PARTNERSHIP

Generally, once partnership is dissolved, relationship is changed and authority to contract ceases. Except,
(effect of dissolution as to partners) 1. Winding Up 2. Completion of unfinished transactions 3. Dissolution
by act, insolvency or death of a partner - Partners are liable when the partner continues to act for the
partnership provided that said partner did not KNOW of the act of the other partner or did not have
NOTICE of the insolvency or death. ("Notice the difference" - Atty. E)
Example: Partner withdrew from partnership but despite such withdrawal, C entered into a new contract.
What is the effect? Ans: If C did not know about the withdrawal, then other partners remain bound by the
new transaction entered into by C. However, if C knew of the withdrawal, new transaction will not be
binding.
Effect of dissolution as to third persons: Generally, not binding. Except: 1. Winding Up 2. Completion of
unfinished transactions 3. Third party extended credit without knowledge that partnership is already
dissolved, new transaction is binding. (Here, the credit was extended before the dissolution. Refers to
Prior Dealers) NOTE: murag defective akong notes ani, refer to codals nalang 4. Third party did not
extend credit but knew of the existence of the partnership but did not know of such dissolution because
there was no publication, new transaction is binding. (In Atty. E's example, credit was extended after the
dissolution)
NOT BINDING TO THE PARTNERSHIP: (gipa-explain ra ni niya nganhe na part, keywords ra akong
gihinumduman. Refer to codals) 1. Unlawful 2. Insolvent 3. No Authority
What is NOVATION? Mode of extinguishing obligation whereby a new contract is entered into to replace
the old one. Enumerate modes of extinguishing obligations under ObliCon. 2 types of Novation: 1. REAL
NOVATION - change in the thing itself or the subject matter. 2. PERSONAL NOVATION - change in the
persons involved. This could either be passive or active. (Wa na katubag ang natawag ani kung unsa na
ang passive or active)
Who must agree in novation? The old debtor, old creditor and the new debtor/ creditor.
EXAMPLE: ABC Partners are being sued in an extra-contractual obligation (tort). C, the guilty party,
happen to be the very close friend of the creditor and as a result was released from liability. A learned of
such condonation. What should A do? Ans: Oppose such release of C for they were not consulted, this
being a tort and their liability are solidary as partners. The other partners would be jeopardized by C's
release. No proper novation in this case.
What is the effect if the remaining partners decide to continue the partnership business if C decides to
withdraw from the partnership? A and B can continue the partnership business despite C's withdrawal
provided that C is given his interest in the partnership and he be discharged from any liabs the new
partnership may incur.
What is WINDING UP? Settlement of partnership affairs. How is it done? Either judicial or extra-judicial.

In EXTRA-JUDICIAL, who can wind up the partnership affairs? 1. One designated in the articles of
partnership. 2. If none, any of the partners who is not guilty of the wrongful dissolution. 3. In extreme
cases where no partners are left, the legal representative decided among all other representatives of the
partners. As long as such representative is not representing the guilty partner (for wrongful dissolution) or
insolvent partner. He must have the financial integrity to undertake winding up. NOTE: naglibog sad ko ani
kay diba sa De Leon kay the legal representative of the last surviving partner man. Pero ang kana nga
enumeration kay mao nang sulti ni Atty. E.
In JUDICIAL, any partner or legal representative may seek the authority of the court for dissolution.
If dissolution is voluntary or not in violation of the partnership agreement, very simple settlement process.
What should be done is gather the assets, pay the liabs. Any surplus is shared and distributed to partners.
But distinction must be made between the innocent and guilty partner for they don't necessarily receive
the same share. The guilty partner will be liable for damages.
Partnership agreement may be rescinded when it is shown that Fraud or Misrepresentation is committed
by one of the partner. Guilty partner must pay damages. In this case, the innocent partner's rights are
LIEN, SUBROGATION and INDEMNIFICATION. (Gipa-explain na niya each)
Assets of the partnership? 1. Partnership property 2. Contribution of partners 3. Goodwill - good name
and reputation of the partnership, which is usually commercial in nature, that has monetary value.
Order of Payment in liquidation. (Katong Partnership liab, Advances from partners, return of contribution
ug share in profits. Wa ko nakanotes ani kay nigawas ko)
What would happen if some partners continue the partnership business? There could be a mixture of old
and new creditors.
If partner dies, partnership is dissolved but there can be liabilities due from the deceased partner.
Creditors can go after the estate which is a new entity. Death does not extinguish obligations. Only
criminal liability is extinguished by death, civil liability continues.
Who is entitled to assets of the Estate? Personal Property is to Personal Creditors, while partnership
property is to partnership creditors.

PARTNERSHIP 09.17.2014
Agency is created either express or implied. Define each.
SITUATION: Do you have a boyfriend? If your boyfriend wants to hang his arms
around you, what would you do?
Classmate answers NO COMMENT which means it's okay. Silence in this case was an
implied consent.

In agency, creation may be implied and known by means of either (1) silence, (2)
lack of action and (3) failure to repudiate.
KINDS OF AGENCY as to:
1. Extent of Authority
General Agency - covers everything in the business of the principal.
Special Agency - only one or more specific transactions
2. Character
Onerous - presumption
Gratuitous Agency is implied but cannot be presumed for it must be established as a fact.
There must be an intention to form the agency as implied from the acts or silence of
the parties but there is always a basis for such implication.
Creation may be implied, in the same manner that acceptance may also be implied.
In agency, there must be an offer of power made by the principal and acceptance of
power by the agent.
Implied acceptance may be allowed when the parties are present and facing each
other. Such as when the principal makes the offer and agent remains silent. In this
case, silence means yes.
But when parties are absent, generally no implied acceptance, except when:
(Art872).
In the first scenario, it must be established that the offer was received by the agent
and that there was no objection on his part. The morale is that if you're offered to
be an agent, you should reply and object if you don't want to be one.
In the second scenario, the law speaks of the agent being "habitually engaged"
which means that there is already an existing relationship that is why it is enough
that a letter or telegram was sent and received by the agent, even if he did not
reply.
"Attorney-in-fact"?
when you are given an authority to act for the principal. This is plain authorization
which will establish legal implications.
"Power of Attorney"?

an authorization defining the limits of authority and establishes extent and nature of
the power. Since it delegates certain authority, it is strictly construed.
SITUATION: If the SPA states that the agent is authorized to sell, is he likewise
authorized to sign a deed of sale? NO, authority to sell does not include the
authority to sign a deed of sale.
To be safe, SPA must be precise in its language, it must be very, very specific and
organized in such a way that everything is there as preparation for strict
construction.
WAYS OF GIVING NOTICE TO THIRD PERSONS:
1. Special Information - it must be the principal who gave the information.
2. Public Advertisement - kanang sa newspaper nga NOTICE but seldom done,
usually by big firms.
How is the notice terminated? In the same manner that the notice was given.
SITUATION: Nestle gave a public advertisement of NOTICE OF APPOINTMENT OF
GENERAL AGENCY to an agent here in the Philippines. But when clients made
payments to such agent, the latter did not remit and have absconded. Can Nestle
demand the clients to pay again?
NO, Nestle remain bound to the act of the agent in collecting the payments. There
was no public revocation in the same manner that the agent was publicly appointed
through a public advertisement.
Agency may be oral or in writing. When must authority be in writing? ART.1878
Difference of Guaranty (guarantor subsidiarily liable) and Surety (surety soliarily
liable). Spell Guaranty as a noun and a verb. (Verb - guarantee)
Compromise (among parties) vs. Arbitration (there is a third party involved).
Authority to enter into compromise does not carry with it the authority to submit to
arbitration because while the principal has full trust in the agent to enter into a
compromise settlement, he might not have full trust with the arbitrator.
Does authority to the agent to do acts of administration have to be in writing? NO,
only acts of strict dominion which must be in writing.
Difference of Acts of Administration (includes acts of preservation and
management) from Acts of Strict Dominion (has acts of disposition).
SCENARIOS:
1. Agent of the principal, who was authorized to borrow money, used the said
money to settle the hospital account of the principal's close friend. Is this proper?

NO. Authority to borrow does not carry with it the authority to spend. Strictly
construed against authority.
2. Agent of the principal, who was authorized to borrow money, gave only half of
the proceeds to the principal as compensation of the principal's debt to said agent.
Is this proper? No compensation for different relationships. The principal-agent
relationship is of fiduciary character and not that of a debtor-creditor.
3. Principal authorized the agent to borrow money in the bank. Said agent
conveniently carried with her the certificate of registration of the principal's car in
going to the bank. So a chattel mortgage was established on the principal's car.
When the principal failed to pay, the bank foreclosed the chattel mortgage. Was the
act of the agent proper? It depends on the authority granted in the SPA, if the agent
was also authorized to mortgage then it is proper. However, generally the authority
to borrow does not carry with it the authority to mortgage.
4. Principal authorized the agent to mortgage. The agent logically deduced that she
must also be authorized to borrow money considering that the contract of mortgage
is an accessory to the contract of loan. She obtained a loan with a mortgage which
was later on foreclosed by the bank. Can the
principal question the foreclosure? It depends. If the proceeds of the loan was given
to the principal and she accepted, she cannot anymore question the foreclosure. By
receiving the proceeds, the principal likewise confirms the principal obligation of
loan.
5. Principal authorized the agent to sell the her car for she urgently needed
250,000. The agent found ways to get the 250,000 without selling the car. Instead
of selling, she obtained a loan and mortgaged the car to the bank. The agent then
gave the proceeds to the loan. Should the principal be happy? No, because agent
did not act according to the authority given to her and her procurement of the loan
and mortgage is not advantageous to the principal.
6. Principal authorized agent to mortgage her car. Agent seeing that the principal no
longer needs the car, changed the loan agreement to the bank and asked the bank
to give a higher amount in exchange for the sale of the car to the bank. Is such
amendment proper? No, the agent was not authorized to amend the loan
agreement.
BASIC RULE: The agent must act within the scope of his authority. If agent exceeds
authority, principal ceases to be bound. As long as the agent stays in the authority
prescribed, obligation of the principal remains.
Classmate was asked to give example: She has an agent who is authorized to do
acts of administration. Said agent sold a mixer used in the bakery business of the

principal to a buyer in good faith. Upon discovery of the sale, can the principal get
the mixer back?
SIR: Differentiate the situation given to a situation wherein I left my watch
somewhere and someone else got a hold of it and sold it to her classmate for 500.
When I see that classmate wearing my watch, can I get it back?
(NOTE: Nadugai mi aning last 2 examples kay ang tubag sa akong mga classmate
kay di niya makuha balik ang mixer kay generally the principal will not be bound by
the act of an agent when he exceeded his authority except when it includes the
property of the principal. In the latter case, the principal will be bound. Si Sir on the
other hand kay murag buot ipaibot niya, in connection sa watch example. nga
pwede pa niya makuha kay wa man ju'y authority ang agent therefore he is not
bound by the sale.
Naabot mi sa 1883 wherein there are 4 scenarios in case the agent sells a property
of the principal
1 - Agent was authorized to sell and sells it in behalf of the owner.
2 - Agent was authorized to sell and sells it not in behalf of the owner.
3 - Agent was without authority to sell and still sells it in behalf of the owner.
4 - Agent was without authority to sell and he sold it not in behalf of the owner.
Kuhaa ang effects in each scenarios. Wa mana natubag sa amu :)

PARTNERSHIP
A. 4 scenarios:
1) AGENT WITH AUTHORITY AND ACTED IN THE NAME OF THE PRINCIPAL - most ideal scenario
2) AGENT WITH AUTHORITY BUT ACTED IN HIS OWN NAME - Principal is bound for it is a valid sale
since the agent was authorized. "Violation of agency does not affect his authority to sell." (Paras) Example
1: Father Baoc authorized Atty. E to sell his eyeglasses. Atty. E sold it to the buyer but in his own name.
Can Fr. Baoc recover the eyeglasses? No, this involves principal's property. Atty. E was authorized to
sell, making the sale valid. Example 2: What if Fr. Baoc asked Atty. E to borrow money in the bank. But
upon contracting such loan, Atty. E contracted in his own name. Does it bind Fr. Baoc? No, most
especially if Atty. E did not remit the proceeds to Fr. Baoc, thereby Fr. did not or could not ratify such
loan.

..why the difference between the 2 examples? In the eyeglasses example, this involved property of the
principal. Possession of the latter's property is proof enough that agent was authorized to sell, regardless
in whose name be sold it in.
3) AGENT HAD NO AUTHORITY BUT HE SOLD IT IN THE NAME OF THE PRINCIPAL - subject to
ratification. If principal does ratify, he cannot recover such property. Example: Fr. Baoc left his
eyeglasses and was picked up by Atty. E and sold it to one of his students. Can Father recover? It
depends. If he ratifies such sale, he cannot recover. But if he does not, he can now recover.
4) AGENT HAD NO AUTHORITY AND SOLD IT IN HIS OWN NAME - worst scenario and should not be
allowed.
B. What are acts of administration?
C. Kinds of authority? (Katong General, Ostensible, etc.) Example: Atty. E was authorized by Sacares to
sell her blouse with sequins. Atty. E bought a special iron so as not to ruin such sequins. Is he authorized
to buy the special iron? Yes, Implied Authority. Agent must have authority, otherwise not binding on the
principal. But authority may be implied, like by necessity, etc.
D. General Rule - Agent must act within the scope of his authority. Exception - Ratification,
Customs/Usage, By necessity (page502) Example: Martinez was given a blank check which was already
signed by the principal. He was instructed to place Php 1,000.00. While falling in line to encash the check,
he added another 0, thereby making the amount Php 10,000.00. May drawer of the check (principal)
complain to the bank for what Martinez did? No. By the drawer's negligence, he was the one responsible
for the commission of the act. He is therefore bound and could not complain.
E. "D by A" - D is the principal "A for D" - D is the principal "A and D" - both are the principals "Pay Ms.
Disangcopan. By A." - A is the principal, he is the one giving the order. "I sell the land of X. By A." - A is
the agent; is this binding to X, the principal? If there is SPA indicating such authority, then X is bound.
"Please deliver my laptop to Q, my agent. By Q." - Q is the agent. (Galibog bitaw mi'g maayo ani aie)
To bind the principal, 3 things must be present: 1. There must be authority 2. Acting in behalf of the
principal 3. Indicate name of the principal (if wala ni, it seems that you are not authorized at all.) and that
you as agent are acting as such (if wala, will not bind).
F. "To: Barce Please buy for me the land of Martinez. Sgd. Fr. Baoc"
Barce went to Martinez and Martinez agreed at first. But when they were about to sign the deed of sale,
AFTER Martinez' receipt of the payment, it was only then that Martinez knew that Fr. Baoc was the
principal of Barce. Martinez backed out. Can Martinez be compelled to sign? YES, when Martinez
accepted the payment, it was a ratification of the defects of the agency.
G. Obligations of the agent? Enumerate.

H. If the agent is authorized to borrow, he can lend as long as he charge the legal interest. On the other
hand, if the agent is authorized to lend, the agent cannot borrow without the consent of the principal. This
is because the agent may prove to be a bad borrower.
I. Ms. Albao was made to be an agent of the principal, who delivered to her a truckload of fish to be sold.
But she did not want to because she was busy preparing for the finals. Can she decline? Yes, it is a free
country, she cannot be compelled to enter into an agency.
What are her obligations? As an agent who declines or intends to decline, she has the duty of exercising
the diligence of a good father of the family in preserving the goods that was given to her. In this case, she
could buy ice for the fishes so that they won't deteriorate but it might entail a lot of cost. She might ask her
neighbors to store the fishes in their refrigerators or she might contact the fish vendors' association. As
long as she exercised the reasonable care that is required by the law. Furthermore, the law does not
require the agent to be an insurer of the goods. What is required is that you do your best.
J. "Written authority to Allen to sell the car at such price he deems fair and reasonable." Upon inspection,
Allen concluded that such fair and reasonable price would be Php 150,000.00. Then a beautiful and sexy
friend came along asking about the car. Allen sold it to her for Php 80,000.00 instead. Can the principal
get it back? Yes, Allen in this case violated the authority given to him to sell the car at a fair and
reasonable price. Therefore, the principal can get the car back.
What if the principal authorized the car to be sold at Php 80,000.00 and instead of the beautiful and sexy
friend, a hunchback came. Allen sold it to him at Php 150,000.00. Is the sale valid? Yes, perfectly valid.
Allen did not exceed his authority. In fact, he made the transaction more advantageous to the principal.
Even if the buyer complains afterwards, the sale was valid when it was perfected because the buyer knew
what he was getting into when he bought the car at Php 150,000.00.
What if the principal instructed him not to sell the car lower than Php 120,000.00. But the written authority
is still the same as in the first example. Allen sold it for Php 110,000.00. Can principal cancel the sale?
No, however seller can hold agent liable for not following instructions.
K. Authority vs. Instructions
Gemilga was instructed to go to Boljoon at early in the morning (7am) to pay the seller. She must take the
first available means of transportation, which happens to be a calesa. She arrived at 4 pm and the seller
was no longer there. Is agent liable? Yes, her taking of thr calesa was not in compliance with the
instructions. Instructions should have been taken as a whole. Agent, in this case, did not exercise utmost
diligence. Principal failed to realize profits due to lousy interpretation. What the principal can do is to hold
the agent liable for damages for non-performance of her obligation to exercise utmost diligence.
What if Sarmago was the agent in this case and she took a rental car to Boljoon and indeed arrived there
early. Seller was a no-show. So Sarmago went home at 3:30pm, upon her surrender of the money to the
principal, he said that Sarmago should have waited a while longer since the seller arrived at 5pm. Can
principal get damages? No, there was no clear instructions from the principal. Furthermore, agent does
not insure success of the instruction provided she exercised due diligence, good faith and loyalty. It would

be the height of injustice if the agent would be liable everytime that a transaction turns out to be
unsuccessful.
L. Deviations from authority given may be allowed when: 1. Sudden Emergency 2. Insubstantial departure
3. Ambiguous instructions
M. Gemilga was authorized to sell the land of X, Buyer instead bought the adjacent land which belonged
to Gemilga, herself. Is agent liable? Yes, conflict of interest. The agent should have informed the principal
of the buyer's wishes to buy her own property. Loyalty and Utmost diligence here would have mean full
disclosure to the principal.
N. Jalalon was authorized to buy land for the principal for 10% commission. She found one. She also
discovered another land that the seller was selling, but instead of informing the principal of the other
available land, she told another for 12% commission. Is this proper? Loyalty dictates that Jalalon should
have informed her principal of the other land because the principal might have been interested to buy.
Jalalon got richer by 22%. Any obligations? It depends on the instructions. If what was stated was " Buy
lot A only." She does not have any obligations to disclose her other commission because it does not
concern the principal. But if the authority was "buy parcels of land in that area." Jalalon should have
disclosed all of her commission.
Jalalon was a good broker. As a reward, she received from the buyer a Honda car. Can principal insist
that Jalalon sell the car and the proceeds should be divided by them? Yes, the car was received by
Jalalon in relation to the agency. She must disclose everything.

Partnership Rm403, 01 Oct 2014

What is substituted agent?
Generally, act of sub-agent may or may not bind the principal (wa kayo ko kakuha
nganhe dapita).
It will not bind the principal if
(1) Agent had no authority
(2) Although authorized, agent appointed someone notoriously incompetent.
(3) When the agent was prohibited from appointing the sub-agent.
SCENARIO: Ms. Calam was authorized by Ms. Sacares to appoint anyone. She
appointed Ms. Cuenca who was notoriously incompetent. Does this bind the
principal? NO, because agent was given the discretion to choose. Therefore the
principal will not be bound, if the agent was given the authority, no specific person
was nominated, and the agent chooses someone who is notoriously incompetent.

Ms. Calam was authorized by Ms. Sacares to appoint Ms. Cuenca. Ms. Calam knew
her be notoriously incompetent but Ms. Sacares did not. Will it bind the principal?
YES, because the agent was merely following the authority given to her by the
principal.
Principal bound by the acts of the sub-agent when
(1) Principal specified the sub-agent to be appointed.
(2) Agent was authorized, he is given the discretion and he appointed someone not
notoriously incompetent.
(3) Principal ratified the appointment. (This was not mentioned by Sir)
What did we learn in obligations and contracts,
What is this LIBERALITY of contracts? This means that we can freely enter into
contracts and make stipulations and agreements as long as not contrary to laws,
morals, good customs, public order and public policy.
How about CONSENSUALITY of contract? This means that contracts are perfected by
mere consent.
PRIVITY of contracts means that only the parties of the contract will be bound by the
stipulations in the contract. Appointment of the sub-agent is an exception to such
principal. Generally, sub-agent is a stranger to the principal because the contract of
sub-agency (ako ray ga-mugna2 ana nga term) is between the agent and the subagent only. If there was authority to appoint, even if principal not a party thereto,
principal can still intervene and question the acts of the sub-agent. If something
goes wrong, principal can go against the agent or the sub-agent.
Agents liability is joint unless expressly stipulated. But even if solidarity is expressly
stipulated, if one agent exceeded his authority, only he would be liable for the fault
or negligence.
Acts of agent will NOT bind the principal (page483)
(1) Agent without authority
(2) Agent acted beyond authority
(3) Agent acted not in the name of the principal, he acted in his own name
(4) Agent acts for an incapacitated principal
(5) Agent prevents the principal from performing the contract
Mere representation by someone that he is an agent is not proof enough of such
agency. You need to ask further inquiries like ask for his written authority or verify

such agency with the principal. But you dont have to worry so much when it
involves a sale of the principals property because what have we learned? When
such property to be sold belongs to the principal, there is a presumption that agent
was authorized. Moral is DONT RELY ON THE LOOKS, INQUIRE FURTHER.
SCENARIO: Mr. Moeller was authorized to sell the car at such amount which he finds
fair and reasonable. However, the principal whispered to him not lower than Php
120,000. He sold it for Php 100,000. Is the sale binding? Sale is still binding since
buyer relied on the written authority. Furthermore, the secret instructions by the
principal are only binding between the principal and the agent, not the buyer.
What if in the previous example, the buyer returned the car because he saw another
car but he said instead that the reason for such return was due to Mr. Moellers
violation of the principals instructions. Can buyer return the car? (nangutana pa ko
unsai tubag ani ha. Sa akong notes kay di na pwede, wa lang ko kibaw sa reason)
Mr. Gomez exceeded his authority by selling payable on 2 installments when his
authority said that he should sell for cash. Buyer, after paying the first installment,
said that Mr. Gomez violated his authority. Consequently, he wants to get back his
payment for the first installment and he will return the car. Can the buyer do that?
NO, option to ratify the transaction is with the principal, not the buyer.
What is a commission agent?
Obligations? The commission agent assumes the custody and possession of the
object. Therefore, he must exercise due diligence in taking care of the goods
consigned to him. For any damage, agent would be liable. To escape liability, agent
should make a written statement of the damage goods before accepting the same.
SCENARIO: Five trucks of ripe mangoes were stored in Mr. Gomez warehouse. He is
acting as agent for a principal. When buyer came, he discovered half of it was
rotten. Who will be liable for the rotten mangoes? The agent for he did not make a
written statement of the rotten mangoes before accepting them.
What if there are ten principals with five trucks each, all to be stored in Mr. Gomez
warehouse. Any obligations? He should mark and segregate the goods. Do not
commingle goods without authority. But if the goods are of the same kind and same
quality, commingling is permitted. (Sirs example was regarding his Uncle in Laguna
who owns rice fields.)
Presumption: SELL ON CASH. If on credit, agent liable to the principal for amount of
cash supposed to be generated from the sale. Unless, agent was allowed to sell on
credit but to serve as shield for unscrupulous agents, principal must be diligent
enough to ask a list of the names of the buyers on credit.
What is a guaranty agent?

A guaranty agent guarantees collection. So even if third party does not pay, such
guaranty agent will pay. As consideration, he earns higher.

PARTNERSHIP, 04 October 2014

What are the obligations of the principal? Enumerate as many as you can.
Once principal authorize someone, principal must comply with obligations as long as
agent acted within his authority and in the name of the principal. But even if agent
acted beyond his authority, agent will not be liable if:
1. Ratification by principal. Requisites: - Act must be done in behalf of the principal.
* Principal has knowledge of all material facts.
* Ratify in its entirety.
* Have capacity and power to ratify.
* Act must be capable of ratification.
* It must be voluntary.
2. Estoppel. When does estoppel happen?
3. Emergency or Necessity
4. Tortious Acts must be done within the scope of the agents employment. Follow
Motivation Deviation test.
SCENARIO: Agent (A) went to the house of a potential buyer (PB). He saw the PB
tending to his sick child. So the agent took some guava leaves and tutho it to the
sick boy. As a result the boy died. Can the principal be held liable? NO, following the
motivation-deviation test, although the act of the agent was motivated by his desire
to close the deal, his acts were a great deviation to what he was supposed to do
which is to sell the land.
Agent bringing the jewelry of the principal rode a tricycle. As he was about to
unload from said tricycle, a man held his arm and attempted to rob him of the
jewelry. But the agent was bringing with him a .45 pistol and shot the man dead.
Can the principal be held liable? YES, following the motivation-deviation test. He
was merely protecting the jewelry of the principal which he was about to sell.
EXPENSES if the agent made advances, the principal must reimburse.
SCENARIO: Agent invited a potential buyer to dinner and to karaoke afterwards.
Buyer ordered drinks and everything else. The agent was able pay Php 10,000.

Agent asks for reimbursement. Must the principal reimburse? (Actually galibog mig
maayo ani, pero ang naa sa katong among WWW kay reimburse what is necessary
but what may be necessary for one, may not be necessary for another.)
08 October 2014
What are torts? No intent, negligence in lieu of intent. What are crimes? Acts or
omissions punishable by law.
Commission Agent vs. Guarantee Agent Guarantee agent is liable regardless of
the reason for his failure to collect the proceeds. A commission agent will only be
liable when he is remiss in his duties and failed to exercise due diligence in the
collection of the proceeds.
If agent sells on credit, he must furnish copy of the debtors to the principal,
otherwise it is presumed to be sold on cash.
Ratification vs. Estoppel Principal authorized agent to borrow, agent executed a
promissory note in favor of the principal. Who is liable on the promissory note? The
principal is liable on such PN. Act of the agent when authorized becomes the act of
the principal. If agent was not authorized, Principal is not liable.
a. Principal asks for extension of the obligation. Principal becomes liable by
ratification or estoppel? What if it was the Payee who called the principal to extend
the obligation and the principal agrees? Take note of who made the first move or
who initiated the act. If it is the payee who offered the extension, it is RATIFICATION.
If it is the principal who asked for extension, that is ESTOPPEL.
Lets go back to Karaoke example regarding expenses. GENERAL RULE: Principal is
liable. Except, Article 1918 (enumerate)
What is pledge? Differentiate from chattel mortgage? (Both of them refer to
movable properties.) Pledge may be Voluntary or Legal. It is legal when the contract
is provided by law. (Art.1914)
SCENARIO: Agent is authorized by principal to sell the car and the car was
eventually sold. Can agent retain the proceeds for payment of his commission or
reimbursement for his expenses? NO. (wa ko kasabot sa reason sa among
classmate)
Agent did remit the proceeds and he was paid his commission without
reimbursement for his expenses. Agent has in his possession jewelry of the principal
for sale, can that be retained as payment for his advances? NO, not subject matter
of the agency for which the expenses were incurred. Jewelry has no relation to the
expenses incurred.

There were 3 apartments owned by A, B and C. X is authorized by the 3 to lease

their apartments. A month after, A terminated his authority. What happens to the
authority given by B and C? It subsists. It was not a common transaction or
undertaking. Give then an example of common transaction or undertaking.
Authorizing someone else is not an abandonment of your right to do the thing
authorized. Except when the agent was given the exclusive authority.
Rules regarding double sale General Rule: Prior date prevails. Except, when the
property sold on the same date, distinguish them as to their nature. MOVABLE first
possessor in good faith. IMMOVABLE 1. First registered 2. First possessor 3. Oldest
title
Modes of extinguishing agency (enumerate. Mnemonics: EDWARD)
Principal can always get back what he has given. He can always revoke at will as
long as it is made before the accomplishment of the object of the agency and
agency must not be coupled with interest.
SCENARIO: Principal authorized sale of the car. He got the proceeds. Can he revoke?
No, there is nothing to revoke for the agency has accomplished its objective. The
ground of extinguishment cannot be revocation, rather it is accomplishment.
Can principal revoke even if he has no valid reason? YES. Agency is voluntary. The
principal cannot be compelled to remain in the agency. But if he acted in bad faith,
principal can be held liable since agency is characterized by utmost good faith.
SCENARIO: Agent was authorized to sell the principals car for Php 1 million within
30 days. If he indeed sells the car, he would be entitled to 20% commission. Before
the 30 day period, the principal saw the agent driving the car at 2:30 am. When the
principal was revoking the agency, the agent cited that the principal cannot do that
because such agency is coupled with his interest in the commission. Is the agent
correct? No, this is not the interest contemplated under the law. The commission is
an interest that arises from the agency itself. Interest contemplated must be totally
independent from the agency itself.
Examples of Implied Revocation: 1. When the principal directly manages the agency.
2. When the principal appoints another agent for the same transaction. (refer to
page 590 sa book, nakalimot jud kos words jud nga nagamit)