Void.
D. Unenforceable.

A: B. Valid.

BAR EXAM QUESTIONS YEAR 2004

Compiled by: Santelices, Myrna D.

TOPIC: AGENCY; GUARANTEE COMMISSION

Q: As an agent, AL was given a guarantee commission, in addition to his regular commission,
after he sold 20 units of refrigerators to a customer, HT Hotel. The customer, however, failed to
pay for the units sold. ALs principal, DRBI, demanded from AL payment for the customers
accountability. AL objected, on the ground that his job was only to sell and not to collect
payment for units bought by the customer. Is ALs objection valid? Can DRBI collect from him
or not? Reason. (5%)

SUGGESTED ANSWER:
No, AL's objection is not valid and DRBI can collect from AL. Since AL accepted a guarantee
commission, in addition to his regular commission, he agreed 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
(Article 1907, Civil Code).

TOPIC: AGENCY; REAL ESTATE MORTGAGE

Q: CX executed a special power of attorney authorizing DY to secure a loan from any bank and
to mortgage his property covered by the owners certificate of title. In securing a loan from
MBank, DY did not specify that he was acting for CX in the transaction with said bank. Is CX
liable for the bank loan? Why or why not? Justify your answer. (5%)

SUGGESTED ANSWER:
CX is liable for the bank loan because he authorized the mortgage on his property to secure the
loan contracted by DY. If DY later defaults and fails to pay the loan, CX is liable to pay.
However, his liability is limited to the extent of the value of the said property.

ALTERNATIVE ANSWER:
CX is not personally liable to the bank loan because it was contracted by DY in his personal
capacity. Only the property of CX is liable. Hence, while CX has authorized the mortgage on his
property to secure the loan of DY, the bank cannot sue CX to collect the loan in case DY defaults
thereon. The bank can only foreclose the property of CX. And if the proceeds of the foreclosure
are not sufficient to pay the loan in full, the bank cannot run after CX for the deficiency.

ALTERNATIVE ANSWER:
While as a general rule the principal is not liable for the contract entered into by his agent in case
the agent acted in his own name without disclosing his principal, such rule does not apply if the
contract involves a thing belonging to the principal. In such case, the principal is liable under
Article 1883 of the Civil Code. The contract is deemed made on his behalf (Sy-juco v. Sy-juco
40 Phil. 634 [1920]).

ALTERNATIVE ANSWER:
CX would not be liable for the bank loan. CX's property would also not be liable on the
mortgage. Since DY did not specify that he was acting for CX in the transaction with the bank,
DY in effect acted in his own name. In the case of Rural Bank of Bombon v. CA, 212 SCRA,
(1992), the Supreme Court, under the same facts, ruled that "in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport to be made, signed
and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough
merely that the agent was in fact authorized to make the mortgage, if he, has not acted in the
name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes
himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own name
and has set his own hand and seal to the mortgage. There is no principle of law by which a
person can become liable on a real estate mortgage which she never executed in person or by
attorney in fact".

BAR EXAM QUESTIONS YEAR 2003

Compiled by: Santelices, Myrna D.
TOPIC: AGENCY
Q: Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the supermarket. Was
there a nominate contract entered into between Jo-Ann and Aissa? In the affirmative, what was
it? Explain. (5%)

SUGGESTED ANSWER:
Yes, there was a nominate contract. On the assumption that Aissa accepted the request of her
close friend Jo-Ann to but some groceries for her in the supermarket, what they entered into was
a nominate contract of Agency. Article 1868 of the New Civil Code provides that 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.

ALTERNATIVE ANSWER:
Yes, they entered into a nominate contract of lease to service in the absence of a relation of
principal and agent between them (Article 1644, New Civil Code).

BAR EXAM QUESTIONS YEAR 2001

Compiled by: Santelices, Myrna D.

TOPIC: AGENCY; COUPLED WITH AN INTEREST

Q: Richard sold a large parcel of land in Cebu to Leo for P100 million payable in annual
installments over a period of ten years, but title will remain with Richard until the purchase price
is fully paid. To enable Leo to pay the price, Richard gave him a power-of-attorney authorizing
him to subdivide the land, sell the individual lots, and deliver the proceeds to Richard, to be
applied to the purchase price. Five years later, Richard revoked the power of attorney and took
over the sale of the subdivision lots himself. Is the revocation valid or not? Why? (5%)

SUGGESTED ANSWER:
The revocation is not valid. The power of attorney given to the buyer is irrevocable because it is
coupled with an interest: the agency is the means of fulfilling the obligation of the buyer to pay
the price of the land (Article 1927, CC). In other words, a bilateral contract (contract to buy and
sell the land) is dependent on the agency.

BAR EXAM QUESTIONS YEAR 2000

Compiled by: Santelices, Myrna D.
TOPIC: AGENCY vs. SALE
Q: A foreign manufacturer of computers and a Philippine distributor entered into a contract
whereby the distributor agreed to order 1,000 units of the manufacturer's computers every month
and to resell them in the Philippines at the manufacturer's suggested prices plus 10%. All unsold
units at the end of the year shall be bought back by the manufacturer at the same price they were
ordered. The manufacturer shall hold the distributor free and harmless from any claim for defects
in the units. Is the agreement one for sale or agency? (5%)

SUGGESTED ANSWER:

The contract is one of agency, not sale. The notion of sale is negated by the following indicia: (1)
the price is fixed by the manufacturer with the 10% mark-up constituting the commission; (2) the
manufacturer reacquires the unsold units at exactly the same price; and (3) warranty for the units
was borne by the manufacturer. The foregoing indicia negate sale because they indicate that
ownership over the units was never intended to transfer to the distributor.

BAR EXAM QUESTIONS YEAR 1999

Compiled by: Mallari, John Patrick S.
Topic: Appointment of Sub-Agent
Q: X appoints Y as his agent to sell his products in Cebu City. Can Y appoint a subagent and if he does, what are the effects of such appointment?

SUGGESTED ANSWER:
Yes, the agent may appoint a substitute or sub-agent 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.

BAR EXAM QUESTIONS YEAR 1997

Compiled by: Mallari, John Patrick S.
Topic: Termination; Effect of Death of Agent
Q: Stating briefly the thesis to support your answer to each of the following cases, will
the death - (c) of an agent end an agency?

SUGGESTED ANSWER:
Yes. The death of an agent extinguishes the agency, by express provision of par. 3, Art
1919 of the Civil Code.

BAR EXAM QUESTION YEAR 1994

Compiled by: Diego, Jasmine A.

Topic: Powers of the Agent

Q: Prime Realty Corporation appointed Nestor the exclusive agent in the sale of lots of
its newly developed subdivision. Prime Realty told Nestor that he could not collect or
receive payments from the buyers. Nestor was able to sell ten lots to Jesus and to collect
the down payments for said lots. He did not turn over the collections to Prime Realty.
Who shall bear the loss for Nestors defalcation, Prime Realty or Jesus?

A: a.) The general rule is that a person dealing with an agent must inquire into the
authority of that agent. In the present case, if Jesus did not inquire into that authority,
he is liable for the loss due to Nestors defalcation unless Article 1900, Civil Code
governs, in which case the developer corporation bears the loss.
Art. 1900 Civil Code provides: So far as third persons are concerned, an act is deemed
to have been performed within the scope of the agents 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.
However, if Jesus made due inquiry and he was not informed by the principal Prime
Realty of the limits of Nestors authority, Prime Realty shall bear the loss.
b.) Considering that Prime Realty Corporation only told Nestor that he could not
receive or collect payments, it appears that the limitation does not appear in his written
authority or power of attorney. In this case, insofar as Jesus, who is a third person is
concerned, Nestors acts of collecting payments is deemed to have been performed
within the scope of his authority (Article 1900, Civil Code). Hence, the principal is
liable.
However, if Jesus was aware of the limitation of Nestors power as an agent, and Prime
Realty Corporation does not ratify the sale contract, then Jesus shall be liable (Article
1898, Civil Code).

BAR EXAM QUESTION YEAR 1992

Compiled by: Diego, Jasmine A.

Topic: General Agency vs. Special Agency

Q: A as principal appointed B as his agent granting him general and unlimited
management over As properties, stating that A withholds no power from B and that the
agent may execute such acts as he may consider appropriate.
Accordingly, B leased As parcel of land in Manila to C for four (4) years at P60,000.00
per year, payable annually in advance.
B leased another parcel of land of A in Caloocan City to D without a fixed term at
P3,000.00 per month payable monthly.
B sold to E a third parcel of land belonging to A located in Quezon City for three (3)
times the price that was listed in the inventory by A to B.
All those contracts were executed by B while A was confined due to illness in the
Makati Medical Center.
Rule on the validity and binding effect of each of the above contracts upon A the
principal. Explain your answers.

A: The agency couched in general terms comprised only acts of administration (Art.
1877, Civil Code). The lease contract on the Manila parcel is not valid, not enforceable
and not binding upon A. For B to lease the property to C, for more than one (1) year, A
must provide B with a special power of attorney (Art. 1878, Civil Code).
The lease of the Caloocan City property to D is valid and binding upon A. Since the
lease is without a fixed term, it is understood to be from month to month, since the
rental is payable monthly (Art. 1687, Civil Code).

The sale of the Quezon City parcel to E is not valid and not binding upon A. B needed a
special power of attorney to validly sell the land (Arts. 1877 and 1878, Civil Code). The
sale of the land at a very good price does not cure the defect of the contract arising from
lack of authority.

BAR EXAM QUESTIONS YEAR 1981

Compiled by: Bagtas, Nicole Toni Raisa A.
Topic: Duty of Agent to Account under Article 1891.
Q: A, an official of a mining company, was appointed by the company as its buying agent for
the acquisition of mining rights in a designated area for operation by the company. A
proceeded to enter into contracts with the claim owners. Claim owner B, an illiterate, was
helped by A in locating and perfecting his rights and for which A, by contract, obtained a
participation in the royalty paid by the company to the claim owner.

a.) The mining company goes to you for advice as to whether it is entitled to the
royalty obtained by A from B. What would your advice be and why?
b.) May B the claim owner, question the royalty obtained by A? On what
grounds? Explain.

A:

a.) I would advise the mining company to withhold the payment of the part of the
royalty corresponding to A. This is so because of the explicit mandate of the
Civil Code. According to the law, 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. The act of
A, agent of the company falls within the rule abovementioned.
b.) B the claim owner, may question the royalty obtained by A on the ground
that it is not owing to the principal. It must be observed that the obligation of
the agent to deliver to his principal anything which he has received by virtue of
the agency is followed by the phrase even though it may not be owing to the
principal. This means that the action for recovery by B on the ground of
undue payment would be directed against the mining company and not against
the agent.

BAR EXAM QUESTIONS YEAR 1980

Compiled by: Bagtas, Nicole Toni Raisa A
Topic: Non-revocation of Agency under Article 1927
Q: AA had an option to purchase a vessel. He entered into a contract with BB
wherein he assigned his option to BB under the condition that BB would appoint
him as agent of the vessel for 5 years. BB purchased the vessel and appointed AA as
agent in accordance with the contract. After 3 years of operation BB revoked the
appointment of AA as agent for loss of confidence. AA sued BB for damages.
Would you hold BB liable for damages?

A: Yes. According to the Civil Code, the principal may revoke the agency at will. But
there are exceptions. These exceptions are sometimes denominated as agency coupled
with an interest. One of them is when the agency is the means of fulfilling an obligation
already contracted. It is obvious that the agency is the means of fulfilling an obligation
already contracted in favor of AA. BB has clearly breached his contract or
undertaking by revoking the agency before the expiration of the term or period of five
years.