 When it involves a sale of a parcel of land by an agent in behalf of the principal, the authority of

the agent must be in writing otherwise the sale will be void.

 Agency may be general or special. General if it covers all the business transaction of the
principal. Special if it involves one or more specific transactions – specific transactions.

 Agency coated in general terms – this means that an agent can only act on matters of
administration. Hence, he cannot perform acts of strict dominion.

Example: If the agent is given a general power of attorney, it refers only to acts of
administration.

 For acts of dominion or ownership, the agent must have a special power of attorney. Article
1878 – instances where a specific special power of attorney is given.

Example: Gifts, if it is not part of an act of administration, has to be covered by a special

power of attorney. However, if you give gifts for charity, there is no need for a special
power of attorney.

Example2: Gifts made to employees in the business managed by the agent – it does
need a special power of attorney because it is given to an employee in the business that
is managed by the agent.

 The limits of the agent’s authority is not considered exceeded if it is performed in a manner
more advantageous to the principal than that specified by him.

Example: if the principal authorizes the agent to sell his car for P1M. The agent sells the
car not for P1M but P1.2M. In this case, the agent did not exceed his authority because
it is exercised in a manner more advantageous to the principal. Here the agent will
execute a deed of sale in behalf of the principal in favor of the buyer, to comply with the
provisions under 1403 in the statute of frauds. (If the requirement is not complied with,
the sale is unenforceable. If it is complied, it becomes valid). How much should the
agent turnover to the principal? The agent should turn over the entire amount of P1.2M
to the principal, because everything that the agent will receive by virtue of the agency
should be turned over to the principal.

 Requirements so that the principal will be bound by the act of the agent: (1) He must act within
the scope of his authority; and (2) It must be in behalf or representation of the principal
(meaning the agent must disclose the principal). If the principal is not disclosed, the principal is
not bound. The contracting parties in that case will be the agent and the third person. Since the
principal is not a party in the contract, the principal cannot go after the third party. Neither can
the third party go after the principal. Exception to this is if it involves properties belonging to the
principal. Example: A has a Mercedes car. He appointed X, who also has a Mercedes car, to be
his agent to sell this for P1.5M. X sold not his Mercedes car but A’s car to Y for P1.6M. Because X
sold it in his own name, the principal has no cause of action against Y neither do Y has cause of
action against A. The transaction is between X and Y. Assume that X sold, in his own name, to Y
this car of A. In this case, because it involves things belonging to the principal, then the principal
has a cause of action against Y. (The agent acted in his own name – hence the contract is
 unenforceable. The agent is the one directly bound in favor of the person with whom he has
contracted. Exception to this is if it involves a property belonging to the principal)

 If two or more principals appoint a common agent, what is the liability of the principal? Solidary.
For this to be applicable, it must be that the principals are co-owners or have the same interest
over the subject of the agency. Example: A, B and C are co-owners of a parcel of land. They
appoint X to be the agent in selling this land for P1.2B. If X is able to sell this at P1.2M and X will
turn over to A, B and C the P1.2M and he is entitled, under their agreement, of 10% of the sale.
How much commission is he entitled to? The agent is entitled to the commission of P120,000. If
X will collect from C alone, how much can C be compelled to pay X? C can be compelled to pay
P120,000 because their liability is solidary – he is responsible not just for his own share but also
for the share of his co-debtors. Assume that A is the owner of this parcel of land. B is also the
owner of a separate parcel of land. C is the owner of another parcel of land. They all wanted to
sell these parcels of land. A decided to sell it for P1M; B decided to sell it for P500K; and C
decided to sell it for P1.2M. Three of them agreed to appoint X as an agent. X was able to sell all
of the properties with its respective prices and the total was P2.7. Under the agreement, X has a
commission of 10%. How much can X collect from C? X can collect P120,000 because their
interest is separate, hence their liability will only be for their respective share. This is not from
the total sale of the three lands but from each of the sale separate from each other. If X collects
from B, how much B can be compelled to pay? X can collect P50,000 from B. X can also collect
from A P100,000. Assuming that B will not pay, will A and C be liable for the share of B? No,
because their liability is not solidary. If X was able to sell the abovementioned parcels of land in
the prices of P1.1M for A, 600K for B and 1.3M for C. Did X exceeded his authority? No, because
it is more favorable and beneficial to the principals. The authority of X must be written because
it involves real properties – the authority of the agent must be in writing otherwise it will be
considered void.

 One of the duties of the agent is to render an accounting of what he has received by virtue of
the agency. This duty cannot be waived even if there is an agreement between the principal
and the agent. Example: A has two cars – a Toyota car and a Mitsubishi car. He appointed X as
his agent. The former car was priced for P1M and the other for P1.2M. Their agreement says
that X will be entitled to a commission of 10% of the selling price and he need not render an
accounting of the transaction. X was able to sell the car for P1.2M. He was able to sell the other
car for P1.2M but he was a given a tip for P200K by the buyer. A tells X to give the former an
accounting of the transaction. X refused because they already agreed not to render an
accounting. Can X refuse the request of A not to render an accounting? No because the duty to
render an accounting under the law by the agent cannot be waived – If any such waiver is made,
it is void. How much must X turnover to A? X should turnover the P1.2 + P1.2 + 200K = P2.6M to
the principal and then from this total get the 10% commission – hence X can collect P260,000 as
his commission. So everything that the agent received by virtue of his appointment as an agent,
should be turned over to the principal.

 In the execution of the agency, the agent must act on the authority given or the instruction of
the principal. When you deal with an agent, always demand to read the power of attorney
because special power of attorney contains the authority of the agent. So that if the agent will
perform an act which is specified in the special power of attorney, even if there is an instruction
 on the part of the principal to the agent which the agent did not comply, you are protected.
Example: Principal appoints agent by means of special power of attorney to sell his 2 cars:
Toyota and Mitsubishi car for P1M each. Under the SPA, the agent is authorized to sell these 2
cars for aforementioned prices. But in between the transaction, the principal told the agent not
to sell the other car because I will use it. However, the agent proceeded with the sale of the two
cars at P1M each. Can the principal recover from X one of his cars? No, because a special power
of attorney prevails over the specific instruction that the principal may have given to the agent.
Example2: P appointed A by SPA to sell his two cars for P1M each. If A sold the cars for
P800,000, what kind of a contract will that be between the principal and the third person (X)? If
it is not in accordance with the instruction of the principal, it is unenforceable unless ratified.

 In case of sale and it is silent as to whether it is cash or installment. The sale is to be in cash. If
the agent proceeded with the sale in installments, the contract is unenforceable because it is
not in accordance with the principal’s instructions. However, the principal may ratify. With this,
the principal recognizes the installment. The other alternative is for the principal to compel the
agent to give the cash price. The agent will have the benefit of the interest.

 Options if the agent sold the object in credit: (1) The principal may require the agent to pay in
cash – interest will go to the agent; (2) He may choose to ratify – all the interest should also go
to the principal; or (3) The principal may not ratify and don’t proceed with the sale.

 If the agent is empowered to borrow money, can he be the lender? Yes, the condition is it
should be at the current rate of interest. If he is authorized to lend money, can the agent be the
borrower? No, except when the principal consented.

 Can the agent appoint a substitute? Yes if he is not prohibited.

o If he was prohibited and then the agent appoints a substitute – appointment is void and
the agent is liable.

o If the principal was informed by the agent, but the principal did not say anything or the
principal consented but did not specify the name of the substitute – Yes the agent can
appoint but he is liable if the person appointed is notoriously incompetent or insolvent.
Hence, agent is not liable if he is not notoriously incompetent or insolvent.

o If the principal did not authorize but he was not prohibited – agent is liable for the acts
of the substitute.

 Responsibility of 2 or more agents – joint unless if solidarity is agreed upon. If solidarity is

agreed, each of the agent is liable for the non-fulfillment of agency or default or negligence of
the other except when the agent acted beyond the scope of their authority. The agent who
acted beyond the scope of his authority will be the one responsible not the other agent.

 The agent is not liable if he acts within the scope of his authority and disclosed principal. If he
exceeds his authority, he is liable. Generally, when the agent exceeds his authority an act is only
unenforceable insofar as the principal is concerned. However, if the third party knows the limit
of the agent’s authority and knows that the agent exceeded his authority, then the transaction is
 void because there is an element of bad faith. Unless the agent have assured the third party that
he will get the ratification of the principal – the agent will be liable if the principal did not ratify.

 The third person cannot set up the fact that the agent exceeded his powers even if true if the
principal has ratified the act of the agent. Once the principal ratifies, the third person cannot
complain.

 The principal must be capacitated to enter into the contract. The agent may not be capacitated.
A minor can be an agent because the contract entered into by an agent within the scope of his
authority and in behalf of a disclosed principal is a contract between a principal and a third
person. In this case, both the principal and the third person should be the one who is
capacitated. If a minor acts as the agent, the principal cannot later on claim or invoke the
defense that the agent was a minor because an act of the agent with the third person is
considered valid because the contract is not between the agent and the third person but
between the principal and the third person. Subsequently, a person of age cannot ask for the
annulment of a contract entered into with a minor with whom he contracts. It is the minor who
has the right to question. If the principal is incapacitated and the agent is capacitated – then the
act is considered voidable.

 Del credere commission (guarantee commission). If the agent is given a guarantee commission,
then he guarantees performance of the third person. If the third person does not pay, the agent
will be liable to pay what the third person owes by virtue of the contract.

 The commission agent cannot, without the express or implied consent of the principal, sell on
credit. If the agent sells on credit, then the agent may demand from him payment in cash but
the commission agent shall be entitled from the interest. If the commission agent, with the
authority of the principal, sell on credit. Then the principal should be informed by the agent of
the name of the buyer and if the agent fails, the sale shall be deemed for cash insofar as the
principal is concerned.

 In case of double sale – if it is a movable property, he who is first in possession of a sale in good
faith is preferred. If no possession, then the oldest title is preferred. If it is a real estate or land,
he who registers it in good faith shall be preferred. If not registered, he who first possessed it in
good faith shall be preferred. If there is no registration and no possession in good faith, then the
oldest title will prevail. But at any rate, if the third person whose contract has to be rejected will
have a cause of action against the principal if the agent did not know about the sale made by the
principal. But if the agent knows about the sale made by the principal, the agent is the one liable
because he acted in bad faith.

 Modes of extinguishing obligation – EDWARD. The principal may revoke the agency at will.
Exception to the revocation Art. 1922. Example: If P and A agreed that the agency will be for 5
years, P cannot revoke the agency because a bilateral contract depends upon it. Revocation
should not prejudice third persons who acted in good faith and without knowledge of the
revocation. Notice of revocation in the newspaper of general circulation is sufficient notice to
third person even though the same have not been able to read it.
 P is the owner of a car and wanted to sell the car. A learned that B was selling the car. Without
authority from P, A sold the car in his name to B. What is the status of the sale? The contract is
void because there was no authority and the car did not belong to A (absence of consent? No
meeting of the minds between P and B). It is unenforceable if the agent was authorized by the
principal and if he acted within the scope of his authority but he did not act in behalf of the
principal. Hence, if a person, who is not authorized or appointed as agent and sold the property
– it is void. If the agent was authorized and he acted within the scope of his authority but did not
disclose the principal – contract is unenforceable unless the subject property in the agency
belongs to the principal.

 A corporation published in the manila bulletin that it was appointing A as an agent for the sale of
its products. With such authority, A sold the products to various stores all over Luzon. After 3
years, the corporation removed A’s authority by giving notice of publication to A and publishing
the notice of revocation in the PH star. Despite the revocation, A still continued to sell the
products of the corporation to a specific store that did not read the revocation and hence
without knowledge of the revocation. The store ordered from the corporation but the
corporation refused. Can the store compel the corporation to continue to sell its product to the
former? No, because there was publication of the notice of revocation in a newspaper of
general circulation. Once the revocation is published, it operates to all that the agency has been
revoked.

 P, a corporation appointed A to sell the cars of the company. The authority of A includes the
giving of a discount of 20,000 to customers who pay in cash. A customer went into A and
expressed her intention to buy a car with a selling price of 600K. However, she only had
550,000. She told A that she would pay the car to a discount of 50,000. A agreed and continue to
sell the car. What is the status of the sale? Unenforceable unless ratified. This is a contract by an
agent who exceeded his authority and in behalf of a disclosed principal.

 A gave B a special power of attorney wherein it was written that B was authorized to sell the 2
cars of A. A and B had an understanding that B should only sell one car. B sold 2 cars to C who is
not aware of the instructions given by A to B. What is the status of the sale? Is A bound to
deliver the 2 cars to C? Yes because SPA prevails over special instructions by the principal to the
agent.

 P appointed A to sell a bakery equipment for 50,000 with an ordinary commission of 10% and a
guarantee commission of 50%. A is authorized to sell on credit. A was able to sell the equipment
to X who issued a check. However, the check was dishonored by the bank because X had
insufficient funds. What is the remedy of P? Collect from A because in del credere commission,
the agent guarantees performance of the obligation of the third party with whom the agent
dealt with.

 P appointed A as agent. The authority of A did not authorize A to appoint a substitute but did
not also prohibit A from appointing one. Can A appoint a substitute? Yes, but he will be liable for
the act of the substitute.

 P authorized A to sell a car for P100K cash. A however sold the car in the name of P for P110K
but on credit. B, the buyer, knew that A’s authority was to sell the car of P on cash basis. Is P
 bound by the act of A? No, because A exceeded his authority – it is unenforceable unless
ratified.

 A is the authorized agent of P. A wrote a letter to X offering to sell P’s only car for P200K. On
march 3, X wrote a letter to A that he accepted all the terms of the offer. The letter was received
on March 5. Before A could relay such acceptance to P, P died on an accident on March 6. Is the
contract of sale valid? Yes, because the contract was perfected on March 5. An offer made
through an agent is accepted from the time it is communicated to the agent because the agent
acts as the extension of the principal. There was a valid sale belonging to P. Article 1930 and
1931 does not apply because the contract was perfected before the death of the principal.

 P gave a SPA to A to sell a piece of land belonging to P. On april 1, P was able to sell the land to
X. The sale was in public instrument with X taking immediate physical possession of the land. A
learned of the sale but still proceeded the sale to Y. The sale to Y was in a public instrument and
was registered in the registry of deeds. Neither X and Y knew of the sale made to the other. Who
is the preferred owner? Y, because he was the first to register in good faith. The bad faith of A is
immaterial because the law only talks about the buyers not the agents. In a double or multiple
sales involving an immovable, ownership will pertain to the buyer who: (1) first registers it in
good faith, (2) to the first who took possession of the same in good faith, (3) to the person the
person who can present the oldest title.

VOID VOIDABLE UNENFORCEABLE

1. Sale of a piece of land 1. If the agent acted beyond the
through an agent whose scope of his authority.
authority is not in writing.
Exception: If it was performed
2. All acts of the substitute more advantageous to the
appointed against the principal than that specified by
prohibition of the principal shall him.
be void.
2. If the agent did not disclose
3. If the third person knew the his principal.
limits of the agent’s authority.
(Bad faith) Exception: If it involves things
belonging to the principal –
principal is bound.

3. When the authority of the

agent was not put in writing for
acts of strict dominion.

4.