AGENCY, TRUST AND PARTNERSHIP

A.Y. 2019-2010
INSTRUCTOR: ATTY. PRIME RAMOS
PREPARED BY: MARIA MARTHA YSABEL D. ILAGAN

DISTINGUISHING AGENCY FROM OTHER CONTRACTS

IN GENERAL

To classify a contract, due regard must be given to its essential clauses. A contract is what the law
defines it to be, and not what is is called by contracting parties.

Determined by acts

● General rule: no formalities required for the creation of an agency relationship.

● Designation by the parties not controlling.

Element of control

● Agent’s power to bring about business relations between his principal and third parties
● As contrasted with others who act in representative capacities but are not agents

DISTINGUISHED FROM PARTNERSHIP

Art. 1767. By the contract of partnership, two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession.

● A contract of agency, but not a pure agency

● While an agent acts only for his principal, a partner acts not only for his co-partners and the
partnership but also as a principal of himself.
● Test
○ Each partner is regarded as an agent of his co-partners when he is acting and as a
principal of his co-workers when they are acting.

Control by principal

● Not applicable to partnership

● A partner’s power to bind his co-partner is not subject to the co-partner’s right to control,
unless there is an agreement to that effect.

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Liability of the agent

● A partner acting as an agent for the partnership binds not only the firm members but himself
as well.
● Ordinary agent assumes no liability where he acts within the scope of his authority.

Sharing of profits

● Test: if, when earned, the profits belong to all parties as common proprietors in agreed
proportions: partnership
● If alleged owner/partner takes his agreed share of profits, not as owner but as an agreed
measure of compensation for his services or the like: agency

Art. 1769. The receipt of the share of profits of business is not prima facie evidence that he is a
partner of a business if such profits were received “as wages of an employee.”

DISTINGUISHED FROM SERVICE PROVIDER

Lessor of Services

Art. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work
or to render to the other some service for a price certain, but the relation of principal and agent does
not exist between them.

Agency Lease Service

Basis Representation Employment

Exercise of... Discretionary powers Ministerial Functions

Persons involved Three persons: Principal, Agent Two persons: Lessor

and Third Person (master/employer), Lessee
(servant/employee)

Relates to... Commercial/business Matters of mere

transactions manual/mechanical execution

● Essential distinction is that the agent is employed to establish contractual relations between
his principal and third persons
● BUT a person may be employed to perform duties of both agent and servant

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Independent Contractor

Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work
for the employer, in consideration of a certain price or compensation. The contractor may either
employ only his labor or skill, or also furnish the material. (1588a)

● In agency, agent is still subject to the control and direction of the principal whom he represents
with respect to the matters entrusted to him.
● In contract for a piece of work, the independent contractor exercises his employment
independently and not in representation of the employer.
○ Except only as to the result of the work.
● General rule: employer not liable for the torts/injury inflicted by the independent
contractor/employees of such contractor.

DISTINGUISHED FROM SALE

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money
or its equivalent.

A contract of sale may be absolute or conditional. (1445a)

Agency to Sell Sale

Receipt of goods Agent receives the Buyer receives goods as owner

goods/property as goods of the
principal

Agent delivers proceeds of the Buyer pays the price

sale

Return of object Agent can return the object in General rule: buyer cannot
case he is unable to sell to third return the object sold
persons

In dealing with the thing Agent bound to act according to Buyer (ownder) can deal with
received the instructions of his principal the thing as he pleases.

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 ● The elementary notion of sale is transfer of title to a thing from one to another.

● Agency: involves the idea of an appointment of one act for another.

DISTINGUISHED FROM BROKERAGE

● Broker

○ One who is engaged for others on a commission

○ A negotiator between other parties, never acting in his own name but in the name of

those who employed him (Reyes v Rural Bank of San Miguel)

○ Has no relation with the thing he buys or sells

■ Merely an intermediary

○ Broker earns his pay merely bt bringing the buyer and the seller together, even if no

sale is eventually made.

● Commission agent

○ One engaged in the purchase/sale of another for personal property which for his

purpose, is placed in his possession and at his disposal

○ Agent receives a commission upon the successful conclusion of a transaction such as

sale.

THE CONCEPT OF AGENCY

PURPOSE AND DEFINITION

Purpose

Extend the personality of the principal through facility of the agent to render some services or to do

something.

Definition

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Art. 1868. 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. (1709a)

Art. 1869. Agency may be express, or implied from the 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.

Agency may be oral, unless the law requires a specific form. (1710a)

Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances. (n)

Art. 1876. An agency is either general or special.

The former comprises all the business of the principal. The latter, one or more specific transactions.
(1712)