AGENCY

Agency, concept

Agency 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. (Art. 1868)
Importance of agency
Agency enables a person to perform diverse juridical acts at the same time by enabling him to be constructively
present in many places, which would not be possible for him to do physically.

The underlying principle of the contract of agency is to accomplish results by using the services of others — to do a
great variety of things like selling, buying, manufacturing, and transporting. Its purpose is to extend the personality of
the principal or the party for whom another acts and from whom he derives his authority. The basis of agency is
representation, i.e., the agent acts for and on behalf of the principal on matters within the scope of his authority and
said acts have the same legal effects as if they were personally executed by the principal. By this legal fiction, the
actual or real absence of the principal is converted into his legal or juridical presence — qui facit per alium facit per
se, (Eurotech Industrial Technologies, Inc. vs. Cuizon, G.R. No. 167552, April 23, 2007), i.e., he who acts through
another, acts by himself. (Bank of the Philippine Islands vs. De
49 Phil 593; Rallos vs. Felix Go Chan and Sons, 81 SCR A &259)

Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates
from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the
authority. (Sps. Viloria Vs. Continental Airlines, Inc., G. R. No. 188288, January 16' *012)

Elements of a contract of agency

1. Consent, express or implied, of the portico to establish the relationship.
2. The object is the execution of a juridical act in relation to a third person.
3. The agent acts as representative and not for himself.
4. The agent acts within the scope of his authority. (Eurotech Industrial Technologies, Inc. vs. Cuizon, supra)

Characteristics of agency
1. Principal -- It can stand by itself.
2. Preparatory — It is a means by which other contracts may be entered into.
3. Consensual — It is perfected by mere consent.
4. Onerous — It is presumed to be for a compensation, unless there is proof to the contrary. (Art. 1875)
5. Nominate — It has a name given to it by law. (Art. 1868)
6. Bilateral — The parties are bound reciprocally to each other.
7. Commutative The parties give and receive almost equivalent values; hence, there is real fulfillment.

Parties to a contract of agency, capacity of the parties

1. Principal The person represented by the agent and from whom the latter derives his authority; he is the
party primarily and originally concerned in the contract of agency.
a. Capacity to be a principal
Agency being a contract, any person with legal capacity may appoint an agent for any legal purpose whatsoever.
b. Effect if principal is incapacitated
If the principal is incapacitated but the agent incapacitated, the contract of agency is voidable at the instance of the
principal. Should the agent enter into a contract in behalf of his principal, such contract is likewise voidable because
the real party to such contract is the principal the agent being merely an extension of the personality of the principal.
2. Agent — He who acts for and represents the principal and from whom he derives his authority.
a. Capacity to be an agent
A person capable of acting for himself can be an agent of another. 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.

b. Effect if agent is incapacitated

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. In
case of dispute between the principal and the agent who is incapable, the latter may avail himself of his incapacity as
a defense or as a ground to set aside the contract of agency.

Acts that may be delegated

Any act which one may lawfully do personally may be delegated. However, the following acts may not be delegated:
1. Acts which are personal in nature.
2. Acts that are prohibited by law to be delegated.
Examples:
1. The right of a stockholder to vote during stockholders' meetings may be delegated since this is something that
one can lawfully do. (Sec. 58, Corp. Code) However, a director cannot be represented by proxy during board meetings
because this is prohibited by law. (See Sec. 25, Corp. Code.)
2. The right to vote and to run for public office cannot be delegated since delegation thereof is prohibited by
law.
3. The right to be represented in a marriage ceremony where the principal is a party to the marriage cannot be
delegated, this act being purely personal.
4. An alien cannot purchase land in the Philippines because this is prohibited by the Constitution. Accordingly,
he cannot delegate such act to a Filipino. What an alien cannot lawfully do, he may not lawfully do it through
another.

Relationship between principal and agent

The relation of an agent to his principal is fiduciary since it is based on trust and confidence. (See Palma vs. Cristobal,
440 O.G. 67; Severino vs. Severino, 44 Phil 343.)

How agency relationship is created

1. By appointment
This is usually made by giving a person a power of attorney.
2. By ratification
An agency by ratification is created when a person adopts or confirms an act performed by another in his behalf
without prior authority.
Example: A sells the car of P to B without P 's authority. The sale is in the name of P. The sale cannot be enforced by B
against P. If P ratifies the sale, then he will be bound by it. An agency is deemed created between P and B by reason
of P's ratification of the sale.
3. By estoppel
For an agency by estoppel to exist, the following must be established: (a) The principal manifested a

representation of the agent's authority or knowingly allowed the agent to assume such authority; (b) The third
person in good faith, relied upon such representation; and (c) Relying upon such representation, such third person
has changed his position to his detriment. (Country Bankers Insurance Corp. vs. Keppel Cebu Shipyard, G.R. No.
166044, June 18, 2012)
Example: S, a salesman, has been persistently offering goods to P, a store owner. P, however, does not want to buy
goods from S. In order to avoid S, P tells S, "You better to talk to A. He is there. He is my agent." A is not really P's
agent but his employee. S, believing that A is P's agent, transacts with A who buys goods from S in P's behalf. P will be
bound by the act of A since he has led S to believe that A is his agent.
4. By necessity
An agency by necessity arises when an emergency makes it necessary for one to act for another without receiving
any authority from the latter.
Example: W, a wife and mother of a minor child, buys necessaries in the name of H, her husband who has not been
giving them support. An agency by necessity is created between W as agent, and H as principal. H is bound by the
purchase made by W.

Kinds of agency
1. According to form
A.Express,

1. Oral agreement — An oral agency is valid unless the law requires a specific form. (Art. 1869)
2. Written agreement
a) Those that require a special power of attorney, such as those enumerated under Article 1878.
The act performed is not enforceable against the principal if the power of attorney is not special.
b) When the sale of a piece of land or an interest therein (such as easement and usufruct) is made through an
agent, the authority of the agent must be in writing, otherwise the sale is void. (Art. 1874)
B.Implied — An agency may be implied from the following:
1) Acts of the principal.
2) Silence of the principal.
3) Lack of action of the principal.
4) Failure of the principal to repudiate the agency knowing that another person is acting in his behalf without
authority. (Art. 1869)
 Examples:
1) P learns that A is selling his car in his (P's) name without any authority. P does not do anything to stop A. Later, A
brings the buyer to P who voluntarily accepts the payment and delivers the car to B. An agency is implied from the
acts of P.
2) P noticed that the financial reports on his business were being signed by B and not A whom he had appointed as
his agent to manage the business. He learned on inquiry with the relatives of A that the latter was seriously ill and
that he had turned over the management of the business to B before he became sick. P continued to receive without
any protest or question the reports coming from B and did not designate a new agent or give B a attorney. Instead, P
allowed B to the functions of a manager knowing that another person was acting in his behalf without any authority.
2. According to extent
a) General agency — One that comprises all the business of the principal. (Art. 1876)
b) Special agency — One that comprises one or more specific transactions. (Art. 1876)
3. According to authority-conferred

a) Agency couched in general terms (general power of attorney) This comprises only acts of administration. This is
true even if the principal should state:
1) That he withholds no power; or
2) That the agent may execute acts as he may consider appropriate; or
3) Even though the agency should authorize a general and unlimited management. (Art.1877)

Power of attorney, concept

Power of attorney 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. This may be a
general power of attorney or a special power Of attorney.
b.) Agency couched in specific terms — A special power of attorney is required for the performance of the following
specific acts (Art. 1878):
1) To make such payments as are not usually considered acts of administration.
2) To effect novations which put an end to obligations already in existence at the time the agency was
constituted.
3) To compromise.
In a compromise, the parties make reciprocal concessions to avoid or put an end to litigation. A special power to
compromise does not authorize submission to arbitration.
(Art. 1880)
4)To submit questions to arbitration.
Arbitration is an extra-ordinary method of settlement by referring a dispute to a third person known as arbitrator
whose judgment will substitute that of the agent representing his party principal. Thus, a special power of
attorney is required.
5) To renounce the right to appeal from a judgment.
6) To waive objections to the venue of an 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 the following where a general power of attorney is sufficient:
a) Customary ones for charity.
b) Those made to employees in the business managed by the agent.
11) To loan or borrow money, except that no special power of attorney is required if the borrowing of money is
urgent and indispensable for the preservation of the things which are under administration.
12) To lease any real property to another person for more than a 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.
A special power to sell excludes the power to mortgage; a special power to mortgage does not include the power to
sell.
(Art. 1879)
1) To accept or repudiate an inheritance.
2) To ratify or recognize obligations contracted before the agency
3) Any other act of strict dominion.

Kinds of acceptance of agency by the agent

1. Express — This may be made orally or in writing.
2. Implied — Acceptance by the agent may be implied from:
a. His acts which carry' out the agency.
b. His silence or inaction according to the circumstances. (Art. 1870)

Cases when there is implied acceptance

a. Between two persons who are present, i.e., they are face to face
There is implied acceptance if the principa l delivers his power of attorney to the agent and the latter accepts it
without any objection. (Art. 1871)
b. Between two persons who are absent
Acceptance by the agent can be implied from the silence of the agent in the following cases:
1) When the principal transmits his power Of attorney to the agent, and the latter
1) When the principal transit his power of attorney to the agent, and the latter receives it without any objection, (Art.
1872)
This will recruit the agent to at least acknowledge receipt of the power of attorney to distinguish it from the second
situation where the authority pertains to the business in which the agent is habitually engaged.
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. (Art. 1872)

Announcement of appointment of an agent

1. By special information — This is usually made through a letter addressed to a specified person or persons
The person appointed will be considered a duly authorized agent with respect to the person who received the special
in formation. (Art. 1873)
2. By public advertisement This may be made by publication In the newspapers, signs, leaflets, posters, or
billboards.
The person appointed will be considered as agent with regard to any person. (Art. 1873)

Announcement of the revocation of appointment of an agent

1. If the announcement of the appointment is by special information, the announcement of the revocation of the
appointment shall also be made by special information. (Art. 1873)
2. If the announcement of the appointment is by public advertisement j the announcement of the revocation of
the appointment shall also be by public advertisement. (Art.
1873)
However, any revocation shall be effective against any person who has actual knowledge thereof whether the
announcement Of the appointment was by special information or by public advertisement.

Basic principles of agency

1. The agent must act within the scope of his authority. (Art 1881)
The agent may do such acts as may be conducive to the accomplishment of the purpose of the agency. (Art 1881)
The limit 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. 1882)
2. The agent must act in behalf of his principal. (Art. 1868)

Effects if an agent acts within the scope of his authority and in behalf of the principal (disclosed principal)
1. The act is valid.
2. The principal alone is liable unless the agent expressly bound himself. (Art. 1897)

Effects if one or both principles are absent

1. Agent acts within the scope of his authority but in his (agent's) own behalf (undisclosed principal)
a .The principal has no right of action against the person with whom the agent has contracted.
b. The person with whom the agent has contracted has no right of action against the principal.
c. The agent is the one directly bound in favor of the one with whom he has contracted as if the transaction were his
own except when the contract involves things belonging to the principal, (Art• 1883) in which case, the principal
shall have a right of action against the third person, and the third person against the principal. (Syjuco vs. Syjuco, 40
Phil 634)
Note: This is without prejudice to the actions between the principal and the agent. (Art. 1883)
Examples:
a. P authorizes A to borrow money from a bank. A, however, borrows money in his own name and not that of P. The
loan is a contract between the A and the bank. P and the bank shall have no right of action against each other.
b. P authorizes A to sell P's computer. A sells the computer in his (A's) name and delivers it to B. P shall have a right of
action against B since the contract involves a thing belonging to him (P). In case B has paid the price but has not yet
received the computer, he shall have a course of action against P for the delivery of the computer.
2. Agent acts in excess of the authority of his principal and in the principal's behalf or a person acts without the
authority of another but in the latter's behalf
The act is unenforceable against the principal or the person in whose name the contract was entered into unless the
latter ratifies the same. (See Arts. 1317 and 1403.)
Example: A was authorized by P to sell P's car for at least P 100,000.00 cash. A, however, sold the car in the name of P
to B for the same price but on credit. B cannot enforce the sale against P unless P ratifies the contract. A alone will be
liable to B.
3. Agent acts in excess of the authority of his principal and in his own (agent's) behalf or a person acts without the
authority of another but in his (the former's) own behalf
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 acting in excess of authority (or person acting without authority) and the third person.
Accordingly, if the agent or such person cannot perform his part of the contract, he shall be liable thereon in his
personal capacity.
In the case of a contract of sale, a person may sell in his own name something belonging to another provided he can
transfer its ownership thereof at the time of delivery. The act is therefore valid. If he cannot transfer such ownership,
he can be held liable for breach of warranty against eviction. (Arts. 1459, 1548)
Example: P is the owner of a house and lot. A with the intention of buying the house and lot from p sells the house
and lot in his (A's) name to B without any authority from P. The sale is a binding contract between A and B. If A
cannot transfer the ownership of the house and lot at the time of delivery, then A can be held liable for breach of
warranty against eviction.

Obligations of the Agent

Obligations of a person who declines an agency

If a person is appointed as an agent but declines the appointment, he is bound to observe the diligence of a good
father of a family in the custody and preservation of the goods forwarded to him by the owner. (Art. 1885) The owner
shall as soon as practicable either:
1. Appoint an agent, or
2. Take charge of the goods. (Art. 1885)

Obligations, in general, of a person who accepts an agency

1. To carry out the agency.

2. To be liable for damages which, through his nonperformance, the principal may suffer.
3. To finish the business already begun on the death of the principal, should delay entail any danger. (Art. 1884)

Specific obligations of an agent

1. To advance the necessary funds if there was a stipulation to that effect, except when the principal is insolvent. (Art'
1886)
AGENCY
2. To act in accordance with the instructions of the principal in the execution of the agency. In the absence of
specific instructions from the principal, he shall do all that a good father of a family would do, as required by the
nature of the business. (Art. 1887)
a. Instructions, concept; distinguished from authority
Instructions refer to the orders given by the principal to his agent relating to the manner by which the agency shall be
carried out. They refer to the private orders given by the principal to his agent to guide him in carrying out the
agency. (See 2 C.J.S. 1200-1201.) They need not be known by third persons because they affect only the principal and
the agent.
Authority, on the other hand, refers to the subject matter upon which the agent is commissioned
to act. Third persons are bound to know whether an agent is acting within his authority or not. Accordingly, they have
the right to require the agent to present his authority as written. (See Art. 1900.)
Example: P gives a general power of attorney to A to lease P's apartments to third persons.- This is A's authority. The
power of attorney does not indicate the persons with whom A shall transact. But P tells A privately not to lease the
apartments to any foreigner. This prohibition on leasing to a foreigner is a matter between P and A and refers to
instruction.
c. Rule if agent acts in accordance with the orders of the principal
The principal cannot set up the ignorance of the agent as to circumstances which he himself was, or ought to have
been, aware. (Art. 1899)
Thus, the principal cannot claim the good faith of the agent in case the buyer should lose by eviction the property
sold if the principal ought to have known that there was a rightful claimant to the property.
3. Not to carry out an agency if its execution would manifestly result in loss or damage to the principal. (Art 1888)
4. To be liable for damages if there being a conflict between his interest and that of the principal, he should prefer his
own. (Art. 1889)
This is by reason of the fiduciary nature of an agency relationship.
Example: P gives a special power of attorney to A to sell P's lot. On meeting with a prospective buyer who offers a
very good price, A sells instead his lot to B. A shall be liable for damages to P for preferring his own interest.
5. Not to borrow the money of the principal without the principal's consent, if the latter has authorized him to lend
the principal's money at interest. (Art. 1890)
This is so because the agent may not be a good credit risk. He may not subject himself to the same strict
requirements he imposes on prospective borrowers
If he has been empowered to borrow money, he may himself be the lender at the current rate of interest. (Art. 1890)
6. To render an accounting of his transactions and to delive r to the principal whatever he may have received by virtue
of the agency, even though it may not be owing to t he principal. Any stipulation exempting the agent from the
obligation to render an account shall be void. (Art. 1891)
Thus, the agent must account and deliver to his principal any excess price and interest he collects including those on
unauthorized credit sales.
7. Agent's liability when he appoints a substitute
The following rules shall be observed when the agent appoints a substitute:
a. Agent is not prohibited to appoint a substitute
Here, the power of attorney does not expressly authorize or prohibit the appointment of a substitute, i.e., it is silent
on this point.
The agent may appoint a substitute. However, he shall be responsible for the acts of the substitute. (Art. 1892) The
principal may furthermore bring an action against the substitute with respect to the obligations which the latter has
contracted. (Art. 1893)

b. Agent is authorized to appoint a substitute

1) If the principal did not designate the person to be appointed as substitute:
a) Agent shall be liable if the person he appointed as substitute is notoriously incompetent or insolvent. (Art. 1892)
The principal may furthermore bring an action against the substitute with respect to the obligations which the latter
has contracted. (Art. 1893)
b) Agent shall not be liable if the person he appointed as substitute is not notoriously incompetent or insolvent, i.e.,
the substitute is a reasonably prudent man. (See Art. 1892.) The substitute himself will be liable.
2) If the principal designated the person to be appointed as substitute
The agent is not responsible for the acts of the substitute even if the latter is notoriously incompetent or insolvent
since the agent had no choice as to whom he would appoint as substitute. In this case, the substitute himself will be
liable to the principal for his own acts. (See Art. 1892.)
c. Agent is prohibited to appoint a substitute
The agent cannot appoint a substitute. If he appoints one, ail the acts of the substitute shall be void. (Art, 1892)

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

General rule: Each agent is liable only for his own acts or omissions. (Art. 1894) If all are at fault, their liability shall be
joint.
Exception: The agents' liability shall be solidary if the same has been agreed upon. (Art. 1894) In this case, each of the
agents shall be responsible for the following:
a. For the non-fulfillment of the agency.
b. For the fault or negligence of his fellow agents, except when the latter acted beyond the scope of their authority.
(Art. 1895) Examples:
a. P appointed Al and A2 as his agents to sell his (P's) Toyota car. The appointment did not indicate whether the
agents' liability was joint or solidary. While A1 was drunk day, he alone drove the car to a prospective buyer. Not
being in control of his senses, he caused the car to bump an electric post resulting in damages to the car amounting
to P 10,000.00. Al alone will be responsible for the payment of the damages of P 10,000.00.
If both Al and A2 were driving alternately while drunk, and Al, while driving, caused the car to bump an electric post
resulting in damages to the car amounting to P 10,000.00, each one will be liable for only P5,000.00. This is so
because their liability shall only be joint.
b. In both cases above, if the liability of the agents as indicated in their authority were solidary, either Al or A2 can be
held liable for the whole amount of 10,000.00.
c. P appointed A1 and A2 to sell P's Toyota car for P200,000.00 cash. The agents' appointment indicated that their
liability shall be solidary. One day, A1 received a call from a prospective buyer who was interested in buying the car
for P200,000.00 but on credit. So A1 brought the car to the buyer but along the way he caused the car to bump into
an electric post resulting in damages of P 10,000.00. Al alone shall be liable because he exceeded his authority since
he and A2 were authorized only to sell the car on cash basis.
9. To be liable for interest on the sums he has applied to his own use from the day on which he did so, and on those
which he still owes after the extinguishment of the agency. (Art. 1896)
10. Agent's liability if he contracts in the name of the principal
General rule: The agent who acts as such shall not be liable to the party with whom he contracts. (Art. 1897)
Exceptions: The agent shall be personally liable in the following cases:
a. If he expressly binds himself. (Art. 1897)
In this case, both the agent and the principal shall be liable to the party with whom the agent has contracted.
b. If he exceeds the limits of his authority without giving such party sufficient notice of his powers. (Art. 1897)
(Eurotech Industrial Technologies, Inc. vs. Cuizon, supra)
1) Rule if the other party was aware of the agent's acting beyond the limits of his authority
a) If the agent did not undertake to secure the principal's ratification, the contract shall be void.
The agent here will not be liable. (Art. 1898)
b) If the agent undertook to secure the principal's ratification of the act and the principal does not ratify the same,
the agent shall be liable.
c) If the principal ratifies the contract the contract shall be enforceable against the principal (Art. 1910)
2) Rights and obligations of third person have contracted with an agent who exceeded his authority
a) As to third persons, an act is deemed to have been performed within the scope of the agent's authority, if such act
is within the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according
to an understanding between the principal and the agent. (Art. 1900)
b) A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has
signified his willingness to ratify the agent's acts. (Art. 1901)
c) A third person may require the agent to present his power of attorney, or the instructions as regards the agency.
Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the
power of attorney or instructions shown them. (Art. 1902)

1. To be responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the
courts, according to whether the agency was or was not for a compensation, (Art. 1909)

Commission agent
1. Commission agent, concept
A commission agent is one buys and sells goods or chattels consigned o delivered to him by his principal, for a
compensation known as commission.

2. Distinctions between a commission agent and a broker.

A commission agent maintains a relation not only with his principal and the buyer or seller but also with the property
subject matter of the transaction which is placed in his possession and at his disposal.
A broker is merely an intermediary between the buyer and the seller and has no relation to the property, He does not
acquire either the custody or possession of the thing. His function is to bring together the parties to the transaction.
A commission agent receives a commission upon the successful conclusion of a sale. On the other hand. a broker
earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. (Philippine
Health Care Providers, Inc. vs. Estrada, G. R. No. 171052, January 28, 2008, citing Tan vs. Gullas, 44 Phil 622)

3. Obligations of a commission agent

a. To be responsible for the goods received by him in the terms and 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. (Art. 1903)
b. To distinguish by countermarks goods of the same kind and mark which belong to different owners, and designate
the merchandise respectively belonging to each principal. (Art. 1904)
c. Authority of commission agent to sell on credit
General rule: The commission agent
cannot sell on credit. (Art. 1905)
Exception: The commission agent can sell on credit only with the express or implied consent of the principal, (Art.
1905)
1) Effects if the commission agent sells on credit without principal's consent
a) The principal may demand payment from him in cash.
b) The commission agent, however shall be entitled to any interest or benefit, which may result from such sale. (Art.
1905)
2) Example:
P gives a general power of attorney to A to sell P's goods for P 10,000.00 cash for a commission. A sell the goods on a
15-day credit term for PI 1,000.00 to B without authority from P. In this case:
a) P may demand the immediate payment of P 10,000.00, but when A collects the amount of PI 1,000.00 from B, A
gets the excess of PI,000,00 or
b) P may ratify the sale on credit, in which case, when A collects the amount of PI 1,000.00 from B, the said amount
shall be accounted in full by A to P.
3) Obligation of the commission agent if he is authorized to sell on credit
The commission agent who sells on credit must so inform the principal, with a statement of the names of the buyers.
If he fails to do so, the sale shall be deemed to have been made in cash insofar as the principal is concerned. (Art.
1906)
d. To bear the risk of collection and to pay the principal the proceeds of the sale on the same terms agreed upon with
the purchaser if he receives on a sale, in addition to the ordinary commission, another called a commission guarantee
commission. (Art. 1907) Guarantee also known as del credere commission.
Example: P gave a general power of attorney to A to sell P's gave goods. The general parties power agreed of that A
will receive an ordinary commission of 5% and a guarantee commission of 10%. A sold P's goods on credit for
P507000.00. Later, A could not collect the amount due because the customer had become insolvent. In this case, A
will be liable to P for the price of P50,000.00 because as a guarantee commission agent, he bears the risk of collecting
the price from the customer.
e. To be 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. (Art. 1908) This applies only to an
ordinary commission agent.

Obligations of the principal

1. To comply with all the obligations which the agent may have contracted within the scope of his authority. (Art.
1910)
2. To be bound for any obligation wherein the agent has exceeded his power if he ratifies such obligation expressly or
tacitly. (Art. 1910)
3. To be solidarily liable with the agent if he allowed the latter to act as though he had full powers when the agent
exceeded his authority. (Art. 1911)
4. To advance to the agent the sums necessary for the execution of the agency should the agent so request. (Art.
1912)
5. To reimburse the agent the sums advanced by the latter even if the business or undertaking was not successful
provided the agent is free from all fault. (Art. 1912)

The reimbursement shall include interest on the sums advanced from the date on which the advance was made.
(Art. 1912)

When principal not liable for expenses incurred by the agent.

a. When the agent acted in contravention of the principal's instructions, unless the latter should wish to avail himself
of the benefits derived from the contract.
b. When the expenses were due to the fault of the agent.
c. When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not
aware thereof.
d. When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a
certain sum. (Art. 1918)
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. (Art. 1913)
7. Liability when there are two or more principals
When two or more persons have appointed an agent for a common transaction or undertaking, they shall be
solidarily liable for all the consequences of the agency. (Art. 1915)

Right of retention of agent

The agent shall have the right to retain in pledge the things which are the object of the agency until the principal:
1. Reimburses him for the sums necessary for the execution of the agency which he had advanced, even if the
business or undertaking was not successful, provided the agent is free from all fault.
2. Pays him the indemnity for all damages which the execution of the agency may have caused the agent' without
fault (3r negligence on his part. (Art. 1914)
Note: The right of retention of the agent is in the nature of legal pledge.

Incompatible contracts with agent and principal

1. Rules in incompatible contracts
When two persons contract with regard to the same thing, one of them with the agent, and thc other with the
principal, and the two contracts are incompatible with each other, the following rules shall be observed:
a. If the thing is a movable -- ownership shall belong
1) The first possessor in good faith.
2) In the absence thereof, the contract with a prior date shall be preferred. (Arts. 1544, 1916)
b. If the thing is an immovable — Ownership shall belong to:
1) The first registrant in good faith.
2) In the absence thereof, the first possessor in good faith.
3) In the absence of both, the one who presents the oldest title in good faith. (Art. 1544)
2. Liability for damages to third person whose contract is rejected in incompatible contracts

a. Agent is liable if he acted in bad faith.

b. Principal is liable if the agent acted in good faith.
(Art. 1917)
Extinguishment of Agency
Modes of extinguishment of agency
1. By revocation.
2. By withdrawal of the agent.
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent

a. Death
There is no one to be represented if the principal dies. If it is the agent who dies, there is no one to represent the
principal.
b. Civil interdiction
A person civilly interdicted is not only in prison. He cannot manage his property or dispose of it by an act or
conveyance inter vivos. In the case of the principal, his acts are restricted. In the case of the agent, he will not be able
to carry out the agency because he is deprived of his liberty.
c. Insanity
The principal cannot give his consent if he is insane. An insane agent, on the other hand, cannot be expected to carry
out the agency.
d. Insolvency
The insolvency of the principal modifies or limits his capacity to act. The insolvency of the agent, on the other hand,
results in his not being able to effectively carry out the agency because the trust originally reposed upon him is
affected.

Note: Under Art. 1323, an offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either
the offerer or the offeree before acceptance is conveyed. Therefore, if the principal dies, is civilly interdicted, or
becomes insane or insolvent, any offer previously made by him or his agent becomes ineffective before any
acceptance is conveyed 'to him (principal) or through his agent.
4. By the dissolution of the firm or corporation which entrusted or accepted the agency.
This is equivalent to the death of a natural person.
5.By the accomplishment of the object or purpose of the agency.
There is nothing more to do after the purpose Of the agency is accomplished.
6. By the expiration of the period for which the agency was Constituted. (Art. 1919)
The duration of the agency is limited to the period agreed upon by the parties.

Revocation by principal
1. Revocation, concept
Revocation refers to the act of the principal of terminating the Agency at will confidence and representation being
the foundation of the contract. (See Barretto vs. Sta. Marina, 26 Phil 440.)
The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency.
(Art. 1920)

2. Who may revoke agency when there are two or more principals
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. (Art. 1925) This is consistent with the solidary liability of the principals. (See Art.
1915.)

3. Kinds of revocation
a. Express — When made orally or in writing.
b. Implied — When revocation can be inferred from the act of the principal as in the following:
1) When a new agent is appointed for the same business or transaction, the previous agency is revoked from the day
on which notice thereof was given to the former agent. (Art. 1923)
Example: P gave a general power of attorney to Al to manage P 's building. Later, P gave an exclusive authority to A2
to manage P is building and notified Al of the giving of such exclusive authority to AX A I 's authority is impliedly
revoked upon the giving of the notice. The notice need not indicate that Al's authority is being revoked; otherwise, it
will become an express revocation.
2)If the principal directly manages the business entrusted to the agent, dealing directly with third persons.
If the purpose of the principal is just to assist the agent, the latter's authority is not deemed revoked.
Example: P gave a general power of attorney to A to manage P's building. Later, P wrote all the tenants of the
building to transact all business with him alone. A's authority is impliedly revoked.
If P goes to the building from time to time to help A in a managing the building, A's authority is not deemed revoked.
3) A general power of attorney is revoked by a special one granted to another agent, as regards the special matter
involved in the latter. (Art. 1926)
Example: P gave a general power of attorney to Al to manage P's building. As manager, Al's authority includes,
among other powers, building administration, maintenance, repairs, electrical works. Later, P appointed A2, who is
an expert electrician, to manage the electrical works of the building. Al 's authority with respect to electrical works is
impliedly revoked.
4. When agency may not be revoked at will

a. If a bilateral contract depends upon the agency.

Example: P sold his lot and building to A for P2,000,000.00 under the following terms: down payment of
P800,OOO.OO; balance Of P 1,200,000.00 to be paid in 24 equal monthly installments of P50,000.00. The parties
stipulated that (1) the transfer certificate of title to the lot and building will be delivered to A upon full payment of
the balance of the purchase price; and (2) A will be given a general power of attorney to manage the building with his
salary of P50,000.00 to be applied to the installments. Here, P cannot revoke the agency at will because a bilateral
contract depends upon it with A being obligated to pay the purchase price and P to deliver the transfer certificate of
title to the property.
b. If the agency is a means of fulfilling an obligation already contracted.
Example: P borrowed P50,000.OO from A. To pay the debt, P appointed A as his agent to collect P's receivables and
apply the amounts collected to the debt. P cannot revoke the agency at will.
c. If a partner is appointed manager of a partnership in the contract of partnership and his removal from the
management is unjustifiable. (Art. 1927)
Removal of a partner appointed as manager in the articles of partnership without justifiable reason is an act of
novation which will require the consent of all the partners including the manager who is sought to be replaced.
5. Notice of revocation
a. If the agency has been entrusted for the purpose of contracting with specified persons, the principal must give a
timely notice of the revocation to such third persons.
Without such notice, said third persons will not be prejudiced, i.e., the act done shall be legally operative against the
principal. (See Art. 1921.)

b. If the agent had general powers, i.e., he was entrusted to contract with the public or any person, revocation of the
agency does not prejudice third persons who acted in good faith and without knowledge of the revocation.

Notice of revocation in a newspaper of general circulation is sufficient warning to third persons. (Art. 1922) However,
the revocation is in any case binding against third persons who had knowledge thereof.
Examples:
a. P gave a power of attorney to A "to sell my Toyota Altis car to T." Later, P wrote a letter to A revoking the latter's
authority to sell the car to T. P did not give any notice to T of the revocation of A's authority but had such revocation
published in a newspaper of general circulation. T, however, was not able to read the publication. Should A still sell
the car to T, will P be bound by the sale?
Answer: Yes, A will still be bound by the sale. For the revocation of A's authority to be binding upon T, P should have
given a notice of revocation to T since A's authority was to transact with a specified person. The publication of the
revocation of A's authority was therefore not binding upon T. T, however, will be bound by the revocation if he had
read the publication of the revocation of A's authority.
b. P gave a power of attorney to A "to sell my Toyota Altis car." Later, P revoked A's authority by giving the latter a
notice of revocation. P also had the revocation published in a newspaper of general circulation. Despite the
revocation, A still sold the car to T who was not able to read the publication of the revocation of A's authority. Will P
be bound by the sale made by A?
Answer: No, because the power given to A was to transact with anybody. Hence, the publication of the revocation of
A authority was binding on any person, whether or not they have read such publication.

Withdrawal by the agent

1. How withdrawal is made
By the agent giving due notice to the principal of his withdrawal. (Art. 1928)
2. Liability/ obligation of an agent who withdraws
a. The agent must indemnify the principal for any damage suffered by the latter by reason of the withdrawal, unless
the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without
grave detriment to himself. (Art. 1928)
Thus, the agent will not be liable if the reason for his withdrawal is his failing health.
b. The agent who withdraws must continue to act as such until the principal has had reasonable opportunity to take
the necessary steps to meet the situation, even if he withdraws for a valid reason. (Art. 1929)
c.
Death of the principal
1. When death of principal does not extinguish the agency
As a general rule, the death of the principal extinguishes the agency. However, the agency is not extinguished in the
following:
a. If the agency has been constituted in the common interest of the principal and the agent.
Example: P borrowed P50,000.00 from A. P delivered his gold bracelet to A by way of pledge and gave A the authority
to sell the bracelet if P defaults in the payment of his debt. Should P die before the debt is paid, A remains an agent
until his claim is collected.
b. If the agency has been constituted in the interest of a third person who has accepted the stipulation in his favor.
(Art. 1930)
Example: P sells his lot to A for P 100,000.00 which is payable in 10 equal monthly installments of P 10,000.00. P
appointed A as his agent to make the monthly payment to T, a creditor of P, who accepted the stipulation in his

favor. Even if P dies before the payments are completed, the agency remains. is a case of stipulation pour autrui.
2. Validity of agent's acts without knowledge of the death of the principal or other cause of extinguishment of the
agency
The acts of the agent which are done without knowledge of the death of the principal or of any other, cause
which extinguishes the agency are valid and shall. be fully effective with respect to third persons who may have
contracted with him in good faith. (Art. 1931)
The agent must finish the business already begun on the death of the principal, should delay entail any danger. (See
Art. 1884.) This presupposes that the agent had knowledge of the principal's death.

Death of the agent

1. Effect of death of agent on agency
The death of the agent extinguishes the agency.
2. Duty of agent's heirs
a. To notify the principal of the agent's death
b. To adopt in the meantime such measures as the circumstances may demand in the interest of the principal. (Art.
1932)

 
AGENCY – DIAGNOSTIC EXERCISES

TEST I - MULTIPLE CHOICE. Select the best answer by writing the letter of your choice. 

1. 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. 
a. Contract for lease of services 
b. Contract of agency
c. Contract for a piece of work
d. Contract to sell 

2. One of the following is not a characteristic of the contract of agency. 

a. Consensual
b. Accessory 
c. Nominate
d. Preparatory 
 
3. P, 25 years old, appointed A, 17 years old, as his agent to sell certain goods for P20,000.00. Thereafter, A sold the
goods to B for the said amount. P, however, learned that the price of the goods had increased to P22,000.00 so he
sought to disaffirm the sale made by A to B, and brought an action to recover the goods from B on the ground that
A's act was voidable, A being a minor, and hence, could not be an agent. Decide.
a. The sale is valid because the principal is capable.
b. The sale is void, because A is a minor and therefore, cannot be an agent.
c. The sale is voidable, because A is a minor.
d. The sale is unenforceable, because A exceeded his authority 
 
4. Pantaleon appointed Arturo as the manager of his coconut plantation in Quezon Province. After managing
the plantation for 10 years, Arturo informed Pantaleon on account of failing health, he, Arturo, was turning the
administration of the plantation to Bartolome experienced coconut plantation administrator. Art also informed
Pantaleon that he had given a general of attorney to Bartolome and that if such authority not sufficient, Pantaleon
could send to Bartolome a new power of attorney or appoint a manager of his choice Pantaleon neither repudiated
the designation of Bartolome nor appointed a new agent. Instead, he allowed Bartolome to manage the plantation
and continued to receive the reports on the plantation from the latter without any protest. Was Bartolome an agent
of Pantaleon? 
a. No, because Pantaleon himself, did not give a general power of attorney to bartolome
b. No, because the designation of Bartolome as manager by Arturo was without Pantaleon's authority. 
c. Yes, Bartolome became an agent of Pantaleon because of Pantaleon's failure to repudiate the agency.
d. Yes, because Bartolome was highly qualified to administer the plantation. 
 
5. One of the following acts may be delegated by a principal to his agent. Which is it? 
a. Vote during the meeting of stockholders of a corporation where the principal is a stockholder.
b. Attend meetings of the board of directors of a corporation where the principal is a director.
c. Purchase land in the Philippines of which the principal is an alien.
d. Represent the principal in a marriage ceremony where the principal is a party to the marriage contract. 

6. One of the following acts requires a special power attorney granted by the principal to his agent. Which it?
a. To make gifts to employees in the business managed by the agent. 
b. To borrow money which is urgently needed to preserve the property of the principal under the administration of
the agent.
c. To make payments for purchases in the ordinary course of the business,
d. To lease the real property of the principal to another person for more than one year. 

7. One of the following acts requires only a general power of attorney, not a special power of attorney, for the
agent. Which is it? 
a. To bind the principal in a contract of partnership. 
b. To loan money of the principal.
c. To enter into a contract by which the ownership of an immovable is transmitted or acquired gratuitously or for a
valuable consideration.
d. To make such payments as are usually considered acts of administration. 

8.  Pedro, a Filipino who was on a business trip in Timbuktu, learned that Federico, also a Filipino, was interested in
buying his lot located in Fairview, Quezon City. To take advantage of the opportunity, he made an overseas call to
Almario, his business associate who was in Manila, to sell the lot in his (Pedro's) behalf, to Federico, for P1,
000,000.00 cash. Almario thus sold the lot promptly to Federico. The contract of sale was in a public instrument
which was signed by Almario in behalf of Pedro as seller, and Federico as buyer. The said contract of sale is:
a. Valid, because it is in a public instrument and Almario was duly authorized to represent Pedro.
b. Void, because the authority of Almario was not in the form required by law.
c. Unenforceable, because Pedro did not sign the contract of sale and so he had no consent thereto.
d.  Rescissible, because the contract was entered into in representation of an absentee. 

9. P, the owner of a certain car, wanted to sell the car. A learned that P was selling the car. Without the authority  of
P, A sold the car in his (A's) name to B. What status of the sale of the car?
a. Valid between A and B but A must be able transfer the ownership of the car to B at the time delivery.
b. Unenforceable against P because he did authorize A to sell the car.
c. Void because A was not the owner of the car at the time of sale.
d. Voidable because the sale was without the consent of P. 

10. Purefine Corporation (Purefine) published in the Manila Bulletin that it was appointing Armando Arcos (Armando)
as its duly authorized agent for the sale of "Purofino" flour, one of its products. With the authority, Armando sold
"Purofino" flour to various bakeshops all over Luzon. After three years, Purefine revoked Armando's authority by
giving a notice of revocation to Armando and publishing a notice of revocation in the Philippine Star. Despite the
revocation, Armando still sold 50 bags of "Purofino" flour to Barbie's Bakeshop, a single proprietorship owned by
Barbie Barredo, who did not read the notice of revocation of Armando's authority in the Philippine Star. Barbie
Barredo now wants to have the flour she had ordered delivered to her by Purefine but Purefine seeks to set aside the
sale of 50 bags of flour to Barbie's Bakeshop.
a. Purefine is not obliged to deliver 50 bags of flour because Barbie Barredo is deemed to have known of the
revocation of Armando's authority.
b. Purefine is obliged to deliver 50 bags of flour to Barbie Barredo because the latter did not read the publication of
the revocation of Armando authority.
c. Purefine is obliged to deliver 50 bags of flour because the revocation was not binding up Barbie Barredo since it
was published in another newspaper.
d. Purefine is not obliged to deliver 50 bags of because the notice of revocation to Armand sufficient. 

11. Precision Appliances Corporation (Precision), which is based in Metro Manila, sent a letter with a special power of
attorney, to Alberto Aguado (Alberto), an agent dealing with appliances, in the latter's office in Cebu, appointing
Alberto as the agent of Precision to sell its new appliances. The letter, which was sent through LBC Courier Services,
was duly received by, Alberto Aguado, who signed in the logbook of LBC. Alberto, however, did not respond to the
letter. Based on the foregoing data:
a. An agency was created between Precision and Alberto by the implied acceptance of Alberto of the agency.
b. No agency was created between Precision and Alberto because Alberto did not respond to the letter.
c. An agency was created by the ratification of Alberto when he duly received the letter with a special power of
attorney.
d. No agency was created because of the inaction of Alberto. 

12.  The following statements refer either to authority or instruction given by the principal to his agent. 
I. Relates to the kind of business or transaction upon which the agent is commissioned to act.
II. Concerns the principal and the agent.
III. Refers to the mode of action by the agent in carrying out the agency.
IV. Third persons can require the agent to present it to them since they are chargeable with knowledge thereof. 

You are to determine whether the above statements pertain to authority or instruction.
a. I and II refer to authority. 
b. I and IV refer to authority.
c. II and IV refer to instruction.
d. III and IV refer to instruction. 

13. Pamela, a professional singer based in Cebu, authorized Allona, also a professional singer, to go to Manila to look
for a nightclub where Pamela could sing. When Allona arrived in Manila, she presented herself, not Pamela the
singer, to the Twinkle Night Club which engas services to sing nightly for two months at the club. B on the foregoing
information, which of the follow statements is correct 
a. Pamela has a right of action against Twinkle Night Club.
b. Twinkle Night Club has a right of action against Pamela.
c. The contract between Allona and Twinkle Night Club is a valid contract between them, not between Pamela and
Twinkle Night Club.
d. The contract between Allona and Twinkle Night Club is void because Pamela was not the party thereto. 

14.  Paramount Auto Corporation (Paramount), an authorized dealer of Honda cars, appointed Armando as
its agent to sell the cars of the company. The authority of Armando includes the giving of a discount of P20,000.00 to
customers who pay in cash. One day, Carmina, a customer, went to the company's car center and told Armando that
she wanted to buy a car with a sales price of P600,000.00. However, as she only had P550,000.00, she told Armando
that she would take the car if Armando agreed to a discount of P50,000.00. Armando agreed and sold the car to
Carmina at P550,000.00 in behalf of the corporation. What is the status of the sale made by Armando to Carmina?
a. Voidable at the instance of Paramount because it did not give its consent to the sale at the discount of
P50,000.00.
b. Unenforceable against Paramount, the principal, because Armando acted beyond the scope of his authority.
c. Void, because the additional discount Ol P30,000.00 given by Armando was not authorize by Paramount.
d. Rescissible, because Paramount suffered damage of P30,000.00 

15.  Perez gave Almendras a special power of attorney wherein it was written that Almendras was being
authorized to sell the two cars of Perez. However, Perez and Almendras had an understanding that Almendras should
sell only one of the cars. Almendras sold the two cars to Bernarte who was not aware of the instruction given by
Perez to Almendras.
a. Perez is bound by the sale of only one car in accordance with his understanding with Almendras.
b. Perez is bound by the sale of the two cars because that is what is contained in the special power of attorney as
written.
c. Perez is not bound at all by the sale of either one or both of the two cars because Almendras violated the
instructions given by Perez.
d. Perez will be bound by the sale of one or both cars at his option. 

16.  Ponciano gave a power of attorney to Alfonso for the sale of his 2 cars, a Toyota and a Lancer. Their
agreement included, among other provisions, the following: (1) Alfonso shall be entitled to a commission of 10%
based on the actual selling price of the cars which Ponciano fixed at a minimum of P400,000.00 for the Toyota; and
P500,000.00 for the Lancer; and (2) Alfonso need not render to Ponciano any accounting of his transactions as long as
Alfonso turns over the actual selling price of the cars net of the commission of 10%. Alfonso was able to sell the
Toyota to Teodolfo for P410,000.00; and the Lancer for P500,000.00 to Leoncio who gave Alfonso a tip of P20,000.00.
After the sale, Ponciano demanded from Alfonso an accounting of the transactions that he had made but Alfonsa
refused claiming that it was enough that he turned over the net selling price of P810,000.00 (P900,000 less 10% of
P900,000.00 as commission) to Ponciano as agreed to by the two of them. Decide. 
a. Alfonso need not render an accounting to Ponciano because that was their agreement.
b. Alfonso must account and deliver to Ponciano only the sum of P900,000.00. 
c. Alfonso must account and deliver to Porn P910,000.00
d. Alfonso must account and deliver to Ponce P930,000.00 

17.  The following statements pertain to either a commission agent or a broker. 

I. He has a relation not only with his principal, and the buyers or sellers, but also with the property which is the
object of the transaction.
II. Maintains no relation with the thing he purchases or sells.
III. The goods are placed in his possession and disposal.
IV. He is merely an intermediary whose function is to bring the parties to the transaction. 

Determine whether the above statements pertain to commission agent or broker. 

a. I and III pertain to a commission agent.
b. I and IV pertain to a commission agent. 
c. II and III pertain to a broker.
d. I and IV pertain to a broker. 

18. The principal is not liable for the expenses incurred by the agent in the following, except when: 
a. although the agent acted in contravention of the principal's instructions, the principal wishes to avail himself of
the benefits derived from the contract.
b. it was stipulated that the agent would be allowed only a certain sum.
c. the agent incurred them with the knowledge that an unfavorable result would ensue, if the principal was not
aware thereof.
d.  the expenses were due to the fault of the agent. 

19. When two persons contract with regard to the same immovable thing, one of them with the agent, and other
with the principal, and the contracts a. incompatible with each other, ownership shall belong the: 
a. first purchaser in good faith.
b. one who first completed the payment of the price in good faith.
c. one who first registered in good faith the transaction.
d. one who presents the oldest title who must be in good faith. 

20. An agency is 'impliedly revoked in three of the following cases. Which is the exception? 
a. When a new agent is appointed for the same business or transaction.
b. When the principal directly manages the business entrusted to the agent, dealing directly with third persons.
c. When a special power of attorney is granted to another agent pertaining to a special matter involved in a general
power of attorney issued to a previous agent.
d. When the desire of the principal is help the agent manage the business.
 
21. Penelope appointed Alicia as her agent to sell a set of bakery equipment for P50,000.00 with an ordinary
commission of 10% and a guarantee commission of 15%. Alicia is authorized to sell on credit. Alicia was able to sell, in
behalf of Penelope, the bakery equipment for P50,000.00 to Nicole who issued a check dated ten days after the sale.
On the tenth day, however, the check was dishonored by the bank because Nicole did not have sufficient funds for it.
a. Alicia is liable to Penelope because she must bear the risk of collecting the price from Nicole.
b. Alicia is not liable to Penelope because the dishonor of the check was without Alicia's fault.
c. Alicia is not liable to Penelope because she is not the purchaser but Nicole.
d. Alicia is liable to Penelope because she acted beyond the scope of her authority. 

22.  P appointed A as his agent. The authority of A din authorize A to appoint a substitute but It did not
prohibit him from appointing one. In this case:
a. A may appoint a substitute because he is no prohibited from doing so in his authority but he shall be liable for the
acts of the substitute.
b. A may not appoint a substitute because there is no express provision in his appointment from D allowing him to
appoint one.
c. A may appoint a substitute but he shall be liable for the acts of the substitute only when the substitute is
notoriously incompetent or insolvent.
d. A may appoint a substitute only when the substitute is designated in the authority given by P to A. 

23.  The following cases are presented to you for evaluation: 

I. A bilateral contract depends upon the agency.
II. The agency is a means of fulfilling an obligation previously contracted.
III. The agency is one where the a partner was appointed manager in the contract of partnership and the removal of
the partner from the management is unjustifiable. 

In which of the above cases is the principal not allowed to revoke the agency? 
a. I and II.
b. II and III.
c. I and III.
d. I, II and III. 
 
24. Which of the following is not a mode of extinguishing an agency?
a. Death, civil interdiction, insanity or insolvency of the principal or agent.
b. Accomplishment of the purpose of the agency.
c. Expiration of the period for which the agency was constituted.
d. Continued losses on the part of the principal or agent. 

25.  X. Y and Z, co-owners of a house and lot, appointed a to sell the house and lot at a price of not less P1,500,000.00
cash with A being entitled to a commission of 10% of the selling price. A was able to sell the house for P1,800,000.00
cash. How much commission may A collect from X? 
a. P150,000.00
b. P180,000.00
c. P60,000.00
d. P50,000.00 
  
26. R, S and T, each one owning a separate lot, appointed A in one instrument to sell their respective lots. Under the
agreement, A will receive a commission of 10% of the selling price of each lot. A was able to sell the lot of R for
P100,000.00; the lot of S for P200,000.00; and the lot of T for P300,000.00. How much commission may A collect
from R?
a. P60,000.00
b. P10,000.00 
c. P20,000.00
d. P30,000.00 

27. This is an agency that comprises one or more specific transactions of the principal. 
a. Special agency.
b. General agency. 
c. Agency couched in general terms.
d. Agency couched in specific terms. 

28. P, owner of a certain car, authorized A to sell the car for P100,000.00 cash. A, however, sold the car in the name
of P for P110,000.00 but on credit. B, the buyer, knew at the time of the transaction that A's authority was to sell the
car of P on cash basis. The contract entered into by A is: 
a. Void because B was aware of A's limit of authority. In this case, A is not liable because he did not undertake to get
P's ratification.
b. Valid because the transaction, although it was for credit, was more advantageous to P. Accordingly, P will be
liable. 
c. Unenforceable against P because A acted in a of his authority. Thus, A alone will be liable.
d. Rescissible, because P will suffer damage if +7 sales price is not paid by B. 

29.  Pentinio appointed Anzures as commission agent to Pentinio's goods for P10,000.00 cash. Anzures,
however sold the goods on credit for P11,000.00 without Pentinio's consent. Based on the foregoing facts, which of
thin following options are available to Pentinio? 
I. Pentinio may demand immediate payment in P11,000.00 cash.
II. Pentinio may demand immediate payment in 10,000.00 cash. However, Anzures shall be entitled to keep the
excess of P1,000.00 when he collects the price of P11,000.00.
III. Pentinio may ratify the sale on credit for P11,000.00 and wait for the amount to be collected. 

a. Either I or III.
b. Either II or III.
c. Either I or II.
d. I only. 

30.  P leads B to believe that A is his (P's) agent. However, A is not really the agent of P. Later, B transacted
with A believing that A is the agent of P. What kind of agency was created here? 
a. Agency by ratification.
b. Agency by appointment.
c. Agency by estoppel.
d.  Agency by necessity. 
 
31. Consider the following statements: 
I. An agency may be constituted in the commons interest of the principal and the agent.
II.  An agency may be constituted in the interest third person who has accepted the stipulation his favor. 

The death of the principal extinguishes the agency, as a rule. However, the death of the principal does not extinguish
an agency if the reason why the agency was created is:
a. Reason I only.
b. Reason II only.
c. Either Reason I or Reason II.
d. Neither Reason I nor Reason II. 

32.  An agent who contracts in the name of the principal is nou liable in one of the following cases. Which is
it?
a. If the agent expressly bound himself.
b. If the agent acted beyond the limits of his authority without giving the party he contracted with sufficient notice
of his powers.
c. If the other party knew that the agent exceeded his authority and the agent undertook to secure the principal's
ratification but the principal did not ratify the contract.
d. If the other party knew that the agent acted in excess of his authority but the agent did not undertake to secure
the principal's ratification. 

33. A, a duly authorized agent of P, wrote a letter to X on May 1, 2015 offering to sell P's only Mercedes Benz car for
P2,000,000.00 cash. On May 3, 2015, X wrote a letter to A stating that he accepted all the terms of the offer, which
letter was received by A on May 5, 2015. Before A could relay such acceptance to P, P died in a vehicular accident on
May 6, 2015.
a. The contract was not perfected because P, the real party to the sale, died before the acceptance came to his
knowledge.
b. The contract was perfected on May 1, 2015.
c. The contract was perfected on May 3, 2015.
d. The contract was perfected on May 5, 2015. 

34. P published the appointment of A as P's agent in the Manila Bulletin. For 5 years, A, as P's agent, dealt with the
public including X. On June 1, 2015, P revoked A's authority by giving the latter a notice of revocation. The revocation
was published in the Philippine Star. A month later, X, who was ignorant of the revocation, sold good. A as P's agent.
a. P is not obliged to pay for the goods because publication of the revocation of A's authority sufficient notice.
b. P is obliged to pay for the goods since X was no aware of the revocation of A's authority.
c. P is obliged to pay for the goods because the revocation should have been published in the same newspaper.
d. P is not obliged to pay for the goods because the notice of revocation to A is sufficient. 

35.  P appointed A as his agent to sell the appliance products of P. The agreement between P and A provides
for the payment to A of a 5% ordinary commission and a 10% guarantee (or del credere) commission. A sold several
appliances to B for P20,000.00 the same being payable after 30 days. When A went to B's place to collect the price of
the appliances, B, together with the appliances that were sold, was nowhere to be found:
a. A is liable to P for the price of the appliances because A must bear the risk of collecting.
b. A is not liable to P for the price of the appliances because it was not his fault that B should disappear.
c. P must bear the risk of collection because he is the owner of the appliances.
d. A is liable to P because A acted beyond the scope of his authority. 

36. An agent acting in the name of the principal shall not be liable to the third person with whom he contracts:
a. When he expressly binds himself.
b. When he exceeds the limit of his authority without giving the third person sufficient notice of his powers.
c. When the third person knew of the agent's lack authority and the agent undertook to get principal's ratification
but failed to get the same. 
d. When the third person knew of the agent's lack of authority but the agent did not undertake to get the principal's
ratification. 

37.  P appointed A as his agent to sell the goods belonging to P for a commission of 10%. Hereafter, A sold the
goods off to B on 30-days credit term for P20,000.00 without authority from P. The goods have a cash price of
P19,000.00. Which of the following is not an option available to P?
a. P may demand immediate payment from A of the amount of P18,000.00. (P20,000 less 10%).
b. P may demand immediate payment from A the amount of P17,100.00 (P19,000.00 less 10%).
c. P may demand payment from A of the amount of P18,000.00 (P20,000.00 less 10%) when A collects from B after
30 days.
d. P may choose not to ratify the sale. 

38.  Which of the following acts does not require a special power of attorney for the agent?
a. To effect novation which put an end to obligations already in existence at the time, the agency was constituted.
b. To make gifts to the employees in the business managed by the agent. 
c. To bind the principal in a contract of partnership.
d. To lease any real property to another person for more than a year. 

39.  P gave a general power of attorney to A to sell P's products all over the Philippines. After three years, P
revoked A's authority by giving a notice of revocation to A. P also had the revocation published in the Manila Bulletin.
Despite the revocation, A still sold P's products to X who had been a regular customer for the past 3 years and who
was also known to P. However, X did not read the notice of revocation in the Manila Bulletin.
a.  P is bound by the sale.
b. The contract is unenforceable against P. 
c. A is not liable on the sale.
d. X must be specially informed of the revocation. 

40. P gave a special power of attorney to A to sell P's h and lot. On May 1, 2014, A sold the house and lot through a
deed of absolute sale which was duly acknowledged before a notary public. On May 5, 20 sold the house and lot to Y
not knowing that Ah already sold the same to X. Although the deed of sal favor of Y had not yet been acknowledged
before a nota public by P and Y, Y immediately took possession of the house and lot. X and Y were not aware of the
sale made to the other.
a. X is the owner of the house and lot.
b. Y is the owner of the house and lot. 
c. X and Y will become co-owners of the house and lot.
d. P remains the owner of the house and lot. 

41. The principal may delegate to an agent the performance of one of the following acts:
a. The power to attend and vote at the meetings of directors of a corporation of which the principal is a director.
b. The power to represent the principal in a marriage ceremony where the principal is the groom.
c. The power to vote in the elections of officials for public office while the principal is abroad.
d. The power to vote in the election of directors of a corporation of which the principal is a stockholder.

42. Which of the following statements pertaining to a contract of agency is incorrect? 

a. The death of the principal extinguishes the agency.
b. An agent may be a natural person or an artificial person like a corporation.
c. A guarantee commission agent is not liable to the principal if he cannot collect the price of sale from the buyers.
d. A contract of agency is presumed to be 101 compensation. 

43. P gave a general power of attorney to A. During the your A entered into a lease contract involving two lots on
follows: 
I. Lease of a lot located in Manila to X for a period of 5 years with an annual rental of P60,000.00.
II. Lease of a lot located in Quezon City to Y on a month-to-month basis at a monthly rental of P5,000.00 

Which of the two leases is valid and binding upon P? 

a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II. 

44. Which of the following is not a characteristic of the contract of agency? 

a. Onerous, which means that an agency is presumed to be for a compensation.
b. Real, which means that the principal must deliver the object to the agent for the perfection of the contract.
c. Principal, which means that a contract of agency can stand by itself.
d. Preparatory, which means that the a contract of agency is a means by which other contracts will be entered into. 

45. P delivered to A a power of attorney authorizing A to sell goods for P10,000.00 on cash basis.. A was able to sell
the goods for P10,500.00, also on cash basis, to X, who upon learning of A's authority as regards the selling price,
sought to annul the sale. 
a. X may successfully annul the sale because A exceeded his authority.
b. X may not successfully annul the sale because A acted in a manner more advantageous to P.
c. X may successfully annul the sale because there was no instruction given by P to A to sell more than P10,000.00.
d. X may successfully annul the sale because no mention was made on A's authority that he could sell only at the
price of P10,000.00. 

46. P appointed A as his agent. For more than 5 v transacted business with the general public including X. On the sixth
year of the agency, P revoked the author A as his agent by giving a notice of revocation to A causing the publication of
the revocation in the Ma Bulletin on the same day that P revoked A's author. Three months thereafter, X, who was
not aware of the revocation of A's authority, in the course of his usuo business transactions with A as P's agent, sold
and delivered goods to A. X now sues P for the price of the goods.
a. P is liable to X because X did not read the publication of the revocation of A's power.
b. P is not liable because the revocation as published is binding upon any person including X although x has not read
the publication.
c. P is liable to X because P should have specially informed X that A's authority had been revoked.
d. P is liable because A was a customer of long standing and must be given the benefit of the doubt. 

47.  P gave a general power of attorney to A. During the year, A entered into two lease contracts involving
properties belonging to P as follows: 
I. Lease of a drilling equipment located in Manila to X for a period of 2 years with an annual rental of P120,000.00.
II. Lease of a lot located in Quezon City to Y on a month-to- month basis at a monthly rental of P5,000.00. 
 
Which of the two leases is valid and binding upon P? 
a. I only.
b. II only
c. Both I and II.
d. Neither I nor II. 

48.  P appointed A as his exclusive agent to sell generators 0 cash basis in Davao City. As A had to leave for
Europe for a one-month pleasure trip, he asked P to allow him appoint a substitute to take his place during his
absence to which P agreed. A selected S as his substitute. S sold generators on a term of 60 days. The accounts
resulting from these sales later proved to be uncollectible. Based on the foregoing, which of the following
statement/s are/is false? 
I. A will be liable to P if S is notoriously incompetent or insolvent without prejudice to the right of Flo go after S.
II. A will not be liable to P if S is not notoriously incompetent or insolvent.
III. A will be liable to P whether or not S is notoriously incompetent or insolvent without prejudice to the right of P to
go after S. 

a. I and II are false.

b. I and III are false.
c. II and III are false.
d. Only III is false. 

49. P gave a special power of attorney to A to sell a piece of land belonging to P. On April 1, P was able to sell the land
to X. The sale was in a public instrument with X taking immediate physical possession of the land. A learned of the
sale made by P but nonetheless, he sold the same piece of land to Y. The sale was in a public instrument which Y
registered in the Register of Deeds. Neither X nor Y knew of the sale made to the other.
a. The piece of land belongs to X. 
b. The piece of land belongs to Y.
c. The piece of land shall be owned jointly by X and Y since no one was aware of the sale made to the other.
d. The ownership of the piece of land remains with P since neither X nor Y is entitled to the land. 

50.  S sold a piece of land belonging to his father F, to B. In the deed of absolute sale which was
acknowledged before a notary public, S signed as the agent of F. The fact, however, was that no power of attorney
was executed in favor of s by his father. Later, in the presence of two witnesses, F told B that he would abide by the
sale executed by S. 
a. The sale was void at the start but was validated upon the ratification by F.
b. The sale remained void despite the ratification F.
c. The sale was valid from the start since it was more in a public instrument and F, the owner, agreed to abide by the
same.
d. The sale was merely unenforceable at the start hesi was ratified when F agreed to abide by the same. 

51.  Almirante was given a general power of attorney by Pamplona to manage Polaris Building which is owned
Pamplona. During the month of November 2015. Almirante made the following payments: 
I. Purchase price of the adjacent lot which was acquired by Pamplona.
II. Salaries and wages of the building employees for November 2015.
III. Service fee of Otis Elevators for the maintenance of the building elevator.
IV. Cost of electrical and other building supplies. 

Based on the foregoing facts, which of the payments will be binding on Pamplona? 
a. I, II and III.
b. II, III and IV.
c. I, II and IV.
d. I, III and IV. 

52. Alcantara and Adviento were appointed as agents by Precious Rugs and Carpets, Inc. to sell its products. Since
Alcantara and Adviento would be working together, the general power of attorney granted to them indicated that
their liability to Precious would be solidary. In a trip to Davao, Alcantara, without the knowledge of Adviento,
purchased rugs and carpets in behalf of Precious at a discounted price of P20,000.00 using the funds that they had
collected from their sales. When the company learned of the purchase, it sought to recover the amount of
P20,000.00 from Alcantara and Adviento. 
a. Alcantara alone will be liable for P20,000.00 Precious. 
b. Alcantara and Adviento will be liable jointly at P10,000.00 each to Precious.
c. Either Alcantara or Adviento may be held liable by Precious for P20,000.00 since their liability 18 solidary.
d. The purchase of the carpets and rugs is voidable; hence, the amount of P20,000.00 may be recovered from the
seller of the said items. 

53.  P, 30 years old, gave a special power of attorney to A, 17 years old, to sell 2 lots (Lot X and Lot Y)
belonging to P. The contract of agency provided for a term of 2 years from the date of execution. Before reaching the
age of 18, A was able to sell Lot X. After turning 18 years old and before the expiration of the two-year term, he also
sold Lot Y.
a. The sale of both Lot X and Lot Y are binding on P.
b. The sale of both Lot X and Lot Y are not binding on P.
c. Only the sale of Lot X is binding on P.
d. Only the sale of Lot Y is binding on P. 

54. P gave a special power of attorney to A to buy 1,000 shares of stock of EXXO Corporation which was then being
traded at the stock exchange at P50.00 per share. P instructed A to make the purchase within two days and advance
the purchase price of P50,000.00 plus the stock transaction tax, commission and other expenses which amounted to
P3,000.00. With the instruction, A made the purchase and received the stock certificate for the shares. However,
three days thereafter and before A was able to get his reimbursement from P for the advances he had made, the
price of EXXO shares went down to P45.00 per share. P now is having second thoughts on making the reimbursement
to A. 
a. P is liable to A only for P48,000.00 [(1,000 shares x P45.00) + P3,000.00.]
b. P is liable to A for P53,000.00 [(1,000 shares x P50.00) + P3,000.00.]
c. P is not liable at all because the transaction resulted in a loss. 
d. A alone will shoulder the loss because the risk of loss is part of his job as an agent.
 
55. Refer to No. 54. Assuming that the circumstances show that P is liable to A for the amount advanced by A, but P is
unwilling to make the reimbursement, A can retain possession of the stock certificate until he receives the
reimbursement Such right of retention is also a security which is in the nature of a: 
a. Chattel mortgage.
b. Legal pledge. 
c. real mortgage.
d. antichresis. 
 
56.  Which of the following contracts entered into by the agent is binding upon the principal although the
agent's authority is a general power of attorney? 
a. Sale of a piece of land.
b. Lease of a piece of land to a third person for a period of 2 years.
c. Gifts made to employees in the business managed by the agent.
d. Contract of partnership with the principal as partner. 

57. P, in Manila, wrote a letter to T, who is based in Cebu, informing the latter that he (P) had given a power of
attorney to A to sell P's goods. For more than 5 years, T dealt with A for the purchase of P's goods. On the sixth year,
P gave a notice to A that he was revoking the latter's authority. Despite the revocation of his authority, A sold goods
to T who was not aware that A's authority had been revoked. The revocation of A's authority was published in the
Manila Bulletin but T was not able to read it. Although T had paid the price to A who kept the proceeds to himself,
the goods had not yet been delivered to T. So T demanded delivery from P.
a. P is not obliged to deliver the goods because he had already revoked A's authority.
b. P is obliged to deliver the goods because the revocation of A's authority was not binding on T.  
c. P is not obliged to deliver the goods because P had not yet received the price of the goods.
d. P is not obliged to deliver the goods because is presumed to have read the publication of the revocation of A's
authority. 

58.  Which of the following does not extinguish an agency? 

a. Dissolution of the corporation that entrusted the agency.
b. Insanity of the agent.
c. Continued business losses of the agent for at least 2 years.
d.  Insolvency of the agent. 

59.  P gave a special power of attorney to A to lease a building at a good location where P could put up an
auto supply business. A found a building at a good location that belonged to T at Banaue in Quezon City, but seeing
the brisk business in the area, A presented himself as the lessee instead of P. Accordingly, Alease contract was
executed between A as lessee, and T as lessor, who was not aware of the agency between P and A. Based on the
foregoing facts, the following statements are presented to you for evaluation:
I. P and T shall have no right of action against each other.
II. The contract of lease is a valid and binding contract between A and T.
III. P can go after A for damages for preferring his interest over that of P. 

In your evaluation of the foregoing facts and statements:

a. I and II are true. 
b. I and III are true.
c. II and III are true.
d. All are true. 

60.  P appointed A1 and A2 as his agents to manage P's grocery store. The general power of attorney given by
P to the agents indicated that their liability to P shall be solidary. One day, a truck salesman visited the store and
offered to sell his delivery truck for a discounted price. A2, who was the only one at the store at that time purchased
the truck in P's behalf since he believed that the store really needed a vehicle in the delivery of good from suppliers
and to customers. Moreover, he thought that the transaction was a good one since the truck was being sold at a
discounted price. A1 paid the price out of his collections from grocery sales. When P learned of the purchase, he
sought to disaffirm the sale and recover the amount paid for the purchase. 
a. Both A1 and A2 are liable to P for the amount paid for the delivery truck.
b. Only A1 can be held liable by P for the return of the amount paid for the delivery truck.
c. P cannot hold the agents liable because the transaction benefited P.
d. P and A1 should shoulder the purchase price equally in fairness to A1 whose only concern wa s the benefit to the
business of the transaction. 

61.  P, the owner of a condominium, gave a general power of attorney to A to manage the building. P and A,
however, had a private understanding that A should not lease any unit to a foreigner. For the month of May 2014, A
entered into the following leases of two condominium units:
I. Unit 2, to F, a Filipino, for a period of 2 years.
II. Unit 5, to J, a Japanese, who was in a business trip to the Philippines, for 3 months. 

Based on your review of the foregoing statements: 

a. Both lease contracts are valid and binding on P.
b. Both lease contracts are not binding on P.
c. Only I is valid and binding on P.
d. Only II is valid and binding on P. 

62.  Which of the following is a valid delegation by the principal to his agent?
a. The purchase by the agent of a land located in Manila. The principal is an American.
b. The exercise of the voting right in the local elections. The principal is Filipino who is a qualified voter like the
agent. 
c. The lease of a vehicle for the use of the principal who is a duly licensed driver for two months.
d. The attendance at the board meetings of a corporation of which the principal is a director. 

63.  P, the owner of a lot, gave an oral authority to A to sell the lot. A thus sold the lot to B in P's name in a
public instrument. Shortly after the sale, P sent B a telegram informing him that he (P) was ratifying the sale. B,
however, had already changed his mind and informed P that he (B) was withdrawing from the contract.
a. P and B became bound by the contract of sale at the time of execution because it was in a public instrument.
b. P and B became bound by the contract of sale at the time that P ratified the sale.
c. P and B never became bound by the contract of sale because it was not susceptible of ratification.
d. B can no longer withdraw from the contract because P had made an earlier ratification of it. 

64.  P gave a general power of attorney to A to manage P's business in Manila. While P was in Bacolod City,
he made a call to A to sell P's lot located in Sampaloc. A thus sold the lot to X by presenting the general power of
attorney given to him by P. The sale to X was in a public instrument. Thinking that A had not yet sold the lot, P sold
the same lot to Y with whom he was meeting in Bacolod and who was interested in the lot. Y was not aware of the
sale entered into by A with X. The sale to Y was likewise in a public instrument. 
a. The lot belongs to X.
b. The lot belongs to Y.
c. Neither X nor Y is entitled to the lot. 
d. The lot will be owned jointly by X and Y. 

65.  Which of the following contracts entered into by the agent is binding upon the principal although the
agent's authority is a general power of attorney? 
a. Sale of a building.
b. Lease of a piece of land to a third person for a period of 2 years. 
c. Customary gifts to charity
d. Contract of partnership with the principal as partner

66.  A has been the agent of P for the past 3 years in purchase of palay in different provinces of Luzon. The
authority given by P to A provided that A need not render an accounting of his transactions. One day, A chanced upon
a wholesaler of palay who offered to sell them to A the discounted price of P500.00 per sack. A purchased all the
palay using his own money and stored them at bi warehouse. Every time that P needed palay, A would get them from
his stock and made it appear that he bought them from a supplier at the regular price of P 600.00 which was the same
purchase price of palay in his earlier transactions.
a. A must account to P all the profits that he obtained from the transaction.
b. A need not account to P the profits that he obtained because he used his own money.
c. A need not render an accounting of his transactions because he was not obligated to do so under the power of
attorney given to him by P.
d. A cannot be held liable for damages because he passed on the palay to P at the purchase price of his previous
transactions. 

67. The following statements pertain to the appointment by the agent of a substitute:
I. If the agent was authorized to appoint a substitute but the substitute was not designated, the agent will not be
liable to the principal if the substitute appointed was not notoriously incompetent or insolvent.
II. If the agent was authorized to appoint a substitute but the substitute was designated, the agent will not be liable
to the principal even if the substitute was notoriously incompetent or insolvent. 

In your evaluation of the foregoing statements: 

a. Both statements are true.
b.  Both statements are false. 
c. Only Statement I is true.
d. Only Statement II is true. 

68.  The following statements pertain to the appointment of an agent: 

I. If the announcement of the appointment of an agent is by special information, the person appointed will be
considered a duly authorized agent with respect to the person who received the special information.
II. If the announcement of the appointment of an agent is made by public advertisement, such as by publication in a
newspaper of general circulation, the person appointed will be considered as agent with regard to any person who
reads the publication. 
In your evaluation of the foregoing statements: 
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true. 
69. P, 28 years old, gave a power of attorney to A, 17, to sell antique furniture. Pursuant to the authority, A sold an
antique table for P30,000.00 to B, who is insane, and an antique desk for P20,000.00 to C, 35 years old. Which of the
foregoing contracts is valid? 
a. The contract of agency.
b. The sale of the antique table. 
c. The sale of the antique desk.
d. None of the foregoing contracts is valid. 

70. These statements are presented to you: 

I. A general agency may be couched in specific terms.
II. A special agency may be couched in general terms. 
 
In your evaluation of the foregoing statements: 
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true. 

71.  P, who owns a lot, gave A, his agent, the authority the lot. In which of the following cases is the sale of
the unenforceable? 
Form of A's Authority  Form of Contract of 
Sale
a. Oral Public instrument
b. Private instrument Public instrument 
c. Public instrument  Oral
d. Public instrument Private instrument 

72.  These statements are presented to you:

I. An agent acts for himself and for his principal
II.  A partner acts for himself, for the partnership, and for his partners. 

In your evaluation of the foregoing statements: 

a. Only Statement I is true.

b. Only Statement II is true.
c. Both statements are true.
d. Both statements are false. 

73.  These statements are presented to you:

I. Agency and partnership are preparatory contracts.
II. Partnership is a branch of the law on agency.

In your evaluation of the foregoing statements: 

a. Both statements are true.
b. Both statement are false.
c. Only Statement I is true.
d. Only Statement II is true. 

74.  Agency is different from negotiorum gestio because in agency: 

a. There is a meeting of minds.
b. The legal relation is created by law.
c. The one who acts follows his own judgment and the presumed will of the owner. d. No representation has
been agreed upon. 
 
75.  Sampaca, manufacturer of “Dreamland” beds, and Bergonio entered into a contract with the following
terms: Sampaca was to furnish beds to Bergonio who must pay the price within 30 days from the receipt of the
shipment, minus a discount of 25%. What contract was entered into between Sampaca and Bergonio?
a.  Contract of sale
b. Contract of agency to sell
c. Contract to sell
d. Contract of consignment 

76.  These statements are presented to you:

I. If the agent has been empowered to borrow money in behalf of his principal, he may himself be the lender at the
current rate of interest.
II. If the agent has been authorized to lend the money of his principal, he may himself be a borrower even without
the principal's consent provided the interest is higher than the current rate. 

In your evaluation of the foregoing statements: 

a. Both statements are true.
b.  Both statements are false. 
c. Only Statement I is true.
d. Only Statement II is true.

71. Paladino, the owner of a grocery store, gaye a general power of attorney to Almiro to manage the business.
Almiro was given the authority to borrow money for the business at 1% interest per month. Almiro himself is the one
who lends the money at such interest rate. Thus, in the said contract of loan, Almiro enters into the contract in his
own behalf as lender and represents Paladino as borrower. The contract of loan in such a case is considered as:
a. an auto-contract. 
b. an aleatory contract.
c. a remuneratory contract.
d. a gratuitous contract. 

78.  Principe, the owner of a BMW car, gave a power of attorney to Agerico to sell it. A week later, Principe
gave another power of attorney to Anastacio to sell the same car without giving notice thereof to Agerico. Agerico
was able to sell the car to Borsalino. When Borsalino demanded the delivery of the car, Principe refused to claiming
that Agerico's authority to sell the car impliedly revoked by the authority given to Anastacio.
a. Agerico's authority was impliedly revoked by appointment of Anastacio to sell the car.
b. Agerico's authority to sell the car was not revoked despite the new authority given to Anastacio.
c. Agerico's authority did not co-exist with that given to Anastacio.
d. The authority given to both agents is considered nullified because of conflict. 

79.  Statement I - A stipulation exempting the agent from the obligation to render an account of his
transactions is valid provided the principal does not suffer any damage. 

Statement II - A stipulation that the agent will advance the necessary funds to carry out the agency is void. 

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true. 
 
80.  Pastorfide, an importer of fire extinguishers, gave Angeles the exclusive authority to distribute the
product in Laoag City. The authority provided that all sales should be on cash basis, but no mention was made
whether or not Angeles could appoint a substitute. Without notifying Pastorfide, Angeles appointed Sulpicio, a
reasonably prudent man, as his substitute when he went on a one month Asian cruise. Sulpicio sold the fire
extinguishers on a term of 60 days. The sales later proved to be uncollectible.
a. Pastorfide cannot proceed against Angeles because the latter acted in good faith in appointing o substitute.
Neither can he proceed again Sulpicio because the latter was a reasonave  prudent man.
b.  Pastorfide can only proceed against Angeles damages since Sulpicio was not notorious incompetent or insolvent. 
c. Pastorfide can proceed only against Sulpicio because Angeles exercised prudence when he appointed as his
substitute one who was not notoriously incompetent or insolvent.
d. Pastorfide can proceed against Angeles and Sulpicio for the uncollectible account and other damages that he
sustained by him. 

81.  A was appointed by P to sell the latter's car for a cash price of P100,000.00. However, A was able to sell
the car for P120,000.00 cash.
a. A must turn over only the amount of P100,000.00 to P whose only right was to demand the cash price agreed
upon. Thus, the A keeps the excess of P20,000.00. 
b. A must turn over the amount of P120,000.00 to P since A must account all that he had received in carrying out the
agency. Besides, A did not act in excess of his authority because the sale he made was more beneficial to P. 
c. A must turn over the amount of P100,000.00 to P since A acted in excess of authority when he sold the car for
more than P100,000.00.
d. A must turn over the amount of P120,000.00 to P, but P must eventually give the excess of P20,000.00 to A. 
 
82.  P, the owner of several properties including a certain car, appointed A to manage them. Later, the car
was repossessed by the bank on account of P's default in the payment of a loan obligation for which the car was
given as security by way of chattel mortgage. During the auction sale, A, in his personal capacity, was able to buy the
car since his bid was the highest among 10 bidders. His purchase of the car was without the knowledge of A. What is
the status of the sale?
a. Valid, because A bought the car fair and square as his bid was the highest among 10 bidders.
b. Voidable, because an agent cannot acquire by purchase any property of the principal placed under his
administration without the principal's consent. 
c. Void, because the purchase of the car by A violation of his fiduciary duty to P.
d. Unenforceable, because the acquisition of the by A was without P's consent. 

83.  P gave a power of attorney to A to sell a certain nis Before A could find a buyer, P was able to sell the
piano to X through a private instrument and informed A about it. Nonetheless, A still sold the piano to Y who
immediately took possession of the piano. Neither X nor Y knew of the sale made to the other. Whose contract will
prevail?
a. The contract with X. 
b. The contract with Y.
c. Neither, because of conflict of interest.
d. Both contracts with X and Y becoming co-owners of the piano. 

84.  Refer to No. 83. Who will be liable for damages to the party whose contract will be rejected?
a. P, because he disregarded the authority he gave to A when he made the sale to X.
b. A, because he was in bad faith when he made the sale to Y although he had knowledge of the previous sale made
by P.
c. Both A and P will share equally in the payment of damages.
d. Neither A nor P, because both contracts will be honored. 

85.  Principal appointed Agent for a period of two years: 

I. Principal may revoke the agency before the end of the two-year period.
II. Agent may withdraw from the agency before the end of the two-year period. 

In your evaluation of the foregoing statements: 

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true. 

86. These statements are presented to you:

I. A special power to sell includes the power to mortgage.
II. A special power to mortgage excludes the power to sell. 

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true. 
d. Only Statement II is true. 

87.  Almonte was given general powers of administration by Pampilo who was suffering from financial
difficulties. In order to help Pampilo, Almonte sold the former's lot for double its market price, which amount was
more than enough to improve Pampilo's financial condition. Is Pampilo bound by the sale made by Almonte?
a. Yes, because the transaction resulted in saving Pampilo from his financial difficulties.
b.  Yes, because an agent is not considered to have exceeded his authority if he acted in a manner more
advantageous to this principal.
c. No, because Almonte acted in excess of authority.
d. Yes, because the disposition of any property belonging to Pampilo is embraced in the authority he gave to
Almonte. 

88.  Primicias gave a special power of attorney to Amper to sell the former's lot for P100,000.00. Amper
offered to sell the lot to Letada who, however, was willing only to lend P100 .000,00 and take a mortgage on the lot.
Amper thus mortgaged the lot and received the loan proceeds of P100.000.00. Which contract was binding on
Primicias? 
a. The loan obligation of P100,000.00
b. The real mortgage on the lot.
c. Both (a) and (b), because the transactions were advantageous to Primicias. He gets P100,000.00, while the
mortgage allowed him to retain title to the lot.
d. Neither (a) nor (b) because Amper acted in excess of authority. 

89.  Pomeranz, the owner of three cars, authorized Abrazado, sell Car 1 for P600,000.00; Car 2 for
P400,000.00 Car 3 for P700,000.00, all on cash basis. Later, Abrazado gave an account of his transactions to Pomerat
follows: 
I. Car 1 - sold for P590,000.00 cash.
II. Car 2 -- sold for P450,000.00 in three equal monthly installments of P150,000.00.
III. Car 3 - sold for P720,000.00 cash.

The sale that is binding on Pomeranz is the sale of:

a. Car 1 and Car 3.

b. Car 2 and Car 3. 
c. Car 3 only.
d. None of the three cars, because Abrazado acted in excess of authority in each case. 

90.  The following acts require a special power of attorney, except: 

a. To loan the money of the principal.
b. To borrow money in behalf of the principal.
c. To submit questions to arbitration.
d. To lease real property for one year or less. 

TEST II – MATCHING TYPE. Indicate your answers by writing the letter representing the statement or phrase that best
describes, defines or explains the numbered items. 

Terms
1. Agency 11. Broker
2. Fiduciary 12. Del credere commission
3. Implied agency 13. Civil interdiction
4. Express agency 14. Principal
5. General agency 15. Agent
6. Special agency 16. Compromise
7. General power of attorney 17. Arbitration
8. Special power of attorney 18. Revocation
9. Substitute 19. Withdrawal
10. Commission agent 20. Instructions  

Statements

A. The receipt thereof by the agent, in addition to the ordinary commission, will make the agent bear the risks of
collection.
B. The person who gives authority to another to perform a certain act in the former's behalf. C. It comprises all
the business of the principal.
D. The nature of the relationship of the principal and the agent, which is founded on trust and confidence.
E. This refers to the act of the principal of terminating the agency at will.
F. He serves as intermediary between his principal and the buyer or seller and has no relation to the property
subject matter of the transaction. 
G. 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.
H. A person appointed by the agent to perform the tasks entrusted to him by the principal.
I. This refers to the submission of the controversy to a third person for decision and which will require a special
power of attorney when made by an agent in behalf of principal.
J. A contract whereby the parties agree to make reciprocal concessions to avoid or end a ligation, and the
performance of which by an agent will require a special power of attorney from the principal.
K. A mode of extinguishment of an agency when the agent terminates the agency by giving notice of such
termination to the principal.
L. A person who performs a service or does something in representation or in behalf of another with the latter's
consent and authority.
M. A penalty which deprives a person of the right to manage or dispose his property and which will cause the
extinguishment of an agency if imposed upon the principal or the agent.
N. The authority required when the act to be performed by an agent is an act of ownership or strict dominion, a
gratuitous act, or an act where trust and confidence is the essence of the agreement.
O. They refer to the orders given by the principal to his agent relating to the manner by which the agency shall be
carried out.
P. An agency that is inferred from the acts of the principal or from his silence or inaction, or from his failure to
repudiate the agency knowing that another person is acting in his behalf without authority.
Q. The authority given by the principal to his agent when the act to be performed is an act of administration.
R. An agency that is entered into orally or in writing.
S. An agency that comprises one or more specific transactions. 
T. A person who buys and sells goods consigned or delivered to him by his principal, for a compensation known as
commission.
U. None of the foregoing. 
 
TEST III - TRUE OR FALSE. Write the word “TRUE” if the statement is true, and the word “FALSE” if the statement is
false.

1. Legal capacity of the agent is not necessary for the validity of his acts since they are considered to be those of the
principal.
2. When the sale of a piece of land is made through an agent, the authority of the agent must be in writing for the
sale to be valid.
3. The right to vote during elections for a public office may be delegated by a person to his agent since it is a right
that the principal may lawfully do.
4. A general agency may be couched in specific terms.
5. A special agency may be couched in general terms.
6. The agent may borrow money in behalf of the principal even without a special power of attorney if the same is
urgent and indispensable for the preservation of the property under the administration of the agent.
7. Payments made by the agent, whether or not they are considered as acts of administration, require only a general
power of attorney from the principal.
8. Customary gifts for charity, when made by an agent, requires a special power of attorney.
9. An agent is deemed to have impliedly accepted an agency if the principal transmits 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 the agent did not
reply to the letter or telegram.
10. If the announcement of the appointment of an agent is by special information, and the announcement of the
revocation of the appointment is made by public advertisement, the person to whom the special information was
given is bound by the revocation although he has not read the advertisement.
11. If an agent acts with the authority of the principal but in his (agent's) own name, the third person with whom the
agent had contracted shall have no right of action against the principal unless the contract involves things belonging
to the principal.
12. An agent is bound to advance the necessary funds for the accomplishment of the agency although there is no
stipulation that the agent shall make such advances.
13. Third persons are bound to know whether an agent is acting within his authority or not and thus can require the
agent to present his power of attorney. 
14.  The agent may, even without the consent of the principal, borrow the money of the principal which is
under (agent's) custody or administration.
15. A stipulation between the agent and the principal that agent need not render an accounting of his transactions is
valid.
16. The agent shall be liable for damages if there being conflict between his interest and that of the principal, he
should prefer his own. 
17. An agent may appoint a substitute if attorney does not contain any prohibition to the agent from doing so.
18. The liability of two or more agents appointed simultaneously by the principal is solidary.
19. An agent who acts within the scope of his authority and in the name of his principal shall not be liable to the third
person with whom he contracts unless he expressly bound himself.
20. If an agent acts in excess of authority and the person with whom he contracts knows of such fact, the agent shall
not be liable if he did not undertake to get the principal's ratification.
21. A commission agent can sell on credit even without the consent of his principal.
22. The principal and the agent may stipulate that the principal shall be liable for the expenses of the agency up to a
certain amount only.
23. When two or more principals have appointed an agent for a common transaction or undertaking, they shall be
jointly liable for all the consequences of the agency.
24. The principal shall reimburse the agent the sums advanced by the latter even if the business or undertaking was
not successful provided that the agent is free from all fault. 
25. The agent has the right to retain in pledge the things which are the object of the agency until the principal pays
him the indemnity for all damages which the execution of the agency may have caused the agent, without fault of
negligence on his part.
26. When two persons contract with regard to the same this one of them with the agent, and the other with principal,
and the two contracts are incompatible with each other, the principal shall be liable for damages to the person
whose contract shall be rejected if the agent acted in good faith.
27. The insolvency of the agent does not cause the extinguishment of the agency as long as the principal is not
insolvent. 
28. The principal may terminate an agency at will although a bilateral contract depends upon it.
29. An agency is not terminated by the death of the principal if it was constituted in the common interest of the
principal and the agent.
30. Although the agent knows of the death of the principal, he must finish the business that he had already begun
on the death of the principal. 

ANSWERS TO DIAGNOSTIC EXERCISES

AGENCY
TEST I - MULTIPLE CHOICE 

1. B 21. A 41. D 61. D 81. B

2. B 22. A 42. C 62. C 82. B
3. A 23. D 43. B 63. C 83. B
4. C 24. D 44. B 64. B 84. B
5. A 25. B 45. B 65. C 85. A
6. D 26. B 46. B 66. A 86. D
7. D 27. A 47. C 67. A 87. C
8. B 28. A 48. D 68. C 88. D
9. A 29. B 49. B 69. C 89. C
10. A 30. C 50. B 70. A 90. D
11. A 31. C 51. B 71. C
12. B 32. D 52. A 72. B
13. C 33. D 53. A 73. A
14. B 34. A 54. B 74. A
15. B 35. A 55. B 75. A
16. D 36. D 56. C 76. C
17. A 37. A 57. B 77. A
18. A 38. B 58. D 78. B
19. C 39. B 59. D 79. B
20. D  40. A 60. B 80. D

TEST II -MATCHING TYPE 

1. G 6. S 11. F 16. J
2. D 7. Q 12. A 17. I
3. P 8. N 13. M 18. E
4. R 9. H 14. B 19. K
5. C 10. T 15. L 20. O

TEST III - TRUE OR FALSE 

1. TRUE 6. TRUE 11. TRUE 16. TRUE 21. FALSE

2. TRUE 7. FALSE 12. FALSE 17. TRUE 22. TRUE
3. FALSE 8. FALSE 13. TRUE 18. FALSE 23. FALSE
4. TRUE 9. TRUE 14. FALSE 19. TRUE 24. TRUE
5. TRUE 10. FALSE  15. FALSE 20. TRUE  25. TRUE

26. TRUE
27. FALSE
28. FALSE
29. TRUE
30. TRUE