Recursos en la Red

1. Binding Effect on Principal of Contracts Made by the Agent

a. When Done Within Agent’s Scope of Authority: Principal the Only One Bound (Art.

1897)

In investment management account, where under the terms of the written instrument, the bank shall purchase debt securities on behalf of the client and will handle the accounts in accordance with the instructions of the client, creates a principal-agent relationship, and not a trust relationship or an ordinary bank deposit account. UConsequently, under Article 1910, the client assumed all obligations or inherent risks entailed by transactions emanating from the arrangement, and the bank may be held liable, as an agent, only when it exceeds its authority, or acts with fraud, negligence or bad faith. Principals in an agency relationship are solely obliged to observe the solemnity of the transaction entered into by the agent on their behalf, absent any proof that the latter acted beyond its authority, and concomitant to this obligation is that the principal also assumes the risks that may arise from the transaction. Panlilio v. Ci tibank, N.A ., 539 SCRA 69 (2007).

b. When Done Outside of Agent’s Scope of Authority: Principal Not Bound ( Art. 1910) Where the memorial park company has authorized its agent to solicit and remit offers to purchase internment spaces obtained on forms provided by the company, then the terms of the offer to purchase, therefore, are contained in such forms and, when signed by the buyer and an authorized officer of the company, becomes binding on both the company and said buyer. And the fact that the buyer and the agent had an agreement different from that contained in the forms accepted does not bind the company, since the same were made obviously outside the agent‘s

authority. When the power of the agent to sell are governed by the written form, it is beyond the authority of the agent as a fact that is deemed known and accepted by the third person, to offer terms and conditions outside of those provided in writing.  Manila Memorial P ark C emetery, I nc.

v. Lins angan, 443 SCRA 377 (2004). c. EXCEPT:

(1) When Principal Ratifies, Expressly or Impliedly ( Art. 1910)

Since the general rule is that the principal is bound by the acts of his agent in the scope of the agency, therefore when the agent had full authority to make the tax returns and file them, together

with the check payments, with the Collector of Internal Revenue on behalf of the principal, then the with the check payments, with the Collector of Internal Revenue on behalf of the principal, then the effects of dishonesty of the agent must be borne by the principal, not by an innocent third party who effects of dishonesty of the agent must be borne by the principal, not by an innocent third party who has dealt with the dishonest agent in good faith.

has dealt with the dishonest agent in good faith.Lim Chai Seng v. Trinidad Lim Chai Seng v. Trinidad , 41 Phil. 544 (1921)., 41 Phil. 544 (1921).

 A person personally liable. On the other hand, if the agency relationship is not proven, it would be the agent personally liable. On the other hand, if the agency relationship is not proven, it would be the agent who would become liable personally on the contract entered into.

who would become liable personally on the contract entered into. Nantes v. MadrigueraNantes v. Madriguera, 42 Phil., 42 Phil.

389 (1921).

389 (1921).

Where a sale of land is effected through an agent who made misrepresentations to the buyer Where a sale of land is effected through an agent who made misrepresentations to the buyer that the property can be delivered physically to the control of the buyer when in fact it was in that the property can be delivered physically to the control of the buyer when in fact it was in adverse possession of third parties, the seller-principal is bound for such misrepresentations and adverse possession of third parties, the seller-principal is bound for such misrepresentations and cannot insist that the contract is valid and enforceable; the seller-principal cannot accept the cannot insist that the contract is valid and enforceable; the seller-principal cannot accept the benefits derived from such representations of the agent and at the same time deny the responsibility benefits derived from such representations of the agent and at the same time deny the responsibility for them.

for them.Gonzales v. Haberer Gonzales v. Haberer , 47 Phil. 380 (1925)., 47 Phil. 380 (1925).

When an agent has been empowered to sell hemp in a foreign country, that express power When an agent has been empowered to sell hemp in a foreign country, that express power carries with it the implied power to make and enter into the usual and customary contract for its carries with it the implied power to make and enter into the usual and customary contract for its

sale, which sale contract may provide for settlement of issues by arbitration. ―We are clearly of the sale, which sale contract may provide for settlement of issues by arbitration. ―We are clearly of the

opinion that the contract in question is valid and binding upon the defendant [principal], and that opinion that the contract in question is valid and binding upon the defendant [principal], and that authority to make and enter into it for and on behalf of the defendant [principal], but as a matter of authority to make and enter into it for and on behalf of the defendant [principal], but as a matter of fact the contract was legally ratified and approved by the subsequent acts and conducts of the fact the contract was legally ratified and approved by the subsequent acts and conducts of the defendant [principal].

defendant [principal].Robinson, Fleming and Co. v. Cruz Robinson, Fleming and Co. v. Cruz , 49 Phil. 42 (1926)., 49 Phil. 42 (1926).

T

The authority to sell any kind of realty that ―might belong‖he authority to sell any kind of realty that ―might belong‖ to the principal was held to include to the principal was held to include also such as the principal might afterwards have during the time it was in force.

also such as the principal might afterwards have during the time it was in force. Katigbak v. Tai HingKatigbak v. Tai Hing Co.

Co., 52 Phil. 622 (1928)., 52 Phil. 622 (1928).

The registered owner who placed in the hands of another an executed document of transfer of The registered owner who placed in the hands of another an executed document of transfer of the registered land, was held to have effectively represented to a third party that the holder of such the registered land, was held to have effectively represented to a third party that the holder of such document is authorized to deal with the property.

document is authorized to deal with the property. Blondeau v. NanoBlondeau v. Nano,. 61 Phil. 625 (1935);,. 61 Phil. 625 (1935);DomingoDomingo v. Robles

v. Robles, 453 SCRA 812 (2005)., 453 SCRA 812 (2005).

When the principal has duly empowered his agent to enter into a contract of mortgage over his When the principal has duly empowered his agent to enter into a contract of mortgage over his property as well as a contract of surety, but the agent only entered into a contract of mortgage, no property as well as a contract of surety, but the agent only entered into a contract of mortgage, no inference from the power of attorney can be made to make the principal liable as a surety, because inference from the power of attorney can be made to make the principal liable as a surety, because under the law, a surety must be express and cannot be presumed. bank officers are liable personally for the losses sustained by the bank. The fact that the bank had bank officers are liable personally for the losses sustained by the bank. The fact that the bank had also filed suits against the borrowers to recover the amounts given does not amount to ratification of also filed suits against the borrowers to recover the amounts given does not amount to ratification of the acts done by the bank officers.

the acts done by the bank officers. PNB v. Bagamaspad PNB v. Bagamaspad , 89 Phil. 365 (1951)., 89 Phil. 365 (1951).

 As a general rule, the mism

 As a general rule, the mism anagement of the business of a paranagement of the business of a par ty by his agents does not ty by his agents does not relieverelieve said party from the responsibility that he had contracted with third persons.

said party from the responsibility that he had contracted with third persons. Commercial Bank &Commercial Bank &

Trust Co. v. Republic Armored Car Services Corp.

Trust Co. v. Republic Armored Car Services Corp., 8 SCRA 425 (1963)., 8 SCRA 425 (1963).

Pursuant to the terms of the judgment, petitioners had issued a check in payment of the Pursuant to the terms of the judgment, petitioners had issued a check in payment of the  judgment debt and made arrangem

 judgment debt and made arrangem ents with the bank for the latter to allow the enents with the bank for the latter to allow the en cashment thereof;cashment thereof;

but the check was dishonored by the bank which increased the amount of the judgment debt. When but the check was dishonored by the bank which increased the amount of the judgment debt. When the petitioner sought not to be made liable for the allege

the petitioner sought not to be made liable for the alleged ―oversight‖ of the bank, the Court deniedd ―oversight‖ of the bank, the Court denied such defense on the ground that ―The principal is responsible for the acts of the agent, done within such defense on the ground that ―The principal is responsible for the acts of the agent, done within

the scope of his authority, and should bear the damages caused upon third parties. If the fault or the scope of his authority, and should bear the damages caused upon third parties. If the fault or oversight lies on the agent bank, the petitioners are free to sue said bank for damages occasioned oversight lies on the agent bank, the petitioners are free to sue said bank for damages occasioned

thereby.‖

thereby.‖ Lopez v. AlvendiaLopez v. Alvendia, 12 SCRA 634 (1964)., 12 SCRA 634 (1964).

Where the principal issued the checks in full payment of the taxes due, but his agents had Where the principal issued the checks in full payment of the taxes due, but his agents had misapplied the check proceeds, it was held that the principal would still be liable, because when a misapplied the check proceeds, it was held that the principal would still be liable, because when a

contract of agency exists, the agent‘s acts bind his principal, without prejudice to the latter seeking contract of agency exists, the agent‘s acts bind his principal, without prejudice to the latter seeking

recourse against the agent in an appropriate civil or criminal action.

recourse against the agent in an appropriate civil or criminal action.Dy Peh v. Collector of InternalDy Peh v. Collector of Internal Revenue

Revenue, 28 SCRA 216 (1969)., 28 SCRA 216 (1969).

Under the principle that knowledge of the agent is considered knowledge by the principle, the Under the principle that knowledge of the agent is considered knowledge by the principle, the Court ruled that the spouses cannot defend by contending lack of knowledge of the rules upon Court ruled that the spouses cannot defend by contending lack of knowledge of the rules upon which they received their tickets from the airline company since the evidence bore out that their which they received their tickets from the airline company since the evidence bore out that their travel agent, who handled their travel arrangements, was duly informed by proper representatives of travel agent, who handled their travel arrangements, was duly informed by proper representatives of the airline company.

the airline company.  A A ir Fir F rance v. Crance v. C ourourt of Appealst of Appeals, 126 SCRA 448 (1983), 126 SCRA 448 (1983)

When a third party admitted in her written correspondence that she had contracted with the When a third party admitted in her written correspondence that she had contracted with the principal through an duly authorized agent, and then sues both the principal and the agent on an principal through an duly authorized agent, and then sues both the principal and the agent on an alleged breach of that contract, and in fact later on dismisses the suit insofar as the principal is alleged breach of that contract, and in fact later on dismisses the suit insofar as the principal is concerned, there can be no cause of action against the agent. Since it is the principal who should concerned, there can be no cause of action against the agent. Since it is the principal who should be answerable for the obligation arising from the agency, it is obvious that if a third person waives be answerable for the obligation arising from the agency, it is obvious that if a third person waives his claims against the principal, he cannot assert them against the agent.

his claims against the principal, he cannot assert them against the agent.Bedia v. WhiteBedia v. White, 204 SCRA, 204 SCRA 273 (1991).

273 (1991).

The fact that the agent defrauded the principal in not turning over the proceeds of the The fact that the agent defrauded the principal in not turning over the proceeds of the transactions to the latter cannot in any way relieve or exonerate such principal from liability to the transactions to the latter cannot in any way relieve or exonerate such principal from liability to the

third persons who relied on his agent‘s authority. It is an equitable maxim that as between two third persons who relied on his agent‘s authority. It is an equitable maxim that as between two

innocent parties, the one who made it possible for the wrong to be done should be the one to bear innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.

the resulting loss. CuisCuis on v. Court of on v. Court of AppealAppealss ,, 227 SCRA 391 (1993). 227 SCRA 391 (1993).

On the basis of the general principle that ―the principal is responsible for the acts of the agent, On the basis of the general principle that ―the principal is responsible for the acts of the agent, done within the scope of his authority, and should bear the damage caused to third persons,‖ the done within the scope of his authority, and should bear the damage caused to third persons,‖ the

principal cannot absolve itself from the damages sustained by its buyer on the premise that the fault principal cannot absolve itself from the damages sustained by its buyer on the premise that the fault

was primarily caused by its agent in pointing to the wrong lot, since the agent ―was acting within its was primarily caused by its agent in pointing to the wrong lot, since the agent ―was acting within its

authority as the sole real estate representative [of the principal-seller] whe

authority as the sole real estate representative [of the principal-seller] when it made the delivery to‖n it made the delivery to‖

the buyer, although ―[i]n acting within its scope of authority, [the agent] was,

the buyer, although ―[i]n acting within its scope of authority, [the agent] was, however, negligent,‖however, negligent,‖

since it is negligence that is the basis of principal

since it is negligence that is the basis of principal‘s liability since under Arts. 1909 and 1910‘s liability since under Arts. 1909 and 1910, the, the liability of the principal for acts done by the agent within the scope of his authority do not exclude liability of the principal for acts done by the agent within the scope of his authority do not exclude those done negligently.

those done negligently. Pleasantville Dev. Pleasantville Dev. v. Courv. Cour t ot of Appealf Appealss, 253 SCRA 10 (1996), 253 SCRA 10 (1996)..

When a bank, by its acts and failure to act, has clearly clothed its manager with apparent When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an acquired asset (piece of land) in the normal course of business, it is legally authority to sell an acquired asset (piece of land) in the normal course of business, it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the property in their names.

property in their names. RR ural Bank of Milaural Bank of Milaor v. Ocfemiaor v. Ocfemia, 325 SCRA 99 (2000), 325 SCRA 99 (2000)..

―Ratification in agency is the adoption or confirmation by one person of an act performed on his

―Ratification in agency is the adoption or confirmation by one person of an act performed on his

behalf by another without authority. The substance of the doctrine is confirmation after conduct, behalf by another without authority. The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the time of ratification of all the material facts and circumstances relating to the unauthorized act of the time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to act as agent. Thus, if material facts were suppressed or unknown, there the person who assumed to act as agent. Thus, if material facts were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in concealing such

circumstances was willful, or that the principal chooses to act in ignorance of the facts. However, in circumstances was willful, or that the principal chooses to act in ignorance of the facts. However, in the absence of circumstances putting a reasonably prudent ma on inquiry, ratification cannot be the absence of circumstances putting a reasonably prudent ma on inquiry, ratification cannot be implied as a

implied as against the principal who is ignorant of the facts.‖gainst the principal who is ignorant of the facts.‖ Thus, the acts of an agent beyond theThus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them, expressly or impliedly. Only scope of his authority do not bind the principal, unless he ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the principal the principal can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the principal

must have knowledge of the acts he is to ratify.‖

must have knowledge of the acts he is to ratify.‖  Manila  Manila Memorial Memorial PPark ark CC emetery, emetery, IncInc . . v.v.

Linsangan

Linsangan, 443 SCRA 377, 394 (2004), 443 SCRA 377, 394 (2004)..

Since the basis of agency is representation, then the question of whether an agency has been Since the basis of agency is representation, then the question of whether an agency has been

Since the basis of agency is representation, then the question of whether an agency has been Since the basis of agency is representation, then the question of whether an agency has been