Business Organization I Reviewer - Pre-Bar

Page| 1 of 32 BUS ORG 1(PARTNERSHIPS, AGENCY AND TRUSTS) Pre-Bar Reviewer Edited by Sasha Go
Sources: ADMU bar ops 2005, de Leon, Lectures by Atty. Precious Pojas
PARTNERSHIP, AGENCY AND TRUSTS
TABLE OF CONTENTS
PARTNERSHIP
General Provisions
Property Rights of a Partner
Obligations of the Partners with Regard to Third Persons
Dissolution and Winding Up
Limited Partnership
AGENCY
Nature, Form and Kinds of Agency

Obligations of the Agent
Obligations of the Principal
Modes of Extinguishment of Agency
TRUSTS
General provisions
Express Trusts
Implied Trusts
Ateneo de Davao University, College of Law: June 2008 1

Partnership Co-ownership Corporation
LAW ON PARTNERSHIPS By contract by agreement of
Creation By Law By law
parties
GENERAL PROVISIONS Personality separate and Personality separate and
Judicial personality distinct from that of each None distinct from that of each
partner incorporator
Article 1767. By the contract of partnership two or more persons bind themselves to contribute money, property,
Enjoyment of a thing or
or industry to a common fund, with the intention of dividing the profits among themselves. Purpose Realization of profits Depends on AoI
right
Two or more persons may also form a partnership for the exercise of a profession. (1665a) Duration/ Term of 50 years max extendible
No limitation 10 years max
existence to not more than 50 years
 PARTNERSHIP  a contract wherein two or more persons bind themselves to contribute money, property, or Disposal/ Partner may not dispose of his SH has right to transfer
Co-owner may freely do
industry to a common fund, with the intention of dividing the profits among themselves. Transferability of interest without consent from his shares without
so
interest all partners consent of other SH
ESSENTIAL FEATURES Each partner is an agent of the Co-owner cannot Management is vested
Power to act with 3 rd
partnership (unless stipulated represent the co- with the Board of
persons
1. There must be a valid contract otherwise) ownership Directors
2. There must be legal capacity to enter into a contract Does not necessarily
Effect of death Dissolution No dissolution
3. There must be mutual contribution of money, property or industry to a common fund. dissolve
4. The object must be lawful Any time by the will of Can only be dissolved
Any time by the will of any or
5. The purpose or primary purpose must be to obtain profits and divide them among the parties. Dissolution any or all of the co- with the consent of the
all of the partners
owners State
RIGHTS OF A PARTNERSHIP: Minimum of
# of incorporators Minimum of 2 persons Minimum of 2 persons
52incorporators
1. It has a personality separate and distinct from the partners From the date of the
2. It can acquire of posses property (share profits and losses) Commencement of From the moment of issuance of the certificate
None
3. It can incur obligations (has equal rights in management) juridical personality execution of the contract of incorporation by the
4. It can bring actions SEC
5. It can be adjudged insolvent  Corporations cannot become partners in a partnership BUT law allows entering in JOINT VENTURES.
 The partnership has a juridical personality separate and distinct from that of each of the partners
DELECTUS PERSONARUM/ DELECTUS PERSONAE  “CHOICE OF PERSONS”
IN DETERMINING WHETHER A PARTNERSHIP EXISTS, THESE RULES SHALL APPLY:
 The right to choose with whom a person wishes to associate himself with is the
foundation/essence of a partnership (1) Except as provided by article 1825, persons who are not partners as to each other are not partners as to
 The consent of all partners must be taken for a partner to associate himself with another third persons;
 Mutual trust must exist (fiduciary nature) (2) Co-ownership or co-possession does not of itself establish a partnership, whether such-co-owners or co-
 There is subjective novation when there is a change in the parties to a contract because their possessors do or do not share any profits made by the use of the property;
consent is necessary to bind them (3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing
them have a joint or common right or interest in any property from which the returns are derived;
Pascual vs. CA: There must be clear intent to form a partnership. There is no implication of a partnership relationship between co-owners (4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in
or co-possessors. the business, BUT NO SUCH INFERENCE SHALL BE DRAWN IF SUCH PROFITS WERE RECEIVED IN
PAYMENT:
Ona vs CA: From the moment of partition of a co-owned property and when heirs allowed their shares to be held in common with the intent a. As a debt by installments or otherwise;
of making profits, an unregistered partnership is formed. b. As wages of an employee or rent to a landlord;
c. As an annuity to a widow or representative of a deceased partner;
Obillos vs CA: 3 sisters brought 4 pcs of property which they leased and derived rentals therefrom. This is not an unregistered partnership. d. As interest on a loan, though the amount of payment vary with the profits of the business;
Sharing of gross returns does not imply such relationship. There must be clear intent. e. As the consideration for the sale of a goodwill of a business or other property by installments or
otherwise.
Partnership vs Co-ownership vs Corporation EFFECTS OF UNLAWFUL PARTNERSHIP

1. Contract is void ab initio b. donations made between persons in a state of adultery or concubinage are void
2. Profits shall be confiscated in favor of the State c. Those made between persons found guilty of the same criminal offense, in
3. Instruments or tools and the proceeds of the crime will be forfeited consideration thereof;
4. Contributions of partners shall not be confiscated unless it falls under #3 d. Those made to a public officer or his wife, descendants and ascendants, by
reason of his office.
FORM OF A PARTNERSHIP CONTRACT
b. PARTICULAR PARTNERSHIP - has for its object determinate things, their use or fruits, or
 GENERAL RULE: may be constituted in any form a specific undertaking, or the exercise of a profession or vocation.
 EXCEPT:
1. Where IMMOVABLE PROPERTY OR REAL RIGHTS are contributed II. As regards the liability of the partners
 public instrument shall be necessary.
 Inventory must be made and signed by the parties and attached to the public instrument a. General – liable pro-rata and subsidiarily
otherwise, it will be void (Torres vs. CA) b. Limited - Formed by 2 or more persona having as members one of more general partners and
2. Capital of three thousand pesos or more, in money or property one or more limited partners, the latter not being personally liable for the obligations of the
 Shall appear in a public instrument, partnership
 Recorded and registered in the SEC.
III. As to duration
 A contract of partnership is void, whenever immovable property is contributed thereto, if an
inventory of said property is not made, signed by the parties, and attached to the public a. PARTNERSHIP AT WILL – no time specified; may be terminated anytime
instrument. b. PARTNERSHIP WITH A FIXED TERM – term is agreed upon
 Any immovable property or an interest therein may be acquired in the partnership name. Title so
acquired can be conveyed only in the partnership name. IV. As to legality of its existence
 Associations and societies, whose articles are kept secret among the members, and wherein any
one of the members may contract in his own name with third persons, shall have no juridical a. DE JURE – complied with all legal requirements
personality, and shall be governed by the provisions relating to co-ownership. b. DE FACTO – failed to comply
CLASSIFICATIONS OF PARTNERSHIPS V. As to purpose
I. As to the extent of the subject matter /object a. COMMERCIAL/TRADING PARTNERSHIP – for business transcations
b. PROFESSIONAL/ NON-TRADING PARTNERSHIP – in the exercise of a profession
a. UNIVERSAL PARTNERSHIP - all the present property or to all the profits
KINDS OF PARTNERS:
i. PARTNERSHIP OF ALL PRESENT PROPERTY constitutes: (1) CAPITALIST – contributes money or property
1. All which the partners contribute all the property which actually belongs (2) INDUSTRIAL – contributes only his industry
to them to a common fund, with the intention of dividing the same (3) GENERAL – liability to 3rd persons extends to his separate property
among themselves (4) LIMITED - liability to 3rd persons is limited to his capital contributions
2. Profits which they may acquire therewith. (property which the partners (5) MANAGING – manages the affairs of the partnership
may acquire subsequently by inheritance, legacy, or donation cannot be (6) LIQUIDATING – takes charge of winding up upon dissolution
included in such stipulation, except the fruits thereof.) (7) PARTNERS IN ESTOPPEL – not really a partner but is liable as a partner to protect innocent 3rd persons
ii. UNIVERSAL PARTNERSHIP OF PROFITS comprises all that the partners may (8) CONTINUING- continues the partnership after its dissolution by reason of admission of a new partner,
acquire by their industry or work during the existence of the partnership. retirement, expulsion, or death of one of the partners
(9) SURVIVING – remains after partnership is dissolved by death of any of the partners
 Articles of universal partnership, entered into without specification of its nature, only (10) SUBPARTNER – not a member of the partnership who contracts with a partner with reference to the
constitute a universal partnership of profits latter’s share in the partnership
 Persons who are prohibited from giving each other any donation or advantage cannot (11) OSTENSIBLE – one who is active and is known to the public as a partner
enter into universal partnership (12) SECRET – active but not known to the public as a partner
(13) SILENT – not active although he may be known to the public as a partner
Who are not allowed to donate? (14) DORMANT – does not take an active part and is not known to the public as a partner
a. Husband and wife, during the marriage, cannot give donations to each other

OBLIGATIONS OF THE PARTNERS exclude him from the firm or 1. Shall bring to the common
2. Capitalist partners may avail funds any profits accruing to
themselves of the benefits him from his transactions,
 A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated.
which he may have obtained 2. Shall personally bear all the
 When a partnership for a fixed term or particular undertaking is continued after the termination of such term or
from the business losses
particular undertaking without any express agreement, the rights and duties of the partners remain the same as
3. With a right to file an action for 3. May be ousted from the
they were at such termination, so far as is consistent with a partnership at will.
damages in either case. partnership
 A continuation of the business by the partners or such of them as habitually acted therein during the term,
without any settlement or liquidation of the partnership affairs, is prima facie evidence of a continuation of
the partnership.
III. Obligations with respect to contributions to partnership capital
1. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of
Obligations of the Partners Among Themselves
the partnership.
2. In case of an imminent loss of the business of the partnership, any partner who refuses to contribute an
I. Obligations with respect to contribution of their property:
additional share to the capital, except an industrial partner, to save the venture, shall he obliged to sell his
1. Becomes debtor of the partnership for whatever he may have promised to contribute thereto.
interest to the other partners
2. Bound for warranty in case of eviction with regard to specific and determinate things which he
may have contributed to the partnership.
REQUISITES FOR A PARTNER TO BE OBLIGED TO CONTRIBUTE ADDITIONAL CAPITAL:
3. Liable for the fruits from the time they should have been delivered, without the need of any
1. Imminent loss
demand.
2. Majority of the partners agree that additional contribution would save the business
4. Preserve the property with the diligence of a good father of a family pending delivery
3. Capitalist partner is financially able but refuses to contribute
5. Indemnify partnership for any damage caused to it by the retention or delay in its contribution
4. No agreement to the contrary
When the capital or a part thereof which a partner is bound to contribute consists of goods, their
appraisal
IV. Obligations of managing partners who collects debt from a person owed to him in his own name and owing
1. Must be made in the manner prescribed in the contract of partnership,
the partnership
2. In the absence of stipulation, it shall be made by experts chosen by the partners, and
3. According to current prices, the subsequent changes thereof being for account of the
1. The sum thus collected shall be applied to the two credits in proportion to their amounts, even
partnership.
though he may have given a receipt for his own credit only;
2. But should he have given it for the account of the partnership credit, the amount shall be fully
EFFECT OF FAILURE TO CONTRIBUTE THE PROPERTY PROMISED:
applied to the latter.
1. Becomes a debtor FOR THE INTEREST AND DAMAGES from the time he should have
REQUISITES:
complied with his obligation.
1. There are 2 debts, one owing to the collector and one owing to the partnership
2. Remedy of other partners: SPECIFIC PERFORMANCE + DAMAGES
2. Both are demandable
3. Collector manages or is authorized to manage the partnership
II. Obligations with respect to contributions of money and money is converted to personal use
V. Obligations of a partner receives share of partnership credit (A partner who has received, in whole or in part, his
1. Liable to contribute on the date fixed the amount he promised to contribute
share of a partnership credit, when the other partners have not collected theirs)
2. Reimbursement for money he may have taken for personal use
1. Obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital
3. Legal interest
what he received even though he may have given receipt for his share only
4. Indemnification for damages
 Every partner is responsible to the partnership for damages suffered by it through his fault, and he
PROHIBITON AGAINST ENGAGING IN BUSINESS
cannot compensate them with the profits and benefits which he may have earned for the partnership by
his industry. However, the courts may equitably lessen this responsibility if through the partner's
INDUSTRIAL PARTNER CAPITALIST PARTNER
extraordinary efforts in other activities of the partnership, unusual profits have been realized.
 Cannot engage in business for  Cannot engage in business
himself, unless the partnership of the same kind for his own
BEARING THE RISK OF LOSS BY THING CONTRIBUTED
expressly permits him to do so account unless there is a
stipulation to the contrary
The risk of specific and determinate things,
Consequences: (1789) Risk shall be borne by the partner who owns them.
which are not fungible, only their use and fruits
1. Capitalist partners may Consequences: (1808)

may be for the common benefit contributed to Two or more partners have Each one may separately execute all If any of them should oppose the
the partnership been intrusted with the acts of administration, acts of the others, the decision of the
If the things contribute are fungible, or cannot management of the majority shall prevail.
be kept without deteriorating, or if they were Risk shall be borne by the partnership partnership without
contributed to be sold specification of their In case of a tie, the matter shall be
Risk shall be borne by the partnership; in such case the respective duties, or without decided by the partners owning the
The things brought and appraised in the a stipulation that one of them controlling interest.
claim shall be limited to the value at which they were
inventory shall not act without the
appraised
Things contributed to be sold Risk shall be borne by the partnership consent of all the others,
Ownership transferred to the partnership Risk shall be borne by the partnership Absence or disability of any one of
Stipulated that none of the
The concurrence of all shall be them cannot be alleged, unless
managing partners shall act
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES: necessary for the validity of the there is imminent danger of grave
without the consent of the
acts, or irreparable injury to the
others
PROFITS LOSSES partnership.
With agreement According to agreement According to agreement (1) All the partners shall be
1. Capitalist  in proportion to his 1. Sharing of profits is stipulated  apply considered agents
But if the refusal of consent by the
capital this sharing (2) Unanimous consent required
other partners is manifestly
2. Industrial  not fixed; must be 2. Sharing of profits is not stipulated  Manner of management has in making any important
Without agreement prejudicial to the interest of the
the amount which is considered losses based on capital contribution not been agreed upon alteration in the immovable
partnership, the court's intervention
just and equitable under the 3. Purely industrial partner is not liable property of the partnership,
may be sought.
circumstances for losses even if it may be useful to the
partnership
 The partnership shall be responsible to every partner for the amounts he may have disbursed on behalf
of the partnership and for the corresponding interest, from the time the expense are made; it shall also  CONTRACT OF SUBPARTNERSHIP  one formed between a member of a partnership and a 3rd person
answer to each partner for the obligations he may have contracted in good faith in the interest of the for a division of profits coming to him from the partnership (DISTINCT FROM PRINICIPAL PARTNERSHIP)
partnership business, and for risks in consequence of its management.
 If the partners have agreed to intrust to a third person the designation of the share of each one in the profits and OTHER RIGHTS OF PARTNERS:
losses, such designation may be impugned only when it is manifestly inequitable.
 In no case may a partner 1. Every partner may associate another person with him in his share, but the associate shall not be
1. who has begun to execute the decision of the third person, or admitted into the partnership without the consent of all the other partners, even if the partner having an
2. who has not impugned the same within a period of three months from the time he had knowledge associate should be a manager.
thereof, complain of such decision. 2. Every partner shall at any reasonable hour have access to and may inspect and copy any of The
 Designation of losses and profits cannot be intrusted to one of the partners. partnership books
 A stipulation which excludes one or more partners from any share in the profits or losses 3. Right to a formal account as to partnership affairs if:
is void. a. If he is wrongfully excluded from the partnership business or possession of its property by his
co-partners;
RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT : b. If the right exists under the terms of any agreement;
c. As provided by article 1807;
May execute: d. Whenever other circumstances render it just and reasonable.
The partner who has been  All acts of administration 4. True and full information of all things affecting the partnership (1807)
appointed manager in the despite the opposition of his 5. Account to the partnership as a fiduciary
Controlling interest shall be
articles of partnership partners,
necessary for such revocation of PROPERTY RIGHTS OF A PARTNER
The vote of the partners  Unless he should act in bad
power.
representing the faith; and
 His power is irrevocable The property rights of a partner are:
without just or lawful cause. 1. His rights in specific partnership property;
A power granted after the 2. His interest in the partnership; and
partnership has been Revocable any time for any cause 3. His right to participate in the management
constituted Nature of rights in SPECIFIC partnership property:

 Equal right to posses but he has no right to possess such property for any other purpose without the consent  Partners are liable solidarily with the partnership for everything chargeable to the partnership under
of his partners; articles 1822 and 1823.
 Non-assignable except in connection with the assignment of rights of all the partners in the same property;
 Limited to the share of what remains after partnership debts have been paid POWER OF PARTNER AS AGENT
 Not subject to attachment or execution, except on a claim against the partnership GR: Every partner is an agent and may
 Not subject to legal support under article 291. execute acts with binding effect
Acts for carrying on the usual way of business of the partnership
E: 3rd person has knowledge of lack of
 A partner's interest in the partnership is his share of the profits and surplus. authority
1. Acts outside the usual way of carrying on the business No act of a partner in contravention of a
 Profits  net income for a given period (returns less expenses) 2. Acts of strict dominion and ownership restriction on authority shall bind the
 Surplus  excess of assets over liabilities 3. Assign the partnership property in trust for creditors or on partnership to persons having knowledge
the assignee's promise to pay the debts of the partnership; of the restriction.
OBLIGATIONS OF PARTNERS WITH REGARD TO 3RD PERSONS 4. Dispose of the good-will of the business;
5. Do any other act which would make it impossible to carry
 Every partnership shall operate under a firm name. Those who, not being members of the on the ordinary business of a partnership;
partnership, include their names in the firm name, shall be subject to the liability of a partner. 6. Confess a judgment;
(1815) 7. Enter into a compromise concerning a partnership claim or
 All partners, including industrial ones, shall be liable pro rata with all their property and after liability;
all the partnership assets have been exhausted, for the contracts which may be entered into in 8. Submit a partnership claim or liability to arbitration;
the name and for the account of the partnership, under its signature and by a person 9. Renounce a claim of the partnership
authorized to act for the partnership. However, any partner may enter into a separate Restricted acts Partnership is not liable to 3rd persons
obligation to perform a partnership contract. (1816) who have knowledge of the restrictions
 Any stipulation against the liability laid down in the preceding article shall be void, except as
among the partners. (1817) EFFECTS OF CONVEYANCE OF REAL PROPERTY BELONGING TO PARTNERSHIP (1819)
 Every partner is an agent of the partnership Any partner may convey TITLE to such property by a conveyance
executed in the partnership name
 Except when authorized by the other partners or unless they have abandoned the business, one or
more but less than all the partners have no authority to: Where title to real property is in
But the partnership may recover such property:
a. Assign the partnership property in trust for creditors or on the assignee's promise to pay the the partnership name
1. Conveyance was not in the usual way of business
debts of the partnership; 2. Knowledge of the buyer or seller’s lack of authority
b. Dispose of the good-will of the business;
c. Do any other act which would make it impossible to carry on the ordinary business of a Only passes the EQUITABLE INTEREST provided the act is one within the
partnership; authority of the partner under the provisions of the first paragraph of
d. Confess a judgment; Title to real property in the
article 1818.
e. Enter into a compromise concerning a partnership claim or liability; name of the partnership;
f. Submit a partnership claim or liability to arbitration; conveyance by a partner in his
But the partnership may recover such property:
g. Renounce a claim of the partnership. own name
1. Conveyance was not in the usual way of business
h. No act of a partner in contravention of a restriction on authority shall bind the partnership to 2. Knowledge of the buyer or seller’s lack of authority
persons having knowledge of the restriction.
The partners in whose name the title stands may convey TITLE to such
 An admission or representation made by any partner concerning partnership affairs within the scope of Title to real property is in the property,
his authority in accordance with this Title is evidence against the partnership. name of one or more but not all
 Notice to any partner of any matter relating to partnership affairs operates as notice to the partnership the partners and the record does But the partnership may recover such property
except in case of fraud not disclose the right of the 1. Conveyance was not in the usual way of business
1. knowledge of the partner acting in the particular matter, acquired while a partner partnership 2. Knowledge of the buyer or seller’s lack of authority
2. knowledge of the partner acting in the particular matter, then present to his mind
3. knowledge of any other partner who reasonably could and should have communicated it to Title to real property is in the
the acting partner, operate as notice to or knowledge of the partnership name of one or more or all the Only passes the EQUITABLE INTEREST
partners, or in a third person in

trust for the partnership
Where the title to real property Article 1827. The creditors of the partnership shall be preferred to those of each partner as regards the partnership property.
Conveys TITLE to such property Without prejudice to this right, the private creditors of each partner may ask the attachment and public sale of the share of the
is in the name of all the partners
latter in the partnership assets.
 Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners, loss or injury is caused to any person, not being a partner RIGHTS OF AN ASSIGNEE: (1813)
in the partnership, or any penalty is incurred, the partnership is liable to the same extent as the partner so
acting or omitting to act. A conveyance by a partner of his whole interest does not of itself dissolve the partnership, or, as against the other
 The partnership is bound to make good the loss: partners in the absence of agreement, entitle the assignee, during the continuance of the partnership,
1. Where one partner acting within the scope of his apparent authority receives money or  to interfere in the management or administration of the partnership business or affairs, or
property of a third person and misapplies it; and  to require any information or account of partnership transactions, or
2. Where the partnership in the course of its business receives money or property of a third  to inspect the partnership books;
person and the money or property so received is misapplied by any partner while it is in the
custody of the partnership. WHAT ARE HIS RIGHTS IN CASE OF DISSOLUTION?
1. Receive in accordance with his contract the profits to which the assigning partner would
 PARTNER BY ESTOPPEL  a person (not a partner) will be liable as a partner if by words or conduct otherwise be entitled.
1. DIRECTLY represents himself as partner, or 2. In case of fraud in the management of the partnership, the assignee may avail himself of the
2. INDIRECTLY represents himself by consenting to another representing him to anyone, usual remedies.
as a partner in an existing partnership 3. Entitled to receive his assignor's interest and
4. May require an account from the date only of the last account agreed to by all the partners.
Article 1825. When a person, by words spoken or written or by conduct, represents himself, or consents to
another representing him to anyone, as a partner in an existing partnership or with one or more persons REMEDIES OF A JUDGMENT CREDITOR: (1814)
not actual partners, he is liable to any such persons to whom such representation has been made, who has,
on the faith of such representation, given credit to the actual or apparent partnership, and if he has made Without prejudice to the preferred rights of partnership creditors, on due application to a competent court by any
such representation or consented to its being made in a public manner he is liable to such person, whether judgment creditor of a partner:
the representation has or has not been made or communicated to such person so giving credit by or with
the knowledge of the apparent partner making the representation or consenting to its being made:  The court may charge the interest of the debtor partner with payment of the unsatisfied amount of
such judgment debt with interest thereon; (CHARGING ORDER)
REQUISITES:  May then or later appoint a receiver of his share of the profits, and of any other money due or to fall
due to him in respect of the partnership, and make all other orders, directions, accounts and inquiries
1. Defendant represented himself as partner/ represented by others as such and not denied by defendant which the debtor partner might have made, or which the circumstances of the case may require.
2. Plaintiff relied on the representation  The interest charged may be redeemed at any time before foreclosure, or in case of a sale being
3. Statement of defendant is not refuted directed by the court, may be purchased without thereby causing a dissolution:
LIABILITIES OF PARTNERS IN ESTOPPEL (1) With separate property, by any one or more of the partners; or
(2) With partnership property, by any one or more of the partners with the consent of all the
partners whose interests are not so charged or sold.
All partners consented to the representation Partnership is liable
No existing partnership RESPONSIBILITY OF PARTNERSHIP TO PARTNERS

Person who represented himself and all those who
All those represented consented
consented are liable jointly (pro-rata) 1. Refund the amounts disbursed by partners in behalf of the partnership + interest (1796)
Not all partners in existing partnership consented
2. Answer for obligations made in good faith by partners (1822-24)
No existing partnership 3. Demand an accounting
Person who represented himself and all those who
Not all those represented consented
consented are liable separately
None of the partners in existing partnership consented
Article 1826. A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership DISSOLUTION AND WINDING UP
arising before his admission as though he had been a partner when such obligations were incurred, except that this liability
shall be satisfied only out of partnership property, unless there is a stipulation to the contrary.

 DISSOLUTION  The dissolution of a partnership is the change in the relation of the partners caused by (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;
any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. (4) WILLFUL/PERSISTENT BREACH OF AGREEMENT: A partner willfully or persistently commits a
(1828) breach of the partnership agreement, or otherwise so conducts himself in matters relating to the
o No new transactions are allowed after dissolution partnership business that it is not reasonably practicable to carry on the business in partnership with
him;
 WINDING UP  process of settling the business or partnership affairs after dissolution (5) BUSINESS LOSSES: The business of the partnership can only be carried on at a loss;
(6) Other circumstances render dissolution equitable.
 On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is
completed. II. On the application of the purchaser of a partner's interest under Article 1813 or 1814:
 TERMINATION  that point in time when partnership affairs are completely wound up and finally settled (1) After the termination of the specified term or particular undertaking;
(this signifies the end of partnership life) (2) At any time if the partnership was a partnership at will when the interest was assigned or when the
charging order was issued.
CAUSES OF DISSOLUTION (1830)
EFFECTS OF DISSOLUTION (1832)
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular undertaking in the agreement;  GR: dissolution terminates all authority of any partner to act for the partnership
(b) By the express will of any partner, in good faith, when no definite term or particular is specified;  Except: So far as may be necessary to wind up partnership affairs or to complete transactions begun but not
(c) By the express will of all the partners who have not assigned their interests or suffered them to then finished
be charged for their separate debts, either before or after the termination of any specified term or
particular undertaking; (1) With respect to the partners:
(d) By the expulsion of any partner from the business in accordance with a power conferred by the (a) When the dissolution is not by the act, insolvency or death of a partner; or
agreement between the partners; (b) When the dissolution is by such act, insolvency or death of a partner, in cases where article
1833 so requires;
(2) In contravention of the agreement between partners, where the circumstances do not permit a dissolution (2) With respect to persons not partners, as declared in article 1834.
under any other provision of this article, by the express will of any partner at any time;
QUALIFICATIONS:
(3) By any event which makes it unlawful for the business of the partnership to be carried on or for the
members to carry it on in partnership;  WITH RESPECT TO THE PARTNERS (1833)
(4) When a specific thing which a partner had promised to contribute to the partnership, perishes before the
1. If dissolution is not caused by the ACT, DEATH OR INSOLVENCY of a partner, the authority of
delivery;;
partners to bind the partnership contract is immediately terminated
(5) By the death of any partner;
2. Where the dissolution is caused by the ACT, DEATH OR INSOLVENCY of a partner:
General Rule: Each partner is liable to his co-partners for his share of any liability created by
(6) By the insolvency of any partner or of the partnership;
any partner acting for the partnership as if the partnership had not been dissolved
Exceptions:
(7) By the civil interdiction of any partner;
(1) The dissolution being by act of any partner, the partner acting for the partnership
had knowledge of the dissolution; or
(8) By decree of court
(2) The dissolution being by the death or insolvency of a partner, the partner acting for
the partnership had knowledge or notice of the death or insolvency.
DISSOLUTION BY A COURT DECREE (Art. 1831)
 WITH RESPECT TO PERSONS NOT PARTNERS (1834)
I. On application by or for a partner the court shall decree a dissolution whenever:
When Partner Can Bind Partnership Even After Dissolution
(1) INSANITY: A partner has been declared insane in any judicial proceeding or is shown to be of
unsound mind; (1) By any act appropriate for winding up partnership affairs or completing transactions unfinished at
(2) INCAPACITY: A partner becomes in any other way incapable of performing his part of the dissolution;
partnership contract;

(2) By any transaction which would bind the partnership if dissolution had not taken place, provided the
other party to the transaction:  The individual property of a deceased partner shall be liable for all obligations of the
partnership incurred while he was a partner, but subject to the prior payment of his separate
(a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice debts.
of the dissolution; or  The partners who have not wrongfully dissolved the partnership or the legal representative
(b) Though he had not so extended credit, had nevertheless known of the partnership prior to of the last surviving partner, not insolvent, has the right to wind up the partnership affairs,
dissolution, and, having no knowledge or notice of dissolution, the fact of dissolution had PROVIDED, however, that any partner, his legal representative or his assignee, upon cause
not been advertised in a newspaper of general circulation in the place (or in each place if shown, may obtain winding up by the court.
more than one) at which the partnership business was regularly carried on.
TESTATE ESTATE OF LAZARO MOTA vs. SALVADOR SERRA [Feb 14, 1925]: The dissolution of a firm does not relieve any of its
The liability of a partner under the first paragraph, No. 2 (By any transaction which would bind the partnership if members from liability for existing obligations, although it does save them from new obligations to which they have not expressly or impliedly
dissolution had not taken place, provided the other party to the transaction), shall be satisfied out of partnership assented, and any of them may be discharged from old obligations by novation or other form of release. It is often said that a partnership
assets alone when such partner had been prior to dissolution: continues, even after dissolution, for the purpose of winding up its affairs.
(1) Unknown as a partner to the person with whom the contract is made; and
(2) So far unknown and inactive in partnership affairs that the business reputation of the partnership could RIGHTS OF PARTNER WHEN DISSOLUTION IS NOT IN CONTRAVENTION OF AN AGREEMENT:
not be said to have been in any degree due to his connection with it.
1. Apply the partnership property applied to discharge its liabilities, and
THE PARTNERSHIP IS IN NO CASE BOUND BY ANY ACT OF A PARTNER AFTER DISSOLUTION: 2. Apply the surplus applied to pay in cash the net amount owing to the respective partners.
(1) Where the partnership is dissolved because it is unlawful to carry on the business, unless the act is E: But if dissolution is caused by expulsion of a partner, bona fide under the partnership agreement and if the
appropriate for winding up partnership affairs; or expelled partner is discharged from all partnership liabilities, either by payment or agreement under the second
(2) Where the partner has become insolvent; or paragraph of Article 1835, he shall receive in cash only the net amount due him from the partnership.
(3) Where the partner has no authority to wind up partnership affairs;
Except by a transaction with one who: RIGHTS WHEN DISSOLUTION CAUSED BY CONTRAVENTION OF AGREEMENT
(a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of
his want of authority; or A. As To Partner Who Has Not Caused Dissolution Wrongfully
(b) Had not extended credit to the partnership prior to dissolution, and, having no knowledge or
notice of his want of authority, the fact of his want of authority has not been advertised in the Each partner who has not caused dissolution wrongfully shall have:
manner provided for advertising the fact of dissolution in the first paragraph, No. 2 (b)
(Though he had not so extended credit, had nevertheless known of the partnership prior to 1. Apply the partnership property applied to discharge its liabilities, and
dissolution, and, having no knowledge or notice of dissolution, the fact of dissolution had not 2. Apply the surplus applied to pay in cash the net amount owing to the respective partners.
been advertised in a newspaper of general circulation in the place (or in each place if more 3. The right to damages
than one) at which the partnership business was regularly carried on). 4. Right to continue the business during the agreed term
5. Possess the partnership property if business is continued.
Nothing in this article shall affect the liability under Article 1825 of any person who, after dissolution, represents himself or
consents to another representing him as a partner in a partnership engaged in carrying business. B. As To Partner Who Has Caused Dissolution Wrongfully
(1) A partner who has caused the dissolution wrongfully shall have:
DISCHARGE THE EXISTING LIABILITY (1835)
(a) If the business is not continued by others - apply partnership property to discharge liabilities
 GR: The dissolution of the partnership does not of itself discharge the existing liability of any partner. of partnership and receive in cash his share of surplus less damages caused by the wrongful
 Exceptions: A partner is discharged from any existing liability upon dissolution of the partnership by an dissolution.
agreement to that effect between: (b) If the business is continued by others- have the value of his interest in the partnership, less
1. Himself, any damage caused to his co-partners by the dissolution, ascertained and paid to him in cash,
2. The partnership creditor and or the payment secured by a bond approved by the court, and to be released from all existing
3. The person or partnership continuing the business; liabilities of the partnership; but in ascertaining the value of the partner's interest the value of
and such agreement may be inferred from the course of dealing between the creditor having knowledge of the good-will of the business shall not be considered.
the dissolution and the person or partnership continuing the business.

RIGHTS OF INJURED PARTY WHEN PARTNERSHIP CONTRACT IS RESCINDED ON THE GROUND OF (1) if the business is continued without liquidation of the partnership affairs;
THE FRAUD OR MISREPRESENTATION (2) Creditors have an equitable lien on the consideration paid to the retiring or deceased partner by the
purchaser when the retiring or deceased partner sold his interest without final settlement to creditors;
The party entitled to rescind is, without prejudice to any other right, is entitled: (3) Rights of retiring/ deceased partner:
(1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the a. Have the value of the interest ascertained as of the date of dissolution
partnership liabilities; b. Receive as ordinary creditor the value of his share in the dissolved partnership with interest/profits
(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the attributable to use of his right at his option
partnership for any payments made by him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the representation against all debts  The right to an account of his interest shall accrue to any partner, or his legal representative
and liabilities of the partnership. as against the winding up partners or the surviving partners or the person or partnership
continuing the business, at the date of dissolution, in the absence of any agreement to the
contrary.
SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS (1839)
PERSONA AUTHORIZED TO WIND UP:
RULES SUBJECT TO ANY AGREEMENT TO THE CONTRARY: 1. Partners designated by agreement
Assets of the Partnership 2. If no agreement, all partners who have not wrongfully dissolved the partnership
(1) The ASSETS OF THE PARTNERSHIP are: 3. Legal representative of the last surviving partner
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the liabilities
Order of Application
LIMITED PARTNERSHIP
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,  LIMITED PARTNERSHIP  is one formed by two or more persons under the provisions of the following
(c) Those owing to partners in respect of capital, article, having as members one or more general partners and one or more limited partners. The limited
(d) Those owing to partners in respect of profits. partners as such shall not be bound by the obligations of the partnership. (1843)
 The assets shall be applied in the order of their declaration in No. 1 to the satisfaction of the liabilities. Characteristics:
 The partners shall contribute, the amount necessary to satisfy the liabilities. 1. Formed by compliance with statutory requirements
 An assignee for the benefit of creditors or any person appointed by the court shall have the right to 2. One or more general partners control the business
enforce the contributions specified in the preceding number. 3. One or more general partners contribute to the capital and share in the profits but:
 Any partner or his legal representative shall have the right to enforce the contributions to the extent a. They do not Participate in the management of the business and
of the amount which he has paid in excess of his share of the liability. b. Are not personally liable for partnership obligations beyond their capital contributions
 The individual property of a deceased partner shall be liable for the contributions. 4. May ask for the return of their capital contributions under conditions prescribed by law
 When partnership property and the individual properties of the partners are in possession of a court for 5. Partnership debts are paid out of the common fi\und and the individual properties of general partners
distribution, partnership creditors shall have priority on partnership property and separate creditors on
individual property, saving the rights of lien or secured creditors. DIFFERENCES BETWEEN A GENERAL AND LIMITED PARTNERSHIP
(3) Where a partner has become insolvent or his estate is insolvent, the claims against his separate GENERAL LIMITED
property shall rank in the following order: Personally liable for partnership Liability extend only to his capital
(a) Those owing to separate creditors; Liability
obligations contributions
(b) Those owing to partnership creditors; When the manner of mgt is not agreed
(c) Those owing to partners by way of contribution. Management upon, all general partners have equal No participation in mgt
rights in the mgt of the business
Contributes cash and property only and
WHEN BUSINESS OF THE DISSOLVED PARTNERSHIP IS CONTINUED Contribution Contributes cash, property or industry
NOT industry
Party in Proper party to proceedings against
When creditors of the dissolved partnership are also creditors of the person or partnership continuing the Not the Proper party
proceedings partnership
business:
Assignment of Interest not assignable without consent of Interest is freely assignable

interest partners Art. 1849. After the formation of a lifted partnership, additional limited partners may be admitted upon filing an amendment
Firm Name Name MAY appear in the firm name Name must appear in the firm name to the original certificate in accordance with the requirements of Article 1865.
Other business Prohibited from engaging in business No prohibition
Retirement, Death, Insolvency, insanity, REQTS FOR LIMITED PARTNERS’ SURNAME TO APPEAR IN FIRM NAME: (1846)
civil interdiction of GP dissolves (1) It is also the surname of a general partner, or
Rights will just be transferred to the legal
partnership unless the business is (2) Prior to the time when the limited partner became such, the business has been carried on under a name
representatives
Effect of continued by the remaining general in which his surname appeared.
Retirement, partners:  A limited partner whose surname appears in a partnership name contrary to the provisions of the first
Estate of a deceased limited partner shall
Death, Insolvency, paragraph is liable as a general partner to partnership creditors who extend credit to the partnership without
be liable for all his liabilities as a limited
insanity (1) Under a right so to do stated in the actual knowledge that he is not a general partner.
partner.
certificate, or
(2) With the consent of all members. EFFECTS OF FALSE STATEMENT IN THE CERTIFICATE(1847)
 One who suffers loss by reliance on such statement may hold liable any party to the certificate who knew
the statement to be false:
STATUTORY REQUIREMENTS TO FORM A LIMITED PARTNERSHIP (Substantial Compliance required) (1) At the time he signed the certificate, or
(2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel
(1) Sign and swear to a certificate, which shall state - or amend the certificate, or to file a petition for its cancellation or amendment as provided in Article
1865.
(a) The name of the partnership, adding thereto the word "Limited";
(b) The character of the business; General Rule: A general partners’ acts do not require consent from the LP’s.
(c) The location of the principal place of business; Exceptions: WHEN GP NEEDS WRIITEN CONSENT FROM LP:
(d) The name and place of residence of each member, general and limited partners being respectively
designated; (1) Do any act in contravention of the certificate;
(e) The term for which the partnership is to exist; (2) Do any act which would make it impossible to carry on the ordinary business of the partnership;
(3) Confess a judgment against the partnership;
(f) The amount of cash and a description of and the agreed value of the other property contributed by each
(4) Possess partnership property, or assign their rights in specific partnership property, for other than a
limited partner;
partnership purpose;
(g) The additional contributions, if any, to be made by each limited partner and the times at which or events
(5) Admit a person as a general partner;
on the happening of which they shall be made;
(6) Admit a person as a limited partner, unless the right so to do is given in the certificate;
(h) The time, if agreed upon, when the contribution of each limited partner is to be returned;
(7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction
(i) The share of the profits or the other compensation by way of income which each limited partner shall
or insolvency of a general partner, unless the right so to do is given in the certificate.
receive by reason of his contribution;
(j) The right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms SPECIFIC RIGHTS OFA LIMITED PARTNER (1851)
and conditions of the substitution;
(k) The right, if given, of the partners to admit additional limited partners;
Same rights as a general partner to:
(l) The right, if given, of one or more of the limited partners to priority over other limited partners, as to (1) Have the partnership books kept at the principal place of business
contributions or as to compensation by way of income, and the nature of such priority; (2) At a reasonable hour to inspect and copy any of them;
(m) The right, if given, of the remaining general partner or partners to continue the business on the death, (3) Have on demand true and full information of all things affecting the partnership,
retirement, civil interdiction, insanity or insolvency of a general partner; and (4) Formal account of partnership affairs whenever circumstances render it just and reasonable; and
(n) The right, if given, of a limited partner to demand and receive property other than cash in return for his (5) Have dissolution and winding up by decree of court.
contribution.
(6) Right to receive a share of the profits or other compensation by way of income, and
(7) To the return of his contribution when the partnership assets are in excess of its liabilities.
(2) File for record the certificate in the Office of the SEC.
REQUISITES FOR RETURN OF CONTRIBUTION:
 A limited partnership is formed if there has been SUBSTANTIAL COMPLIANCE in GOOD FAITH with a. All liabilities of partnership have been paid or if not, assets are at least sufficient to cover them
the foregoing requirements. b. Consent of all members have been obtained
 A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights c. Certificate is cancelled or amended as to set forth withdrawal or reduction of contribution
and powers as a limited partner, he takes part in the control of the business.

 A person who has contributed to the capital of a business erroneously believing that he has become a limited partner, is LIABILITIES OF LP (1858)
not, a general partner with the person or in the partnership carrying on the business, or bound by the obligations of such A limited partner is liable to the partnership:
person or partnership, provided that on ascertaining the mistake he promptly renounces his interest in the profits of the 1. difference between his contribution actually made and that stated in the certificate as having been made;
business, or other compensation by way of income. and
2. unpaid contribution which he agreed in the certificate to make in the future at the time and on the
GP AND LP AT THE SAME TIME? conditions stated in the certificate.
 A person may be a GP and an LP in the same partnership at the same time, provided that this fact shall be
stated in the certificate. A limited partner holds as trustee for the partnership:
 A person who is a GP and an LP, shall have all the rights and powers and be subject to all the restrictions of a 1. Specific property stated in the certificate as contributed by him, but which was not contributed or which
general partner; except that, in respect to his contribution, he shall have the rights against the other members has been wrongfully returned, and
which he would have had if he were not also a general partner. 2. Money or other property wrongfully paid or conveyed to him on account of his contribution.
OTHER RIGHTS OF AN LP: (1854)  The liabilities of a limited partner can be waived or compromised only by the consent of all members;
 May loan money to and transact other business with the partnership, and, unless he is also a general partner, but a waiver or compromise shall not affect the right of a creditor of a partnership.
receive on account of resulting claims against the partnership, with general creditors, a pro rata share of the  When a contributor has rightfully received the return of the capital of his contribution, he is liable to
assets. the partnership for any sum, not in excess of such return with interest, necessary to discharge its
 No limited partner shall in respect to any such claim: liabilities to all creditors who extended credit or whose claims arose before such return.
(1) Receive or hold as collateral security and partnership property, or A LIMITED PARTNER'S INTEREST IS ASSIGNABLE (1859)
(2) Receive from a general partner or the partnership any payment, conveyance, or release from liability if at  An assignee may become a substituted limited partner.
the time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not
claiming as general or limited partners.  SUBSTITUTED LIMITED PARTNER is a person admitted to all the rights of a limited partner who has
The receiving of collateral security, or payment, conveyance, or release in violation of the foregoing provisions is a died or has assigned his interest in a partnership.
fraud on the creditors of the partnership.  Has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those
liabilities of which he was ignorant at the time he became a limited partner and which could not be
PRIORITY OVER OTHER LIMITED PARTNERS ascertained from the certificate.
 Does not release the assignor from liability to the partnership under Articles 1847 and 1848.
Where there are several limited partners The members may agree that one or more of the limited partners shall
have a priority over other limited partners as to: REQUISITES FOR AN ASSIGNEE TO BECOME A SUBSTITUTED LIMITED PARTNER:
a. the return of their contributions, 1. All the members consent thereto or if the assignor, being thereunto empowered by the certificate, gives
b. as to their compensation by way of income, or the assignee that right.
c. as to any other matter. 2. Certificate is appropriately amended in accordance with Article 1865.
If such an agreement is made it shall be stated in the certificate, and in the absence of such a statement all the 3. Amended certificate is registered with the SEC
limited partners shall stand upon equal footing.
LIMITATIONS OF AN ASSIGNEE WHO DOES NOT BECOME A SUBSTITUTED LIMITED PARTNER:
 No right to require any information or
Limited partner may rightfully demand the return of his contribution:  No right to account of the partnership transactions or
 No right to to inspect the partnership books;
1. On the dissolution of a partnership; or  Only entitled to receive the share of the profits or other compensation by way of income, or
2. When the date specified in the certificate for its return has arrived, or  The return of his contribution, to which his assignor would otherwise be entitled.
3. After he has six months' notice in writing to all other members, if no time is specified in the certificate,
either for the return of the contribution or for the dissolution of the partnership. PREFERENCE OF CREDITS: DISSOLUTION PF LIMITED PARTNERSHIPS (1863)
 A limited partner, irrespective of the nature of his contribution, has only the right to demand
and receive cash in return for his contribution. 1) Those to creditors, in the order of priority as provided by law, except those to limited partners on
account of their contributions, and to general partners;
LP MAY HAVE THE PARTNERSHIP DISSOLVED AND ITS AFFAIRS WOUND UP WHEN: 2) Those to limited partners in respect to their share of the profits and other compensation by way of
1. He rightfully but unsuccessfully demands the return of his contribution, or income on their contributions;
2. The other liabilities of the partnership have not been paid, or the partnership property is insufficient for 3) Those to limited partners in respect to the capital of their contributions;
their payment, and the limited partner would otherwise be entitled to the return of his contribution. 4) Those to general partners other than for capital and profits;
5) Those to general partners in respect to profits;

6) Those to general partners in respect to capital.
 The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such.
A CERTIFICATE SHALL BE AMENDED WHEN:

(1) Change in the name of the partnership or in the amount or character of the contribution of any limited
partner;
(2) A person is substituted as a limited partner;
(3) An additional limited partner is admitted;
(4) A person is admitted as a general partner;
(5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the
business is continued under Article 1860;
(6) Change in the character of the business of the partnership;
(7) False or erroneous statement in the certificate;
(8) Change in the time as stated in the certificate for the dissolution of the partnership or for the return of a
contribution;
(9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been
specified in the certificate, or
(10) The members desire to make a change in any other statement in the certificate in order that it shall
accurately represent the agreement among them.

Essential Elements of Agency:

1.) Consent, express or implied;
rd
2.) Object of the contract is the execution of a juridical act in relation to 3 persons;
AGENCY 3.)
4.)
The agent acts as a representative and not for himself;
The agent acts within the scope of his authority.
NATURE, FORM AND KINDS OF AGENCY Delegated Acts

General Rule: Anything that can be done by the principal
 AGENCY  By the contract of agency a person binds himself to render some service or to do something in Exceptions:
representation or on behalf of another, with the consent or authority of the latter. (1868) Acts that cannot be done through an agent:
rd
 Agency: A relationship which implies a power in an agent to contract with a 3 person on behalf of a 1.) Personal acts: if personal performance is regulated by law or public policy or agreement;
principal. 2.) Criminal or illegal acts: attempt to delegate another authority to do an act which, if done by the principal
would be illegal, is void.
Kind of Contract: It is a preparatory contract. It is a contract entered not for its own end but to be able to enter into
other contracts. Nature of Relation between Principal and Agent:
 Fiduciary, based on trust and confidence.
Characteristics:  Agents cannot do acts contrary to the principal’s interest. Why? Once there is recognition of the agency,
1.) Consensual: perfected by mere consent; he will be in estoppel.
2.) Nominate: it has its own name;
3.) Principal: does not depend on another contract for its existence and validity; Agency vs. Partnership
4.) Preparatory: entered into as a means to an end;
5.) Unilateral/Bilateral: Agency Partnership
a.) Unilateral: if contract is gratuitous, it creates obligations for only one of the parties, i.e. agent. Control by the principal Applicable Not applicable
b.) Bilateral: if for compensation, it gives rise to reciprocal rights and obligs.
Binds only the principal if agents acts Partner binds co-partners and
Liability of Agent
within his authority himself
Basis: Representation.
No sharing except as to agent’s Profits shared by co-partner in
Sharing of profits
The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and compensation agreed proportions
binding effects as if the principal personally did them.
Common feature: Fiduciary trust
Distinguishing Features:
1.) Representative character; and
Agency v. Lease of Work or Service
2.) Derivative authority.
Agency Lease of Work/Service
Purpose: To extend the personality of the principal through the facility of the agent.
Basis is representation. Basis is employment
Parties: Agent exercises discretionary powers. Lessor only performs ministerial functions.
1.) Principal; and rd
3 persons are involved: principal, agent & 3 person. Only 2 persons involved: lessor and lessee
2.) Agent. Commercial or business transactions. Matters of mere manual or mechanical execution.
Who can be principal? Agency v. Guardianship

The principal may be a natural person or a juridical person. He must be capacitated. The rule is if a person is
capacitated to act for himself or in his own right, he can act through an agent. Agency Guardianship
Must the agent have capacity? Agent represents a capacitated person. Guardian represents an incapacitated person.
rd
Insofar as 3 persons are concerned, it is enough that the principal is capacitated; but insofar as his obligations to
his principal are concerned, the agent must be able to bind himself.

a.) General: comprises all the business of the principal.
Agent appointed by principal and can be Guardian appointed by court and stands in loco b.) Special: comprises one or more specific transactions.
removed by him. parentis. 4.) As to Authority conferred:
a.) Couched in general terms: deemed to comprise only acts of administration.
Guardian not subject to directions of ward but must act b.) Couched in specific terms: authorizes only the performance of a specific act/s.
Agent subject to directions of principal.
for his benefit. 5.) As to Nature and effects:
a.) Representative: agent acts in name and representation of principal.
Guardian has no power to impose personal liability on b.) Simple/Commission: agent acts in his own name but for the account of the principal.
Agent can make principal personally liable. Can agency be presumed?
his ward.
 General Rule: NO, because the relationship between the principal and agent must exist as a fact.
 Exceptions:
Agency to Sell v. Sale 1. When agency arises by operation of law; or,
2. Agency is presumed to prevent unjust enrichment.
Agency to sell Sale
Agent receives the goods as the goods of the Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or
Buyer receives the goods as owner. from his silence or inaction according to the circumstances.
principal.
Agent delivers proceeds of the sale. Buyer pays the price.
Agent can return object in case he is unable to Form of Acceptance by Agent:
rd Generally, buyer cannot return the object sold.  General Rule: NO formal requirements. Agent’s authority may be ORAL or WRITTEN, it may be in
sell to a 3 person.
PUBLIC or PRIVATE WRITINGS.
Agent in dealing with the thing received is
Buyer can deal with the thing as he pleases, being the  Exception: when the law requires a specific form (e.g. sale of real property or any interest therein by an
bound to act accdg to the instructions of his
owner. agent.)
principal
Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal
Agent v. Independent Contractor
delivers his power of attorney to the agent and the latter receives it without any objection.
Agent Independent Contractor
Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of
Represents the principal. Employed by employer.
the agent, except:
Acts under the control and instructions of the 1.) When the principal transmits his power of attorney to the agent, who receives it without any objection;
Acts according to his own method.
principal 2.) 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.
Principal liable for torts committed by agent w/in Employer not liable for torts committed by
scope of authority. independent contractor.
Form of Acceptance by Agent:
1) Express - when it is oral or written;
Art. 1869. Agency must be express, or implied from the acts of the principal, from his silence or lack of action, 2) Implied - when it can be inferred from the acts of the agent which carry out the agency, or from his
or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. silence or inaction according to the circumstances.
a. Between 2 persons who are present - acceptance is deemed implied when the agent receives
Agency may be oral, unless the law requires a specific form. a power of attorney from the principal himself personally without objection. (Is this
presumption conclusive? NO, it can be rebutted by contrary proof.)
Classifications of Agency: b. Between persons who are absent – acceptance not deemed implied from the silence of the
1.) As to Manner of Creation: agent
a.) Express: actually authorized, either orally or in writing.
b.) Implied: implied from acts of principal, from his silence or lack of action or his failure to  Power of attorney: An instrument in writing by which one person, as principal, appoints another as his
repudiate the agency knowing that another person is acting on his behalf without authority. agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of
rd
2.) As to Character: the principal. Its primary purpose is to evidence the authority of the agent to 3 parties w/ whom the
a.) Gratuitous: agent receives no compensation for his services. agent deals.
b.) Onerous: agent does receive compensation.
3.) As to Extent of business covered:  Construction of power of Attorney: Strictly Construed and Strictly Pursued.

 The instrument will be held to grant only those powers which are specified, and the agent may neither rd rd
3.) Estoppel of 3 Persons – A 3 person, having dealt with one as an agent may be estopped to deny the
go beyond nor deviate from the power of Attorney. The only exception is when strict construction will rd
destroy the very purpose of the power. agency as against the principal, agent or 3 persons in interest.
4.) Estoppel of the govt – The govt is neither estopped by the mistake or error on the part of its agents. But it
Meaning of “present” may be estopped through affirmative acts of its officers acting within the scope of their authority.
Not limited to face-to-face encounters. Two persons conversing on the phone are also considered as both
“present”. 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.
Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent,  A letter is sufficient [Jimenez v. Rabot].
except:
1.) When the principal transmits his power of attorney to the agent, who receives it without any Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary.
objection;
2.) When the principal entrusts to him by letter or telegram a power of attorney with respect to the  Broker: One who in behalf of others, and for compensation or fee, negotiate contracts relative to
business in which he is habitually engaged as an agent, and he did not reply to the letter or property. He is the negotiator between the parties, never acting in his own name, but in the name of
telegram. those who employ him. He is strictly a middleman and for some purposes, the agent of both parties.
When is a broker entitled to compensation?

Way of Giving Notice to Agent and its Effects:  A broker is entitled to commission whenever he rings to his principal a party who is ready, capacitated,
1.) Special information: the person appointed as agent is considered such with respect to the person to able and willing to take the property, and enter into a valid contract upon the terms named by the
whom it was given. principal, although the particulars may be arranged and the matter negotiated and completed between
2.) Public advertisement: Agent is considered such with regard to any person. the principal and the purchaser directly. A broker is never entitled to commission for unsuccessful
efforts (Law of Proximate Cause): he must be the proximate or determining cause as to the
 Revocation – An agency is revoked in the same manner as it was given. consummation of the sale.
 General rule: Special information needs special information of revocation. Does the law allow double agency?
rd
 Exception: if you can prove that the 3 person read the notice in the newspaper.  General Rule: NO. Such agency is disapproved by law for being against public policy and sound
morality.
Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of  Exception: Where the agent acted with full knowledge and free consent of the principals.
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. In case the agent assumes a double agency, what is his right to compensation?
1.) If with knowledge of both principals – recovery can be had from both.
The power shall continue to be in full force until the notice is rescinded in the same manner in which it was 2.) If without knowledge of both – agent can recover from neither.
given. 3.) If with knowledge of only one – 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
Agency by Estoppel: There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, against public policy and good morals.
although no real authority to represent another.
Art. 1876. An agency is either general or special.
1.) Estoppel of Agent – One professing to act as agent for another may be estopped to deny his agency both The former comprises all the business of the principal. The latter, one or more specific transactions.
rd
as against his asserted principal and the 3 persons interested in the transaction in which he is engaged.
Classification of Agents:
2.) Estoppel of Principal –
a.) As to Agent – One who knows that another is acting as his agent and fails to repudiate his
1.) Universal agent: One employed to do all acts that the principal may personally do, and which the
acts, or accept the benefits of them, will be estopped to deny the agency as against such other.
rd
principal can lawfully delegate to another the power of doing.
b.) As to sub-agent – To estop the principal from denying his liability to a 3 person, he must
have known or be charged with knowledge of the fact of the transmission and the terms of the 2.) General agent: One employed to transact all the business of his principal, or all business of a particular
agreement between the agent and sub-agent. kind or in a particular place, or in other words, to do all acts connected with a particular trade, business,
rd
c.) As to 3 persons – One who knows that another is acting as his agent or permitted another to or employment.
rd
appear as his agent, to the injury of 3 persons who have dealt with the apparent agent as
such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.

3.) Special/Particular agent: 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. e.g.: 1.) To sue for collection of debts;
2.) To employ workers or servants and employees needed for the conduct of business;
a.) Attorney at law: One whose business is to represent clients in legal proceedings. 3.) To engage counsel to preserve the ownership and possession of the principal’s property;
b.) Auctioneer: One whose business is to sell property for others to the highest bidder at a public 4.) To lease real property to another person for 1 year or less, provided the lease is not registered;
sale. 5.) To make customary gifts for charity or to employees in the business managed by the agent
c.) Broker: One whose business is to act as intermediary between 2 other parties. 6.) To borrow money if it be urgent and indispensable for the preservation of the things under administration.
d.) Factor: One whose business is to receive and sell goods for a commission, being entrusted
with the possession of the goods involved in the transaction. How are contracts of agency construed?
 Attorney-in-fact: One who is given authority by his principal to do a particular act not of a legal character.
In strict legal sense: An agent having a special authority created by deed. 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
General Agent v. Special Agent [SNETI] from the whole instrument. In case of doubt, resort must be had to the situation, surroundings and relations of the
parties. The intention of the parties must be sustained rather than defeated. So if the contract be open to 2
As to… General agent Special agent constructions, one of which would uphold the intention while the other would overthrow it, the former is to be
chosen.
Only one or more specific acts in pursuance of
All acts connected w/ the business in  MEMORIZE THIS! [PNC-WIGLLS-PG-CARS]
Scope of authority particular instructions or w/ restrictions
which he is engaged.
necessarily implied from the act to be done.
Art. 1878. Special powers of attorney are necessary in the following cases:
Nature of service Series a transactions involving a Single transaction or a series of transactions not 1.) To make such payments as are not usually considered as acts of administration;
authorized continuity of service. involving continuity of service. 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
Extent to which By an act within the scope of his waive objections to the venue of an action or to abandon a prescription already acquired;
Cannot in a manner beyond or outside the
agent may bind authority although it may be 4.) To waive any obligation gratuitously;
specific acts w/c he is authorized to perform.
principal contrary to his special instructions. 5.) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
Apparent authority does not rd 6.) To make gifts, except customary ones for charity or those made to employees in the business managed by
Termination effective as to 3 party unless
Termination of the agent;
terminate by mere revocation of agency was for purpose of contracting w/ that
authority rd
7.) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the
rd
authority w/o notice to 3 parties. 3 party. things which are under administration;
8.) To lease any real property to another person for more than one year;
Construction of
Strictly construed. Limits the authority of 9.) To bind the principal to render some service without compensation;
instructions of Merely advisory.
agent. 10.) To bind the principal in a contract of partnership;
principal
11.) To obligate the principal as a guarantor or surety;
12.) To create or convey real rights over immovable property;
Art. 1877. An agency couched in general terms comprises only acts of administration, even if the principal 13.) To accept or repudiate an inheritance;
should state that he withholds no power or that the agent may execute such acts as he may consider 14.) To ratify or recognize obligations contracted before the agency;
appropriate, or even though the agency should authorize a general or unlimited management. 15.) Any other act of strict dominion.
Examples of acts of mere administration:

Scope of General Authority to Purchase 5.) Give directions for the delivery of the property purchased, and
Where an agent’s power to purchase is general and unrestricted, he has implied authority to do whatever is 6.) May borrow money to pay for the care and preservation of the property purchased.
usual and necessary in the exercise of such power. He may:
1.) Determine the usual and necessary details of the contract, But he has no special power to
2.) Agree upon the price, 7.)
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Settle a contest between the principal and a 3 person regarding the ownership of goods
3.) Modify or rescind the contract of purchase, purchased, or
4.) Accept delivery for his principal, 8.) Agree to an account stated, or

9.) Do anything not usual or necessary to the exercise of such authority. very essence – sine qua non – of the principal and agent relationship. This authority, unless it is
otherwise agreed, includes only the authority to act for the benefit of the principal, and the source of
Scope of Special Authority to Purchase the authority is the principal and never the agent.
Where the agency is a special one, or is restricted to purchases upon certain terms and conditions, the agent has Kinds of Authority:
no authority to 1.) Actual: when it is actually granted, and it may be express or implied. It results from what
1.) Purchase upon different terms and conditions from those authorized, or the principal indicates to the agent.
2.) Modify or rescind a contract of purchase made by the principal. 2.) Express: when it is directly conferred by words.
3.) Implied: when it is incidental to the transaction or reasonably necessary to accomplish the
Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not purpose of the agency, and therefore, the principal is deemed to have actually intended the
include the power to sell. agent to possess.
4.) Apparent or Ostensible: when it is conferred by words, conduct or even by the silence of
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The following are included in a Power to Sell: the principal which causes a 3 person reasonably to believe that a particular person, who
The power to: may or may not be the principal’s agent, has actual authority to act for the principal.
1.) Find a purchaser or to sell directly; Ostensible authority is another name for authority by estoppel.
2.) Deliver the property; 5.) General: when it refers to all the business of the principal.
3.) Make the usual representation and warranty; 6.) Special: when it is limited only to one or more specific transactions.
4.) Execute the necessary transfer documents; 7.) By necessity or by operation of law: when it is demanded by virtue of the existence of an
5.) Fix the terms of the sale unless there be set conditions stipulated by the principal; emergency; it terminates when the emergency has passed.
6.) Sell only for cash;
7.) Receive the price unless he was authorized only to solicit orders. Requisites for Principal to be Bound by Act of Agent:
Powers not included in a Power to Mortgage 1.) The agent must act in behalf of the principal;
1.) Sell; 2.) The agent must act within the scope of his authority.
nd
2.) Execute a 2 mortgage;
rd When is a principal not bound by the act of his agent?
3.) Mortgage for the agent’s personal benefit or for the benefit of any 3 person, unless the contrary has  When the agent acts without or beyond the scope of his authority; or
been clearly indicated.  When the agent acts within the scope of his authority but in his own name except when the transaction
involves things belonging to the principal.
Does the principal have the power to revoke a contract giving an agent exclusive authority to sell?
 YES. But he may not have the right to use such power if he has agreed not to exercise such power during a Authority? Whose behalf? Status of contract
certain period. In case he fails to comply with this obligation-not-to-do, he will be liable for damages.
With authority Principal’s Valid
With authority Own Depends. [1883]
Art. 1880. A special power to compromise does not authorize submission to arbitration.
Without Principal’s Unenforceable
 Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s Without Own Valid
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 Who to sue?
trust of the principal.  In case the agent acts in the name of the principal and within his scope of authority, you must name the
principal as the defendant.
What happens if the agent is specifically authorized to submit to arbitration? Note: The authority to look for buyers does not carry with it the authority to sell.
 Then the arbitration award binds the principal, provided, of course, that the agent acted within the scope of
his authority. Art. 1882. The limits of the agent’s authority shall not be considered exceeded should it have been performed
in a manner more advantageous to the principal than that specified by him.
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. What happens if the agent exceeds his authority but he performs the agency in a manner more advantageous to
the principal?
 Authority: 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. The authority of the agent is the

 It will be as if he did not exceed the limits of his authority since he must do such acts as may be conducive 1.) To carry out the agency he has accepted.
to the accomplishment of the purpose of the agency. 2.) To answer for damages which through his non-performance the principal may suffer.
 Test: Would the principal enter into this transaction? 3.) To finish the business already begun on the death of the principal should delay entail danger.
4.) To observe the diligence of a good father or a family in the custody and preservation of the goods
Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with forwarded to him by the owner in case he declines an agency, until an agent is appointed.
whom the agent contracted; neither have such persons against the principal. 5.) To advance the necessary funds should there be a stipulation to do so.
In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the 6.) To act in accordance with the instructions of the principal, and in default thereof, to do all that a good
transaction were his own, except when the contract involves things belonging to the principal. father of a family would do.
7.) Not to carry out the agency if its execution would manifestly result in loss or damage to the principal.
The provisions of this article shall be understood to be without prejudice to the actions between the principal 8.) To answer for damages if there be a conflict between his interests and those of the principal, he should
and agent. prefer his own.
Kinds of Principals: 9.) Not to loan to himself if he has been authorized to lend money at interest.
10.) Not to render an account of his transactions and to deliver to the principal whatever he may have
received by virtue of the agency.
1.) Disclosed: if at the time of the transaction contracted by the agent, the other party thereto has known
11.) To be responsible in certain cases for the act of the substitute appointed by him.
that the agent is acting for a principal and has known the principal’s identity.
12.) To pay interest on funds he has applied to his own use.
2.) Partially disclosed: if the other party knows or has reason to know that the agent is or may be acting
for a principal but is unaware of the principal’s identity. The partially disclosed principal may enforce
rd rd Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a
against the 3 person the contract of the agent like any disclosed principal. Similarly, the 3 person has family in the custody and preservation of the goods forwarded to him by the owner until the latter should
a right of action against the principal. appoint an agent. The owner shall as soon as practicable either appoint an agent or take charge of the goods.
3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal.
What is the rule if a person declines agency?
 General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his  He is bound to observe the diligence of a good father of a family in the custody and preservation of the
own name, the agent is the one directly liable to the person with whom he had contracted as if the goods forwarded to him by the owner.
transaction were his own.
 Exception: If the contract involves something belonging to the principal. Duty of Owner in case an Agency is Declined:
 He must act as soon as possible by appointing an agent or by taking charge of the goods.
Remedy of the Principal if this situation arises:
 He can demand from the agent damages for his failure to comply with the agency.
rd
Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to
Remedy of the 3 person with whom the agent contracted in case the obligation is not complied with: do so except when the principal is insolvent.
 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 be  The parties stipulate that the agent shall advance the necessary funds.
determined w/o litigation who is liable, he can sue both.
What is the obligation then of the agent?
 GR: He is bound to furnish such funds.
OBLIGATIONS OF THE AGENT  Except: When the principal is insolvent. This exception is based on the principal’s obligation to reimburse
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. Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the
He must also finish the business already begun on the death of the principal, should delay entail any danger. 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.
General Obligations of an Agent to his Principal:
1.) To act with the utmost good faith and loyalty for the furtherance and advancement of the interests
of the principal.  Instructions: Private directions which the principal may give the agent in regard to the manner of
2.) To obey the principal’s instructions. performing his duties as such agent.
3.) To exercise reasonable care.
Authority v. Instructions
Specific Obligations:

Authority Instructions  Except: if before acting that way, it is obvious that the act will result to damage, then the
agent is liable.
Direct the manner of transacting the authorized
Sum total of powers committed or
business and contemplates only a private rule
permitted to the agent by the principal. Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate
of guidance to the agent.
of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the
Relates to the subject with which the agent principal.
Refers to the manner or mode of his action with  Rationale: The agent can lend money to the principal using the agent’s own funds at the current rate of
is empowered to deal or the kinds of
respect to matters which in their substance are interest and NOT at a higher interest rate because the agent is supposed to act for the principal’s benefit.
business or transactions upon which he is
within the scope of permitted action. rd
powered to act.  If the agent is authorized to lend the principal’s money, with interest, to 3 persons, the agent can’t be
Limitations of authority are operative as Without significance as against those dealing the borrower without the consent of the principal because the agent may not be a good borrower or he
against those who have or are charged with the agent with neither knowledge nor may be insolvent or he may not be a good risk. There is a danger here that the interest of the principal
with knowledge of them. notice of them. would be jeopardized.
 This would also seem to be the case if the agent is authorized to lend money w/o interest because of the
Contemplated to be made known to the Not expected to be made known to those w/ same reason.
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3 person dealing w/ the agent. whom the agent deals.
Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal
 Instructions pertain to the principal and agent whatever he may have received by virtue of the agency, even though it may not be owing to the principal.
rd Every stipulation exempting the agent from the obligation to render an account shall be void.
 Authority pertains to the agent and 3 persons.
Exceptions to the rule that the agent must not depart from the instructions of the principal: [SAI]  Rationale: Contrary to public policy as it would encourage fraud. It is in the nature of a waiver of an
A departure may be justified by: action for future fraud w/c is void.
1.) A sudden emergency;  If the agent fails to deliver and instead converts or appropriates for his own use the money or
2.) If the instructions are ambiguous; or property belonging to his principal, with what can he be charged? ESTAFA.
3.) If the departure is so insubstantial that it does not affect the result and the principal suffers no damage
thereby. 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:
When the Agent has a right to disobey the principal’s instructions: 1.) When he was not given the power to appoint one;
1.) When the instruction calls for the performance of illegal acts; or 2.) When he was given such power, but without designating the person, and the person appointed was
2.) Where he is privileged to do so to protect his security/interest in the subject matter of the agency. notoriously incompetent or insolvent.
Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to All acts of the substitute appointed against the prohibition of the principal shall be void.
the principal.
 Sub-agent: 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 representative.
 Rationale: The duty of the agent who is merely an extension of the personality of the principal is to
render service for the benefit of the principal and not to act to his detriment. Furthermore, the agent
Relation among the principal, agent and sub-agent
must exercise due diligence in carrying out the agency.
 In reality, the sub-agent is a stranger to the principal who originally gave life to the agency. But if the
agent is authorized to appoint a sub-agent, the relation of principal and agent exists between the
Art. 1889. The agent shall be liable for damages if, its execution would manifestly result in loss or damage to principal and the sub-agent. That is, the sub-agent may be the agent of the principal if he is in actual
the principal. control of the business and the principal knows of his appointment or knows that his appointment is
necessary. Consequently, any act done by the sub-agent in behalf of the principal is deemed an act of
 Note: This provision applies to both onerous and gratuitous transactions. The law does not the principal; so neither agent nor sub-agent may be held personally liable as long as they act within
distinguish so neither should we. the scope of their authority.
 Rationale: An agent occupies a fiduciary position and therefore is bound to exercise loyalty, obedience, 
and diligence with respect to the interest of the principal. When can an agent appoint a sub-agent?
rd
If the agent follows the principal’s instructions yet his acts still result in damage to 3 persons, who is liable? So long as there’s no prohibition. However, he shall be responsible for all the sub-agent’s acts.
 General rule: The agent is NOT liable. 4 Instances where a Sub-agent is appointed and the Effects of each:

rd
Principal  Agent 3 Party (wrong party to complain if the principal doesn’t complain of the agent’s acts)
Instance Effect
No prohibition Agent responsible for all the acts of sub-agent.  General rule: “an agent who acts as such is not personally liable to the party with whom he contracts.”
 Reason for general rule: Because an agent who acts as such within the scope of his authority represents
the principal so that his contract is really the principal’s.
Prohibition Sub-agent’s acts are VOID as to the principal.
 Exceptions:
1.) When the agent binds himself; or
Authority to appoint but not designated Agent liable for acts of sub-agent if the sub-agent is 2.) When he exceeds the limits of his authority without giving the third party
by principal notoriously incompetent or insolvent. sufficient notice of his powers.
Reasons for exceptions:

Authority to appoint and designated by Agent is released from any liability from the acts of 1.) When the agent expressly binds himself, he thereby obligates himself personally and by his own act.
principal the sub-agent 2.) When the agent exceeds his authority, he really acts without authority and therefore, the contract is
unenforceable against the principal. The agent becomes personally liable because y his wrong or
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Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring omission, he deprives the 3 party with whom he contracts of any remedy against the principal.
an action against the substitute with respect to the obligations which the latter has contracted under the
substitution. 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
When can the principal sue the substitute? the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to
 Under the premises given in the previous provision, the principal can sue both the agent and the secure the principal’s ratification.
substitute. 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.
rd
Art. 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is This article refers to the liability of the principal towards 3 persons.
not solidary, if solidarity has not been expressly stipulated.
What happens if the principal appoints an agent who is ignorant?
 If solidarity is not stipulated, what is the liability to 2 or more agents? JOINT.  Then the fault is the principal’s alone. Equity demands that the principal should be bound by the acts of the
 Each is liable only for proportionate part of debt. agent if the latter acts within the scope of his authority and in accordance with the instructions of the
former.
Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of the
agency, and for the fault or negligence of his fellow agents, except in the latter case when the fellow agents Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of
acted beyond the scope of their authority. the agent’s authority, is 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
If solidarity has been agreed upon, each of the agents becomes solidarily liable for: agent.
1.) The non-fulfillment of the agency; or
2.) The fault or negligence of the fellow agent provided the latter acted within the scope of his Requisite for article to apply: AUTHORITY TO AGENT MUST BE IN WRITING.
authority.
But the innocent agent has a right later on to recover from the guilty or negligent agent. “Scope of agent’s authority” includes:
 Not only the actual authorization conferred upon the agent by the principal, but also that which has
What happens if the fellow agent acted beyond the scope of his authority? apparently or impliedly been delegated to him.
 Then the innocent agent cannot be liable at all to the principal even if solidarity had been agreed upon.
rd
To hold the principal liable, a 3 person dealing with an agent must:
Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did Discover upon his peril not only the fact of agency but the nature and extent of authority of the agent. He is put
so, and on those which he still owes after the extinguishment of the agency. on inquiry. He must also act with ordinary prudence and reasonable diligence.
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he Fundamental principles when inquiring whether authority exists:
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of 1.) The law indulges in no bare presumptions that an agency exists, it must be proved and presumed from
his powers. facts;
2.) The agent cannot establish his own authority, either by his representations or by assuming to exercise it;

3.) An authority cannot be established by mere rumor or general reputation; 5.) By the ejusdem generis rule – such that where in an instrument of any kind, an enumeration of specific
4.) A general authority is not an unlimited one; and matters is followed by a general phrase is held to be limited in scope by the specific matters.
5.) Every authority must find its ultimate source in some act or omission of the principal.
Responsibility of principal when agent acts w/ improper motives:
 In case the fact of agency or the extent of the authority of the agent is controverted, the burden of 
rd
General rule: Motive of agent in entering into a K w/ a 3 person is immaterial.
rd
proof is on: The 3 person to establish the fact of agency or the extent of authority of the agent.  Exceptions:
rd
1.) Where the 3 person knew that the agent was acting for his benefit, in w/c case, the principal is
rd
Does the 3 person have to inquire further if the power of attorney is written? rd
not liable to the 3 person; and
2.) Where the owner is seeking recovery of personal property of w/c he has been unlawfully
 No. He is not required to inquire further than the terms of the written power of attorney. deprived.
If there is a secret mutual understanding between the principal and the agent, and such is not expressed in the Principal’s responsibility for an agent’s misrepresentation:
rd
written power of attorney, does the 3 person have to inquire? 1.) Within the scope of the agent’s authority – Principal is subject to liability for lass caused to another by
rd
the 3 persons reliance upon a deceitful representation of an agent in the course of his employment if:
 No. As far as he is concerned, an act of the agent within the terms of the power of attorney as written, a. Representation is authorized;
is within the scope of the agent’s apparent authority notwithstanding that the agent may have b. Within the implied authority of the agent to make for the principal; or
exceeded the limits of his actual authority according to a secret understanding between him and the c. Apparently authorized.
principal. In such a case, the principal is estopped from claiming that the agent exceeded his authority. 2.) Beyond the scope of the agent’s authority – General rule: Principal is not bound.
3.) Exception: when the principal takes advantage of a K made under the false misrepresentation of his
Ways by which the agent’s authority may be broadened or restricted: [I’m-UNDEr] agent.
4.) For the agent’s own benefit – Principal is liable (motive of agent immaterial).
1.) By implication – agent’s authority extends not only to express requests, but also to those acts and
transactions incidental thereto. It embraces all the necessary and appropriate means to accomplish the
Art. 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has
desired end. ratified, or has signified his willingness to ratify the agent’s acts.
2.) By usage and custom –
a.) An agent’s authority may not be enlarged through usage and custom in the following cases:
Effect of ratification by the principal:
Where it is sought to…
 Ratification of a contract gives it the same effect as if the principal had originally authorized it.
i.) Vary the terms of an express authorization;
Who must ratify the contract?
ii.) Dispense with a legal requirement enacted for the principal’s benefit;
 Only the principal. But there must be knowledge on the part of the principal of the things he is going
iii.) Change a rule of law or dispense with a formality required by law;
to ratify.
iv.) Vary an essential quality of the agency relationship. rd
b.) General rule: principal must have notice of the alleged custom, before the agent’s acts, in When can the 3 person repudiate the contract?
accordance therewith, may bind the principal. Exceptions:  Before actual ratification by the principal, or before the principal has signified his willingness to ratify
i.) Where the principal and the agent reside in the same community, the usage is the agent’s acts.
definite and well-known, and the agent has no notice that he is to act to the Effect of the principal receiving the benefits of the transaction:
contrary;  He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the
ii.) Where the agent is authorized to deal in a particular place or in a particular same time repudiate its burdens.
market exchange.
3.) By necessity – the existence of an emergency or other unusual conditions may operate to invest in an Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the
agent authority to meet the emergency, provided: presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and
a.) Emergency really exists; instructions of the principal do not prejudice third persons who have relied upon the power of attorney or
b.) Agent is unable to communicate w/ the principal; instructions shown them.
c.) Agent’s enlarged authority is exercised for the principal’s protection; and
d.) The means adopted are reasonable under the circumstances. rd
Duty of a 3 person who deals w/ an agent:
4.) By certain doctrines – rd
 3 person deals w/ an agent at his peril. He is bound to inquire as to the extent of the agent’s authority, and
a.) Apparent authority
this is especially true where the act of the agent is of an unusual nature. Ignorance of the agent’s authority
b.) Liability by estoppel;
is no excuse. It is his duty to require the agent to produce his power of attorney to ascertain the scope of his
c.) Ratification.
authority. He may also ask for the instructions of the principal.

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Do secret orders or private instructions prejudice 3 persons? Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on
 No, he cannot be prejudiced by any secret understanding between the principal and the agent. Such secret credit. Should he do so, the principal may demand from him payment in cash, but the commission agent
rd shall be entitled to any interest or benefit, which may result from such sale.
orders cannot be invoked as against 3 parties if the agent had apparent authority.
Rule given in this article:
Art. 1903. The commission agent shall be responsible for the goods received by him in the terms and
 Commission agent can sell on credit only with the express or implied consent of the principal.
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.
Right of the principal in case the commission agent sold goods on credit without authority: [CR]
2 alternatives:
 Commission agent: One whose business is to receive and sell goods for a commission and who is 1.) He may require payment in cash, in w/c case, any interest or benefit from the sale on credit shall
entrusted by the principal with the possession of goods to be sold, and usually selling in his own belong to the agent since the principal cannot be allowed to enrich himself at the agent’s expense; or
name. 2.) He may ratify the sale on credit, in w/c case it will have all the risks and advantages to him.
Ordinary agent v. Commission agent:
Art. 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the
Ordinary agent Commission agent
principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to
Acts for and behalf of his principal. May act in his own name or in that of his principal. have been made for cash insofar as the principal is concerned.
Need not have possession of the goods of his
Must be in possession.
principal. Obligation of the commission agent where a sale on credit was authorized:
 An authorized sale on credit shall be deemed to have been on a cash basis insofar as the principal is
Commission agent v. Broker: concerned if the agent fails to inform the principal of such sale on credit with a statement of the names
Commission agent Broker of the buyers.
Has a relation to principal, buyers or sellers, No relation w/ the thing w/c he purchases or sells.  Reason for this article: Prevent the agent from stating that the same was on credit when in fact it was
and the property itself. Merely a go-between. made for cash.
Liability of commission agent as to goods received: Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another
 If the commission agent received goods consigned to him, he is responsible for any damage or called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of
deterioration suffered by the same in the terms and conditions and as described in the consignment. the sale on the same terms agreed upon with the purchaser.
Presumption established in this article:  Guarantee commission: One where, in consideration of an increased commission, the commission
 Damage in the merchandise were suffered while in the possession and custody of the agent. agent guarantees to the principal the payment of debts arising through his agency.
What the commission agent must do to avoid liability:
 Make a written statement of the damage and deterioration if the goods received by him do not agree  Purpose of guarantee commission: To compensate the agent for the risks he will have to bear in the
w/ the description in the consignment. collection of the credit due to the principal.
 Nature of liability of guarantee commission agent: Liable to principal if the buyer fails to pay or is
Agent v. Depositary: incapable of paying. But he is not primarily the debtor. On the contrary, the principal may sue the
Agent Depositary buyers in his own name. In such a case, the agent amounts to no more than a guaranty. Liability is a
Cannot commingle goods of the same kind. Can commingle goods of the same kind. contingent pecuniary liability.
Art. 1904. The commission agent who handles goods of the same kind and mark, which belong to different Can the agent with a guarantee commission put up the defense of insolvency of the debtor?
owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to  No. an agent receiving a guarantee commission cannot put up the defense that the debtor-3 person
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each principal. possesses no property since this is precisely the risk the commission agent assumes.
Purpose of this provision: Art. 1908. The commission agent who does not collect the credits of his principal at the time when they
 Prevent any possible confusion or deception. become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for
Art. 1904 gives the general rule. Exceptions: that purpose.
1.) By custom;
2.) Collecting banks.
Obligation of the commission agent under this article:

 The commission agent who has made an authorized sale on credit must collect the credits due the principal 
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The principal is civilly liable to 3 persons for torts of an agent committed at the principal’s direction
at the time they become due and demandable. If he fails to do so, he shall be liable for damages unless he or I the course and within the scope of the agent’s employment. The principal cannot escape liability
can show that the credit could not be collected notwithstanding the exercise of due diligence on his part. In whether the tort is committed willfully or negligently so long as the tort is committed by the agent
such a case, the principal’s remedy is to proceed against the debtor. while performing his duties in furtherance of the principal’s business. Nor is it a defense that the act
Does this article apply to a case where there is a guarantee commission? which caused the tort was unknown to him or even that it was in disobedience to his instructions.
 No, because the agent already assumed the risks of collection by accepting the guarantee commission. nd
Meaning of ratification in 2 paragraph:
Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with
 Ratification is the adoption or affirmance by a person of a prior act which did not bind him, but
more or less rigor by the courts, according to whether the agency was or was not for a compensation.
which was done or professed to be done on his account, thus giving effect to the act as if originally
 Is the agent liable for fraud? Yes, in all cases. authorized. The doctrine applies to the ratification of the act of an agent in excess of his authority of
 For negligence? Yes, but this shall be adjudged with rigor by the courts. the act of one who purports to be an agent but who is really not. It may be implied from the
acceptance of benefits by the principal under a contract entered in his name. The authority created by
Why does the court have to take into consideration whether the agency was gratuitous or for compensation? ratification is subsequent but it is equivalent to prior authority.
 In order to fix the liability of the agent for negligence only (not fraud).
Conditions to ratification: [ICK-PEC]
Obligations of the Principal 1.) Intent to ratify;
2.) Principal must have capacity & power to ratify;
Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the 3.) He must have had knowledge of material facts;
scope of his authority. 4.) The act must be done in behalf of the principal;
5.) Principal must ratify acts in its entirety;
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he 6.) The act must be capable of ratification.
ratifies it expressly or tacitly.
Effects of ratification with respect to the agent:
Where can the specific obligations and duties of the principal to the agent be found? 1)
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Relieves the agent from liability to the 3 party to the unauthorized transaction; and
 Usually in the contract creating the agency. 2) To his principal for acting without authority; and
3) He may recover compensation due for performing the act which has been ratified.
Principal obligations of the principal to the agent in the absence of such agreement:
Effects of ratification with respect to the principal:
1.) To comply with all the obligations which the agent may have contracted in his name and within the
scope of his authority; 1.) He assumes responsibility for the unauthorized act, as fully as if the agent had acted under original
2.) To advance should the agent so request sums necessary for the execution of the agency; authority; but
3.) To reimburse the agent for all advances made by him provided the agent is free from fault; 2.) He is not liable for acts outside the authority approved by his ratification.
4.) To 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; and rd
5.) To pay the agent the compensation agreed upon or the reasonable value of the latter’s services. Effects of ratification with respect to 3 persons:
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1.) 3 person is bound by ratification to the same extent as he would have been bound if the ratified act
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Liability of the principal to 3 persons: had been authorized in the 1 instance; and

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Where the relation of agency legally exists, the principal will be liable to 3 persons for all acts 2.) He cannot raise the question of the agent’s authority to do the ratified act.
committed by the agent in his behalf in the course and within the actual or apparent scope of his
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authority, and this is not altered y the fact that the agent may also be liable, nor by the fact that some Must ratification be communicated to the agent or to the 3 party?
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of the acts are to the principal’s advantage while others are to his disadvantage.  No. To be effective, ratification need not be communicated or made known to the agent or the 3
party. The act or conduct of the principal rather than his communication is the key. But before
Liability of the principal for mismanagement of the business by the agent: rd
ratification, the 3 party is free to revoke the unauthorized contract.
 Mismanagement of the business of the principal by the agent does not relieve said principal from the
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responsibility that he had contracted to 3 persons. But where the agent’s acts bind the principal, the Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if
latter may seek recourse against the agent. the former allowed the latter to act as though he had full powers.
Liability of principal for a tort committed by the agent:

 Estoppel: precludes a person from denying or asserting anything contrary to that which has been Art. 1914. The agent may retain in pledge the tings which are the object of the agency until the principal
established as the truth by his own deed or representation, either express or implied. effects the reimbursement and pays the indemnity set forth in the two preceding articles.
Ratification v. Estoppel What happens when the principal fails to reimburse or indemnify the agent for expenses set forth in arts.
1912 and 1913?
Ratification Estoppel  The agent has the right to retain in pledge the things which are the object of the agency.
Rests on intention Rests on prejudice
Affects the entire transaction Affects only relevant parts of the transaction. In case the agent sells the goods for more than his claim, is he entitled to the excess? No.
from the beginning
What is the nature of the agent’s right of lien?
 Specific or particular. It is not general in the sense that it gives the agent a right to retain the goods for
Substance is confirmation of a Substance is the principal’s inducement to another to act to his
claims disconnected with the agency.
unauthorized act or conduct prejudice.
after it has been done.
Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they
Apparent authority v. Authority by estoppel shall be solidarily liable to the agent for all the consequences of the agency.
2
Apparent authority Authority by estoppel Requisites for application of this article: [2C ]
That which though not actually granted, the Arises in cases where the principal, by his negligence, permits his 1.) There are 2 or more principals;
principal knowingly permits the agent to agent to exercise powers not granted to him, even though the 2.) The principals have all concurred in the appointment of the same agent;
exercise or holds him out as possessing. principal may have no notice or knowledge of the conduct of the 3.) The agent is appointed for a common transaction or undertaking.
agent.
Why is solidarity the rule?
Because of the common transaction. Thus, even if the agent was appointed separately, the rule should apply in
the interest of justice.
Basis of article 1911: Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other
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 Principle of estoppel: Necessary for the protection of innocent 3 persons. Instance when solidarity is with the principal, and the two contracts are incompatible with each other, that of prior date shall be
imposed by law. preferred, without prejudice to the provisions of Article 1544.
Art. 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the May 2 persons contract with regard to the same thing, one with the agent and the other with the principal?
execution of the agency. Yes.
Should the agent have advanced them, the principal must reimburse him therefor, even if the business or  If this situation arises, which of the contracts will be preferred?
undertaking was not successful, provided the agent is free from all fault.  If the contracts are compatible, they will both be given effect. If they are incompatible, then the
The reimbursement shall include interest on the sums advanced, from the day on which the advance was contract of prior date shall be preferred.
made.
Should the principal reimburse the agent for advances made by the latter even if the agency was Art. 1544: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who
st
unsuccessful? may have 1 taken possession thereof in good faith if it should e movable property. Should it be immovable property, the
 It depends. Yes, if the agent is free from fault. No, if the agent was with fault. st
ownership shall belong to the person acquiring it who in good faith 1 recorded it in the Registry of Property. Should there
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Is a broker always entitled to a commission? be no inscription, the ownership shall pertain to the person who in good faith was 1 in possession; and in the absence
 A broker is entitled to a commission if the sale is effected, but not if there is no perfected transaction. thereof, to the person who presents the oldest title, provided there is good faith.
Art. 1913. The principal must also indemnify the agent for all the damages which the executive of the agency Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal
may have caused the latter, without fault or negligence on his part. 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.
Basis for the above rule: Equity. Since the principal receives the benefits of the agency, and has a right to demand rd
damages from the agent should the latter not perform the agency, he should answer for the damages resulting Is the principal always liable for damages caused by a 3 person or is it the agent who is liable?
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from the execution thereof without fault or negligence on the part of the agent.  Whether the principal or the agent will be the one liable for damages to the 3 person who has been
prejudiced depends on whether the agent acted in bad faith or not. If the agent acted in good faith and

within the scope of his authority, the principal incurs liability. If the agent acted in bad faith, he alone 2.) Subsequent acts of the parties which may be either:
shall be responsible to such person. a.) By the act of both parties or by mutual consent;
b.) By the unilateral act of one of them.
What is the extent of liability covered under this article? Damages. 3.) By operation of law.
What is good faith referred to in this article? Modes of extinguishment, specifically: [WR-DEAD]
 Good faith here means that the agent had no knowledge that the principal is dealing with a 3 person.
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1.) Withdrawal of the agent;
Note: If the contract is one of sale, article 1544 governs and not arts. 1916 and 1917. 2.) Revocation;
3.) Death, civil interdiction, insanity or insolvency of the principal or of the agent;
Art. 1918. The principal is not liable for the expenses incurred by the agent in the following cases: [F*CKS] 4.) Expiration of the period for which the agency was constituted;
1.) If the agent acted in contravention of the principal’s instructions, unless the latter should wish 5.) Accomplishment of the object or purpose of the agency; and
to avail himself of the benefits derived from the contract; 6.) Dissolution of the firm/corp which entrusted or accepted the agency;
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 Necessary characteristics of the parties for the continuance of the agency: [PCS]
principal was not aware thereof; 1.) Present;
4.) When it was stipulated that the expenses would be borne by the agent, or that the latter would 2.) Capacitated;
be allowed only a certain sum. 3.) Solvent.
Instances wherein the principal is not liable for expenses incurred by the agent? In the instances enumerated Why is presence necessary?
under this article.  Because the general rule in art 1919 is that death of any of the parties extinguishes agency. However in
Reasons why the principal is not liable for the agent’s expenses: Under… the case where you have several principals and/or several agents, whether the death of one principal
1.) To punish the agent, but when the principal has availed of the benefits, he is deemed to have or of one agent terminates the agency would depend on the intention of the parties. Generally the
impliedly ratified the agent’s acts. death of one of several principals does not revoke the agent’s authority nor does the death of one of
2.) “Kasi, kasalanan niya, eh.” several agents put an end to the agency. The intention of the parties controls.
3.) The agent is guilty of bad faith and lack of diligence;
4.) An express stipulation which is not contrary to law, morals, good customs, public order or public Why is capacity necessary?
policy is binding between the parties.  For instance, in the case of civil interdiction, it deprives the offender during the period of his sentence
of the right to manage his property and dispose of such property by any act or any conveyance inter
Modes of Extinguishment of Agency vivos. A person under civil interdiction hence, cannot validly give consent. Same is true for insane
people.
Art. 1919. Agency is extinguished: [WR-DEAD]
Why is solvency necessary?
1.) By its revocation;
 As by an act of insolvency, the principal loses control of the subject matter of the agency, the authority
2.) By the withdrawal of the agent;
of the agent to act for his principal ceases by operation of law upon an adjudication of the principal’s
3.) By the death, civil interdiction, insanity or insolvency of the principal or of the agent;
insolvency. On the other hand, the insolvency of the agent will ordinarily put an end to the agency, at
4.) By the dissolution of the firm or corporation which entrusted or accepted the agency;
least if it is in any way connected with the agent’s business which has caused his failure.
5.) By the accomplishment of the object or purpose of the agency;
6.) By the expiration of the period for which the agency was constituted.
General rule as to death of the principal or agent:
 By reason of the very nature of the relationship between the principal and the agent (which is
Meaning of Presumption of continuance of agency:
fiduciary – argh!), agency is distinguished ipso jure upon the death of the principal.
 When once shown to have existed, an agency relation will be presumed to have continued in the
absence of anything to show its termination.
Exceptions:
1.) If the agency is coupled with an interest;
Who has the burden of proving the revocation/termination of agency? rd
 The burden of proving a revocation or other termination of agency is on the party asserting it. 2.) If the act of the agent was executed without the knowledge of the death of the principal and the 3
Note: Even if the reason for extinguishing the agency is not true, the agent can’t insist on reinstatement. The agent can only person who contracted w/ the agent acted in good faith.
demand damages.
Why does dissolution of a firm or corp extinguish the agency?
Modes of extinguishing an agency, generally: [ASO]  Dissolution of a corp extinguishes its juridical existence.
1.) Agreement;

What happens when the object or the purpose of the agency is accomplished? it, then he may be liable for damages for his wrongful terminating act. But if the subject matter is lost
 As between the parties, the principal and the agent, the fulfillment of the purpose for which the without the fault of the principal, no liability is assumed by him.
agency was created ipso facto terminates the agency.
Will a change of conditions affect the agency?
What happens when the term for which the agency was supposed to continue expires?  General rule: When there is a basic change in the circumstances surrounding the transaction not
 When an agency is created for a fixed period, the expiration of such period ends the agency, even contemplated by the parties which would reasonably lead the agent to believe that the principal
though the purpose for which the agency was created has not been accomplished. would not desire him to act, authority of agent is terminated.
What happens if no time is specified?  Exceptions:

 The agency terminates at the end of a reasonable period of time. 1.) If the original circumstances are restored within a reasonable period of time, the agent’s
authority may be revived.
Can the period be implied? Yes, from… 2.) Where the agent has reasonable doubts as to whether the principal would desire him to act,
1.) The terms of the agreement; his authority will not be terminated if he acts reasonably. (But when in doubt, agent could
2.) Purpose of the agency; and contract principal for instructions if possible).
3.) The circumstances of the parties. 3.) 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
What happens if the subject matter of the agency is lost or destroyed? change and does not give him new instructions.
 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. CONFIDENTIAL INFORMATION
Exceptions:
1.) If it is possible to substitute other material for that which was destroyed without It is difficult to determine whether information is confidential or not, because while the relation of principal and
substantial detriment to either party, or agent is confidential, not all knowledge acquired by the agent is of a confidential nature. Some clearly is of so
3.) If the destroyed subject matter was not in fact essential to the contract; and general a nature that equity ought not attempt to restrict its subsequent use.
4.) A partial loss or destruction.
Usually, what a court does is to determine 2 things:
Are the modes of extinguishments of agency exclusive? 1.) Whether the knowledge or information is indeed confidential, and
 No. Art. 1919 gives only those causes of extinction which are particular to agency. But the list is not 2.) Whether its subsequent use ought to be prevented.
exclusive. The general rule actually is, an agency may be extinguished by the modes of
extinguishments of obligations in general whenever they are applicable, like loss of the thing and Principle behind enjoining an agent from using confidential information:
novation (see art. 1231).  There is in the contract of service subsisting between the principal and the agent an implied contract
on the part of the agent that he will not, after the service is terminated, use information which he has
Does war extinguish agency? gained while the service has been subsisting to the detriment of his former employer.
 During the existence of war, a contract of agency is inoperative if the agent or the principal is an
enemy alien. But since it is generally conceded that war suspends all commercial intercourse between Art. 1920. The principal may revoke the agency at will, and compel the agent to return the document
the residents of 2 belligerent states, the general rule is that agency is terminated, as a matter of law, evidencing the agency. Such revocation may be express or implied.
upon the break of war.
May an agency be terminated by a subsequent act of the principal? Yes, when he does so, it’s called revocation.
Does legal impossibility terminate agency?
 Implied in every contract is the understanding that it shall be capable of being carried out legally at May an agency be terminated by a subsequent act of the agent? Yes, it’s called withdrawal or renunciation.
the time called for by the contract. An agency then terminates if a change in the law makes the
purpose of the agency unlawful. Does it matter if the agency is gratuitous or with compensation when we speak of revocation by the
What happens if the principal’s authority terminates? principal? No, art 1920 makes no distinction.
 A position which flows from a trust relationship whether directly or indirectly, terminates as a matter
of law with the destruction of the trust. Consequently, a sub-agent’s authority terminates with the Reasons:
termination of the principal’s authority. 1.) Since the authority of the agent emanates from the principal, if the principal wishes to terminate the
agency the law must enable him to do so.
In case of loss of the subject matter, does the principal incur any liability? 2.) Confidence being the cardinal basis of the relation, it stands to reason that it should cease when such
 It depends. If the loss was brought about by the principal as in the case where the principal sells the confidence disappears.
subject matter to another party notwithstanding that an agency had been constituted in reference to

3.) The principal-agent relationship is consensual and personal in nature. No one can nor should be forced 3.) When he files a complaint against the principal and adopts an antagonistic
to retain another as his agent against his will. attitude towards him.
In case a principal does revoke an agency, is there any way by which the agent can hold him liable for Does a violation of the instructions of the principal amount to a renunciation?
damages? Yes. For instance,  No. Mere fact that agent violates his instructions does not amount to renunciation, and although he
1.) If the agency was constituted for a fixed period, the principal shall be liable in damages occasioned by may thus render himself liable to the principal, he does not cease to become an agent.
the wrongful discharge of the agent before the expiration of the period fixed.
2.) If the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its
payment of commission about to be earned, the principal can be held liable for damages. revocation shall not prejudice the latter if they were not given notice thereof.
Reason for requiring agent to return the document evidencing the agency: To prevent the agent from making rd
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What is the effect of revocation in relation to 3 persons if the agent was authorized to contract with specified
use of the power of attorney and thus avoid liability to 3 persons who may subsequently deal with the agent on persons?
the faith of the instrument.
 If the agency is created for the purpose of contracting with specified persons, its revocation will not
Kinds of Revocation: rd rd
prejudice such 3 persons until notice thereof is given them. The reason for this is obvious. Since 3
1.) Express; or
persons have been made to believe by the principal that the agent is authorized to deal with them,
2.) Implied, e.g.:
they have a right to presume that the representation continues to exist in the absence of notification
a.) When the principal appoints a new agent for the same business or transaction, or rd
b.) When the principal directly manages the business entrusted to the agent. by the principal. But of course, notice is not required if the 3 persons already know of the revocation.
Is notice of revocation to the agent necessary? Yes. A revocation without notice to the agent will not render Art. 1922. If the agent had general powers, revocation of the agency does not prejudice third persons who
invalid an act done in pursuance of the authority. acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of
Is express notice of revocation to the agent necessary? general circulation is a sufficient warning to third persons.
 As between the principal and the agent, express notice to the agent that the agency is revoked is not
always necessary. If the party to be notified actually knows, or has reason to know, facts indicating Effect of revocation in relation to 3
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persons if the agent was authorized to contract with the public in
that his authority has been terminated or suspended, there is sufficient notice. general:
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 In case the agent has general powers, innocent 3 parties dealing with the agent will not e prejudiced
Is notice of revocation to 3 persons necessary? Yes. by the revocation before they had knowledge thereof. In this case, however, the fact that the
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rd revocation was advertised in a newspaper of general circulation would be sufficient to 3 persons for
What kind of notice should you give 3 persons? rd
publication constitutes notice upon everybody and this is true whether or not such 3 persons have
1.) As to former customers, actual notice must e given to them because they always assume the
read the newspaper concerned.
continuance of the agency relationship.
2.) As to other persons, notice by publication is enough.
Notice required in art. 1921 v. that in art. 1922:
May the agent renounce the agency at will?
 Yes, but subject to the contractual obligations owing the principal. Art. 1921 Art. 1922
 Reason: The essence of the principal-agent relationship is the consent and willingness of the agent to  Must be personal.  May be personal.
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act for the principal. The law cannot compel the parties to continue an agency if they do not want to  Revocation must be known to 3 person  Even if 3 person doesn’t know, as long as there is
do so. (The principal cannot even sue for affirmative specific performance because that would lead to informed of the appointment. publication in a newspaper of general circulation.
involuntary servitude!)
Form of renunciation:  General rule: Special information needs special information of revocation.
 It is not always necessary for the agent to renounce the agency expressly. He can do so impliedly, as rd
 Except: If you can prove that the 3 person read the notice in the newspaper.
for example…
1.) Where he has conducted himself in a manner incompatible with his duties as
agent; or 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
2.) When he abandons the object of his agency and acts for himself in committing a
the two preceding articles.
fraud upon his principal; or

What does this article mean? Exceptions: [BF=Partner]
1.) There is implied revocation of the previous agency when the principal appoints a new agent for the 1.) When a bilateral contract depends on the agency;
same business or transaction if there is incompatibility. But the revocation does not become effective as 2.) When the agency is the means of fulfilling an obligation already contracted;
between the principal and the agent unless it is in some way communicated to the latter. Again, the 3.) When a partner is appointed as manager of a partnership in the contract of partnership and his
rd
rights of 3 persons who acted in good faith and without knowledge of the revocation will not be removal from the management is unjustifiable.
prejudiced thereby.
2.) There is no implied revocation where the appointment of another agent is not incompatible with the Can an agency, coupled with an interest, be terminated by the sole will of the principal? No.
st st
continuation of like authority in the 1 agent, or if the 1 agent is not given notice of the appointment
Requisite for agency to be irrevocable for being coupled with a interest:
of the new agent.
Interest of the agent must be in the subject matter of the power conferred and not merely an interest in the
Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing exercise of the power.
directly with third persons.
Instances of an agency coupled with an interest:
What does the above article provide?
 It provides for another case of implied revocation. 1.) When the agent has parted with value or incurred liability at the principal’s request, and he is looking
to the exercise of the power as the means of reimbursement or indemnity.
Effect of direct management of the business by the principal himself: 2.) When the interest in the thing concerning which the power is to be exercised arises from an
 Generally, it revokes the agency because there would no longer be any basis for the representation assignment, pledge or lien created by the principal with the agent being given the power to deal with
previously conferred. the thing in order to make the assignment, pledge or lien effectual.
 Exception: when the only desire of the principal in doing so is for him and the agent to manage the
business together. If the contract of agency stipulates that such will be irrevocable, is such terminology controlling in all cases?
Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one No. Whether an interest will make an agency irrevocable exists in a particular case is to be determined from the
of them may revoke the same without the consent of the others. entire agreement between the parties and from the facts and circumstances. The terminology is not controlling.
Even if an agency is made in terms irrevocable, the fact will not prevent its revocation by the principal when the
Rationale: Since the appointment of an agent by 2 or more principals for a common transaction or undertaking agency is not in fact coupled with an interest.
makes them solidarily liable to the agent for all consequences of the agency, then each one of the principals
should be granted the right to revoke the power of attorney even without the consent of the others. Remember If an agency is coupled with an interest, does this mean that the principal can never ever revoke it?
that in a solidary obligation, the act of one is the act of all.
No. You can still revoke in extreme situations, e.g.:
Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the 1.) Irrevocability can never be used as a shield for the perpetration of acts in ad faith, breach of confidence
special matter involved in the latter. or betrayal of trust. The law will never permit the agent to commit frauds against the principal.
2.) When the interest is already terminated.
How many agents are involved in this article?
Why is it said that agencies coupled with interest are not true agents?
 2, one to whom a general power is previously granted. Another to whom a special power is given.  Because persons with proprietary interests in the subject matter of their agency are not true agents at all.
(Note that this can also apply if a special power is subsequently given to the same agent.) One of the hallmarks of the agency relation is the control of the principal over the acts of the agent and
over the subject matter of the agency. An agency coupled with an interest removes that control.
Effect of the issuance of a special power as regards the general power:
 The general power is impliedly revoked as to matters covered by the special power because a special Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter suffer
power naturally prevails over a general power. 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.
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. Does the agent have a right to renounce or withdraw from the agency at any time?
 Yes. Even without the consent of the principal. But, in the latter case, he may be subject to
liability for breach of contract or for tort.
General rule: Principal may revoke an agency at will since the essence of agency is the agent’s duty of obedience
to the principal.

Basis: Constitutional prohibition against involuntary servitude. rd
in good faith without notice of revocation, such 3 persons are also protected where it is not shown
that the agent had knowledge of the termination of the agency because of the death of the principal or
Obligation of agent if he withdraws from agency without just cause: any other like cause which extinguishes the agency.
1.) Notify principal (even if w/ just cause); and
2.) Indemnify the principal should the latter suffer any damage by reason of such withdrawal. rd
Does this article only require the agent to be in good faith? No, both agent and 3 person must be.
Reason for indemnity: To answer for losses and damages occasioned by the non-fulfillment of his obligation as
agent. 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.
Is the agent liable for indemnity if the withdrawal was for just cause? No. Agent cannot be held liable if the
agent withdraws for a valid reason as when: In case of death of agent, what must the heirs do?
1.) The withdrawal is based on the impossibility of continuing the agency without grave detriment to 1.) Notify the principal to enable the latter reasonable opportunity to take such steps as may be necessary
himself; or to meet the situation; and
2.) Fortuitous event. 2.) Adopt such measures as the circumstances may demand in the interest of the principal.
What happens when the agent sues the principal? Can the heirs continue the agency?
 Equivalent to withdrawal of the agent.  General rule: No, since an agency calls for personal services on the part of the agent.
Exceptions:
Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act 1.) Agency by operation of law, or a presumed or tacit agency;
until the principal has had reasonable opportunity to take the necessary steps to meet the situation. 2.) Agency is coupled with an interest in the subject matter of the agency.
Obligation of agent after withdrawal:

 Even when withdrawal is for a valid reason, he must continue to act until the principal has had
reasonable opportunity to take the necessary steps like the appointment of a new agent to remedy the
situation caused by the withdrawal. This is to prevent damage or prejudice to the principal.
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.
If the agent dies, his heirs should tell the principal. However, if the principal dies, the principal’s heirs have no obligation to
tell the agent.
General rule: Agency is terminated instantly by the death of the principal.
Rationale: Agency, being based on representation, there is no one to e represented where the principal is already
dead.
Exceptions:
1.) If the agency has been constituted in the common interest of the principal and the agent; and
rd
2.) If the agency has been constituted in the interest of a 3 person who has accepted the stipulation in his
favor.
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.
What does this article provide?

 It provides that the death of the principal or any other like cause, extinguishes the agency. But in the
rd
same way that revocation of the agency does not prejudice 3 persons who have dealt with the agent

b. No particular words are required for the creation of an express trust, it being sufficient that a trust is
clearly intended. (1444); No Specific form required. The only requirement is the direct and positive
act of the trustor.
c. No trust shall fail because the trustee appointed declines the designation, unless the contrary
should appear in the instrument constituting the trust. (1445); Acceptance generally necessary BUT
such is not necessary for the validity of the trust. Why? The court may appoint a trustee in his place.
d. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no onerous condition
upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary. (1446)
IMPLIED TRUSTS
 IMPLIED TRUSTS  Those which, without being express, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation of law, as
matters of equity, independently of the particular intention of the parties.
 An implied trust may be proved by oral evidence.
 The enumeration of implied trust does not exclude others established by the general law of
trust, but the limitation laid down in Article 1442 shall be applicable.
Types:
1. Resulting  A resulting trust is a trust raised by implication of law and presumed always to have
TRUSTS been contemplated by the parties, the intention of which is found in the nature of the transaction, but
not expressed in the deed or instrument of conveyance
2. Constructive  a constructive trust is one not created by words either expressly or impliedly, but by
GENERAL PROVISIONS construction of equity in order to satisfy the demands of justice.
 TRUSTOR  A person who establishes a trust TRUST FUND DOCTRINE  considers this subscribed capital as a trust fund for the payment of the debts of
 TRUSTEE  one in whom confidence is reposed as regards property for the benefit of another person the corporation, to which the creditors may look for satisfaction. Until the liquidation of the corporation, no part
 BENEFICIARY  and the person for whose benefit the trust has been created of the subscribed capital may be returned or released to the stockholder (except in the redemption of redeemable
shares) without violating this principle. Thus, dividends must never impair the subscribed capital; subscription
TYPES OF TRUST: commitments cannot be condoned or remitted; nor can the corporation buy its own shares using the subscribed
1. Express trusts - created by the intention of the trustor or of the parties. capital as the consideration therefor. (NTC vs CA, July 28, 1999, 311 SCRA 508.)
2. Implied trusts - come into being by operation of law
WHEN IS THERE IMPLIED TRUST?
EXPRESS TRUSTS
There is an implied trust:
ELEMENTS:
1. Competent trustor and trustee (1) Art. 1448. When property is sold, and the legal estate is granted to one party but the price is paid by
2. Ascertainable trust res another for the purpose of having the beneficial interest of the property. The former is the trustee,
3. Sufficiently certain beneficiaries while the latter is the beneficiary. (RESULTING)
E: However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
Nature: paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift
in favor of the child.
a. No express trusts concerning an immovable or any interest therein may be proved by parol
evidence. (1443)  PURCHASE MONEY RESULTING TRUST The trust is created in order to effectuate what the
 Must be in writing law presumes to have been the intention of the parties in the circumstances that the person to
 Statute of frauds is applicable whom the land was conveyed holds it as trustee for the person who supplied the purchase
 To affect 3rd persons, it must be in a public instrument and registered in the Registry of money. (Rebuttable by proof of contrary intention)
Property

To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an equivalent, constituting valuable (1) Created by operation of law
consideration; Created by intention of the parties (2) Deducible from the nature of
As to its creation
2. and such consideration must be furnished by the alleged beneficiary of a resulting trust. through direct and positive acts the transaction or
(3) Imposed by law
 CLEAN HANDS DOCTRINE  Will not allow the creation or the use of a juridical relation such
as a trust to subvert, directly or indirectly, the law. "He who comes to court in demand of equity, must Proof of trust regarding immovables Cannot be proved by oral evidence May be proved by oral evidence
come with clean hands."
Express repudiation is required for No express repudiation is required
Repudiation of trust laches or acquisitive prescription to unless there is concealment of the
(2) Art. 1449. When a donation is made to a person but it appears that although the legal estate is apply fact that gave rise to the trust
transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part
thereof. (RESULTING) MAY AN IMPLIED TRUST BECOME AN EXPRESS TRUST?
 Yes! If the trustee recognizes the right of the property owner to his property
(3) Art. 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another
and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises CAN A TRUSTEE ACQUIRE THE PROPERTY ENTRUSTED TO HIM BY PRESCRIPTION?
by operation of law in favor of the person to whom the money is loaned or for whom its is paid. The  GR: NO!
latter may redeem the property and compel a conveyance thereof to him. (CONSTRUCTIVE)  Exception: He repudiates the trust
(4) Art. 1451. When land passes by succession to any person and he causes the legal title to be put in the REQUISITES OF REPUDIATION:
name of another, a trust is established by implication of law for the benefit of the true owner. 1. Open/ unequivocal acts of repudiation amounting to an ouster of the beneficiary
(RESULTING) 2. Positive acts of repudiation
3. Clear and convincing evidence
(5) Art. 1452. If two or more persons agree to purchase property and by common consent the legal title is 4. Period fixed by law has prescribed
taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the
others in proportion to the interest of each. (RESULTING) PRESCRIPTION
(NOT APPLICABLE TO EXPRESS TRUSTS AND RESULTING TRUSTS<if not repudiated>)
(6) Art. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for,
or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is  In short, applicable only in constructive trusts and repudiated resulting trusts!
contemplated. (RESULTING)
Period:
(7) Art. 1454. If an absolute conveyance of property is made in order to secure the performance of an 1. 10 years if not in possession
obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of 2. Imprescriptible if in possession
the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the
property to him. (CONSTRUCTIVE) When period begins to run:
1. From the moment the trust is created OR
(8) Art. 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust 2. From the moment of registration (constructive)
funds for the purchase of property and causes the conveyance to be made to him or to a third person,
a trust is established by operation of law in favor of the person to whom the funds belong. LACHES
(RESULTING)
 LACHES the failure or neglect for an unreasonable or unexplained length of time to do that which
(9) Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
by exercising due diligence, could or should have been done earlier warranting a presumption that he
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
has abandoned his right or declined to assert it.
(CONSTRUCTIVE)
 Express trusts: applies from the time the trustee openly denies or repudiates the trust and the
beneficiary is notified thereof, or is otherwise plainly put on guard against the trustee
Express Trust Implied Trust
 Implied Trusts  express repudiation is not required unless the trustee fraudulently and successfully
conceals that fact

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Page| 1 of 32 BUS ORG 1(PARTNERSHIPS, AGENCY AND TRUSTS) Pre-Bar Reviewer Edited by Sasha Go

PARTNERSHIP, AGENCY AND TRUSTS

Nature, Form and Kinds of Agency

Ateneo de Davao University, College of Law: June 2008 1

Partnership vs Co-ownership vs Corporation EFFECTS OF UNLAWFUL PARTNERSHIP

Ateneo de Davao University, College of Law: June 2008 2

CLASSIFICATIONS OF PARTNERSHIPS V. As to purpose

Ateneo de Davao University, College of Law: June 2008 3

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Ateneo de Davao University, College of Law: June 2008 6

No existing partnership RESPONSIBILITY OF PARTNERSHIP TO PARTNERS

Ateneo de Davao University, College of Law: June 2008 7

Ateneo de Davao University, College of Law: June 2008 8

Ateneo de Davao University, College of Law: June 2008 9

Ateneo de Davao University, College of Law: June 2008 10

Ateneo de Davao University, College of Law: June 2008 11

Ateneo de Davao University, College of Law: June 2008 12

A CERTIFICATE SHALL BE AMENDED WHEN:

Ateneo de Davao University, College of Law: June 2008 13

Essential Elements of Agency:

NATURE, FORM AND KINDS OF AGENCY Delegated Acts

Who can be principal? Agency v. Guardianship

Ateneo de Davao University, College of Law: June 2008 14

Ateneo de Davao University, College of Law: June 2008 15

When is a broker entitled to compensation?

Ateneo de Davao University, College of Law: June 2008 16

Examples of acts of mere administration:

Ateneo de Davao University, College of Law: June 2008 17

Ateneo de Davao University, College of Law: June 2008 18

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Ateneo de Davao University, College of Law: June 2008 20

Reasons for exceptions:

Ateneo de Davao University, College of Law: June 2008 21

Ateneo de Davao University, College of Law: June 2008 22

Ateneo de Davao University, College of Law: June 2008 23

Liability of principal for a tort committed by the agent:

Ateneo de Davao University, College of Law: June 2008 24

Ateneo de Davao University, College of Law: June 2008 25

Ateneo de Davao University, College of Law: June 2008 26

What happens if no time is specified?  Exceptions:

Ateneo de Davao University, College of Law: June 2008 27

Ateneo de Davao University, College of Law: June 2008 28

Ateneo de Davao University, College of Law: June 2008 29

Obligation of agent after withdrawal:

What does this article provide?

Ateneo de Davao University, College of Law: June 2008 30

Ateneo de Davao University, College of Law: June 2008 31

Ateneo de Davao University, College of Law: June 2008 32

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