Business Law - Preliminary Lessons (1).pptx

Business Law

1. GROUP - N0.1 LAW ON AGENCY AND CREDIT TRANSACTION Ambal , Rody Avenido , Bea Ampo , Jehan Bañez , Martina Antiga , Gretell Batutay , Stephanie Arosa , Lawrence Borlaza , Jessel Asunto , Shene Butcon , Tayshaun Se

2. QUESTIONS: 1.) Define Agency. 2.) Enumerate the essential elements of an agency. 3.) Explain the Agency Couched in General Terms. 4.) What is the effect of the Absence of Specific Authority? 5.) Are there any formal requirements in forming agencies? 6.) What is the role of mutual consent in establishing a legally effective agency contract? 7.) Identify the rights of an agent. 8.) What are the general obligations of an Agent to His Principal? 9.) What are the Qualifications of a Principal? 10.) When is the Principal not liable for expenses?

3. ANSWERS: 1.) Define 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. (Art. 1868, NCC) 2.) Enumerate the essential elements of an agency. The essential elements of an agency are: 1. Consent (express or implied) of the parties to establish the relationship.; 2. The object is the execution of a juridical act in relation to third persons; 3. The agent acts as a representative and not for himself; and 4. The agent acts within the scope of his authority.

4. ANSWERS: 3.) Explain the Agency Couched in General Terms. An agency couched in general terms comprises 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 though the agency should authorize a general and unlimited management. 4.) What is the effect of the Absence of Specific Authority? If specific authority is required under Art. 1878 and no such authority was given, the transaction of the agent with a third person is UNENFORCEABLE. The transaction cannot be enforced but it may be RATIFIED by the principal.

5. ANSWERS: 5.)Are there any formal requirements in forming agencies? Generally, there are no formal requirements for forming agencies. Agent's authority may be oral or written, it may be in public or private writings. The only exception is when the law requires a specific form (e.g. sale of real property or any interest therein by an agent.) 6.) What is the role of mutual consent in establishing a legally effective agency contract? Mutual consent in an agency contract that ensures both the principal and agent agree on the terms, forming a binding agreement.

6. QUESTIONS AND ANSWERS: 7.)Identify the rights of an agent. The rights of an agent are: (1.) Indemnity Right; (2.) Right of Remuneration; (3.) Right to Retain Money; (4.) Right of Compensation; (5.) Right of Lien 8.) What are the general obligations of an Agent to His Principal? The following are the general obligations of an Agent to His Principal: 1. To act with the utmost good faith and loyalty for the furtherance and advancement of the interests of the principal. 2. To obey the principal's instructions. 3. To exercise reasonable care.

7. ANSWERS: 9.) What are the Qualifications of a Principal? The Qualifications of a Principal are: 1. Natural or juridical person; and 2. Must have the capacity to enter into a contract in his own right. 10.) When is the Principal not liable for expenses? The Principal is not liable for expenses if: (1) If the agent acted in contravention of the principal’s instructions unless the latter should wish to avail himself of the benefits derived from the contract. (2) When the expenses were due to the fault of the agent; (3) When the agent incurred them with the knowledge that an unfavorable result would ensue, if the principal was not awre thereof;

8. TODAY, WE'LL LEARN ABOUT... 1.2 1.1 1. CONTRACT OF AGENCY, NATURE, CHARACTERISTICS AND KINDS FORM AND PERFECTION OF A CONTRACT OF AGENCY RIGHTS AND OBLIGATIONS OF AGENTS RIGHTS AND OBLIGATIONS OF PRINCIPALS 1.3 1.4

9. 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. (Art. 1868, NCC) a.) Extension of Personality. In an agents-principal relationship, the personality of the principal is so extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principle, authorized to perform acts which the latter would have him do.

10. b.) Doctrine of Representation. The basis of agency is representation. The law in fact contemplates impersonal dealings where the principal need not personally know or meet the third person with whom the agent transacts. The purpose of agency is to extend the personality of the principal through the facility of the agent. c.) Legal Presence. In agency, by legal fiction, "the actual or real absence of the principal is converted into his legal or juridical presence - qui facit per alium facit per se."

11. CHARACTERISTICS OF A CONTRACT OF AGENCY . (1) consensual , because it is based on the agreement of the parties which is perfected by mere consent; (2) principal , because it can stand by itself without need of another contract; (3) nominate , because it has its own name;

12. ESSENTIAL ELEMENTS OF AN AGENCY 1. Consent (express or implied) of the parties to establish the relationship.; NOTE: A person may express his consent: a. by contract, (Art. 1868, NCC), orally or in writing; b. by conduct; (Art. 1869, NCC) c. by ratification; or (Art. 1910, NCC) or d. the consent may arise by presumption or operation of law. (De Leon, 2014)

13. ESSENTIAL ELEMENTS OF AN AGENCY 2. The object is the execution of a juridical act in relation to third persons; 3. The agent acts as a representative and not for himself; and 4. The agent acts within the scope of his authority.

14. (1) Nature . — Since agency is a contract, it is essential that the minds of the parties should meet in making it. (COC) (2) Basis . Agency is also a representative relation. The agent renders some service or does something “in representation or on behalf of another.” (3) Purpose . — The purpose of agency is to extend the personality of the principal through the ability of the agent to render some service to do something. NATURE, BASIS, AND PURPOSE OF AGENCY.

15. 2. KINDS a) Express v. Implied (1) Express Agency - It is expressly agreed upon by the partners. (2) Implied Agency - The agency is presumed from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. b) Verbal v. Formal (1) Oral - no written proof of the agency. (2) Formal - the law requires a specific form. Examples: The authority to sell a piece of land or interest thereon, (the SPA) must be in writing otherwise the sale is void.

16. 2. KINDS c) Contractual v. Legal (1) Contractual Agency or Agency by Contract - the relationship between the principal and the agent is created through the agreement of the parties. (2) Legal or Agency Created by Law - the relationship between the principal and the agent is created by law. In the case where the law creates an agency, the parties did not agree but the law recognizes the relationship between the agent and the principal.

17. 2.01 IMPLIED AGENCY AND AGENCY BY ESTOPPEL a) Implied Agency - The agency is implied from the agent's acts which carry out the agency, or from his silence or inaction according to the circumstances. b) Agency by Estoppel - The principal, by his actions or representation, is barred from questioning the existence of the agency. There is NO true agency. 2.02 GENERAL AGENCY AND SPECIAL AGENCY a) General Agency - The agency comprises all the business of the principal. b) Special Agency - The agency is for one or more specific transactions .

18. 2.03 AGENCY COUCHED IN GENERAL TERMS AND AGENCY COUCHED IN SPECIAL TERMS. This classification concerns the authority given to the agent. 2.03.01 Agency Couched in General Terms . An agency couched in general terms comprises 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 though the agency should authorize a general and unlimited management.

19. 2.03.02 Agency Couched in Special Terms . Specific powers are given to the agent under this type of agency. a) When Special Powers of Authority. A special power of attorney is an agency couched in special terms. Article 1878 provides that special terms are necessary for the following powers. 2.03.03 Power to Sell . A special power to sell excludes the power to mortgage, and a special power to mortgage does not include the power to sell. 2.03.04 Power to Compromise . A special power to compromise does not authorize submission to arbitration.

20. 2.03.05 Effect of Absence of Specific Authority. If specific authority is required under Art. 1878 and no such authority was given, the transaction of the agent with a third person is UNENFORCEABLE. The transaction cannot be enforced but it may be RATIFIED by the principal. a) Exception - WHEN VOID: Sale of land is VOID if there is no written authority given to the agent. 3.01 CONSENT. The consent of agency is GENERALLY CONSENSUAL, hence, it can be preferred by mere consent. Exceptions are formal agencies where the law requires certain formalities like an agency to sell land which the law requires to be in writing.

21. 3.02 ACCEPTANCE BY AGENT. Acceptance may be (a) express, or (b) implied from the agent's acts which carry out the agency, or from his silence or inaction according to the circumstances. a) Between persons who are present . - The acceptance of the agency may also be implied if the principal delivers how power of attorney to the agent and the latter receives it without any objection. b) Between persons who are absent . - The acceptance of the agency cannot be implied from the silence of the agent. Exceptions: Between persons who are absent, agency may be implied from the silence of the agent in the following cases;

22. 3.02.01 Effect of Notice of Appointment to Agent a) Special Notice. If a person specially informs another that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent with respect to the person who received the special information. b) Through Advertisement. If a person states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent with regard to any person. c) How to Rescind - The notice of rescission should be in the same manner in which the agency was given.

23. 4. CONSIDERATION. Agency may be onerous or gratuitous. Agency is presumed to be for compensation unless there is proof to the contrary. a) Procuring Cause Rule . The agent is entitled to the stipulated compensation in the execution of the powers granted to him if the act of the agent is the procuring cause of the transaction. b) Distinguished from Brokers. With respect to compensation of brokers, the action of the agent must also be the procuring cause which is the cause originating a series of events which, without break in the continuity, result in the accomplishment of the prime objectives of the employment of the broker.

24. 5. SUBJECT MATTER. The object of the contract of agency is the presentation and power to represent the principal. The agent must perform the general or specific powers and functions conferred, expressly or implied by the principal. 6. DUTIES OF AGENT. An agent is a fiduciary. In the performance of such functions, the agent must faithfully and diligently exercise his authority and must not commit acts of disloyalty against the principal. The general duties of an agent are; (1) Duty of Obedience, (2) Duty of Diligence, and (3) Duty of Loyalty.

25. 4. DUTY OF OBEDIENCE. The agent must respect the limitations imposed by law and the agreement between the parties. The agent must act within the scope of his authority and must follow the instructions of the principal. 4.01 SCOPE OF AUTHORITY. The agent must act within the scope of his authority. (a) Conducive Acts . Even without express authority, the agent may do such acts as may be conducive to the accomplishment of the purpose of the agency.

26. (b) Control . Control "distinguishes agency from other legal concepts." In agency, "one person - the agent - agrees to act under the control or direction of another - the principal. (c) Advantageous Performance . The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by the principal. 4.02 THE AGENT MUST ACT IN THE NAME OF THE PRINCIPAL. The agent must act in the name of the principal in the performance of his functions. He must also reveal the identity of the principal.

27. a) Effect if an Agent in One's Own Name. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted and vice-versa. (b) Who is liable if Agent Acts in his Own Name? The agent who acts in his own name is the one directly bound in favor of the person with whom he has contracted as if the transaction were his own. (1) The agent can be sued without joining the principal. EXCEPTION: When the contract involves things belonging to the principal. c) Remedy of Principal. Although the principal has no right against the third party, the principal may sue the agent for damages.

28. PARTIES TO A CONTRACT OF AGENCY 1. Principal ( Mandante ) – One whom the agent represents and from whom he derives his authority; he is the person represented or the person who consents that another shall act on his behalf.; and 2. Agent ( Mandatario ) – One who acts for and represents another; he is the person acting in a representative capacity. The agent has derivative authority in carrying out the principal’s business. (de leon,2009)

29. GR: There are no formal requirements governing the appointment of an agent. XPN: When the law requires a specific form, i.e. when sale of land or any interest therein is through an agent, the authority of the latter must be in writing; otherwise, the sale shall be void. (Art. 1874, NCC) APPOINTMENT OF AN AGENT

30. FORMS AND PERFECTION OF A CONTACT OF AGENCY Article 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. An agency may be oral unless the law requires a specific form.

31. CLASSIFICATIONS OF AGENCY 1.) Manner of Creation: a.) Express: actually authorized, either orally or in writing. b.) Implied: implied from acts of the principal, from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf w/o authority. 2.) Character: a.) Gratuitous: the agent receives no compensation for his services. b.) Onerous: the agent does receive compensation

32. 3.) Extent of business covered: a.) General: comprises all the business of the principal, b.) Special: comprises one or more specific transactions. 4.) Authority conferred: a.) Couched in general terms: deemed to comprise only acts of administration. b.) Couched in specific terms: authorizes only the performance of a specific act/s. CLASSIFICATIONS OF AGENCY

33. 5.) Nature and effects: a.) Representative: agent acts in name and representation of principal. b.) Simple/Commission: agent acts in his own name but for the account of the principal. CLASSIFICATIONS OF AGENCY

34. The contract of agency is GENERALLY CONSENSUAL, hence, it can be perfected by mere consent. Exceptions are formal agencies where the law requires certain formalities like an agency to sell land which the law requires to be in writing a) Intention. The intention of the parties is also indispensable. The intention of the principal to appoint the agent and the intention of the agent to accept must be present. However, both intentions may be expressly given or may be implied from the actions of the parties. b) The principal need not personally know or meet the third person with whom her agent

35. Generally, NO formal requirements. Agent's authority may be oral or written, it may be in public or private writings. The only exception is when the law requires a specific form (e.g. sale of real property or any interest therein by an agent.) FORM:

36. RESPONSIBILITY OF TWO OR MORE AGENTS APPOINTED SIMULTANEOUSLY GR: They are jointly liable. (Art. 1894, NCC) XPN: Solidarity has been expressly stipulated. Each of the agents becomes solidarily liable for: 1. The non-fulfillment of the agency; and 2. Fault or negligence of his fellow agent. (Art. 1895, NCC) XPNs to XPN: when one of the other agents acts beyond the scope of his authority- innocent agents are not liable; or when the fault or negligence of his fellow agents was done beyond the scope of their authority- the innocent agent is not liable.

37. KINDS OF AGENTS 1. Universal agent – employed to do all acts which the principal may personally do, and which he can lawfully delegate to another the power of doing.; 2. General agent – employed to transact all business of the principal, or all the business of a particular kind or in a particular place, or in other words, to do all acts connected with a particular trade, business, or employment and; 3. Special or particular agent – authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion.

38. RIGHTS OF AN AGENT 1. Indemnity Right - An agent has a right to be indemnified against the liabilities that fall on him. 2. Right of Remuneration- It is a basic right of an agent that he should receive remuneration for his services. 3. Right to Retain Money - In conducting business, an agent advances or spends some money for the betterment of the business. 4. Right of Compensation - If an agent is injured as a result of the principal's negligence, the principal may compensate him. 5. Right of Lien - An agent has the right to retain the goods or property of a principal until the payment due is received by him.

39. Obligations of the Agent. (The Law on Sales, Agency and Credit Transactions by De Leon, 2010) A. General Obligations of an Agent to His Principal: 1. To act with the utmost good faith and loyalty for the furtherance and advancement of the interests of the principal. 2. To obey the principal's instructions. 3. To exercise reasonable care.

40. B. Specific Obligations: 1) To carry out the agency he has accepted. (Article 1884) 2) To answer for damages that, through his non-performance, the principal may suffer. (Article 1884) 3) To finish the business already begun with the death of the principal, the delay should entail danger. (Principal Death Case- Article 1884) 4) To observe the diligence of a good father or a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency until an agent is appointed. (Article 1885) 5) To advance the necessary funds, should there be a stipulation to do so except when the principal is insolvent. (Article 1886)

41. 6) To act within the scope of his authority; 7) To act in accordance with the instructions of the principal and, in default thereof, to do all that a good father of a family would do. (Obey the Instructions- Article 1887) 8. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal. (Article 1888) 9) To be liable for damages, if there is a conflict between his interests and those of the principal, he should prefer his own. (Article 1889) 10) Not to loan to himself if he has been authorized to lend money at interest without the consent of the principal. (Article 1890)

42. 11) Not to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. (Payment of All Sum- Article 1891) 12) To be responsible in certain cases for the acts of the substitute appointed by him. (Article 1892) - Appointment of a Substitute (Sub-Agent) The agent may appoint a substitute, unless expressly prohibited from doing so, but is still responsible for the act of the substitute. a. When he was not given the power to appoint one, b. When he was given such power, but without designating the person, the person appointed was notoriously incompetent or insolvent.

43. -All acts of the substitute appointed against prohibition shall be void. Then the principal may bring an action against the substitute with respect to the obligations that the latter has contracted under the substitution. 13) To pay interest on funds he has applied to his own use (Article 1896). 13) To pay interest on funds he has applied to his own use (Article 1896). Other Duties of the Agent 1. Return of Undue Profit - If an agent has earned undue profit from the business, he should return it to the principal.

44. 2. Showing of Accounts - It is the duty of an agent to maintain the accounts properly and submit them to the principal on his demand. 3. Performance with Honesty. - If he conducts the business dishonestly, then he is not entitled to receive the reward for his services. 4. Communication with Principal - It is the duty of the agent to give all the information about the business to the principal. 5. Separate Account - It is his duty to keep the accounts of a principal Senarate

45. RIGHTS AND OBLIGATIONS OF PRINCIPALS OBLIGATIONS OF THE PRINCIPALS. (1) Comply with all the obligations which the agent may have contracted within the scope of his authority. (2) Comply with all the obligations which the agent may have contracted not within the scope of his authority but has ratified expressly or tacitly.

46. OBLIGATIONS OF THE PRINCIPALS. (3) Comply with all the obligations, solidarily with the agent, which the agent may have contracted not within the scope of his express authority but the principal allowed the agent to act as though he had full power (4) Pay or reimburse the advances of the agent necessary for the execution of the agency without the fault of the agent. (5) Indemnity the agent for all the damages which the execution of the agency may have caused the latter, without the fault or negligence on his part.

47. QUALIFICATIONS OF A PRINCIPAL 1. Natural or juridical person; and 2. Must have capacity to enter into contract in his own right. NOTE: If a person is capacitated to act for himself or his own right, he can act through an agent

48. KINDS OF PRINCIPAL 1. Disclosed principal – At the time of the transaction contracted by the agent, the other party knows that the agent is acting for a principal and of the principal’s identity.; 2. Partially disclosed principal – The other party knows or has reason to know that the agent is or may be acting for aprincipal butisunaware ofthe principal’s identity.; and 3. Undisclosed principal – Theparty has no notice of the fact that the agent is acting as such for a principal

49. ACTS THAT A PRINCIPAL MAY DELEGATE TO HIS AGENT GR: what a man may do in person, he may do thru another XPNs : Personal acts; and Criminal acts or acts not allowed by the law

50. PRINCIPAL NOT LIABLE FOR EXPENSES. (1) If the agent acted in contravention of the principal’s instructions, unless the latter should wish to avail himself of the benefits derived from the contract. (2) When the expenses were due to the fault of the agent; (3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not awre thereof;

51. PRINCIPAL NOT LIABLE FOR EXPENSES. (4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. a) Two Principals Solidarily Liable. - 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 consequence of the agency.

52. Thank You!