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11; Agency agreed to order 1,000 units of the manufacturer's computers

every month and to resell them In the Philippines at the


2003 No V
manufacturer's suggested prices plus 10%. All unsold units
Jo-Ann asked her close friend, Aissa, to buy some groceries at the end of the year shall be bought back by the
for her in the supermarket. Was there a nominate contract manufacturer at the same price they were ordered. The
entered into between Jo-Ann and Aissa? In the affirmative, what manufacturer shall hold the distributor free and harmless
was it? Explain. 5% from any claim for defects in the units. Is the agreement
one for sale or agency? (5%)
Suggested Answer:
SUGGESTED ANSWER:
Yes, there was a nominate contract. On the assumption that
Aissa accepted the request of her close friend Jo-Ann to but some The contract is one of agency, not sale. The notion of
groceries for her in the supermarket, what they entered into was sale is negated by the following indicia: (1) the price is
a nominate contract of Agency. Article 1868 of the New Civil fixed by the manufacturer with the 10% mark-up constituting
Code provides that by the contract of agency a person binds the commission; (2) the manufacturer reacquires the unsold
himself to render some service or to do something in units at exactly the same price; and (3) warranty for the
representation or on behalf of another, with the consent or units was borne by the manufacturer. The foregoing indicia
authority of the latter. negate sale because they indicate that ownership over the
units was never intended to transfer to the distributor.
Alternative Answer:
11; Agency; appointment of sub-agent
Yes, they entered into a nominate contract of lease to
service in the absence of a relation of principal and agent 1999 No XV.
between them (Article 1644, New Civil Code).
(a) X appoints Y as his agent to sell his products in
11; Agency Cebu City. Can Y appoint a sub-agent and if he does, what
are the effects of such appointment? (5%)
2004 No. IV
ANSWER:
B. CX executed a special power of attorney authorizing DY to
secure a loan from any bank and to mortgage his property covered a. Yes, the agent may appoint a substitute or sub-
by the owner’s certificate of title. In securing a loan from agent if the principal has not prohibited him from doing so,
MBank, DY did not specify that he was acting for CX in the but he shall be responsible for the acts of the substitute:
transaction with said bank.
(1) when he was not given the power to appoint one;
Is CX liable for the bank loan? Why or why not? Justify
(2) when he was given such power, but without
your answer. (5%)
designating the person, and the person appointed was
11; Agency; agency vs sale notoriously incompetent or insolvent.
2000 No XVIII 11; Agency; authority to sell does not include authority to
collect
A foreign manufacturer of computers and a Philippine
distributor entered into a contract whereby the distributor 2004 No. VI

1
B. As an agent, AL was given a guarantee commission, in (NOTE: The above answer is based on Infante vs.
addition to his regular commission, after he sold 20 units of Cunanan, 49 Off. Gaz. 3320.)
refrigerators to a customer, HT Hotel. The customer, however,
11; Agency; coupled with an interest
failed to pay for the units sold. AL’s principal, DRBI, demanded
from AL payment for the customer’s accountability. AL objected, 2001 No XV
on the ground that his job was only to sell and not to collect
Richard sold a large parcel of land in Cebu to Leo for
payment for units bought by the customer.
P100 million payable in annual installments over a period of
Is AL’s objection valid? Can DRBI collect from him or not? ten years, but title will remain with Richard until the
Reason. (5%) purchase price is fully paid. To enable Leo to pay the
price, Richard gave him a power-of-attorney authorizing him
11; Agency; commission
to subdivide the land, sell the Individual lots, and deliver
1978 No. VII-b the proceeds to Richard, to be applied to the purchase
price. Five years later, Richard revoked the power of
A authorized B to sell her property for P20,000 subject to
attorney and took over the sale of the subdivision lots
the condition that the purchaser would assume the mortgage
himself. Is the revocation valid or not? Why? (5%)
existing in favor of Plaridel Bank and agreed to pay B a
commission of six per cent (6%) on the purchase price plus SUGGESTED ANSWER
whatever over price he may obtain for the property. B found a
The revocation is not valid. The power of attorney
buyer C who was willing to buy the property under the terms
given to the buyer is irrevocable because it is coupled with
stipulated by A. When B introduce C to A, A told B that she was
an interest: the agency is the means of fulfilling the
no longer interested in selling the property and a document was
obligation of the buyer to pay the price of the land
signed canceling the written authority to sell with the agreement
(Article 1927, CC). In other words, a bilateral contract
of B. One (1) month later, A sold the same property directly to C
(contract to buy and sell the land) is dependent on the
for P22,000, A refused to pay B his commission, contending that
agency.
when the property was sold to C the authority to sell of B was
already cancelled. B sued to collect his commission. Is B 11; Agency; coupled with an interest
entitled to his agent's commission? Give reasons for your answer.
1980 No. VIII
Answer
(a) "AA" had an option to purchase a vessel. He
B is entitled to his agent's commission. C, the buyer of B, entered into a contract with "BB" wherein he assigned his
was willing to buy the property under the terms stipulated by A. option to "BB" under the condition that "BB" would appoint
Despite this, A told B that she was no longer interested in him as agent of the vessel for five years. "BB" purchased
selling the property. As a result, B's authority was cancelled. the vessel and appointed "AA" as agent in accordance with
And yet, all of a sudden, one month later, A sold the property the contract. After three years of operation "BB" revoked
directly to C for P22,000. It is clear that there was bad faith the appointment of "AA" as agent for loss of confidence.
on the part of A. This act of bad faith cannot serve as a basis "AA" sued "BB" for damages.
for him to evade payment of the commission of B.
Would you hold "BB" liable for damages?
Answer

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(a) "BB" should be held for damages. True, according to Answer
the Civil Code, the principal may revoke the agency at will.
The bank cannot be compelled to accept the tender of
But there are exceptions. These exceptions are sometimes
redemption by the heirs of DT. True, agency is extinguished
denominated as agency coupled with an interest. One of
by the death of the principal, but there are two well-known
them is when the agency is the means of fulfilling an obligation
exceptions. The first exception is where the agency is
already contracted. It is obvious that the agency is the means
coupled with an interest and the second is where the agent,
of fulfilling an obligation already contracted in favor of
unaware of the death of his principal, enters into a
"AA". "BB" has clearly breached his contract or
contract in behalf of his principal with a third person who
undertaking by revoking the agency before the expiration of
is also unaware of the death of the principal (Arts. 1930,
the term or period of five years.
1931, Civil Code) The instant case falls squarely within the
(NOTE: The above answer is based upon Arts. 1927, 1930, purview of agency coupled with an interest. According to the
Civil Code.) Civil Code, the agency shall remain in full force and effect
even after the death of the principal, if it has been
11; Agency; coupled with an interest
constituted in the common interest of the latter and of the
1979 No. XVI agent, or in the interest of a third person who has accepted
the stipulation in his favor. Hence, despite the death of
DT borrowed P50,000.00 from a bank and to secure the
DT, the power granted by him to the bank to sell the
payment thereof, signed a Deed of Real Estate Mortgage in favor
property mortgaged and to sign all documents and perform any
of the bank in the usual printed form wherein it is provided
act requisite and necessary to accomplish the extra-judicial
among others that "for the purpose of extra-judicial foreclosure,
foreclosure in case he is unable to pay the loan is still of
the mortgagor hereby appoints the mortgagee his attorney-in-fact
full force and effect. The foreclosure, therefore, and the
to sell the property mortgaged under Act 3135, as amended, to
consolidation by the bank of its title over the mortgaged
sign all documents and perform any act requisite and necessary to
property are perfectly valid.
accomplish said purpose." Upon failure of DT to pay the loan, the
bank foreclosed and bought the property at the foreclosure sale. 11; Agency; general vs special agency
During the one year period of redemption DT died and the property
1992 No 8:
was not redeemed despite the lapse of one year. The bank, despite
its actual knowledge, of DT's death, consolidated its title by A as principal appointed B is his agent granting him
executing the affidavit of consolidation and Deed of Sale of the general and unlimited management over A's properties,
land in its favor as empowered in the Deed of Real Estate stating that A withholds no power from B and that the agent
Mortgage. After the bank had consolidated its title the heirs of may execute such acts as he may consider appropriate.
DT asked the bank to allow them to redeem the property by paying
Accordingly, B leased A's parcel of land in Manila to
only the P50,000.00 plus accrued interest and expense of
C for four (4) years at P60,000.00 per year, payable
foreclosure, contending that the sale in favor of the bank was
annually in advance.
invalid due to the prior death of DT which therefore revoked the
power of attorney inserted in the Deed of Mortgage but the bank B leased another parcel of land of A in Caloocan City
demanded payment of P200,000.00, the then fair market value of to D without a fixed term at P3,000.00 per month payable
the property. Can the bank be compelled to accept the tender of monthly.
redemption by the heirs of DT? Why?

3
B sold to E a third parcel of land belonging to A located No, the Bank is not liable to B. The letter of A to
in Quezon City for three (3) times the price that was listed in PNB is merely an authority given to PNB to pay B. PNB,
the inventory by A to B. therefore, is merely an agent of A, and an agent cannot be
personally liable as long as be acts within the scope of his
All those contracts were executed by B while A was confined
authority.
due to illness in the Makati Medical Center.
Moreover, the Bank did not assume the obligation to
Rule on the validity and binding effect of each of the
pay A's indebtedness to B, either as co-principal, surety or
above contracts upon A the principal. Explain your answers,
guarantor. (Hodges v. Rey, 111 Phil. 219)
Answer:
11; Agency; liability of an agent to render an account
The agency couched in general terms comprised only acts of
1981 No. 15
administration (Art. 1877, Civil Code). The lease contract on the
Manila parcel is not valid, not enforceable and not binding upon "A", an official of a mining company, was appointed
A. For B to lease the property to C, for more than one (1) year, by the company as its buying agent for the acquisition of
A must provide B with a special power of attorney (Art. 1878. mining rights in a designated area for operation by the
Civil Code). company. "A" proceeded to enter into contracts with the
claim owners. Claim owner "B", an illiterate, was helped by
The lease of the Caloocan City property to D is valid and
"A" in locating and perfecting his rights and for which "A",
binding upon A. Since the lease is without a fixed term, it is
by contract, obtained a participation in the royalty paid by
understood to be from month to month, since the rental is payable
the company to the claim owner.
monthly (Art. 1687, Civil Code).
a) The mining company goes to you for advice as to
The sale of the Quezon City parcel to E is not valid and
whether it is entitled to the royalty obtained by "A" from
not binding upon A. B needed a special power of attorney to
"B". What would your advice be and why?
validly sell the land (Arts. 1877 and 1878, Civil Code). The sale
of the land at a very good price does not cure the defect of the b) May "B", the claim owner, question the royalty
contract arising from lack of authority obtained by "A"? On what grounds? Explain,
11; Agency; liability of an agent Answer
1975 No. XIV (a) I would advice the mining company to withhold the
payment of the part of the royalty corresponding to "A".
A borrowed from B the sum of P3,000.00. Three days after A
This is so because of the explicit mandate of the Civil
in a letter authorized the Philippine National Bank to pay his
Code. According to the law: Every agent is bound to render
debt to B out of whatever crop loan might be granted to him by
an account of his transactions and to deliver to the
said Bank. On the same day, the Bank agreed but the Bank paid B
principal whatever he may have received by virtue of the
only P2,000.00. On the date of the maturity, B sued the Bank and
agency, even though it may not be owing to the principal. It
A for the remaining P 1,000.00. Is the Bank liable to B? Explain.
is crystal dear that the act of "A", agent of the mining
Answer company, falls squarely within the purview or coverage of
this rule.

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(Note: The above answer is based on Art. 1891 of the Civil However, if Jesus made due inquiry and he was not
Code.) informed by the principal Prime Realty of the limits of
Nestor's authority. Prime Realty shall bear the loss.
(b) "B", the claim owner, may question the royalty obtained
by "A" on the ground that it is "not owing to the principal." It b) Considering that Prime Realty Corporation only
must be observed that the obligation of the agent to deliver to "told" Nestor that he could not receive or collect payments,
his principal anything which he has received by virtue of the it appears that the limitation does not appear in his
agency is followed by the phrase "even though it may not be owing written authority or power of attorney. In this case,
to the principal" This means that the action for recovery by "B" insofar as Jesus, who is a third person. Is concerned,
on the ground of undue payment would be directed against the Nestor's acts of collecting payments is deemed to have been
mining company and not against the agent. performed within the scope of his authority {Article 1900.
Civil Code). Hence, the principal is liable.
(Note: The above answer is based on Art. 1891 of the Civil
Code and on Manresa's opinion — Vol. 11, p. 512,} However, if Jesus was aware of the limitation of
Nestor's power as an agent, and Prime Realty Corporation
11; Agency; powers of the agent
does not ratify the sale contract, then Jesus shall be
1994 No. 18: liable (Article 1898. Civil Code).
Prime Realty Corporation appointed Nestor the exclusive 11; Agency; termination; death or principal: double sales
agent in the sale of lots of its newly developed subdivision.
1988 No. 13:
Prime Realty told Nestor that he could not collect or receive
payments from the buyers. Nestor was able to sell ten lots to (b) In 1950, A executed a power of attorney
Jesus and to collect the down payments for said lots. He did not authorizing B to sell a parcel of land consisting of more
turn over the collections to Prime Realty. Who shall bear the than 14 hectares. A died in 1954. In 1956, his four children
loss for Nestor's defalcation. Prime Realty or Jesus? sold more than 12 hectares of the land to C. In 1957, B sold
8 hectares of the same land to D, It appears that C did not
Alternative Answer:
register the sale executed by the children. D, who was not
a) The general rule is that a person dealing with an agent aware of the previous sale, registered the sale executed by
must inquire into the authority of that agent. In the present B, whose authority to sell was annotated at the back of the
case, if Jesus did not inquire into that authority, he is liable Original Certificate of Title.
for the loss due to Nestor's defalcation unless Article 1900,
(1) What was the effect of the death of A upon B's
Civil Code governs, in which case the developer corporation bears
authority to sell the land?
the loss.
(2) Assuming that B still had the authority to sell
Art. 1900 Civil Code provides: "So far as third persons are
the land—who has a better right over the said land, C or D?
concerned, an act is deemed to have been performed within the
scope of the agent's authority, if such act is within the terms Answer:
of the power of attorney, as written, even if the agent has in
(b) (1) While the death of the principal in 1954
fact exceeded the limits of his authority according to an
ended the authority of the agent to sell the land, it has
understanding between the principal and the agent.
not been shown that he was aware of his principal's demise.

5
Hence, the act of such agent is valid and shall be fully
effective with respect to third persons which may have contracted
with him in good faith in conformity with Art. 1931 of the Civil
Code. (Buason vs. Panuyas, 105 Phil. 795, Herrera vs. Luy, 110
Phil. 1020.)
(2) D has better right since he registered first in good
faith.
Alternative Answer to: No, 13 (b):
(b) (1) The agency is terminated upon the death of either
the principal or agent. Exceptionally, a transaction entered into
by the agent with a third person where both had acted in good
faith is valid. Article 1930 of the Civil Code provides that:
"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.'* and Article 1931 provides that;
"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,"
11; Agency; termination; effect of death of agent
1997 No. 17:
Stating briefly the thesis to support your answer to each
of the following cases, will the death - (c) of an agent end an
agency?
Answer:
(c) Yes. The death of an agent extinguishes the agency,
by express provision of par. 3, Art 1919 of the Civil Code.