law on sales, agencies and bulk sales law
TRANSCRIPT
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The Bulk Sales Law
A sale is considered in bulk in any of the following instances:
1.) There is a sale, transfer, mortgage or assignment of stock other than in theordinary course of business
2.) All or substantially all of the trade or business is sold, transferred or
mortgaged
3.) All or substantially all of the fixtures and eui!ment of the business are
sold
The !ur!ose of the bulk sales law "Act 3#$2) is to !re%ent the defrauding of
creditors by secret sale or dis!osal in bulk of all or substantially all of the
merchant&s stock or goods. '(ubstantially' means *+. t doesn&t only a!!ly tocreditors whose claims are already due at the time of the sale, but also to those
whose claims aren&t due but are already existing at the time of the sale.
The bulk sales law will not a!!ly to the following:
1.) (ales-transfers in the ordinary course of trade or business
2.) There is a written wai%er from the creditors
3.) f the sale is made by an executor, administrator, recei%er or assignee
in insol%ency !roceedings or a !ublic officer acting under udicial !rocess
/hen a bulk sale is made, the seller must do the following:
1.) 0eli%er a sworn statement containing a list of all his creditors with thecorres!onding amounts of indebtedness to the buyer
2.) A!!ly the !ayment recei%ed from the sale pro rata to the claims of the
creditors as shown in the sworn statement3.) ake a full and detailed in%entory of the stock to be sold-mortgaged in
bulk
.) nform the creditors of the sale at least 1* days before it actually takes !lace
enalties
4iolations of the bulk sales law makes the sale %alid between the !arties but
%oid for the affected creditors. The buyer will hold the !ro!erty in trust for the
seller and is liable to the seller&s creditors for !ro!erties forming !art of the
bulk and already dis!osed by him.
Also, the seller can be !unished with a !rison term of 5 months to $ yearsand-or a fine of u! to h!$,***.**.
Acce!tance of deli%ery and !ayment of !urchase !rice
The buyer is obligated to acce!t deli%ery and to !ay the !rice of the thing sold
at the time and !lace617 sti!ulated in the contract.86279xce!t as otherwiseagreed u!on, the buyer is not reuired to acce!t deli%ery by installments.637
easonable o!!ortunity to examine
f the buyer has not yet !re%iously examined goods deli%ered to him, he is
deemed not to ha%e acce!ted them unless and until he has had a reasonable
o!!ortunity of examining them for the !ur!ose of ascertaining whether they
are in conformity with the contract if there is no sti!ulation to the contrary.
67 f the seller !hysically tenders deli%ery of the goods to the buyer, the seller is reuired, u!on reuest of the buyer, to afford the buyer a reasonable
o!!ortunity of examining the goods for the !ur!ose of ascertaining whether
they are in conformity with the contract.6$7
;oods deli%ered to a carrier
f the seller deli%ers the goods to a carrier !ursuant to an agreement or order
from the buyer, u!on the terms that the goods are not to be deli%ered by thecarrier to the buyer until he has !aid the !rice, whether such terms areindicated by marking the goods with the words 7
2. f the goods ha%e been deli%ered to him, and he does any act in
relation to them which is inconsistent with the ownershi! of the
seller= 67 or
3. f, after the la!se of a reasonable time, he retains the goods withou
intimating to the seller that he has reected them. 6#7
?on@discharge of seller from liability
nless otherwise sti!ulated or by im!lied agreement, the buyersB acce!tance
of the goods does not discharge the seller from liability in damages or other
legal remedy for breach of any !romise or warranty in the sales contract.
61*7 Cowe%er, the buyer is reuired to gi%e notice to the seller of the breach in
any of the warranty within a reasonable !eriod of time after the buyer knowsor ought to know of such breach= otherwise, the seller will not be held be
liable for such breach.6117
Duyer not obligated to return goods des!ite refusal to acce!t
9xce!t as otherwise agreed u!on, if goods are deli%ered to the buyer, and he
refuses to acce!t them, ha%ing the right so to do, he is not bound to return
them to the seller, but it is sufficient if he notifies the seller that he refuses toacce!t them.6127 fe he %oluntarily constitutes himself a de!ositary thereof, he
will be liable as such.6137
Duyer owes interest from deli%ery to !ayment
The buyer is reuired to !ay interest for the !eriod between the deli%ery of the
thing and the !ayment of the !rice, in the following three cases: "a) should it
ha%e been so sti!ulated= "b) should the thing sold and deli%ered !roduce fruits
or income= or "c) should he be in default, from the time of udicial orextraudicial demand for the !ayment of the !rice.617
ight to sus!end !ayment
The buyer may sus!end !ayment of the !rice until the seller has caused tosto! the disturbance or danger in cases where the buyer is disturbed in the
!ossession or ownershi! of the thing acuired, or if he has reasonable groundsto fear such disturbance, by a %indicatory action or a foreclosure of mortgage.
61$7 (uch right of sus!ension will not a!!ly if the seller has gi%en security for
the return of the !rice in a !ro!er case, or it has been sti!ulated that,notwithstanding any such contingency, the %endee is bound to make the
!ayment.6157 The right of sus!ension does not co%er a mere act of tres!ass.
61>7
escission of sale for fear of loss of immo%able !ro!erty sold and !rice
The seller may initiate an action for rescission of the sale if he has reasonable
grounds to fear the loss of immo%able !ro!erty sold and its !rice.617
ayment after ex!iration of !eriod in a sale of immo%able !ro!erty
n a sale of immo%able !ro!erty with a sti!ulation that failure to !ay the !rice
at the agreed time rescission will take !lace by right, the buyer may still !ay,
e%en after the ex!iration of the !eriod, as long as no demand for rescission ofthe contract has been made u!on him either udicially or by a notarial act.61#7
escission of sale of mo%able in fa%or of seller
The rescission of the sale will take !lace by right in the interest of the seller in
case the buyer u!on the ex!iration of the !eriod fixed for the deli%ery of the
thing, should not ha%e a!!eared to recei%e it, or, ha%ing a!!eared, he should
not ha%e tendered the !rice at the same time, unless a longer !eriod has been
sti!ulated for its !ayment.62*7
E E E
617
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2. The !rice is !ayable on a certain day, irres!ecti%e of deli%ery or of
transfer of title and the buyer wrongfully neglects or refuses to !ay
such !rice, the seller may maintain an action for the !rice althoughthe ownershi!627 in the goods has not !assed.637
Action for damages by seller due to non@acce!tance by the buyer
The seller may initiate an action against the buyer for damages67 arising from
non@acce!tance of the goods if the buyer wrongfully neglects or refuses to
acce!t and !ay for the goods.6$7
escission by seller
The seller may totally rescind the sales contract after due notice thereof to the
buyer if the goods ha%e not been deli%ered to the buyer, and the buyer hasre!udiated the sales contract, or has manifested his inability to !erform his
obligations thereunder, or has committed a breach thereof.8657
(!ecific !erformance by buyer
f the seller has breached the contract to deli%er s!ecific or ascertained goods,the buyer may initiate an action for s!ecific !erformance with a com!etent
cour t6>7 for the !ur!ose of obtaining an order which would direct that the
contract is to be !erformed s!ecifically, without gi%ing the seller the o!tion of
retaining the goods on !ayment of damages.67
Ior breach of warranty by seller, buyer may initiate %arious actions
f the seller is guilty of breach of warranty, the buyer may, at his election:
1. Acce!t or kee! the goods and set u! against the seller, the breach
of warranty by way of recou!ment in diminution or extinction of
the !rice=6#7
2. Acce!t or kee! the goods and maintain an action against the sellerfor damages for the breach of warranty=61*7
3. efuse to acce!t the goods, and maintain an action against the
seller for damages for the breach of warranty=6117
. escind the sales contract and refuse to recei%e the goods or if the
goods ha%e already been recei%ed, return them or offer to return
them to the seller and reco%er the !rice or any !art thereof which
has been !aid=6127
$. n the case of breach of warranty of uality, such loss, in the
absence of s!ecial circumstances showing !roximate damage of a
greater amount, is the difference between the %alue of the goods atthe time of deli%ery to the buyer and the %alue they would ha%e
had if they had answered to the warranty.6137
Extinguishment of sale in general
n general, a sales contract may be extinguished by the same causes as allother obligations and by con%entional or legal redem!tion.617
Fon%entional redem!tion
Fon%entional redem!tion ha!!ens 7
1. f the !rice of a sale with right to re!urchase is unusually
inadeuate=67
2. f the %endor remains in !ossession as lessee or otherwise=6#7
3. f u!on or after the ex!iration of the right to re!urchase another
instrument extending the !eriod of redem!tion or granting a new
!eriod is executed=61*7
. f the !urchaser retains for himself a !art of the !urchase !rice=6117
$. f the %endor binds himself to !ay the taxes on the thing sold=6127
5. n any other case where it may be fairly inferred that the real
intention of the !arties is that the transaction is to secure the
!ayment of a debt or the !erformance of any other obligation.6137
oney, fruit, benefit considered interest
n any of the abo%e instances considered an euitable mortgage, the money,fruits, or other benefit to be recei%ed by the buyer as rent or otherwise is
considered an interest.617
ight to re!urchase= euirements
Defore the seller can a%ail of the right to re!urchase, the seller is reuired
first: "a) to return to the buyer the !rice of the sale= "b) to !ay for the ex!ensesof the contract, and any other legitimate !ayments made by %irtue of the sale=
and "c) to !ay for the necessary and useful ex!enses made on the thing sold.61$7 f the sale in%ol%es a real !ro!erty, a udicial order, after the seller has
been duly heard, is reuired for the registration and consolidation of the
ownershi! in the buyer .6157
Action against e%ery !ossessor
To enforce his rights, the seller may init iate an action against e%ery !ossessor
whose right is deri%ed from the buyer .61>7 The seller may do so e%en if the
contract between the buyer and the !ossessor does not mention the sellerBsright to re!urchase, without !reudice to the ortgage Gaw and the Gand
egistration Gaw in relation to third !ersons.617
(ubrogation by buyer
The buyer is subrogated to the sellerBs rights and actions des!ite existence of
right of re!urchase.61#7
Freditors to exhaust !ro!erty of seller
The sellerBs creditors are reuired to exhaust the !ro!erty of the seller before
they can make use of the right of redem!tion against the buyer.62*7
ndi%ided immo%able !ro!erty sold ointly
f se%eral !ersons ointly sell an undi%ided immo%able in the same contractand it !ro%ides for a right of re!urchase, each one may exercise his right to the
extent of his res!ecti%e share only.6217 The same rule a!!lies if a seller has
se%eral heirs.6227 Cowe%er, the buyer may demand of all the sel lers or co@
heirs that they come to an agreement u!on the re!urchase of the whole thing
sold.6237 f the sellers or heirs fail to do so, the buyer cannot be com!elled toconsent to a !artial redem!tion.627
Fo@owner may re!urchase res!ecti%e share only
A co@owner who may ha%e sold his share se!arately may inde!endently
exercise the right of re!urchase as regards his own share.62$7The buyer canno
reuire said co@owner to redeem the entire !ro!erty.6257
DuyerBs heirs subect to redem!tion to !ro!ortionate share only
The buyerBs heirs may be the subect of the sellerBs right of redem!tion to
their !ro!ortionate share only regardless of whether the !ro!erty is undi%ided
or it has already been !artitioned.62>7 Cowe%er, if the inheritance has already been di%ided, and the thing sold has already been awarded to an heir, he may
be the subect of an action for redem!tion for the whole !ro!erty.627
?o reimbursement or !rorating for fruits
f there were %isible and growing fruits at the time of the execution of the sale
a reimbursement or !rorating of existing fruits is not reuired unless the buyer
!aid indemnity when the sale was executed.62#7 Fon%ersely, if no fruits wereexisting at the time of the sale but later on exist at the time of redem!tion, the
fruits will be !rorated between the redem!tioner and the buyer.63*7 The
buyerBs share is to corres!ond to the time he !ossessed the land in the last
year, counted from the anni%ersary of the date of the sale.6317
edem!tioner to recei%e !ro!erty free from charges or mortgages
The redem!tioner will recei%e the !ro!erty free form all charges or mortgages
which may ha%e been constituted by the buyer .6327Cowe%er, the redem!tioneris to res!ect the leases which the latter may ha%e executed in good faith, and
in accordance with customs of the !lace where the land is situated.6337
Legal Redemption
Gegal redem!tion is 7
Adoining lot ownerBs right of redem!tion
Ior rural land that does not exceed one hectare, the owners or adoining lands
may exercise the right of redem!tion unless the grantee-buyer does not ha%e
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any rural land.637 The owner of the adoining land of smaller area is
!referred should there be se%eral !ros!ecti%e buyers.63#7 f the lands ha%e the
same area, the first who reuested the redem!tion is !referred.6*7 This rightcannot be exercised on adacent lands which are se!arated by brooks, drains,
ra%ines, roads, and other a!!arent ser%itudes for the benefit of other estates.
617
ight of !re@em!tion of adoining land owner
f a !iece of urban land bought for s!eculation is so small and so situated that
a maor !ortion thereof cannot be used for any !ractical !ur!ose within a
reasonable time is about to be re@sold, the adoining land owner has a right of !re@em!tion at a reasonable !rice.627 f the same has already been sold, the
adoining landowner has the right of redem!tion for a reasonable !rice.637 f
there are two or more who desires to exercise the right of !re@em!tion orredem!tion, the owner whose intended use of the land in uestion a!!ears to
best ustified is !referred.67
ight of !re@em!tion or redem!tion when exercised
The redem!tion may only exercise the right of legal !re@em!tion orredem!tion within 3* days from the notice in writing by the !ros!ecti%e seller,
or by the seller, as the case may be.6$7 The said seller is reuired to
accom!any the deed of sale with an affida%it stating therein that he has gi%en
written notice thereof to all !ossible redem!tioners= otherwise, the egistry of
0eeds will not record the deed of sale.657
ight of redem!tion of co@owners excludes adoining land owners
(hould there be a conflict between a co@owner and adoining land owners, theright of redem!tion of co@owners !re%ails and will exclude the adoining land
owners.6>7
ASSI!"E!T
(ale of credits J other incor!oreal things�
Technical term but basically a sale�
/CAT AK9( A((;?9?T 0II99?T IH (9F9( (AG9:
A((;?9?T
(ubect matter: ntangibles
Iorm: Fonsensual
Dinding effect to 3rd !ersons: ecorded in registry of !ro!erty or in !ublic
instrument
(AG9
(ubect matter: Tangibles
Iorm: Fonsensual
Dinding effect to 3rd !ersons:?o recording needed to such effect
9II9FT HI A((;?9?T
1. lack of knowledge or consent of debtor not essential for %alidity but has
legal effects
2. assignment of rights made w-o knowledge of debtor debtor may set u!�against assignee the com!ensation w-c would !ertain to him against assignorof all credits !rior to assignment and of later ones until he had knowledge of
the assignment
3. debtor has consented to assignment cannot set u! com!ensation unless�assignor was notified by debtor that he reser%ed his right to the com!ensation
. debtor has knowledge but no consent @ may still set u! com!ensation of
debts !re%ious to assignment but not the subseuent ones.
TA?(I9 HI H/?9(C
by tradition J not by !erfection�
execution of !ublic instrument because intangibles cannot be !hysically�transferred
AFF9((H9( J AFF9((H?(
includes all accessory rights such as guaranty, mortgage, !ledge or� !reference
/AA?T9(
1. against hidden defect @ ?-A because intangibles has no !hysical existence
2. existence J legality of credit @ there is warranty exce!t when ex!ressly sold
as a doubtful account
3. sol%ency of debtor @ no warranty, unless
a. there is sti!ulation
b. insol%ency was !rior to assignment J of common knowledge
warranty shall last for 1 year only�
. one who assigns inheritance right w-o enumerating rights shall be
answerable for his character as an heir
$. one who sells whole of certain rights for a lum! sum, shall be answerablefor legitimacy of the whole in general but not for each of the %arious !arts
D9AFC HI /AA?TL
1. if in good faith @ ex!enses of the contract J other legitimate !aymentsmade by reason of the assessment
2. if in bad faith @ ex!enses of contract J other legitimate !ayments !lus
useful J necessary ex!enses
A((;?9?T HI F90T H ?FHH9AG ;CT ? GT;ATH?
!resum!tion: buyer s !ur!ose is s!eculation� �
law would rather benefit the debtor of such credits rather than the one who�merely s!eculates for !rofit
when credit or incor!oreal right in litigation is assigned or sold, debtor has�a right to extinguish it by reimbursing the assignee for the !rice the buyer !aid
!lus interest
right to redeem to be exercised within 3* days from demand by assignee�for !ayment
;CT TH 9099 DL 09DTH ?HT A4AGADG9 ? TC9IHGGH/?; ?(TA?F9(
"?HT FH?(0990 (9FGAT49)
1. assignment of credit - incor!oreal right to co@heir or co@worker
2. assignment to creditor in !ayment for his credit
3. assignment to !ossessor of tenement or !iece of land which is subect to the
right in litigation assigned
Darter or 9xchamge
#hat is a contract of barter or exchange$
Darter is a contract whereby one of the !arties binds himself to gi%e one thingin consideration of the other&s !romise to gi%e another thing. " Art. 1638)
#hen is the contract of barter perfected$
The contract is !erfected from the moment there is a meeting of minds u!on
the things !romised by each !arty in consideration of the other.
#hen is the contract of barter consummated$
Darter is consummated from the time of mutual deli%ery by the contracting
!arties of the things !romised.
#hat laws go%ern the contract of barter$
1. Articles 153 to 1#* of the Fi%il Fode
2. (u!!letorily, the !ro%isions on sales.
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#hat is the effect if the gi%er is not the lawful owner of the thing
deli%ered$
The aggrie%ed !arty cannot be com!elled to deli%er that which he offered in
exchange, but he shall be entitled to damages. " Art. 1639)
#hat are the remedies of a party in a contract of barter if he loses the
thing which he had recei%ed in barter by e%iction$
n case of e%iction, the inured !arty is gi%en the o!tion either to:
1. eco%er t hat which he h as gi%en i n exchange w ith a r ight t odamages, or
2. Hnly demand an indemnity for damages.
Cowe%er, he can only make use of the right to reco%er the thing which he has
deli%ered while the same remains in the !ossession of the other !arty, and
without !reudice to the rights acuired in good faith in the meantime by a
third !erson. " Art. 1640)
@ (ee more at: htt!:--legal%ault.blogs!ot.com-2*1-*#-barter@or@
exchange.htmlMsthash.hksN1wdy.d!uf
Agency
n a contract of agency, 7
Notice via special information or public advertisement
f the !rinci!al s!ecially informs another that the former has gi%en a !ower ofattorney to a third !erson, the latter becomes the duly authoriOed agent.67
Best Legal Practices:
Publish in papers of general circulation the revocation of agenc ! As
revocation of an agenc depends on ho" third persons "ere notified# the
$anner previousl observed in notifing a third part of the agenc should be follo"ed in the revocation as "ell. If a third person is given notice of the
agenc through a letter# another letter should be sent infor$ing hi$ of the
revocation. %he sa$e goes for notice $ade b publication.
Publish in papers of general circulation the revocation of agenc ! &or good
$easure# and even after a special notice of revocation# it is best to publish the
revocation of the agenc in papers of general circulation. %he publishing ofnotices in such $anner binds the "hole "orld so to spea'.
f the !rinci!al states by !ublic ad%ertisement that he has gi%en a !ower of
attorney to a third !erson, the latter becomes the duly authoriOed agent to any
!erson or e%eryone.6#7 n both circumstances, the !ower of agency continues
to be in full force until the notice is rescinded in the same manner in which it
was gi%en.861*7
An agency is !resumed to be for a com!ensation, unless otherwise agreed andu!on and there is such a !roof .617
Kinds and Scope of Agency
The kinds and sco!e of agency de!end on the terms and conditions of the
agency contract.
General and special agency
An agency may be general or s!ecial.617 A general agency com!rises 7
Ultra vires in agency
The agent is reuired to act within the sco!e of his authority.617 f the agent
acts outside the sco!e of his !ower, his acts are ultra vires627 resulting in their
nullity and they cannot be gi%en any effect.637
Best Legal Practices:
(ecure board resolution fro$ authoried representative of a corporation !
*hen transacting "ith an authoried representative of a corporation or fir$#
secure the board resolution evidencing the authorit and po"er granted to such person. As corporate po"ers are e+ercised b the board of directors# the
proper legal docu$ent sho"ing that the board authoried a representative is a
board resolution.
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,+ecutive -o$$ittee resolution sufficient in lieu of board resolution ! If an
e+ecutive co$$ittee has been for$ed "hich is authoried to e+ercise certain
po"ers of the board# a co$$ittee resolution "ill be sufficient in lieu of a
board resolution as evidence of authorit granted to a representative.
(ecretars certificate sufficient for ordinar transactions ! In co$$ercial
transactions# a secretars certificate is ordinaril considered acceptable as
proof of authoriation. %his practice is borne out of convenience due to the
difficult of obtaining a board resolution re/uiring the signatures of the
directors. legal standards# a secretars certificate $a suffer fro$infir$it as it is a docu$ent "hich si$pl states that the corporate secretar
attests or certifies that a board resolution e+ists on a subect $atter. If no such
board resolution e+ists# the corporation cannot be held liable.
2btain directors certificate for high level transactions ! &or high level
transactions or those involving substantial a$ounts# it is best to obtain a
directors certificate "hereb all the re/uired signatures of the directors "illbe reflected.
When more advantageous to principal
n acting within the sco!e of authority, the agent may do such acts as may be
conduci%e to the accom!lishment of the !ur!ose other than what !rinci!al hass!ecified.67 Fonseuently, the limits of the agentBs authority are not exceeded
if it has been !erformed in a manner more ad%antageous to the !rinci!al than
that s!ecified by him.6$7
When agent acts in his own name
f the agent acts in his own name, the !rinci!al has no right of action againstthe !erson with whom the agent has contracted.657Fon%ersely, the third !erson
does not ha%e any right of action against the !rinci!al.6>7 t is the agent who is
directly bound in fa%or of the !erson with whom he has contracted, as if the
transaction were his own, exce!t when the contract in%ol%es things belonging
to the !rinci!al.67
Agent not personally liable by default
The agent who acts in his ca!acity as such is not !ersonally liable to the !arty
with whom he contracts unless: "a) the agent ex!ressly binds himself= or "b)
the agent exceeds the limits of his authority without gi%ing such !arty
sufficient notice of his !owers.6#7
Best Legal Practices:
Agent to e+pressl declare in "hat capacit heshe is e+ercising "hen dealing
"ith third part ! %he agent should e+pressl declare in "hat capacit#
"hether personal or as an agent# heshe is e+ercising "hen dealing "ith a
third part.
When agent is not personally liable despite ultra vires
f the agent enters into a contract in the name of the !rinci!al and the agent
acts in ultra vires in so doing, and the !rinci!al does not ratify such contract, it
is %oid if the !arty with whom the agent contracted is aware of the limits of
the !owers granted by the !rinci!al.61*7 The agent is liable only if he
undertook to secure the !rinci!alBs ratification.6117
bligations of the Agent
!o be liable for damages
The agent is bound by his acce!tance to carry out the agency.
617 Fonseuently, he is liable for the damages which, through his non@ !erformance, the !rinci!al may suffer .627 Ior business that already began on
the death of the !rinci!al, the agent must finish the same if delay entails any
danger .637
Best Legal Practices:
(cope and e+tent of po"er e+pressl stated in "ritten po"er of attorne ! %he
agent should ensure that the scope and e+tent of the po"ers granted to hi$ b
the principal be e+pressl stated in the "ritten po"er of attorne.
uties and responsibilities also stipulated in "ritten po"er of attorne ! %heagent should also ensure that the e+act duties and responsibilities be
stipulated in the "ritten po"er of attorne.
nsofar as third !ersons are concerned, an act is deemed to ha%e been
!erformed within the sco!e of the agentBs authority, if such act is within the
terms of the !ower of at torney, as written, e%en if the agent has in fact
exceeded the limits of his authority according to an understanding between the !rinci!al and the agent.67
n the abo%e mentioned situation, the third !erson cannot set u! the fact that
the agent has exceeded his !owers if the !rinci!al has: "a) ratified it, or "b)
signified his willingness to ratify the agentBs acts.6$7
!o be obligated by third person to present power of attorney
The third !erson may reuire the agent to !resent the !ower of attorney, or the
instructions as regards the agency, both coming from the !rinci!al.657
Third !ersons who ha%e relied u!on the !ower of attorney or instructions
shown them cannot be !reudiced by !ri%ate or secret orders and instructions
of the !rinci!al.6>7
Best Legal Practices:
Agent to bring original and photocopies of authoriation ! %he agent should
bring original and photocopies of the authoriation docu$ents during the firs$eeting "ith a third part. If the third part re/uires the agent to present the
authoriation docu$ents# the agent $a deliver the photocop and co$pare it
"ith the original one.
-aveat is on third part dealing "ith an agent ! %he caveat 5"arning) is on
the third part dealing "ith an agent. If later on it is found out that the agent"as not authoried b the principal# the third part "ill not have an clai$
against the principal. It is for this reason that the la" grants the third part a
right to re/uire the agent to present the po"er of attorne or instructions fro$
principal.
!o observe diligence of a good father of a family in thecustody and preservation of goods received
f a !erson refuses or declines an agency, he is bound to obser%e the diligence
of a good father of a family in the custody and !reser%ation of the goodforwarded to him by the owner until the latter should a!!oint an agent or take
charge of the goods.67
!o advance necessary funds if re"uired by contract
The agent is reuired to ad%ance the necessary funds if there is a sti!ulation to
that effect exce!t when the !rinci!al is insol%ent.6#7
!o follow instructions of principal
n the !erformance of the agency, the agent is to act in accordance with the
instructions of the !rinci!al.861*7
Dy default, the agent is reuired to obser%e all that a good father of a family
would do, as reuired by the nature of the business.6117
!o not to act in a way that it will manifestly result in loss ordamage to principal
The agent cannot carry out an agency if its execution or !erformance wouldmanifestly result in the loss or damage to the !rinci!al.6127
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The agent is liable for damages if, there being a conflict between his interests
and those of the !rinci!al, he should !refer his own.6137
The agent may be the lender at the current rate of interest if he was
em!owered to borrow money.617 f the agent is authoriOed to lend money atinterest, he cannot borrow it without the consent of the !rinci!al.61$7
!o account and deliver whatever received by virtue of agency
9%ery agent is reuired to render an account of his transactions and to deli%er
to the !rinci!al whate%er he may ha%e recei%ed by %irtue of the agency, e%enthough it may not be owing to the !rinci!al.6157 Any sti!ulation wai%ing the
agentBs obligation to account is %oid.61>7
Best Legal Practices:
Agent to disclose all infor$ation received ! %he agent should disclose all
infor$ation received in "riting 5e.g. e$ail) to have a docu$entation of such
fact.
Agent to turnover an and all propert received ! %he agent is re/uired to
turnover an and all propert received b hi$ even if the sa$e is hisco$$ission or co$pensation. 2ther"ise# the agent $a open hi$self to
cri$inal liabilit forestafa# a$ong others.
!o be liable for substitute appointed by agent
f the !rinci!al has not !rohibited it,617 the agent may a!!oint a substitute
but he remains res!onsible for the acts of the substitute when: "a) when theagent was not gi%en the !ower to a!!oint one,61#7 or "b) he was gi%en such
!ower, but without designating the !erson, and the !erson was notoriously
incom!etent or insol%ent.62*7
!o be solidarily liable with other agents if stipulated
f solidarity has not been ex!ressly sti!ulated, two or more agents e%en if
a!!ointed simultaneously are not solidarily liable.6217 f solidarity has been
ex!ressly sti!ulated, each of the agents is res!onsible for the non@fulfillment
of agency, and for the fault or negligence of his fellow agents, exce!t in the
latter case when the fellow agents acted beyond the sco!e of their authority.
6227
!o be liability for interest
The agent owes interest on the sums he has a!!lied to his own use from the
day on which he did so, and those which he still owes after the extinguishment
of the agency.6237
bligations of a #ommission agent
The commission agent is res!onsible for the goods recei%ed by him in the
terms and conditions and as described in the consignment, unless u!on
recei%ing them he should make a written statement of the damage anddeterioration suffered by the same.627
$istinguish goods of same %ind and mar% belonging todi&erent owners
f the commission agent handles goods of the same kind and mark belonging
to different owners, he is reuired to distinguish them by countermarks, and
designate the merchandise res!ecti%ely belonging to each !rinci!al.62$7
#annot sell on credit without consent from principal
/ithout the ex!ress or im!lied consent of the !rinci!al, the commission agentcannot sell on credit.6257 f the commission agent has the reuired consent, he
is reuired to inform the !rinci!al through a statement of the names of the
buyers.62>7 f without the reuired consent, the !rinci!al may demand from
him !ayment in cash= howe%er, the commission agent is entitled to any
interest or benefit, which may result from such sale.627
#ommission agent who has guaranteed commission bears ris%of collection
n addition to ordinary commission, the commission agent may recei%e on
sale a guarantee commission.62#7 f so, the commission agent bears the risk ofcollection and he is reuired to !ay the !rinci!al the !roceeds of the sale on
the same terms and conditions agreed u!on with the !urchaser .63*7
Liability of commission agent when credit is due anddemandable
nless otherwise the commission agent !ro%es that he has exercised due
diligence, the commission agent is liable for damages if he does not collect the
credits owing to the !rinci!al at the time when they become due and
demandable.6317
Best Legal Practices:
7elease# *aiver# and uitclai$ ! After the ter$ination of the contract ofagenc# the agent should as' fro$ the principal a release# "aiver# and
/uitclai$.
'(tent of liability of agent for fraud and negligence
The agent is liable for fraud and negligence, which shall be udged with moreor less rigor by the courts, according to whether the agency was or was not for
com!ensation.6327
bligations of the )rincipal in a #ontract of Agency
To be bound by obligations contracted by agent
The !rinci!al is reuired to com!ly with all the obligations which the agent
may ha%e contracted within the sco!e of his authority.617The !rinci!al cannot
set u! the ignorance of the agent as to circumstances whereof the !rinci!al
himself was, or ought to ha%e been, aware.627
nless the !rinci!al ex!ressly or tacitly ratifies an ultra vires act of the agent,
the !rinci!al is not bound to any obligations where the agent has exceeded his
!owers.637
To ad%ance for ex!enses of agent
f the agent reuires it, the !rinci!al is obligated to ad%ance to the agent thesums necessary for the execution of the agency.67 n case the agent has made
the ad%ance, the !rinci!al is reuired to make reimbursement e%en if the
business or undertaking was not successful so long as the agent is free from
all fault.6$7 The reimbursement includes interest on the sums ad%anced
reckoned from the day it was made.657
Best Legal Practices:
Principal to as' for regular accounting and update ! %he principal should as' for regular accounting and update fro$ the agent. Preferabl# the de$and
should be done in "riting 5e.g. e$ail) so the sa$e $a be docu$ented. %his
is to avoid an possible charge of negligence or conse/uence of estoppel.
As' for perfor$ance bond ! If the agenc is for co$pensation# the principal$a re/uire the agent to e+ecute and sub$it a perfor$ance bond to ensure
the due e+ecution of the agenc.
To indemnify agent for damages
f the agent is without fault or negligence, the !rinci!al is obligated to
indemnify the agent for all the damages which the execution of the agency
may ha%e caused the latter.
AgentBs lien
To ensure !ayment of indemnity as well as for reimbursements of ad%ances
made, the agent may retain in !ledge the things which are the obect of the
agency until !ayment is made.
9xtent of liability to third !erson who contracted with !rinci!al or agent
f two or more !ersons contracted in relation to the same thing, where one did
so with the agent and the other with the !rinci!al, and the two contracts are
incom!atible, that of !rior date is to be !referred without !reudice to rules on
double sale of !ro!erties.6>7 f the agent acted in good faith, the !rinci!al is
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agency/#_ftn2http://www.legalaspects.ph/1925/obligations-of-the-principal-in-a-contract-of-agency/#_ftn3http://www.legalaspects.ph/1925/obligations-of-the-principal-in-a-contract-of-agency/#_ftn4http://www.legalaspects.ph/1925/obligations-of-the-principal-in-a-contract-of-agency/#_ftn5http://www.legalaspects.ph/1925/obligations-of-the-principal-in-a-contract-of-agency/#_ftn6http://www.legalaspects.ph/1925/obligations-of-the-principal-in-a-contract-of-agency/#_ftn7
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liable for damages to the third !erson whose contract is reected as a
conseuence.67 f the agent acted in bad faith, he alone is liable. 6#7
(olidary liability if !rinci!al allowed agent to do ultra %ires
The !rinci!al is solidarily liable with the agent who acted in ultra vires if the
!rinci!al allowed the agent to act as though he had full !owers.61*7
f there are two or more !rinci!als who commonly a!!ointed an agent for a
common transaction-undertaking, they are solidarily liable to the agent for any
and all the conseuences of the agency.6117
/hen !rinci!al is not liable for agentBs ex!enses
The !rinci!al is not liable for the agentBs ex!enses in these situations:6127
1. f the agent acted in contra%ention of the !rinci!alBs instructions,unless the latter should wish to a%ail himself of the benefits
deri%ed from the contract=6137
2. f the ex!enses were due to the fault of the agent=617
3. f the agent incurred them with knowledge that an unfa%orable
result would ensure, if the !rinci!al was not aware thereof =61$7and
. f it was sti!ulated that the ex!enses would be borne by the agent,
or that the latter would be allowed only a certain sum.6157
Best Legal Practices:
Principal to as' for return of authoriation docu$ents ! After the ter$ination
of the agenc# the principal should re/uire the return of the authoriationdocu$ents to avoid unto"ard incidents "here the agent continues perfor$ing
the agenc resulting the principal being bound.
*ow to terminate a contract of agency
The contract of agency may be extinguished by the following modes:
1. Dy re%ocation of the agency=
2. Dy the withdrawal of the agent=
3. Dy the death, ci%il interdiction, insanity or insol%ency of the !rinci!al or of the agent=
. Dy the dissolution of the firm or cor!oration which entrusted oracce!ted the agency=
$. Dy the accom!lishment of the obect or !ur!ose of the agency= or
5. Dy the ex!iration of the !eriod for which the agency was
constituted.617
The acts done for the !rinci!al by the agent who had no knowledge of the
death of the !rinci!al or any other causes- modes of extinguishing the agency
is %alid, binding, and fully effecti%e with res!ect to third !ersons who may
ha%e contracted with him in good faith.627
Best Legal Practices:
Pro$ptl infor$ agent of e+tinguish$ent of agenc ! iven the strict
conse/uences for failing to infor$ the agent of the e+tinguish$ent of theagenc# the principal should pro$ptl infor$ the agent of the ter$ination of
their contract. 7e/uire agent to deliver authoriation after e+tinguish$ent of agenc ! &or
good $easure# the principal should re/uire the principal agent to underta'eto deliver the authoriation docu$ents after e+tinguish$ent of agenc
regardless of the $ode of ter$ination.
Dy re%ocation of the agency
The contract of agency is !rimarily based on trust and confidence.637 Cence,
the !rinci!al has generally the right to re%oke the agency at will.
67 e%ocation may be ex!ress or im!lied.6$7
Ther are exce!tions to the general rule abo%e. The agency cannot be
unilaterally re%oked by the !rinci!al when: "a) bilateral contracts de!end u!on
it= "b) it is the means of fulfilling an obligation already contracted= "c) a
!artner is a!!ointed manager of a !artnershi! in the contract of !artnershi!and his remo%al from the management is unustifiable.657
/hen a contract of agency is at will, the !rinci!al may com!el the agent to
return the document e%idencing the agency at any time.6>7 f the agency was
constituted in order to contract with s!ecified !ersons, the re%ocation of theagency does not !reudice the latter if they were not gi%en notice thereof.
67 ?otice in these cases are crucial.
Best Legal Practices:
(end "ritten notice of revocation to specific third parties ! It is a good and
sound practice to send "ritten notices of revocation of the agenc to specific
third parties. %hese "ill bar the$ fro$ dealing "ith the unauthoried agent
and prevent the$ fro$ clai$ing good faith.
Publish revocation "henever practicable ! &or added protection# therevocation of the agen should be published in ne"spaper of general
circulation "henever practicable. Publication is notice to the "hole "orld.
E E E
Industry &ractices' n businesses where transactions and acti%ities are
hea%ily de!enden on agents, it is a recogniOed !ractice to !ublish in
news!a!er of general circulation the re%ocation of the authority or !ower
granted to an agent. This !rotects consumers from dealing with unauthoriOed !ersons.
E E E
f the agent had general !owers, the re%ocation of the agency will not
!reudice third !ersons who acted in good faith and without knowledge of the
re%ocation.6#7 Fonseuently, notice of the re%ocation in a news!a!er of
general circulation is a sufficient warning to third !ersons.61*7
/hen the !rinci!al a!!oints a new agent for the same business or transaction,the !re%iously a!!ointed agent loses his authority and his agency is effecti%ely
re%oked from the day on which notice thereof was gi%en to him.6117
n some instances, the !rinci!al directly manages the business entrusted to the
agent and-or deals with third !ersons. This results in the re%ocation of the
agency.6127
Ior situations wherein two or more !rinci!als ha%e granted a !ower ofattorney for a common transaction, either one of them may re%oke the agencywithout the consent of the others.6137
eanwhile, the general !ower of attorney is re%oked by a s!ecial !ower of
attorney of another agent as regards only to the s!ecial matter in%ol%ed in the
latter authority.617
n any mode of re%ocation, it is a best !ractice to inform third !arties of the
termination of the authority of the agent so as to a%oid liabilities. To be clear,the re%ocation of the authority of the agent may bind the latter but not
necessarily third !arties who were not !ro!erly informed as reuired by law.
By the withdrawal of the agent
As agency is a contract, the agent may choose to withdraw from his duties andres!onsibilities for %alid reasons.61$7 Cowe%er, the law ex!ressly reuires tha
the agent should gi%e due notice to the !rinci!al.6157
The agent may held l iable for any damages suffered by the !rinci!al by reason
of the withdrawal unless it is on the ground of im!ossibility of continuing the
!erformance of the agency without gra%e detriment to himself.61>7
Best Legal Practices:
(end "ritten notice of "ithdra"al ! *hile the la" does not e+pressl state
that the notice of "ithdra"al should be in "riting# the agent should send a"ritten notice of "ithdra"al to the principal. %he agent should retain a
receiving cop or an proof of service to serve as docu$entar evidence.
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7easonable ti$e for notice ! %here is no e+pressl stated ti$e as "hen the
notice should be given. As such# the notice should be given "ithin a
reasonable ti$e prior to actual ter$ination in order to give the principal
a$ple ti$e to respond accordingl. %he reasonable ti$e $a var perindustr and on a casetocase basis.
,+ercise caution in "ithdra"ing ! ue to the potential liabilit# the agent
should e+ecise caution in "ithdra"ing. %he agent should co$$unicate first
the intent to "ithdra" prior to the actual ter$ination date.
ocu$ent da$ages caused b agents "ithdra"al ! 2n the other hand# the
principal "ho suffers da$age due to the agents "ithdra"al should docu$entthe$ to serve as evidence later on.
9%en if the agent withdrew for a %alid reason, he must continue to act until the
!rinci!al has had reasonable o!!ortunity to take the necessary ste!s to meet
the situation.617
By the death+ civil interdiction+ insanity or insolvency of theprincipal or of the agent
As a general rule, the death of the !rinci!al extinguishes the agency.
61#7 Cowe%er, the contract of agency may sur%i%e des!ite the death of the
!rinci!al in these situations: "a) if the agency has been constituted in thecommon interest of the !rinci!al and the agent= "b) in the interest of a third
!erson who has acce!ted the sti!ulation in his fa%or .62*7
f the agent dies, his heirs are obligated to notify the !rinci!al.6217 n the
meantime, they are reuired to ado!t such measures as the circumstances may
demand in the interest of the !rinci!al.6227
By the dissolution of the ,rm or corporation which entrustedor accepted the agency
As a necessary and logical conseuences of the dissolution of the form orcor!oration which entrusted or acce!ted the agency, the contract of agency is
terminated as either the !rinci!al or agent is no longer existing following the
termination of their res!ecti%e firm.6237
By the accomplishment of the ob-ect or purpose of the agency
f the contract of agency s!ecifically and ex!ressly !ro%ides that the agency is
created for a !articular obect or !ur!ose and the same has been achie%ed, then
the agency agreement automatically terminates.627
By the e(piration of the period for which the agency wasconstituted
Ior contracts of agency which carry a !eriod and the same has already la!sed,
the agency agreements ipso facto terminates as the same has been agreed u!on
by the !arties.62$7
Best Legal Practices:
,+piration of po"er of attorne ! %he po"er of attorne should have ane+piration "hich $a be a date certain or the co$pletion of a tas' or
underta'ing.
G'N'.AL )./0S0NS N LAN
Art. 1#33. Dy the contract of loan, one of the !arties deli%ers toanother, either something not consumable so that the latter may use the
same for a certain time and return it, in which case the contract is
called a commodatum= or money or other consumable thing, u!on the
condition that the same amount of the same kind and uality shall be !aid, in which case the contract is sim!ly called a loan or mutuum.
Fommodatum is essentially gratuitous.
(im!le loan may be gratuitous or with a sti!ulation to !ay interest.
n commodatum the bailor retains the ownershi! of the thing loaned,
while in sim!le loan, ownershi! !asses to the borrower. "1>*a)
#N!.A#! 1 LAN
P The abo%ementioned defines the two kinds of loan and gi%es theircharacteristics
#*A.A#!'.0S!0#S 1 !*' #N!.A#!
1. eal contractQbecause the deli%ery of the thing loaned is necessary forthe !erfection of the contract
2. nilateral contractQonce the subect matter has been deli%ered, it
creates obligations on the !art of only one of the !arties
#AUS' . #NS0$'.A!0N 0N A #N!.A#! 1 LAN
P Ior the borrowerQthe acuisition of the thing
P Ior the lenderQthe right to demand its return or its eui%alent
K0N$S 1 LAN
1. FHH0ATQwhere the bailor deli%ers to the bailee a non@
consumable thing so that the latter may use it for a certain time and
return the identical thing
2. (G9 GHA? H TQwhere the lender deli%ers to the
borrower money or other consumable thing u!on the condition that the
latter shall !ay he same amount of the same kind and uality
W*'N 0S A !*0NG #NSU2ABL'3
t is consumable when used in a manner a!!ro!riate for its !ur!ose or
nature, like gasoline, rice, money, fruit, firewood, etc.
1. n commodatum, if you do not return the thing when it is due, you will beliable for estafa because ownershi! of the !ro!erty is not transferred to the
borrower.
2. n loan, the borrower who does not !ay is not criminally liable for
estafa. Cis liability is only a ci%il liability for the breach of the obligation
to !ay. This is because in loan, ownershi! of the thing is transferred
to the borrower, so there is no unlawful taking of !ro!erty belonging toanother.
Art. 1#3. An acce!ted !romise to deli%er something by way of commodatum
or sim!le loan is binding u!on !arties, but the commodatum or sim!le loanitself shall not be !erfected until the deli%ery of the obect of the contract. "n)
$'L0/'.4 'SS'N!0AL ! )'.1'#!0N 1 LAN
P The abo%ementioned is a necessary conseuence of the fact that
commodatum and mutuum are real contracts which reuire the deli%ery of
the subect matter thereof for their !erfection
A##')!'$ ).20S' ! 2AK' A 1U!U.' LAN
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8/16/2019 Law on Sales, Agencies and Bulk sales law
9/17
P s there a contract of loan at this !ointR ?o, because loan is a real
contract and is !erfected only u!on deli%ery of the thing.
1.2AL0!4 0N LAN
P There are no formal reuisites for the %alidity of a contract of loan exce!t
if there is a sti!ulation for the !ayment of interest. A sti!ulation for the
!ayment of interest must be in writing.
#22$A!U2
?AT9 HI FHH0AT
Art. 1#3$. The bailee in commodatum acuires the used of the thing loaned
but not its fruits= if any com!ensation is to be !aid by him who acuires theuse, the contract ceases to be a commodatum. "1#1a)
K?0( HI FHH0AT
1. (R)I!AR* +(""()AT,"2. &RE+ARI," Qone whereby the bailor may demand the thing loaned
at will
Art- ./01- +onsumable goods may be the sub2ect of
commodatum if the purpose of the contract is not the consumptionof the ob2ect3 as when it is merely for exhibition- 4n5
Art- ./06- "o%able or immo%able property may be the ob2ect of
commodatum- 4n5
Art- ./07- The bailor in commodatum need not be the owner of the
thing loaned- 4n5
Art- ./0/- +ommodatum is purely personal in character .
Fonseuently:
"1) The death of either the bailor or the bailee extinguishes the contract=
"2) The bailee can neither lend nor lease the obect of the contract to athird !erson. Cowe%er, the members of the bailee&s household may make
use of the thing loaned, unless there is a sti!ulation to the contrary, or
unless the nature of the thing forbids such use. "n)
Art- ./89- A stipulation that the bailee may make use of the fruits of the
thing loaned is %alid- 4n5
!AT,RE (: +(""()AT," S,""ARI;E)
1. FHH0AT ( 9((9?TAGGL ;ATTH(
a. A commodatum is essentially gratuitous b. The contract ceases to be a commodatum if any com!ensation is to
be !aid by the borrower who acuires the use
c. A commodatum is similar to a donation in that it confers a benefit to
the reci!ient
2. 9NT9?T HI DAG99B( ;CT TH (9 is limited to the thing loaned
but not to the fruits unless there is sti!ulation to the contrary
a. As the bailor is the owner of the thing loaned, the bailor is naturallyentitled to its fruits
3. FA? TC99 D9 A (TGATH? ;A?T?; TC9 DAG99 (9
HI TC9 IT(R Hf course. The law sanctions such sti!ulation DT such
use should only be incidental and not the main cause of the contract. Decause
if it is the main cause, then the contract may that one of a usufruct.
. The H(9 of a commodatum is the tem!orary use of thing
loaned