San Beda College, Alabang

School of Law

Final Examination in
Business Organization I

Submitted to: Atty. Charlton Jules Romero

Submitted by:
VALERIANO, Charles Daniell B.
2017400020 (Section 2-B)
 Table of Contents:

Topic Pages

1. Agency Outline

a) Life of an Agency Diagram

b) Concept of an Agency
c) Obligations of an Agent
d) Obligations of a Principal
e) Modes of Extinguishment

2. General Power of Attorney

and Special Power of Attorney

3. Trust Arrangement
 Outline in the Law of Agency

Meeting of the minds Creation of the Agency Dissolution of the Agency

( Agent and Principal)
Article 1869 Article 1919- 1932
Article 1868

Obligation of the Obligation of the Agency

Obligation of the
Agent Principal
Article 1884- 1909 Article 1910- 1918

Life Cycle of an Agency

 Consent of the Parties
 Formation of the Agency
 Creation of Obligations by the Parties
 Dissolution of the Agency

Comments:
The creation of an Agency in a nutshell is relies in the fiduciary relationship between the Principal
and its prospective agents. Similar to the rule on sales a contract of agency is born once there is a
meeting of the minds between these two parties. Hence, an entity which is the Agency is acquires
assets or obligations among others to third persons to facilitate its purpose until such time that it is
achieved and the agency and the contract between the principal and agent is dissolved.

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 I. Concept of Agency

Contract of Agency:
- All Situations in which one person is employed to render service to another
- Relationship of Employer
A) employee ( Master > servant)
B) ( Employer > independent contractor)
- Fiduciary relationship which implies a power in agent to contract with a third person in
behalf of a principal
- Power to effect the principals contractual relations with third persons
- Either Commercial or Non- business
Other Senses:
- To denote the place at which the business is transacted
- Instrumentality by which it is done
- Exercise right of a person to sell a product of another in a specified territory
Characteristics:
1. Consensual- based on the agreement of the parties which is perfected by mere consent
2. Principal- it can stand by itself without need of another contract.
3. Nominate- it has its own name by law
4. Unilateral/ Bilateral- gratuitous because it creates obligations for only one of the parties for
compensation because it gives rise to reciprocal rights and obligations
5. Preparatory-entered as means to an end

Nature: Contract- minds of the parties should meet.

- How is it manifested?
A) Principal- intent that the agent shall act for him
B) Agent- intend to accepts authority and act on it
Note; X No intention X No agency is created
Basis for Representation
- Agent
 some service or does something to show that he is acting for another
- It is revocable
- Acts of the agent within his authority
- Actual or Real absence of the principal ( Legal or juridical Presence)

Purpose

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 - Expansion of commercial transactions and consequent increase in business organizations
conducted mainly through the combined efforts of individuals acting in representative
capacity.
- To extend the personality of the principal through the facility of an agent
- To render service to another
- To perform diverse juridical acts
Parties:
1. Principal: One whom the agent represents and from when he derives his benefit
- Person represented or the person who consents that another shall act on his behalf
2. Agent: one who acts for and represents another
- The person acting in representative capacity
- Has derivative authority to carry out principals business operation
- May employ has his own agent in which case he becomes a principal
Essential Elements:
1. There is consent, express or impaired of the parties to establish the relationship
2. The object is the execution of a juridicate act in relation to a third person
3. The agent acts as a representative and not for himself
4. The act agent acts within the scopes of his authority
5. Parties must be competent to act as principal and agent

Consensual- based on the concept of that the parties mutually agree on its creation
 contract
 ratification
 Presumption or operation of law

Relationship of the third party with whom the agent was contracted
 Agent has neither rights nor liabilities as against the third party
 Not real party in interest in an action to upon the contract
 Not necessary that the principal encounter the third person with whom the agent
interacts

Capacity of the Parties

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 1. Principal: must be capacitated or have the legal capacity to enter into contract in his own
right
 Depends in general on the capacity to of the principal to do act himself if he were
present
 Can be natural persons or artificial persons
 General Rule: an agent who assumes that to contract in the name of a principal without
contractual capacity renders himself liable to third persons
 Acts of the agent done for an incapacitated principal may be ratified by the latter after

2. Agent: Anyone can be an agent

 Capacity is usually immaterial
 Derives his authority from the principal
 Conclusively presumed: where one knowingly and without dissent permits another to
act as his agent
 Principals to should appoint agents who are to make sound decisions
 Fiduciary in nature
Acts that my be or not delegated
 General Rule: What a man may do in person, he may be do thru another
 Personal Acts:
X right to vote
X making a will
X statements to be made under oath
 Criminal Acts:
- An attempt to delegate authority to do an act which if done by the principal illegal
- No agency to facilitate a crime
Determination of Existence of Agency:
 No Formalities
- Direct or circumstantial evidence
 Designation of the Parties
- Manner in which the the parties designate the relationship is not controlling
- Agent: An act done by one person in behalf of another is in its essential nature one of
Agency
- The use of words to “ Agency Agreement’ does not connote the making of an contract or
appointment of agent
 Fact of existence
- Determined by the fact that one represents and is acting for another
- If relations exist to which will continue an agency. It will be an agency whether the parties
understood the exact nature

Instances where Special Power of Attorney

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  To make payments are not usually considered act of administration
 Effect of novation which put an end to obligations already in placed
 Compromise submit questions for arbitration
Classes of Agents
1. Universal Agent
 Employed to do all acts which the principal may do
 May delegate another to perform such act
2. General Agent
 May transact business for a particular act or at specified place
 Limited to an exact trade
3. Special or Particular Agent
 Authorized only to perform specific transactions
 To act by occasion
Kinds of Agency
1. As to manner of creation
a) Express: Oral or Verbal
b) Written
2. As to Character
a) Gratuitous
b) Onerous
3. As to Authority
a) Couched in general terms and is deemed to comprise only acts of administration
b) Or in specific terms
4. As to nature and effects
a) Ostensible
b) Simple/ Commission

II. Obligations of an Agent

1. Obey all lawful orders and instructions of principal within the scope of the agency
2. Act with utmost good faith and loyalty for furtherance of the principals interest
3. To exercise reasonable care, skill and diligence.
4. Observe diligence of a good father of a family in the custody and preservation of the goods
in case he declines the agency
5. To answer for the damages if there being a conflict between his interest and those of the
principal
Specific Obligations of an agent to principal
1. To carry out this agency which he has accepted
 Exception; An agent shall not carry out an agency of its execution would manifestly
result in loss or damage to the principal
2. To answer for damages which through his non-performance the principal may suffer

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  This rule is on application of the general rule in contracts that any person guilty of
fraud, negligence in the performance of its function and is liable for the damages the
principal may suffer

Who is a factor or commission agent?

 A person whose business is to receive and sell goods entrusted to him in terms and
conditions and as described in the consignment unless written statement is present
 Difference with a broker and Ordinary agent?
a) An OA can have no possession while Broker needs to have possession over goods
b) As to representation: An CA sells in his own name while an OA and broker acts in
the name of their principal or employer
 Del Credere Agent
a) The liability of a del credere agent is contingent of the buyer fails he shall pay the
principal
 Duties and liabilities of the principal are primarily based upon the contract and the
validity of the contract between them in addition to the contractual duties.

II. Obligations of the Principal

Specific Obligations of Principal to agent

 Comply with the Obligations which the agent have contracted within the scope of his
authority
 Advance to the agent should the latter request the sums needed to execute the agency
 Reimburse the agent for what the latter has advanced even if the business was not
successful provided that no fraud is present
 Indemnify the agent for damages in the course of the agency if it was not his fault
 Pay the agent the compensation agreed upon
Ratification
 it is the adoption of the or affirmation by a person of a prior act which did not bind
him but which was done or professed to be done on his account.
 Conditions for Ratification:
a) Principal must have capacity and power to ratify
b) Act was done in behalf of the principal
c) Principal must ratify the same in its entirety
d) Act must be capable of Ratification
e) Principal must have knowledge or had reason to know of material facts
 Acts that may be ratified:
a) Valid acts
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 b) Voidable acts
c) Unrevoked acts
d) Criminal acts
Effects of Ratification by the Principal
 With respect to agent- Ratification relieves the agent from liability to the third party in
a unauthorized transaction
 With respect to the principal himself- The principal who ratifies thereby assumes
responsibility for the unauthorized transaction
 With respect to third persons- Ordinarily a third person is bound by a ratification to the
same extent as he would have been if the ratified act was authorized in the first
instance.
Two Persons contracts separately from the Agent and Principal
 The preferred contract will be the one which has a prior date
Exception:
Rule on double sale will apply

Liability for Agents illicit Acts

 General rule: if the illicit act not in connection with the performance of duty principal
is not liable
 Exceptions:
a) The wrong act was a result of defective instruction by the principal
b) Where the fraudulent transaction cannot be separated from the lawful transaction
c) If the power conferred upon the agent was proper and third persons acted in good
faith
Instruction versus Authority
 Instruction
a) Directs the manner of transacting
b) Refers to the mode of his action with respect to those which are permitted
c) Not expected to be made known to those the agent has dealt with
 Authority
a) The sum total of the powers committed to or permitted to the agent by the
principal
b) Relates to the subject with the agent has the power to transact or act
c) Contemplated to be made known to the third person
Estoppel
 A bar which precludes a person from denying or asserting the contrary to that which
has been established as the truth by his own deeds or representation either express or
implied

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 III. Modes of Extinguishment of Agency

Presumption of Continuance of Agency

 Once shown to have existed an agency relation will be presumed to have continued, in
the absence of anything to show its termination
Modes of Extinguishment of Agency
1. Expiration of the period
2. Death,civil interdiction, insanity or insolvency of either the principal or the agent
3. Withdrawal of the agent
4. Accomplishment of the object or purpose of the agency
5. Revocation
6. Dissolution of the firm entrusted to or accepted the agency
7. Other modes of extinguishment of a contract

Duty to notify
 If in the case that the agent dies, his heirs must have the duty to notify the principal in
writing
 Acts done in without the knowledge of Principal’s death
- Anything the agent might do or any causes that extinguishes the agency is valid and shall
remain in force with respect to third persons.

Effects of Death in case of Multiple Agents

 In case, of multiple agents death of one or more will not result in the automatic
dissolution of the agency with respect to those who are still living
 Unless a clear stipulation of the agency that the common agents intended that the
incapacity of one dissolves the agency

Loss or destruction of the subject matter

 General Rule: Agency is terminated
 Exception:
a) Contrary agreement
b) Substitution
c) Partial loss of the agency

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Revocation at will is Proper
 Even if the agency is onerous
 Even if the period has not yet expired
 Exception:
a) When agency is coupled with interest
b) Obligation is already existing
c) Partner in a partnership ( Manager)
Notice of Revocation
 To the agent
a) Express notice to the agent is not always mandatory
 A revocation without a notice to the agent will not render invalid an act done in
pursuance of the authority
 To third persons
a) Actual notice must be brought home to the former client while publication is
sufficient to others
 Kinds of Revocation
a) Express
b) Implied

Liability of Principal for Damage caused by Revocation

 While the principal may have absolute power to revoke the agency at any time, he
must respond in damages for breach of contract where the termination is wrongful
 Two types
a) Fixed Period
b) No fixed Period

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 PART II
( GENERAL POWER OF ATTORNEY AND SPECIAL
POWER OF ATTORNEY)

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 PART III
(TRUST AGREEMENT)

Date of Execution

The trust agreement will be executed on June 18, 2020

Who are the parties of the agreement?

Designation Name Address

Pent House 2056
Charles Daniell B. Center Ortigas
Trustor Valeriano Avenue San
Antonio, Pasig City
BPI corporate
Trustee Bank of the center 7899, Julio
Philippine Islands Vargas Avenue,
Makati city
Pent House 2056
Primary- John Dave Center Ortigas
Beneficiary Valeriano Avenue San
Antonio, Pasig City
Secondary- Molito Complex
Beneficiary Tahanan Walang Building 2899,
Hagdan Alabang- Zapote
Road, Muntinlupa
City

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IDENTIFICATION AND PURPOSE OF THE FUND

The trust created by this agreement shall be known as the “VALERIANO TRUST FUND”
The purpose of this agreement is to create a trust fund exclusively for the sole heir of Charles
Daniell B. Valeriano. The trustee should manage the trustors assets and properties through a
common fund to be held in trust while awaiting for the beneficiary to be of legal age. Furthermore,
this trust was also created as a form of estate planning for the trustor and to help facilitate the
transfer of assets through the use of an trust arrangement between the contracting parties.

BENEFICIARY

Who are the Beneficiaries?

The primary beneficiary of this trust agreement will be the sole heir of the trustor who is
JOHNDAVE B. VALERIANO. The proceeds of the said trust fund including all of its attached
properties either immovable or movable as provided under this arrangement shall be assigned to
him by the trustee upon reaching the legal age.

In the event that my sole heir dies or will be incapacitated even upon reaching the legal age my
estate including all of its emoluments will be transferred to ““TAHANANG WALANG
HAGDAN” a non-stock non profit charitable institution for the elderly as the secondary
beneficiary of this arrangement

TRUST ASSETS

What are the Properties that will comprise the said trust fund?

The properties are all owned by the trustor. The rent that can be extracted from the commercial
spaces provided are to be used for the administration or maintenance of the properties and the
sustenance of the primary beneficiary.

The properties that will compose it will be the following: ( Both immovable and Movable)

1. Real Property-

LOCATION LAND DESCRIPTION TCT NO.

AREA
1578 Tarhata Street, 800 square 4- Story Residential T- 450928
San Lorenzo Village. meters House, 10 Car garages
Makati city
4567 Bellview 300 Square 2 -Story Residential T- 780912
avenue, Moonwalk meters House, 2 Car garages
Village, Las Pinas
City
Block 93 Lot 16 1000 Farmland, plantations of T-98087
Sanfrancisco Street, hectares Rice paddies and Mango
Brgy. Rizal Laoag Orchard
City , Ilocos Norte ( three- hundred thousand
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 P300,000- Yearly crop
revenue)
23456, Maria Orosa 700 square 5 story- commercial T- 87567
avenue, Manila City meter building
( five hundred thousand-
P500,000 monthly rate
collection)
151 Muralla Street, 900 square 20 story- commercial T- 32457
Intramuros, Manila meters building
City ( Ten- million
P10,000,000 Monthly rate
collection)

2. Movable Property-

A) Complements of the Real properties:

All movable complements of the real property such as the furniture and other appurtenances (Crops
of the farmland) located therein shall form part of the fund if in the case it needs to be sold and
liquidated for distribution in the form of cash for the qualified beneficiaries.

B) Bank Deposits:

The following bank account information are all deposited in these banks are all deposited under the
name of the trustor. In the case for the creation of the trust all must be consolidated under the
trustor’s BPI account since it will now function as the sole trustee of this fund.

Financial Institution’s Name Account Number Amount

Bank of the Philippine Islands A-387990 P50, 000, 000 ( Fifty-million
Pesos)
Metropolitan Bank 815878Z P 10,000,000 ( Ten- million
Pesos
Eastwest Bank B230989C P 40, 000,000 ( Forty-million
Pesos)

3. Incorporeal Properties

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The properties that are included here are investments of stocks made by the trustor during his
lifetime. Hence, the trustee should hold these shares of stock in trust for the primary- beneficiary
until he is of legal age or if he is incapacitated it must be liquidated and the proceeds thereof be
awarded to the secondary beneficiary. The trustee cannot convey, or sell these shares without
approval of the court or until the primary beneficiary is capable of giving consent.
The investment Portfolio is as follows:
Investment Name Amount of Shares Total Price of Share
Jollibee Food Corporation One hundred Thousand Twenty Million Pesos
100, 000 ( P 20,000,000)
Ayala Land Incorporated Three hundred Thousand Fifty Million Pesos
300,000 ( P 50,000,000)
Manila Electric Company Thirty Thousand One- Million Pesos
30,000 ( P1,000,000)

TRUSTEES

Trustees: Successor Trustees and Disqualification

The sole trustee in the aforementioned trust fund will be shouldered by the Bank of the
Philippine islands under its “TRUST AND INVESTMENT GROUP”. The trusteeship of my trust
fund cannot be delegated to other persons either natural or Juridical. The irrevocability of this
trusteeship can only be overridden by my sole heir upon reaching the required legal age or should it
be found that in the course of the trusteeship that BPI will be held liable by a competent court for
any willful negligence or malice at the expense of my designated beneficiaries in which case my
qualified beneficiaries can transfer the trusteeship of my estate to any other qualified Banking
investment firm of their own choice.

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POWERS, RIGHTS AND OBLIGATIONS OF TRUSTEES

Powers and Obligations of the trustees

(a) Except as limited by this agreement, the Trustees shall have all powers granted by law to be
responsible for and may take such actions as are required to assure the effective day-to-day
operation of the Trust. However, except as otherwise expressly permitted hereunder, the Trustees
shall not, and shall not have the right or power to,
(i) exchange, distribute, assign,sell, transfer, renounce or convey the Trust Assets,
(ii) terminate the Trust Assets registration,
(iii) enter into a license for, grant an option or encumber the Trust Assets without seeking the
permission of a competent court of jurisdiction.

Decision-making

A quorum for a meeting of the Trustees shall be a majority of the Trustees then in once. Except as
otherwise provided In this Agreement all decisions of the Trustees must be approved by majority
vote of the Trustees then in office. No Trustee shall have the power to act for the Trust unless
specifically so authorized in accordance with the immediately preceding sentence.

Delegation.

The Trustees shall have the authority to delegate certain duties and responsibilities of administering
the Trust to other individuals or entities who shall remain under the supervision, direction and
control of the Trustees. The Trust shall have the authority to contract with third parties to carry out
any actions necessary to acquire, hold, maintain and Trust Assets subject to the limitations of this
Agreement.

Trustee’s Compensation

The trustee shall be entitled to thirty percent of the gross annual profits of the trustor’s assets of
this arrangement and the entity should continue to receive until the designated beneficiaries stated
above are eligible to be assigned of the proceeds of the “VALERIANO ESTATE TRUST
FUND”

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TERM OF TRUST
What is the Term of the trust?

The term of the trust shall be until my primary beneficiary and sole heir JOHNDAVE B.
VALERIANO reaches the legal age and is already capable of handling my estate for his own
personal disposal or should he become incapacitated before reaching such age. The secondary
beneficiary TAHANAN WALANG HAGDAN shall assume as the next beneficiary.

ADMINISTRATION OF TRUST

The administration of the trust fund shall fall solely to Bank of the Philippine Islands ( BPI) as
the only trustee indicated therein, He shall have the power to manage the affairs of the estate of
the trustor and he shall have the prerogative to use all necessary means as provided by law to
preserve the properties left behind the trustor. In the event, that the primary beneficiary will
become incapacitated or dies before reaching the legal age. The trustee should initiate the
liquidation proceedings of the estate and convert into a trust fund and the proceeds be awarded to
the secondary beneficiary.

MISCELLANEOUS STIPULATIONS

Severability

If any term or other provision of this agreement is invalid, illegal or incapable of performing by
any rule of law or public policy, all other conditions and provisions of this agreement shall
nevertheless remain in full force and effect so long as the economic or legal attributes of the
activities contemplated hereby is not affected in a manner materially adverse to the trust. Upon
determination that any term or other provision is invalid or incapable of being enforced the
parties shall modify this agreement so as to effect the purpose it is intended to achieve in the
acceptable manner as provided by law.

Entire Agreement.
This agreement constitutes the entire agreement of the parties and supersedes all prior
agreements, understanding either oral and written with respect to the subject matter of this
agreement.
Governing Law

This agreement and the trust herein created hereby shall be governed in accordance with the
law of the Philippines, without giving effect to the conflict of laws principles thereof, The
original place of administration of the trust shall govern

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