CIVIL LAW REVIEWER

AQUINO

PARTNERSHIP

PARTNERSHIP - A contract whereby 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.

ELEMENTS:
1. Two or more persons bound themselves to contribute money, property or industry to
a common fund
2. Intention to divide profits

- The contract of partnership is CONSENSUAL. Perfected by meeting of minds with

respect to the object and consideration of the contract

ENTITY THEORY - At the time of perfection, the partnership has personality separate and
distinct from the partners

- The PAT can acquire properties in its own name

- It may conduct business using its own name which may or may not include the
names of the partners
- The partnership should be impleaded in cases involving a property registered in the
name of the partnership. REAL PARTY IN INTEREST
- No formality is required. It need not to be in writing
- EXC:
1. When immovable property or real rights are contributed - It must be in a
public instrument and an inventory signed by the parties must be
attached. Otherwise, the partnership is INVALID.
EXCEPTION TO THE EXCEPTION: SC said if no third party will be
prejudiced, nullity of the partnership agreement will not prevent the
court from considering it as an ordinary contract.

2. When the partnership capital is PHP3,000 or more - Must be in public

instrument but failure to comply does not affect the existence of the
juridical entity.
- Partnership with a capital of at least 3k must be registered with SEC. Juridical
personality still exists if not registered in SEC.
- Any capacitated person can be a partner.

DELECTUS PERSONAE - The partners choose with whom they will enter into a partnership
agreement, who will be accepted in their partnership and whether they will remain as
partners.

DISQUALIFICATIONS IN UNIVERSAL PARTNERSHIP

- Those who are prohibited from making donations cannot be partners
1. Persons guilty of adultery or concubinage at the time of the donation
2. Persons found guilty of same criminal offense in consideration thereof
3. Made to public officer or his wife, defendants, ascendants by reason of his office.

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PARTNERSHIP CORPORATION

Created by mere agreement Commences only from the issuance of the

Certificate of registration

Two or more persons may form At least 5 incorporator

Subject only to what the parties have agreed More restricted powers because of limited
upon personality

Mutual agency. Each general partner may Stockholders are not agents of the corporation
represent and bind the partnership

Interests cannot be transferred without the Can be freely transferred.

consent of the partners

Death of partner dissolved partnership Does not dissolve.

Partnership Joint accounts

Separate and distinct personality No juridical personality

Can adopt a partnership name No commercial name common to all participants

can be adopted

All general partners may be liable even up to The person carrying on the joint business can be
the extent of their personal properties and may sued and is liable to persons transacting with the
therefore be sues by third person former

PARTNERSHIP CO-OWNERSHIP

Has juridical personality No juridical personality

Cannot be created by law. only by agreement Can be created by law and by agreement

Intent to distribute profit No intent

Valid stipulation not to divide property for more Invalid

than 10 years

Mutual agency Does not apply

Death extinguishes Death does not extinguish

Assignment does not result to partnership Assignment may result to co-ownership

May validly stipulate the division of profit. Stipulation that it shall be divided not respective in
the interest is void

JOINT VENTURE

Association of persons or companies jointly undertaking some commercial enterprise, generally all
contribute assets and share risks

Form of partnership and should be governed by law of partnership

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UNIVERSAL PARTNERSHIP - May refer to all the present property or all the profits
- In absence of any statement, Universal pat is presumed to be one of PROFITS only

UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTIES - The partners contribute all the
properties tat actually belong to them AT THE TIME OF THE PERFECTION to a common
fund or shall become part of the partnership property, with the intention of dividing the
same among themselves, as well as all the profits which they may acquire therewith.

- Property acquired subsequently by INHERITANCE, LEGACY OR DONATION, cannot be

included in stipulation making future properties EXCEPT fruits thereof.

UNIVERSAL PAT OF PROFITS - Comprises of ALL that the partners may acquire by their
industry or work during the existence of the partnership. Partners shall retain ownership
their properties but usufruct shall pertain to partnership.

GENERAL PARTNERSHIP - The partners are all liable for all partnership obligations even up
to the extent of their personal properties. There is no limited partner.

LIMITED PARTNERSHIP - There are limited and general partners.

PARTNERSHIP AT WILL - does not fix its term. The birth and life of this type is predicated on
the mutual desire and consent of the partners.

DE FACTO PARTNERSHIP - Partnership if legal formalities are not complied with. It cannot
exist because partnership is perfected by mere consent.

DE JURE PARTNERSHIP - Merely by consent as to the elements of the contract.

- If no intent to enter into a partnership, there can be no partnership whether de facto

or de jure.

CAPITALIST PARTNER - one who contributes money or property.

INDUSTRIAL PARTNER - one who contributes industry. He cannot be liable for losses. He
cannot engage in business unless expressly provided for in the agreement.

GENERAL PARTNER - One who controls and manages the partnership and is liable for
partnership obligations.

LIMITED PARTNERS - He is not personally liable for partnership obligations but is not
involved in the management

MANAGING PARTNER - One who is designated as the person who will administer the
affairs of partnership.

LIQUIDATING PARTNER - Winds up the affairs

ASSOCIATE/ SUBPARTNER - He is not a real partner but he is the one with who a partner
shares his profits in partnership.

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- A corporation cannot become a member of a partnership in absence of express

authorization by statute or charter.
- The mutual agency would be inconsistent with the policy of law that the
corporation shall manage its own affairs separately. Such arrangement would
improperly allow corporate property to be subject of risks not contemplated by the
stockholders.
- EXCEPTION BY SEC: Allowed if complied with the following conditions:
1. Authority to enter into partnership
2. Nature of the business venture of partnership is in line with the business
authorized by the charter or AOI
3. Partnership must be limited and corporation is a limited partner.

- Spouses cannot enter into a universal partnership. But it may enter limited partnership
with another spouse.

OBLIGATIONS OF PARTNERS:
- To contribute money or property
- The partner becomes the debtor from the time of execution
- Liable to pay interest and damages even if not stipulated and even without
demand from the time the execution unless different time is stipulated.
- If property, the partner who fails bears the risk of loss
- Partner who contributed the property is liable for warranty against hidden defects
and eviction

- It cannot be agreed upon that all will only contribute INDUSTRY in a partnership.
- If there is no agreement to contrary, a capitalist must contribute additional capital to
save the partnership in case of imminent loss
- IF HE FAILS TO CONTRIBUTE: he may be obliged to sell his interest to other partners.
- Partners have fiduciary duty that requires them to act in good faith and with fairness.

FIDUCIARY DUTIES OF PARTNER (LODI)

1. Loyalty
2. Obedience
3. Diligence
4. Inform

DUTY OF LOYALTY
- Duty not to act adversely to the interest of the partnership.
- If a debtor is indebted in the partnership and a managing partner and the latter was
able to collect from the said debtor, The partner should divide what he has collected
and apply it to both debts in proportion to their amount.
- Application of payment shall only be applied if the debt to the managing partner is
more onerous to the debt to the partnership.
- If the debt is given in the name of the partnership, the entire amount should be paid
to the partnership.
- If debt is given in the name of the partner, In proportion of the amount of debts.
- INDUSTRIAL cannot engage in ANY business for himself UNLESS authorized by the
partnership. If he engages, he may be excluded and be required to pay damages.
- CAPITALIST cannot engage in the SAME LINE OF BUSINESS unless expressly permitted.

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- if he violated, Profits of capitalist partners belong to PARTNERSHIP and he shall bear

the loss.
- Partner must account for the common benefit all the secret profits connected with
the affairs or use of property of the partnership.
- When money or property have been received for a specific purpose, and he
misappropriated, HE IS LIABLE FOR ESTAFA

DUTY OF OBEDIENCE
- Must adhere to the provisions of partnership agreement and decisions of partners
- A partner is liable to the partnership for any damage caused by his negligence
- Negligent partner cannot compensate the DAMAGE with the profits and benefits
he earned.

DUTY TO INFORM
- Notice to the partner is notice to the partnership unless there is fraud
- A partner who is in charge of the books has the duty to allow other partners to
inspect books and records. And has the duty to render accounting in proper cases.

RIGHTS OF PARTNERS
1. Participate in management
- May execute all acts of administration unless otherwise agreed.
2. Rights to share in the profits. Distribution shall be in accordance with:
A. Will and stipulation
B. If no stipulation, Capital contributions
C. For industrial, if no stipulation: He is NOT LIABLE for the losses. If he contributed
a capital, he is also entitled to share in profits in proportion to his capital.
- GR: Partners are not entitled to compensation unless agreed upon.
3. Right to reimbursement of expenditures incurred in behalf of partnership
4. Right to return advances.
5. Right to return of capital
6. Right to information and right to inspect and copy the partnership’s books at any
reasonable hours and to demand full information of things affecting partnership
7. Right to accounting when:
a. If he is wrongfully excluded from the partnership business
b. If agreed upon
c. If he derives secret profits
d. Whether other circumstances render it just or reasonable.

PROPERTY RIGHTS OF PARTNERSHIP

- A partner is the co owner with his partners of specific partnership properties.
- He can possess for partnership purposes but he has no right to possess for any other
purposes without the consent of others.
- Cannot exclude the other partners from possession.
- Properties are not assignable except in connection with assignment of his rights of all
the partners in the same property
- Properties not subject to attachment or execution except on a claim against the
partnership. Not subject of legal support.
- The interest in the partnership is PERSONAL PROPERTY

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- The interest may be assigned but the assignee does not get all the rights of a partner.
only the following:
1. Profits
2. Right to surplus upon dissolution
3. Limited right of accounting upon dissolution (from the date of last account
agreed upon the partners)

RIGHTS NOT ACQUIRED:

1. Right to interfere in management
2. Right to information or account
3. Right to inspect books.

EXCEPTION: A retiring partner may assign his rights to the partnership to the remaining
partners. The latter will acquire all the rights.

- Every partner may associate but such does not become a partner
- The judgment creditor may ask for charging order if a decision in a case is rendered
against a partner.
- The judgment creditor does not become a partner
CHARGING ORDER - Order of the court charging the interest of the debtor partner with
payment of the unsatisfied amount of such judgment debt with interest therefrom.
- After charging order, the court may appoint a receiver
- The court may order the auction sale of the interest if the partner subject to right of
redemption. Right of redemption if:
a. With separate property, by anyone or more of the partners.
b. With partnership property, by any one of the partners with the consent of all
partners.

- Management means administration of partnership. EX: Hiring, purchase of supplies

- IF MANAGER IS DESIGNATED: The manager can perform all acts of administration.
Decisions are irrevocable even over the objection or opposition of the partners
except in bad faith.

- IF TWO OR MORE ARE DESIGNATED:

- SPECIFIC DUTIES: One can perform such duties without the consent of others.
- UNANIMITY REQUIRED BY STIPULATION: All must consent. EXCEPT: Imminent danger
of grave or irreparable injury.
- NO DESIGNATION: Each may separately perform acts of administration. In case of
conflict, majority prevails. In case of tie, Controlling interest shall decide.

- NO DESIGNATED MANAGER:
- All partners shall be considered agents
- None of the partners may without the consent of the others make any important
alteration in the immovable property of the partnership EVEN IF IT MAY BE USEFUL TO
THE PARTNERSHIP. But if refusal if MANIFESTLY prejudicial, Court intervention may be
sought.

- Partners including INDUSTRIAL PARTNERS are jointly liable to third persons for
partnership obligations even up to the extent of their personal properties. However,

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he has the right to hold the general partners liable for what he has paid to creditors in
proportion to the general partner’s interests.

- The partners are liable pro rata for any contract liability even to the extent of their
personal properties. The liability is not limited to their contributions. Stipulation to the
contrary is VOID
MUTUAL AGENCY RULE - Every partner is the agent of the partnership for the purpose of
its business.
- Act of partner for apparently carrying the usual way of business is bonding even if
there is limited authority.
- The third person is not duty bound to inquire and investigate the limits of authority of
the person with apparent authority.

CASES WHEN UNANIMOUS APPROVAL IS REQUIRED:

1. Assignment of properties in trust for creditors or on assignee’s promise to pay the
debt of the partnership.
2. Dispose the goodwill of business.
3. Do act that would make it impossible to carry on the ordinary business.
4. Confess a judgment
5. Compromise/Arbitration concerning partnership claim or liability
6. Renounce claim

- Sale or mortgage of a real property of a partner is binding if it is in the exercise of his

express, implied or apparent authority.
- If the title is in the name of the partnership and the sale is in the name of the partner,
equitable title will be transferred to buyer if the sale is within the authority of the
partner
- Buyers in good faith and for value are always protected.
- Partnership is also liable if it will ratify the same
- Partners are PERSONALLY/JOINTLY liable for contracts and debts of the partnership. A
plaintiff must be in the name of the partnership and ALL the partners are defendants.
- All of the partners shall be liable pro rata (in proportion with their interests) with all
their property after all of the partnerships assets have been exhausted.
- The partnership is liable to third persons who are injured by torts committed by a
partner in the ordinary course of business, if given authority, for misappropriation of
funds received, for misapplication of money in partnership custody.
- All partners are SOLIDARILY liable with the partnership in all cases of tort liability
enumerated above.

NOT A PARTNER BUT LIABLE FOR PARTNERSHIP OBLIGATIONS:

1. When the name of a person who is not a partner appears in the partnership or firm
NAME.
2. Partnership by estoppel - A person who is not a partner but who represents himself
as a partner or who consented to such representation being made public is liable to
third persons who relied on his representation. This may happen even if there is no
really partnership.
1. WHEN PARTNERSHIP ACTUALLY EXISTS:
- Partnership liability results if all the partners consent to the representation
- Partnership liability does not result if NOT ALL of the partners consented. Those
who consented are liable PRO RATA with the partner by estoppel.

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2. WHEN PARTNERSHIP DOES NOT EXIST:

- The partner by estoppel is liable pro rata with persons who consented
with the representation.

- If a person who consented is made to pay, He may claim for reimbursement against
other partners.
- A new partner who is admitted to partnership is liable for the EXISTING obligations of
the partnership BUT ONLY to the extent of his or her capital contributions.
- The retiring partner may still be liable to third persons who had no notice that he is no
longer part of the partnership

FINAL STAGES OF LIFE OF PARTNERSHIP:

1. Dissolution - the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying of business
2. Winding up - Administration of the assets of the partnership for the purpose of
terminating the business.
3. Termination - End of the process of winding up.

- Doctrine of Delectus personae - The right to chose with whom a person wishes to
associate himself.

TYPES OF DISSOLUTION:
1. Judicial
2. Extra judicial

TERMINATION WITHOUT VIOLATION OF AGREEMENT:

1. Termination of the definite term
2. Express will of the partner who must act in good faith
3. Express will of all the partners who have not assigned their interests or suffered them
to be charged for their separate debts either before or after the termination of any
specified term or particular undertaking
4. Expulsion of any partner from the business bonafide in accordance with such a
power conferred by the agreement between the partners.

- Dissolution is allowed even if the same is in violation of the agreement because of the
proscription against involuntary servitude.

DISSOLUTION BY OPERATION OF LAW:

1. Illegality of partnership’s business
2. Specific thing is promised to be contributed but it perishes before delivery when
partner who contributed it has only transferred to the partnership the use or
enjoyment of the same.
3. Death of any partner
4. Insolvency
5. Civil interdiction of any partner

JUDICIAL DISSOLUTION
1. Declared insane in any judicial proceeding
2. Incapable or performing his part of the partnership contract

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3. Guilty of a conduct that is prejudicial to the business

4. Willfully or persistently commits a breach of partnership agreement
5. Business can only be carried on at a loss
6. Other circumstances equitable

RIGHT OF PURCHASER OF INTEREST TO FILE AN ACTION FOR DISSOLUTION:

1. After the termination of the specified term or Particular undertaking
2. Any time if the partnership was a partnership at will when the interest was assigned
or when charging order was issued.

- A partner who wrongfully terminates may be held liable for damages

- Dissolution terminates mutual agency
- Dissolution is binding even without notice if the dissolution is not due to any act, death
or insolvency of the partner.
- If it is due to any act, death or insolvency of a partner, notice should be given to all
partners.
- If a partner who has not received notice of dissolution enters into a contract on
behalf of the partnership in the course of partnership business, the contract is binding
on all the partners is THE DISSOLUTION IS CAUSED BY THE ACT, DEATH, OR INSOLVENCY
OF A PARTNER.
- The creditor can make the partnership liable despite the dissolution if without actual
notice of such.

A SUBSEQUENT CREDITOR CAN STILL MAKE PARTNERSHIP LIABLE OF:

1. He has known of the partnership prior to dissolution
2. No actual knowledge or notice of dissolution
3. He has no constructive notice of the dissolution (publication in newspaper)

- Those owing to the creditors are preferred over the claims of partners
- Dissolution does not discharge a partner from his existing liability as a partner
- Continuation of partnership dissolves the old partnership and a new partnership is
created.

CREDITORS OF THE OLD PARTNERSHIP ARE STILL CREDITORS OF THE NEW PARTNERSHIP IF:
1. Any new partner is admitted into an existing partnership or when any partner retires
or assigns and if it is continued without liquidation of partnership’s affairs
2. One partner retires, dies, wrongfully causes dissolution, assigns or is expelled to the
partnership and thew new one continues without liquidation
3. When all the partners assign their rights to one or more third persons who promise to
pay the debts and continue partnership

ORDER OF DISTRIBUTION OF ASSETS FOR WINDING UP:

1. Owing to creditors other than partners
2. Owing to partners other than for capital and profits
3. Owing to partners for capital
4. Owing to partners for profits

- Where a partner becomes insolvent, Order for claims against his property shall:

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1. Owing to separate creditors other than partners

2. Owing to partnership creditors
3. Owing to partners by way of contributions

LIMITED PARTNERSHIP - One formed by two or more persons having as members one or
more general partners and one or more limited partners.

- Limited partners shall not be bound with the obligations of partnership

- Only general are supposed to be involved in the management. If limited is involved,
he is liable as a general partner

REQUIREMENTS TO FORM LIMITED PARTNERSHIP:

1. Sign and swear to a certificate which shall state the stipulations provided in Art 1844
2. File in SEC

- A limited partnership is not formed when there is no substantial compliance of the

requirements

CONTENTS OF CERTIFICATE OF LIMITED PARTNERSHIP:

1. Name of partnership adding LTD or Limited
2. Character of business
3. Principal place
4. Name and place of residence of each member
5. Term
6. Contributions
7. Time when contribution of limited partners are to be returned
8. Share of profits
9. Rights of substitution if given to limited partner
10. Right to admit additional limited partners
11. Name of general partners

- If certificate contains false statement, one who relies may hold liable the party to
certificate who knew the false statement.

GROUNDS FOR CANCELLATION AND AMENDMENT

1. Change in the name or amount of contribution
2. Substitution as limited partner
3. Additional limited partner is admitted
4. Person is admitted as general
5. General retires, dies or becomes insolvent
6. Change of character of business
7. False statement
8. Change of term
9. Time is fixed when no time is fixed before
10. Desire to change statements

DEFECTIVE IF:

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1. Not filed in SEC

2. Defects which shall result to failure to substantially comply
3. Statutory requirements are not met

- Surname of the limited partner shall not appear in the name unless it is also the name
of general or the business has been carried on under a name in which the surname
appeared prior to the time the limited partner became such
- Limited cannot contribute services. only cash or property
- A limited is liable for the difference between his contribution as actually made and is
stated in certificate and for any unpaid contributions.

LIMITED MAY DEMAND RETURN:

1. Dissolution
2. Date specified arrived
3. After 6 months notice in writing to all other members if no time is specified in the
certificate.

- A limited partner cannot receive any part of his contributions until:

1. All liabilities in partnership have been paid
2. Consent of all members
3. Certificate is cancelled.

- General partners are liable up to their personal properties.

- Limited partners are liable only for the debts and obligations of the limited partnership
up until its capital contributions.

LIMITED IS LIABLE AS GENERAL IF:

1. Takes part in administration
2. Surname appears in the partnership name

WHEN CONSENT OF ALL LIMITED PARTNERS ARE NEEDED IF:

1. Do any act in contravention of certificate
2. Do any act which will make it impossible to carry on the business
3. Confess a judgment against partnership
4. Possess partnership property or assign their rights
5. Admit a person as general partner
6. Admit a person as limited
7. Continue business with partnership property on the death, retirement etc unless the
right is stated in certificate

RIGHTS OF LIMITED PARTNERS:

1. Partnership books at any reasonable hour
2. Demand true and full information of partnership
3. Have dissolution or winding up by decree of court
4. Right to receive share of profits

- Limited has the tight to share in the profits

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- The share in the profits cannot be paid if after such payment is made, the partnership
assets are not in excess of all liabilities of partnership except liabilities to limited
partners on account to contributions and to general partners
- If mistaken belief as limited partner, He is not a general partner with the person or in
the partnership carrying on the business or bound by the obligation PROVIDED that
on ascertaining the mistake he promptly renounces his interest in the profits of the
business or other compensation by way of income.

- No limited partner shall in respect to any claim on loan he extended may:

1. Receive or hold as collateral security the partnership property
2. Receive from a general partner any payment in conveyance or release from liability
if at the same time the assets of the partnership liabilities to persons not claiming as
general or limited partners.

- Breach of such provisions is fraud on the creditors of partnership.

- Limited partner’s interest is assignable. The assignee may or may not become a
substituted limited partner.

SUBSTITUTED LIMITED PARTNER (SLP) - Person admitted to all the rights of a limited partner
who has died or has assigned his interest in the partnership

HOW:
1. All members consented
2. Assigned being empowered by certificate assigns the right

- SLP has all the rights and powers.

- SLP does not release the assignor from liability
- If he does not become SLP, he has no right to require any information or account or
receive any profits.

- The partnership is not dissolved if the business is continued by the remaining general
partners:
1. Under the right so to do stated in certificate
2. Consent of all members

PREFERENCE OF CREDITS:
1. Those to creditors in the order of priority as provided by law except those to limited
partners on account of their contributions, and to general partners.
2. Those to limited partners in respect to their share of profits
3. Those to limited partners in respect to their capital contributions
4. Those to general partners other than capital and profits
5. Those to General as to profits
6. Those to general as to capital

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AGENCY - 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.

- Personality of the principal is extended to the agent.

ELEMENTS:
1. Consent (expressed or implied)
2. The object is the execution of the juridical act in relation to a third person.
3. The agent acts as a representative and not for himself
4. The agent acts within the scope of his authority

KINDS:
- EXPRESS - Agreed upon by the parties
- IMPLIED - Presumed from the acts of the principal from his silence or lack of action or
his failure to repudiate the agency knowing that other person is acting on behalf
without authority.
- AGENCY BY ESTOPPEL - The principal by his actions or representations is barred from
questioning the existence of agency. There is no true agency in this sense.
- ORAL
- FORMAL
- CONTRACTUAL - Agreement by the parties
- LEGAL - Created by law
- GENERAL AGENCY - Comprises ALL the business of the principal
- SPECIAL - for one or more specific transactions.
- AGENCY COUCHED IN GENERAL TERMS - 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 authorizing unlimited
management.
- AGENCY COUCHED IN SPECIAL TERMS
- SPA - An agency couched in special terms.
- SPA IS NECESSARY:
- Make payments as are not usually considered as act of administration
- Effect novations which will end to the obligation
- Compromise, submit to arbitration, renounce right to appeal, waive objections
to venue
- Waive any obligations gratuitously
- Enter into any contract by which the ownership of an immovable is transmitted
or acquired
- Make gifts except customary ones for charity or employees in the business
- To loan or borrow money unless urgent and indispensable for the preservation
- Lease any real property to another person for more than one year
- To bind the principal to render some service without compensation
- To bind the principal in a contract of partnership
- To obligate as guaranty or surety
- To create or convey real rights over immovable
- Accept or repudiate inheritance
- To ratify or recognize obligations in agency

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- Any other act of strict dominion

- Even if the document is entitled GENERAL POWER OF ATTORNEY, The requirement for
SPA is complied with if the general power of attorney includes SPECIFIC POWERS.
- A special power to sell excludes the power to mortgage and vice versa
- A special power to compromise does not authorize submission to arbitration
- If SPA is required, failure to acquire makes the transaction UNENFORCEABLE. But it
may be ratified by the principal
- Sale of land is VOID if there is no written authority given to the agent

- Agency is consensual.
- Intention is also indispensable.
- Principal need not to personally know or meet the 3rd person with whom the agent
transacts

PERSON WHO ARE PRESENT: May be implied if the principal delivers his power of attorney
to the agent and the latter receives it without any objection.

BETWEEN PERSON WHO ARE ABSENT: cannot be implied from the silence.
EXCEPT IN THESE CASES:
1. When the principal transmits his power of attorney to the agent who receives it
without any objection
2. Principal entrusts to him by letter or telegram with respect to business in which he
habitually engaged as agent and he did not reply.

- If he gave special notice, the latter becomes duly authorized to the person who
received such special information.
- If through advertisement which is public, he becomes duly authorized to any person.
- Notice of rescission should be given in the same manner in which agency is given.

- Agency may be onerous or gratuitous

PROCURING CAUSE RULE - The agent is entitled to the stipulation compensation in the
execution of the powers granted to him if the act of the agent is the PROCURING
CAUSE OF THE TRANSACTION. It must be concluded through the measures that the
agent employed and efforts exerted. QUANTUM MERIUT

BROKER - one whose occupation is to bring the parties together in matters of trade,
commerce or navigation. Brokers do not represent a principal.

- Agency is fiduciary relationship

- Agent must act within the scope of authority
- The agent may do acts as may be conducive to the accomplishment of the purpose
for the agency even without express authority
- In agency, one person agrees to act under the control of the principal
- Authority shall not be considered exceeded if the act is more advantageous to the
principal than that specified by the principal.
- Agent must reveal the identity of the principal
- If agent acts on his own name, principal has no cause of action

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- The agent may be liable for damages for not following the instructions of the
principal.
- Agent must finish the business already begun on the death of the principal
- Agent may be liable for fraud or negligence
- Agent shall not carry agency if execution would manifestly result in loss or damage to
the principal
- The principal shall give to the agent the sum for the execution of the agency
- Principal shall reimburse the agent even if the business or undertaking was not
successful provided that the agent is free from all fault.
- The agent may retain in pledge the things which are the object of agency
- The agent shall be liable for damages if there being a conflict of interest, the agent
prefer his own.
- If the agent has been empowered to borrow money, he may himself be the lender.
- Agent cannot borrow without the consent of the principal if he has been authorized
to lend money at interest
- An agent cannot acquire or purchase the property whose administration or sale may
be entrusted to him unless he consented.
- Every stipulation exempting the agent from the obligation to render an account shall
be void
- If agent does not turn over what he received in behalf of the principal, he may be
liable for estafa.
- Agent may appoint a substitute or subagent if the principal has not prohibited him
from doing so.

AGENT AND SUB SHALL BE LIABLE FOR THE ACTS OF THE SUBSTITUTE IF:
1. Agent was not given the power to appoint
2. Agent was given the power but person appointed was notoriously incompetent or
insolvent

- If agent is prohibited to appoint a sub, all acts of substitute appointed shall be void.
- GR: agent is not personally liable.
EXCEPTION:
1. Expressly binds himself
2. Exceeds limits without giving sufficient notice of his powers
3. Contracts on his own name

CONTRACT IS VOID IF:

1. Entered into by the agent who exceeded authority
2. Party contracted is aware of the limits granted by the principal
- Agent shall be liable if he undertook to secure the principal’s ratification.

- Principal may be liable by an apparent authority

DOCTRINE OF APPARENT AUTHORITY / HOLDING OUT OR DOCTRINE OF OSTENSIBLE

AGENCY - Anybody who makes it appear that the agent is authorized is bound by the
acts of the agent. Apparent authority is determined only by THE ACTS OF THE PRINCIPAL
and not by the agent.

- Person dealing with agent shall exercise doagfoaf

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AQUINO

- A person who deals with agent us put upon inquiry and must discover upon his peril
the authority of the agent. If he does not make such inquiry, he shall be chargeable
with the knowledge of agent’s authority and his ignorance will not be an excuse.
- 3rd person may require the presentation of SPA
- Private or secret orders and instructions of principal do not prejudice third persons

COMMISSION AGENT (Factor) - one who is engaged in the business of receiving,

handling and selling of goods for commission whether in his own name or in that of
another.

- CA cannot sell on credit without the consent

- If he was authorized to sell on credit, he must inform the principal first or else deemed
as cash sale.

GUARANTEE COMMISSION - In addition to the ordinary commission. The guarantee

commission is given so that he can bear the risk of collection and pay the principal the
proceeds of the sale on the terms AGREED UPON with the purchaser.

OBLIGATION OF PRINCIPAL
1. Comply with all the obligations contracted within authority
2. Comply to those ratified
3. Comply solidarily to obligations allowed even outside the scope.
4. Reimburse advances
5. Indemnify damages

PRINCIPAL IS NOT LIABLE IF:

1. Acted in contravention of principal’s instruction
2. Fault of agent
3. Agent incurred with knowledge of unfavorable result.
4. Stipulated

- If two or more persons have appointed an agent for a common transaction or

undertaking, they shall be solidarily liable to the agent for all the consequences of
agency
- If both agent and principal contracted and if the contracts are incompatible, that of
PRIOR date shall be preferred.
- If the agency acted in GF, the principal shall be liable for damages to the third
person whose contract must be rejected. If the agent acted in BF, he alone be
responsible.

MODES OF EXTINGUISHMENT:
1. By its revocation may be done at will or at anytime by the principal
2. Withdrawal of the agent with due notice
3. Death, Civil interdiction, insanity, or insolvency
4. Dissolution of the firm which accepted the agency
5. Accomplishment of object
6. Expiration of the period

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 CIVIL LAW REVIEWER
AQUINO

IMPLIED REVOCATION:
1. Principal directly managed
2. General is revoked by the special one regarding the specific act

- Principal may be held liable for tort under ART 2180 for the acts of the agent. Liability
may be vicarious

WHEN IRREVOCABLE
1. Bilateral contract depends
2. Means of fulfilling is already contracted
3. Partner is a appointed manager of a partnership in the contract of partnership and
his removal from the management is unjustifiable
4. Coupled with interest
- If constituted in the common interest of both the principal and agent or in the
interest of third person who has accepted the stipulation in his favor.
- Shall remain at force even after the death of principal and cannot be revoked
except for cause
- Mere fact that it is for compensation does not make it coupled with interest

- Anything done by the agent without the knowledge of the death of the principal
shall be valid and is fully effective with respect to third persons who may have
contracted with him in good faith.

_____________________________________________________________________________________________
Sorry for all the typographical errors. Good luck and God bless you! Kindly pass
this or pay it foward! In God's perfect timing I know you will be the person you
aspire to be.
- Edward Arriba

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