PARTNERSHIP, AGENCY AND TRUSTS Pineda 2014

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June 14, 2014
AGENCY
40% MIDTERM GRADE
40% FINAL GRADE
20% RECIT
PAB

JULY 5, 12, 19 (NO CLASS)
Q: WHAT DO YOU UNDERSTAND ABOUT AGENT?
ARTICLE 1868: By the contract of agency a person
(agent) binds himself to render some service or to
do something in representation or on behalf of
another (principal), with the consent or authority of
the latter.
*When I doubt go back to CC
Concept of agency: Include all situations in which one
person is employed to render service for another.
Exemptions:
Relationship of an employer and employee (Article 1700)
A constructs the building himself, buying the
materials and employing C who shall construct the building
under his direction and supervision.
Masters and servants (Article 1680)
Employer and independent contractor (Article 1713)
A hires C, a building contractor, to construct the
building with the materials and labor to be furnished by C
Term used in other senses:
1. To denote the place at which the business is
transacted
2. In the sense of instrumentality by which the
thing is done
3. Refer to the exclusive right of the person to sell
a product of another in specific territory
Q: WHAT ARE THE CHARACTERISTICS OF AGENCY?
Consensual-perfected by mere consent
Principal-can stand alone without the need of
another contract
Nominate-has its own name
o What do mean about it has its own
name?
To distinguish them. E.g sale,
loan, hiring, partnership etc.
The civil code specifically
provides for it. It is
specifically defined in the
civil code
Unilateral-if gratuitous(obligation for one of the
party) Bilateral (for compensation=reciprocal
rights and obligations)
Preparatory-means to an end
o Preparation or creation of other
transactions or contracts.
E.g. sale of land, principal
hires an agent to sell the
land, before the contract of
sale to proceed a contract of
agency must be perfected so
as to achieve what the
principal wants (sale of a
piece of land)
NATURE, BASIS AND PURPOSE
NATURE: Agency as a contract in article 1868
Manifestation of consent: Principal must intend
that an agent shall act for him in turn agent must
accept the authority and act on it.
o EXPRESSION: EITHER IN WORDS OR
CONDUCT BETWEEEN THEM
Agent, by legal fiction, becomes principal: In
acting for the principal, by legal fiction agent
becomes the principal authorized to perform all
acts which the latter would have him do.
Presence/absence of contract or consideration:
Although usually the agency relationship is
usually contractual one either express or
implied, based upon a consideration (ART. 1875)
It is not necessarily so; the relationship can also
be created by operations of law or acting as a
principal gratuitously.
o Ergo, there can be an agency or
agency power without contract or
consideration.
o Legal consequence of agency may
attach where one person acts forf
another without authority or in
excess of his authority if the principal
subsequently ratifies it (ARTS 1881-
1882)
BASIS: Also a representative relation. agent renders
some service or does something in representative or in
behalf of another
Personal contract of representation: based on
trust and confidence reposed by principal on his
agent
o Agency is generally revocable (Arts
1920, 1927)
Acts of agents, by legal fiction , acts of principal

Art 1881: The agent must act within the scope of his
authority xxx

Thus, agents acts produce the same legal and binding
capacity as if they were personally done by the principal.

He who acts through another acts himself

PURPOSE: To extend the personality of the principal
through the facility of the agent

Party to the contract of agency (PAT)
Principal - one whom the agent represents and
from whom he derives his authority
Agent one who acts for and represents
another
Third party the party whom the business is
transacted
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Essential elements of COA
Consent
o Implied
o Express
Object
o What the trancsaction is?
o Eg. Business transactions
o Execution of the agent of the juridical
act as a representative of the principal
to a third person
Agent acts as a representative and not for
himself
Agent acts within the scope of his authority

Q: do contracts of agency needs a
consideration? NO
Q: What are the limit of an agent can do?
*must act within the limit of the authority conferred by
the principal
Capacity of the agents
Principle legally capacitated
Natural and juridical person can contract in his own right
Agent- Anyone can be an agent since he assumes no
personal responsibility
Santos V Buenconsejo 14 SCRA 407 (1965)
Lot No. 1917 was originally owned in common by
Anatolio Buenconsejo to the extent of
undivided portion and Lorenzo Bon and Santiago
Bon to the extent of the other
Anatolio Buenconsejos rights, interests and
participation over the portion were transferred
and conveyed to Atty. Tecla San Andres Ziga,
awardee in an auction sale after the decision in
juvenile delinquency and domestic relations
court was promulgated
By a certificate of redemption, the rights,
interest, claim and/or or participation which
Atty. Tecla San Andres Ziga may have acquired
over the property in question by reason of the
aforementioned auction sale award, were
transferred and conveyed to the herein
petitioner Santos in his capacity as Attorney-in-
fact of the children of Anatolio Buenconsejo
Petitioner Santos had redeemed the
aforementioned share of Anatolio Buenconsejo,
upon the authority of a special power of
attorney executed in his favor by the children of
Anatolio Buenconsejo.
Relying upon this power of attorney and
redemption made by him, Santos now claims to
have acquired the share of Anatolio Buenconsejo
in the aforementioned Lot No. 1917
ISSUE: WON Petitioner Santos has acquired the share of
Anatolio Buenconsejo in Lot No. 1917 relying upon a
power of attorney and redemption made by him
HELD: NO
RATIO:
The special power of attorney authorized him to
act on behalf of the children of Anatolio
Buenconsejo, and, hence, it could not have
possibly vested in him any property right in his
own name;
the children of Anatolio Buenconsejo had no
authority to execute said power of attorney,
because their father is still alive and, in fact, he
and his wife opposed the petition of Santos;
in consequence of said power of attorney (if
valid) and redemption, Santos could have
acquired no more than the share pro indiviso of
Anatolio Buenconsejo in Lot No. 1917, so that
petitioner cannot adjudicate to himself in fee
simple a determinate portion of said Lot No.
1917, as his share therein, to the exclusion of the
other co-owners, without the conformity of the
other co-owners (Lorenzo and Santiago Bon), or
a judicial decree of partition


ACTS WHICH MAY NOT BE DELEGATED
GENERAL RULE: cannot be delegated if personal acts.
CRIMINAL ACTS
DETERMINATION OF AGENCY
Is there intent? yes
There must be consent of the principal of who he would
APPOINT an agent and likewise the agent would accept
Fiduciary in character
must transact in good faith, based on trust and
confidence
always for the best interest of the principal
within the scope of the agency of that specific
principal

Q: CAN AN AGENT ASSERT AN INTEREST CONTRARY TO
THAT OF HIS PRINCIPAL?
A: NO, agent is estopped from asserting or acquiring a title
adverse to that of the principal. COA is created for the best
interest of the principal. (EXCLUSIVE interest or benefit of
the principal)
Q:CAN AN AGENT WHO IS AUTHORIZED TO SELL A
PROPERTY BUY THE PROPERTY HIMSELF? WHY? WHAT IS
THE DANGER THERE?
*CONFLICT OF INTEREST
AGENTS INTEREST VS PRINCIPALS INTEREST
LOWER PRICE VS HIGHER PRICE
Q:KNOWLEDGE OF THE AGENT IS IMPUTED TO THE
PRINCIPAL, WHAT DOES THIS MEAN?
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Duty of the agent to notify the principal relating
to all material facts pertaining to the agency
why?
o A binding relationship between the
agent and principal, it is already
presumed that the knowledge of the
principal is the same as the knowledge
of the agent.
Recit: reason and exemptions:
AGENT SUBJECT TO PRINCIPALS CONTROL
Q:WHAT IS THE SCOPE OF THE CONTROL OF THE
PRINCIPAL?
A: Control over matters that are the subject/scope of the
agency.
AGENCY VS LOAN
AGENCY LOAN
Advancement of payment
is only used for the subject
of the agency. (benefit of
the principal
Money is lent, to be used
for his personal business

AGENCY VS LEASE
AGENCY LEASE
BASIS: REPRESENTATION LEASE OF SERVICE:
EMPLOYMENT
POWERS: WITH
DISCRETIONARY POWER
MINISTERIAL FUNCTIONS
PARTY: THREE PERSONS
PRINCIPAL, AGENT, THIRD
PARTY
TWO PERSONS
MASTER, SERVANT OR
EMPLOYER, EMPLOYEE
COMMERCIAL OR
BUSINESS TRANSACTIONS
MANUAL OR MECHANICAL
EXECUTION

CASE: Neilson & Co. vs. Lepanto Consolidated Mining Co.
ARTICLE 1868 (page 347 In agency, the agent exercise
discretionary power, while in lease of service, the lessor
(like a servant) ordinarily performs only ministerial
functions.)
TITLE: NIELSON & CO. INC. V. LEPANO CONSOLIDATED
MINING CO. [L-21601, Dec. 28, 1968] (26 SCRA 540, 1968)
PONENTE: J. Saldivar
FACTS:
Lepanto seeks the reconsideration of the decision on
December 17, 1966. The motion for reconsideration
is based on two grounds, the first set consisting of
four principal grounds and the second set consisting
of five alternative grounds. Relative to our Agency
subject, only the first principal ground will be
discussed.
In the first principal ground, Lepanto claims that its
own counsel and this Court had overlooked the real
nature of the management contract entered into by
and between Lepanto and Nielson, and the law that is
applicable on said contract.
Lepanto now asserts for the first time that the
management contract in question is a contract of
agency such that it has the right to revoke and
terminate the said contract, as it did terminate the
same, under the law of agency and particularly
pursuant to Article 1733 of the Old Civil Code (Article
1920 of the New Civil Code)
Lepanto contends that the management contract in
question is one of agency because:
(1) Nielson was to manage and operate the mining
properties and mill on behalf, and for the
account of Lepanto, and
(2) Nielson was authorize to represent Lepanto in
entering, on Lepantos behalf, into contracts for
the hiring of labourers, purchase of supplies, and
the sale and marketing of the ores mined.

All these, Lepanto claims, show that Nielson was, by
the terms of the contract, destined to execute
juridical acts not on its own behalf but on behalf of
Lepanto under the control of the Board of Directors
of Lepanto at all times. Hence Lepanto claims that
the contract is one of agency. Lepanto then
maintains that an agency is revocable at will of the
principal (Article 1733 of the old civil code),
regardless of any term or period stipulated in the
contract, and it was in pursuance of the right that
Lepanto terminated the contract in 1945 when it took
over and assumed exclusive management of the work
previously entrusted to Neilson under the contract.
Lepanto finally maintains that Nielson as an agent is
not entitled to damages since the law gives to the
principal the right to terminate the agency at will.

ISSUE: WON the contract between Nielson and Lepanto
is a contract of agency or a contract of lease of service.
HELD: SC ruled that the contract between Nielson and
Lepanto is a contract of lease of service and NOT a
contract of agency
RATIO:
Article 1709 of the Old Civil Code (now Article 1868),
defining contract of agency as follows:
o By the contract of agency, one person
binds himself to render some service or do
something for the account or at the request
of another.
Article 1544, defining contract of lease of service
provides:
o In a lease of work or services, one of the
parties binds himself to make or construct
something or to render a service to the
other for a price certain.
In both agency and lease of service one of the parties
binds himself to render some service to the other
party. Agency however, is distinguished from lease of
work or services in that the basis of agency is
representation, while in the lease of work or services
the basis is employment.
The lessor of services does not represent his
employer while the agent represents his principal. By
the contract of agency, a person binds himself to
render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
There is another obvious distinction between agency
and lease of services. Agency is a preparatory
contract, as agency does not stop with the agency
because the purpose is to enter into other contracts.
The most character feature of an agency relationship
is the agents power to bring about business relations
between his principal and third persons. The agent is
destined to execute juridical acts (creation,
modification, or extinction of relationship with third
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party). Lease of service contemplate only material
(non-juridical) acts.
The principal and paramount undertaking of Nielson
under the management contract was the operation
and development of the mind and the operation of
the mill. All the other undertakings mentioned in
the contract are necessary or incidental to the
principal undertaking. In the performance of the
principal undertaking, Nielson was not in any way
executing juridical acts from Lepanto, destined to
create, modify or extinguish business relations
between Lepanto and third persons. In other words,
in performing its principal undertaking, Nielson was
not acting as an agent of Lepanto, in the sense that
the term agent is interpreted under the law of
agency, but as one who was performing material
acts for an employer for compensation.
It is true that the management contract provides that
Nielson would also act as purchasing agent of
supplies and enter into contracts regarding the sale of
mineral, but the contract also provides that Nielson
could not make any purchase, or sell the minerals,
without the prior approval of Lepanto. It is clear,
therefore, that even in these cases Nielson could not
execute juridical acts which would bind Lepanto
without first securing the approval of Lepanto.
Nielson, then, was to act only as an intermediary, not
as an agent.
Lepanto contends that the management contract is
question being one of agency it had the right to
terminate the contract at will pursuant to the
provisions of Article 1733 of the old civil code. From
paragraph XI of the contract, Lepanto could not
terminate the agreement at will. Lepanto could
terminate or cancel the agreement by giving notice of
termination ninety (90) days in advance only in the
event that Nielson should prosecute in bad faith and
not in accordance with approved mining practice the
operation and development of the mining properties
of Lepanto. Lepanto could not terminate the
agreement if Nielson should case to prosecute the
operation and development of the mining properties
by reason of acts of God, strike and other causes
beyond the control of Nielson.
*neilson never represented Lepanto in anyway

AGENCY VS INDEPENDENT CONTRACT
AGENCY INDEPENDENT CONTRACT
CONTROL: HOW THE ACT IS
EXECUTED
NONE, END PRODUCT
MATTERS OVER THE
PROCESS
LIABILIETIES: PRINCIPAL IS
LIABLE, AGENT IS NOT
CONTRACTOR IS
GENERALLY LIABLE FOR
OWN NEGLIGENCE

CASE: AFRICA VS CALTEX INC. 16 SCRA 448 (ILLUSTRATIVE
CASE P350-351)
AGENCY VS PARTNERSHIP
AGENCY PARTNERSHIP
CONTROL: PRINCIPAL
LIABILITY
PROFIT SHARING

CASE: SEVILLA VS CA (ILLUSTRATIVE P354)
AGENCY VS NEGOTIORUM GESTIO

AGENCY VS BAILMENT
AGENCY VS GUARDIANSHIP
AGENCY VS TRUST
AGENCY VS JUDICIAL ADMINISTRATION
KINDS OF AGENCY
1. as to manner of creation
a) express- one where the agent has been
actually authorized by the principal, either
orally or in writing;
b) implied- one which is implied from the
i. acts of the principal- from his
silence or lack of action, or
his failure to repudiate the
agency knowing that another
person is acting on his behalf
without authority.
ii. Acts of the agent- when he
carries out the agency, or
from his silence or inaction
according to the
circumstances.
2. as to its character
a) gratuitous- one where the agent receives no
compensation for his services.
b) compensated or onerous- one where the
agent receives compensation for his services.
3. as to extent of business covered
a) general- one which comprises all the
business of the principal;
b) special- one which comprises one or more
specific transactions.

4. as to authority conferred
a) couched in general terms- one which is
created in general terms and is deemed to
comprise only acts of administration;
i. a general power of attorney
covers only acts of
administration, or expressed
in commercial terms, it only
covers power to pursue the
ordinary or regular course of
business. Whereas, a special
power of attorney covers
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acts of dominion or strict
ownership. The general rule
is that unless so expressly
stated, an agency covers only
the powers to execute acts
of administration. Thus,
under Article 1877 of the
Civil Code: "An agency
couched in general terms
comprises only acts of
administration, even if the
principal should state that he
withholds no power or that
the agent may execute such
acts as he may consider
appropriate, or even though
the agency should authorize
a general and unlimited
management."
In Macke vs. Camps, 7 Phill. 553 (1907), the Court
held: "It seems easy to answer that acts of administration
are those which do not imply the authority to alienate for
the exercise of which an express power is necessary. Yet
what are acts of administration will always be a question
of fact, rather than of law, because there can be no doubt
that sound management will sometimes require the
performance of an act of ownership. (12 Manresa 468)
But, unless the contrary appears, the authority of an agent
is presumed to include all the necessary and usual means
to carry out the agency into effect." (at p. 555)


b) couched in specific terms- one authorizing
only the performance of a specific act or
acts.
5. as to its nature and effects
a) ostensible or representative- one where the
agent acts in the name and in representation
of the principal.
b) simple or commission- one where the agent
acts in his own name but for the account of
the principal.