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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS > RFBT - AGENCY > Flashcards

RFBT - AGENCY Flashcards

1
Q

What is a contract of agency?

A

It is a contract whereby a person binds himself to render some service or to do something in representation or in behalf of another, with the consent and authority of the latter.

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2
Q

What are the elements of a contract of agency?

A

Elements:

a. CONSENT, express or implied, of the parties to establish the relationship
b. OBJECT, which is the execution of a juridical act in relation to a 3rd person
c. The agent ACTS AS A REPRESENTATIVE AND NOT FOR HIMSELF
d. The agent ACTS WITHIN THE SCOPE OF HIS AUTHORITY.

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3
Q

What are the characteristics of agency?

A
  1. Principal - can stand by itself
  2. Preparatory - other contracts may be entered into
  3. Consensual - perfected by mere consent
  4. Onerous - presumed to be for a compensation unless otherwise agreed upon
  5. Nominate
  6. Bilateral
  7. Commutative - parties give and receive almost equivalent values
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4
Q

Who are the parties to a contract of agency?

A
  1. PRINCIPAL - person represented by the agent from whom the latter derives his authority. He is the party primarily and originally concerned in the contract of agency. He must be LEGALLY CAPACITATED
  2. AGENT - He who acts for and represents the principal.
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5
Q

What happens if the principal in a contract of agency is incapacitated?

A

The contract of agency is VOIDABLE at the instance of the principal. Contracts entered into by the agent where the principal is incapacitated is LIKEWISE VOIDABLE because the real party to such contract is incapacitated, the agent merely being an extension of the personality of the principal.

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6
Q

T or F

Legal capacity is required for the validity of an agent’s acts.

A

False, Legal capacity IS NOT REQUIRED for the validity of the agent’s acts which are considered those of the principal since the agent is merely an extension of the personality of the principal.
THE AGENT, HOWEVER, NEEDS TO POSSESS SOME MENTAL CAPACITY.

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7
Q

What happens if the agent in a contract of agency is incapacitated?

A

The CONTRACT OF AGENCY IS VOIDABLE if the agent is incapable of giving consent.

While the CONTRACT ENTERED INTO BY THE AGENT IN BEHALF OF THE PRINCIPAL is really that of the principal and WHICH WILL BE VALID AS LONG AS THE PRINCIPAL IS NOT INCAPACITATED, THE CONTRACT OF AGENCY ITSELF IS VOIDABLE because one of the parties is incapable of giving consent.

(Note difference between Contract of Agency vs Contracts entered into by the agent)

  1. If the principal is incapacitated while the agent is capacitated, both the contract of agency and contracts entered into by the agent become VOIDABLE
  2. If the principal is capacitated while the agent is incapacitated, so long as the agent has some mental capacity, the contract of agency is voidable while contracts entered into by the agent are valid.
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8
Q

What are the acts that may and may not be delegated to the agent?

A

An agent may be delegated anything so long as it is lawful. However, the following may not be delegated under the law:

  1. Acts personal in nature
  2. Acts prohibited by law to be delegated
    a. Director may not be represented by a proxy during board meetings
    b. Right to vote
    c. Right to be represented in a marriage ceremony
    d. Alien purchases through an agent land in the PH.
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9
Q

T or F

The relation of an agent to his principal is fiduciary since it is based on trust and confidence

A

True.

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10
Q

How is a contract of agency created?

A

It can be created by:

  1. Appointment
  2. Ratification - adoption or confirming an act performed by another
    Example:
    A sells P’s car to B without P’s authority in the name of P, but P subsequently ratified the sale. A contract of agency is deemed created between P and A.
  3. By estoppel - The following must exist:
    a. Principal manifested a representation of the agent’s authority or knowingly allowed the agent to assume such authority
    b. 3rd person in good faith relied upon such representation
    c. 3rd person changed his position to his detriment
  4. By Necessity - when an emergency makes it necessary for one to act for another without receiving any authority from the latter.
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11
Q

What are the kinds of agency?

A
  1. According to FORM

a. Express
- Oral: Valid unless law requires a specific for,
- Written

b. Implied - by the acts/silence/lack of action of the principal or his failure to repudiate the agency knowing that another person is acting in his behalf without his authority

  1. According to EXTENT
    a. General agency - comprises all business of principal
    b. Special agency - for specific transactions
  2. According to AUTHORITY CONFERRED
    a. Agency couched in general terms
    b. Agency couched in specific terms - SPA
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12
Q

What is the concept of power of attorney?

A

It is a written instrument given by a principal to his agent authorizing the latter to perform specified acts in behalf of the former, which acts, when performed, shall have a binding effect on the principal, which could either be GENERAL OR SPECIAL.

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13
Q

What specific acts require a special power of attorney?

A
  1. To make payments as are not usually considered acts of administration
  2. Effect novations which put an end to obligations already in existence at the time the agency was constituted
  3. To compromise
  4. Submit questions to arbitration
  5. Renounce right to appeal from a judgment
  6. To waive objections to the venue of action
  7. To abandon a prescription already acquired
  8. To waive obligations gratuitously
  9. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration
  10. To make gifts, except when a GPA is sufficient
  11. To loan or borrow money
  12. To lease any property to another person for more than 1 year.
  13. To bind the principal to render some service without any compensation
  14. To bind the principal in a contract of partnership
  15. To obligate the principal as a guarantor or surety
  16. To create or convey real rights over immovable property
  17. To accept or repudiate inheritance
  18. To ratify or recognize obligations contracted before agency
  19. Any other act of strict dominion
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14
Q

What is arbitration?

A

It is an extra-ordinary method of settlement by referring a dispute to a 3rd person known as an arbitrator whose judgment will substitute that of the agent representing his party principal.

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15
Q

What are the kinds of acceptance of agency by the agent?

A
  1. Express - oral or in writing
  2. Implied
    a. Agent’s acts which carry out the agency
    b. Silence or inaction according to the circumstances
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16
Q

What are the kinds of announcement of appointment of an agent and revocation of appointment of agent?

A
  1. BY SPECIAL INFORMATION - done usually through communication addressed to specified persons. The person appointed who will be considered a duly authorized agent with respect to the person who received the special information.

If the announcement of the appointment was by special information, the announcement of revocation of appointment shall also be made by special information.

  1. BY PUBLIC ADVERTISEMENT - Person appointed will be considered as an agent with regards to any person

If the announcement of the appointment was by public announcement, the announcement of revocation of appointment shall also be made by public advertisement.

17
Q

What are the basic principles of agency?

A
  1. The agent must act within the scope of his authority

2. The agent must act in behalf of his principal

18
Q

What are the effects if the agent acts within the scope of his authority and in behalf of the principal?

A

The act by the agent is VALID and the principal alone is liable unless the agent expressly bound himself.

19
Q

What are the effects if the agent acts within the scope of his authority but in his own behalf?

A
  1. The principal has no right of action against the person with whom the agent has contracted
  2. The person with whom the agent has contracted has no right of action against the principal
  3. The agent is the one directly bound in favor with whom he has contracted as if the transaction were his own, EXCEPT WHEN THE CONTRACT INVOLVES THINGS BELONGING TO THE PRINCIPAL, in which case the principal shall have a right of action against the 3rd person, and the 3rd person against the principal.

Examples:
P authorizes A to borrow money from a bank, but does so in his own name and not of P. The loan is a contract between A and bank. P and the bank shall have no right against each other.

P authorizes A to sell P’s car. A sells the car in his own name and delivers it to B. P shall have a right of action against B and B against P since the contract involves a thing belonging to the principal.

20
Q

What are the effects if the agent acts in excess of his authority and in the principal’s behalf?

A

The act becomes unenforceable against the principal or the person in whose name the contract was entered into unless the latter ratifies the same, while the agent becomes liable to 3rd persons with whom he contracted.

Example:
A was authorized by P to sell P’s car for at least 100,000 cash. A, however sold it to B but on credit. B cannot enforce the sale against P unless P ratifies the contract. A alone will be liable to B.

But if the 3rd person knew of the agent’s lack of authority and the agent did not undertake to get the principal’s ratification, the agent shall not be liable to 3rd persons.

21
Q

What are the effects when the agent acts in excess of his authority and does so in his own behalf?

A

The act is deemed to be that of the agent himself or of the person acting without authority. The act is generally valid between the agent and the 3rd person. Accordingly, if the agent or such person cannot perform his part of the contract, he shall be liable thereon in his personal capacity.

22
Q

What are the obligations of the agent?

A

Different scenarios and different obligations for the agent:
1. Obligations of an agent who declines agency - he is bound to observe diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner

  1. Obligations, IN GENERAL, of a person who accepts an agency -
    a. To carry out the agency
    b. To be liable for damages which, through his non-performance, the principal may suffer.
    c. To finish the business already begun on the death of the principal, should delay entail any danger.
  2. SPECIFIC OBLIGATIONS OF AN AGENT

A. To advance the necessary funds if there was a stipulation to that effect, except when the principal is insolvent

B. To act in accordance with the instructions of the principal in the execution of the agency, and in the absence thereof, he shall do all that a good father of a family would do as required by the nature of the business.

C. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal

D. To be liable for damages if there being a conflict between his interest and that of the principal, he should prefer his own

E. Not to borrow money for the principal without the principal’s consent, if the latter has authorized him to lend the principal’s money at interest

F. To render an accounting of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Any stipulation exempting the agent from the obligation to render an account shall be void.

G. Agent’s liability when he appoints a substitute

a. Agent is not prohibited to appoint a substitute - agent may appoint a substitute and he shall be responsible for the acts of the substitute, and the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted.

b. Agent is authorized to appoint a substitute
1. If the principal did not designate the person as a substitute - agent shall be liable if the substitute he appointed is notoriously incompetent or insolvent and the principal may bring action against the substitute

  1. Agent is not liable if the substitute is not notoriously incompetent or insolvent.
    c. Principal designated the substitute - agent is not responsible for substitutes act.
    d. Agent is prohibited to appoint a substitute - all acts of the substitute shall be void.

H. Liability of two or more agents if they have been appointed simultaneously.

I. To be liable for interest on the sums the agent has applied to his own use

J. Agent’s liability if he contracts in the name of the principal

K. To be responsible not only for fraud, but also for negligence which shall be judged with more or less rigor by the courts depending on whether the agency was for compensation or not.

23
Q

Differentiate instruction from authority.

A

Instruction - orders given by principal to his agent relating to the manner by which the agency shall be carried out

Authority - refers to the subject matter upon which the agent is commissioned to act

24
Q

Explain the rules on the liability if two or more agents have been appointed simultaneously.

A

GENERAL RULE: Each agent is liable only for his own acts or omissions. If they are all at fault their liability shall be joint.

Exception - their liability shall be solidary if the same has been agreed-upon. In this case, each of the agent shall be responsible for the following:

a. For the non-fulfillment of the agency
b. For the fault/negligence of his fellow agents except when the latter acted beyond the scope of their authority.

25
Q

Explain the agent’s liability if he contracts in the name of the principal.

A

GENERAL RULE: The agent who acts as such shall not be liable to the party with whom he contracts

Exceptions: The agent shall be personally liable when:

a. He expressly binds himself
b. He exceeds the limit of his authority without giving such party sufficient notice of his powers.

26
Q

What is a commission agent?

A

It is one who buys and sells goods or chattels consigned or delivered to him by his principal for a compensation known as commission.

27
Q

T or F

The commission agent cannot sell on credit.

A

True. He can only sell on credit if there is consent of the principal, whether implied or express.

28
Q

What are the obligations of the principal?

A
  1. To comply with all the obligations the agent may have contracted within the scope of his authority
  2. To be bound for any obligation wherein the agent has exceeded his power if he ratifies such obligation expressly or tacitly
  3. To be solidarity liable with the agent if he allowed the latter to act as though he had full powers when the agent exceeded his authority
  4. To advance to the agent the sums necessary for the execution of the agency should the agent so request
  5. To reimburse the agent the sums advanced by the latter even if the business or undertaking was not successfully provided the agent is free from fault.
  6. To indemnify the agent for all damages which the execution of the agency may have caused the latter, without fault or negligence on his part
  7. Solidary liability when there are two or more principals
29
Q

What are the modes of extinguishment of agency?

A
  1. Revocation
  2. Withdrawal of the agent
  3. Death/civil interdiction/insanity/insolvency of principal or agent
30
Q

T or F
When the power of attorney was granted for a common transaction, any one of the principals may revoke the same without the consent of the others.

A

True.

31
Q

What is the status of contracts entered into by the agent on the principal’s behalf, but such contract was in excess of the agent’s authority?

A

Unenforceable contract.

32
Q

The principal tasked the agent to sell his house. Principal found a buyer and sold it to X, while the agent sold the house to Y. The agent and principal did not know of each others sale. Who among X or Y has a better right to the house?

A 
Follow the rules on immovables:
Order of priority:
1. First registrant in good faith
2. First possessor in good faith
3. OLDEST TITLE
33
Q

The principal tasked the agent to sell his car. Principal found a buyer and sold it to X, while the agent sold the car to Y. The agent and principal did not know of each others sale. Who among X or Y has a better right to the car?

A

Follow the rules on immovables:
Order of priority:
1. First possessor in good faith
2. OLDEST TITLE

34
Q

What are the effects if the commission agent sells on credit without the principal’s consent?

A

a. The principal may demand from him in cash
b. The commission agent shall be entitled to any interest or benefit which may result from such sale

Example:
P gives general power of attorney to A to sell P’s goods for 10,000 cash for a commission. A sells the goods to B for 11,000 on credit without authority from P. In this case, P may demand the whole 10,000 from A, but A shall be entitled to collect the 11,000, with the 1000 as benefit to A.

If P ratifies the sale on credit, A must account the whole 11,000 to P.

35
Q

What are the effects if the commission agent sells on credit with the principal’s consent?

A

The agent must inform the principal with a statement of the name of the buyer. If he fails to do so, the sale shall be deemed to have been made in cash insofar as the principal is concerned.

36
Q

T or F
The commission agent bears the risk of collection and to pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser if he receives on a sale, in addition to the ordinary commission, another guarantee commission.

A

True.
Example:
P gives A general power of attorney to sell P’s goods, with A receiving 5% commission and 10% guarantee commission. A sold P’s goods on credit to B, but later on A could not collect from B since he became insolvent. In this case, A will be liable to P for the 50,000 because as GUARANTEE COMMISSION AGENT, HE BEARS THE RISK OF COLLECTING THE PRICE FROM THE CUSTOMER.

37
Q

T or F

Guarantee commission is also known as del credere commission.

A

True.

38
Q

T or F
The commission agent is liable for damages if he does not collect the credits of the principal at the time when they become due and demandable unless he proves that he exercised due diligence for that purpose.

A

True, but this is applicable only for commission agents and not guarantee commission agents.

39
Q

T or F
An agent acting in the name of the principal shall not be liable to 3rd persons with whom he contracts when the 3rd person knew of the agent’s lack of authority but the agent did not undertake to get the principal’s ratification.

A

True.

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS (24 decks)

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