Prof. Jose U. Cochingyan III

1. Agency, Trusts, Partnerships and Joint Ventures Prof. Jose U. Cochingyan III

2. The basis of agency is representation because: • the agent must act within the scope of the authority granted to him by the principal and does so under the presumption that agency is for compensation • the agent has the general power of administration and if authorized may likewise have unlimited management • its object is the execution of judicial acts by the principal and as such is a principal contract between the parties • the agent acts for the principal and the principal can through the agent extend his personality beyond the principal’s physiological limitations, doing diverse juridical acts, with the result of converting an actual absence to a juridical presence

3. The liability of two or more agents who are appointed simultaneously by the same principal is • Solidary • not solidary • not solidary, if stipulated • solidary if one of the agents acted beyond the scope of his authority

4. The liability of two or more principals appointing an agent for the same transaction, their liability to the agent for the consequence of the agency is • Solidary • not solidary • not solidary, if stipulated • solidary if one of the principals committed a breach

5. 4. What is the correct rate of interest mentioned in the Civil Code that an agent is entitled to in the event that the agent himself acts as the lender of the principal in an agency where the agent is empowered to borrow money on behalf of the principal? • the legal rate of interest for loans and forbearances • the interest rate is due only in the case of breach by the principal of the obligation to reimburse the agent • the current rate • the agent cannot be himself the lender and should he do so in contravention of fiduciary nature of agency no interest is due the agent

6. 5. Where a special power of attorney is followed subsequently by a general power of attorney will the subsequent general power of attorney revoke the special power of attorney? • Yes, because the later appointment will always supersede the earlier one • No, because a general power of attorney can never revoke a special power of attorney unless it is expressly stated in the general power of attorney that the principal has revoked the prior special power of attorney • Yes, when what appears to be comprised in the general matters of the general power of attorney is actually the business stated in the prior special power of attorney • No, because the general power of attorney comprises only of the powers of administration and by its very nature is incompatible with the special power of attorney

7. 6. What is the effect of a commission agent selling on credit without the consent of the principal? • the power to sell includes the power to sell on credit and hence there is no effect • the principal may demand from the agent the payment in cash • the agent must render an accounting to the principal of the interest charged on the sale on credit • the sale is void ab initio

8. 7. Do you agree that in the event of death of either principal or agent, the Civil Code imposes on the heirs the duty of notification? • neither the heirs of the principal nor the heirs of the agent is obliged to notify any party and anything done by the agent without the knowledge of the death of the principal shall be fully effective with respect to third persons • the heirs of the principal must notify the agent of the death of the principal and vice versa the heirs of the agent must notify the principal of the death of the agent • it is only the heirs of the principal who must notify the agent of the death of the principal • it is only the heirs of the agent who are required under the provisions of the Civil Code to notify the principal of the death of the agent

9. 8. A resulting trust may be proven by: • oral evidence • the acceptance of the beneficiary • parolevidence only if it does not involve an immovable • particular words expressly stating that a trust has been created

10. 9. The difference/s between a resulting trust and a constructive trust is/are: • A constructive trust is presumed to be contemplated by the parties while a resulting trust is created not by any word evincing a direct intention to create a trust but by operation of law. • A constructive trust is where the intention to create the trust is found in the nature of the transaction itself while resulting trust is raised by equity with respect to property which has been acquired by fraud or even where originally without fraud it is against equity that it should be retained by the person holding it. • A constructive trust may be proven by oral evidence but no resulting trust may be proved by parolevidence. • A resulting trust is akin to an express trust in that it arises from the intent of the parties to create a trust while a constructive trust is created by operation of law

11. 10. When property is sold and the legal estate is granted to the illegitimate child of the person paying for the price of the property: • An express trust is created where the child is the trustee of the person who paid for the price and the latter is the beneficiary • An implied trust is created where the child is the trustee of the person who paid for the price and the latter is the beneficiary • No trust is created it being presumed that it is a gift in favor of the child • A resulting trust is created because for a gift to be presumed to have been created the child should be legitimate

12. 11. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee: • An agency is created as the means of fulfilling an obligation • A trust by virtue of law is established and if the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property • An express trust is created which must be proven by written evidence if it involves an immovable • Neither a trust or agency is created but an equitable mortgage

13. 12. None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership: • even if the partner or partners making the important alteration contends that it is useful for the partnership. • even if it may be useful for the partnership. • unless it is manifestly prejudicial to the interest of the partnership • unless it is useful to the partnership

14. 13. Unless otherwise stipulated, a partnership begins from the moment of the • execution of the contract. • meeting of the minds of the partners who desire to form the partnership. • contribution of each of the partners becomes due and demandable. • registration of the partnership where registration is required and where none is required as may be deduced from the intention of the parties.

15. 14. Is a person admitted as a partner into an existing general partnership liable for all obligations of the partnership liable for obligations arising prior to his or her admission into the partnership? • No, he or she is only liable for obligations arising after his or her admission into the partnership, and any stipulation to the contrary shall be deemed unenforceable. • No, but he or she can be made liable for obligations arising prior to his or her admission in cases where such obligation is secured by partnership property, unless there is a stipulation to the contrary. • Yes, it will be as though he or she was a partner when such obligations were incurred, and such liability will be satisfied only out of the partnership property. • Yes, but only in cases where it is stipulated or where it is expressly or impliedly a principal condition for securing the consent if the existing partners for his or her admission to the partnership.

16. 15. A partner who has undertaken to contribute a sum of money to the general partnership but fails to do so: • is deemed to be not a partner to the partnership and is liable for fraud. • becomes a debtor to the partnership for the interest and damages from the time he should have complied with his obligation. • must contribute property in its place, the value of which shall be determined by experts to be chosen by partners. • shall remain in the partnership as an industrial partner who cannot engage in business for himself.

17. 16. A partner’s right to specific partnership property is not assignable except • when there is a claim against the partnership • in the event of an execution. • where the property is in the possession of a partner with the consent of his partners • where all the partners in a partnership assigned the rights to it.

18. 17. In the event that there is a need to stave off an imminent loss threatening the general partnership business and in the absence of any agreement, a partner who refuses to contribute to save the venture: • shall become a debtor to the partnership for interest and damages from the time he should have contributed to save the venture. • shall be excluded from the benefits of the partnership upon the recovery of the business of the partnership, except if he is an industrial partner. • cannot be held liable for his refusal as there is precisely no agreement requiring his extraordinary contribution in a venture threatened with insolvency. • shall be required to sell his share to the other partners, provided that he is a capitalist partner.

19. 18. The charging order refers to: • the right of a partner to be reimbursed for whatever he may have disbursed for the partnership and the corresponding interest from the time the expenses were made and to be indemnified for the risks and consequences of management of the partnership business. • an order issued by the court to charge the interest of a partnership with such interest as may be due to partnership creditor before redeeming the interest in a partnership at any time before foreclosure or in case of a sale directed by the court. • an order of the court to charge the interest of a debtor partner in a partnership with payment of an unpaid judgment debt and/or to appoint a receiver for whatever the debtor partner may receive from the partnership and/or such other remedies required by the circumstances. • an order of the court to issue a decree of dissolution where a partner has retired, died, become insolvent, insane or is charged with civil interdiction or any other circumstances as to render a dissolution equitable by a partner not in contravention

20. 19. A person who was made an associate of a partner in the share of the said partner in a partnership • shall be a limited partner if the power of management has been conferred on the said partner in the articles of partnership. • shall only be entitled to the profits but shall not be entitled to any accounting. • shall not be admitted into the partnership unless the partner having the associate should be the manager. • shall in no case be admitted into the partnership without the consent of all the other partners.

21. 20. In a limited partnership, can a general partner admit another partner without the consent of all the limited partners? • No, without exception. • He can admit a limited partner if the right to do is so stated in the certificate, but he cannot admit a general partner. • Yes, but if there be more than one general partner, he cannot do so without the written consent or ratification of all the general partners. • He can admit another general partner if the right is so stated in the certificate but he cannot admit another limited partner.

22. 21. In which one of the following instances can you say that the power of attorney sufficiently provides the agent with the authority to sell the land covered by TCT No. 1234567 owned by Carlos: • special power of attorney which provides that the agent is empowered to “enter into such agreements that shall protect the rights and interest of the principal in the real property covered by TCT No. 1234567” • a general power of attorney which provides that the agent may "buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of real property, more specifically TCT No. 1234567, upon such terms and conditions and under such covenants as the said attorney shall deem fit and proper." • a special power of attorney which provides that the agent is “empowered to take charge, manage and administer and/or to do all that is necessary to protect and promote the interests of the principal with respect to all the principal’s properties, real or personal, wheresoever located.” • a document entitled “Irrevocable Special Power of Attorney” empowering the agent to “secure a loan from such bank or banks and other institutions for the purpose of paying the debt due to the agent and for this purpose to do whatever is necessary with respect to the real property covered by TCT No. 1234567 to secure the loan.”

23. 22. VictorioVende is a licensed real estate broker. He was appointed in writing by Carlos Carro to look for buyers for Carlos’ car. Victorio will not be entitled to a commission upon the sale of the car. Victorio’s job will be to show the car to prospective buyers, accompany them in test driving the car and convincing them to make an offer on the car. Their agreement was that Victorio will be paid Php1,400 for every serious prospective buyer he presents to Carlos. Carlos will then negotiate with the prospective buyer. Once Carlos and Victorio and the prospective buyer agrees on the price of the car, Victorio’s next obligation to Carlos Carro is to do all the necessary paperwork to consummate the sale, including signing the sales contract on behalf of Carlos, ensuring and accepting payment on behalf of Carlos prior to transfer of possession and doing all that is necessary to complete the sale and transfer of the vehicle to the new owner. For the last task, Victorio is to be paid an additional Php5000. Is VictorioVende the agent of Carlos within the meaning of the Civil Code?

24. There is an element of agency in the facts since one of the conditions is that after Carlos and the prospective buyer agree on a price, Victorio is empowered to sign the sales contract, accept payment and do all that in necessary to transfer ownership to the buyer in representation of Carlos with the power to bind Carlos in the sales contract. • Victoriois an agent because he is in fact to be paid Php5000 upon consummation in addition to the Php1,400 to be paid to him after every introduction of prospective buyer. As provided in the Civil Code, agency is for compensation. • Victoriois a mere broker as his main function is merely to bring buyer and seller together. • Victoriois a mere broker since he earns a sum of money by merely introducing prospective buyers to Carlos. To be a true agent Carlos should have been paid a commission upon the successful consummation of the sale.

25. 24. RufinaManda appointed her son Ignacio to sell her land in a valid written special power of attorney. The power of attorney is silent as to the appointment of a sub-agent. Ignacio, being a lazy individual, appointed his girlfriend, Luz to sell the property. Is the appointment of Luz by Ignacio valid? • No. Ignacio must perform the agency personally and the appointment of a sub-agent is prohibited. • Yes, but Ignacio will be responsible for the acts of Luz. • Yes, Ignacio will not be responsible for the acts of Luz as he is only acted on behalf of the principal, except if Luz turns out to be notoriously incompetent or insolvent. • No, because Ignacio cannot appoint a sub-agent unless he is incapacitated, laziness not being one of the grounds permitted by law for the appointment of a sub-agent.

26. 23. In which one of the following cases would you say that the agent has violated the rules on conflict of interest stated in the Civil Code, where the agent acquired the property of the principal, assuming in all cases that the acquisition was at a fair price, through the following means: • the agent acquired by purchase in person at a public auction, the property of his principal under the agent’s administration • the agent acquiring by purchase the property of his principal which is not under his administration or sale through the mediation of another • the agent acquiring by purchase, after negotiating directly with the principal the principal’s property, which property has been entrusted to the agent for sale • the agent acquired by purchase property under his administration property of the principal with as trustee, through a deed of assignment executed by the principal as trustor.

27. 24. RufinaManda appointed her son Igancio to sell her land in a valid written special power of attorney. The power of attorney is silent as to the appointment of a sub-agent. Ignacio, being a lazy individual, appointed his girlfriend, Luz to sell the property. Is the appointment of Luz by Ignacio valid? • No. Ignacio must perform the agency personally and the appointment of a sub-agent is prohibited. • Yes, but Ignacio will be responsible for the acts of Luz. • Yes, Ignacio will not be responsible for the acts of Luz as he is only acted on behalf of the principal, except if Luz turns out to be notoriously incompetent or insolvent. • No, because Ignacio cannot appoint a sub-agent unless he is incapacitated, laziness not being one of the grounds permitted by law for the appointment of a sub-agent.

28. 25. In the absence of stipulation, in which case would you say that the risk of the thing underscored below shall be borne by a capitalist partner who handed over the thing to a general partnership by way of contribution to the partnership? • a condominium unit for sale by the partnership • shares of stock in a publicly listed corporation given in lieu of a cash contribution • landwhere the landowner-partner permits the partnership to put up its manufacturing facility • vehiclesfor use of the salesmen for selling the products of the partnership

29. 26. Anita Falsamiga is a partner in Naranjal Trading, a general partnership engaged in the business of trading fruits. In which one of the following activities would you say Anita would have violated her duties to Naranjal Trading? • Anita engages in the business of real estate leasing, where Anita invested funds in both Naranjal Trading and in her real estate business. • Anita is not an investor in Naranjal Trading and her only contribution to Naranjal Trading is her management and accounting skills, while she works as an examiner at the Bureau of Internal Revenue. • Anita invests funds in Naranjal Trading but takes no active part in its management. She then engages in the business of buying and selling cars for her own account. • Anita is not an investor in Naranjal Trading and her only contribution to Naranjal Trading is her management and accounting skills and she engages in the business of selling jewelry.

30. 27. Since formal accounting is a tedious process and may in fact be disruptive to the business of the partnership, the right to formal accounting may not necessarily be available • for all things specified in a partnership agreement where such right is specified. • for all things affecting the partnership to any partner. • when a partner is wrongfully excluded from possession of partnership property by his co-partners. • in the case where a partner derives secret profit from a transaction connected with the conduct of partnership business and already holds the profits so derived as trustee.

31. 28. A judgment creditor of a partner applies to a court which entered the judgment against the debtor partner to charge the interest of the debtor partner and asks for the appointment of a receiver for the share of the debtor partner. Which of the following objectives is allowed by law for the benefit of the judgment creditor? • to gain preference over partnership creditors with regards partnership property. • to execute against the right of the debtor partner against specific partnership property. • redemption of the interest to be sold without thereby causing dissolution of the partnership with partnership property. • prevent non-debtor partners from making any further payments to the debtor partner and instead to pay the judgment creditor.

32. 29. Anita Falsamiga decides to sell her entire interest in the general partnership of Naranjal Trading to Cristina Queperravida. Aside from enjoying the profits derived from the said interest, which of the following is Cristina entitled to during the continuance of the partnership? • She can ask for true and full information for all things affecting the partnership but she may not require any account of the partnership transactions nor can she demand to inspect the books of the partnership • She can participate in the administration of the partnership but she cannot interfere in the actual management thereof, nor can she demand for a formal accounting. • She is only entitled to the usual remedies in case of fraud in the management of the partnership. • She is only entitled to the right of inspection of the books of the partnership upon dissolution of the partnership and only up to the last account.

33. 30. Are partners liable up to their personal property for claims by withdrawing partners of a general partnership for the return of their equity? • Yes, because the withdrawal of the partner does not by itself discharge the liability of any partner. • No, because it is the partnership that is liable for such claim and only after paying those who are preferred by law. • Yes, because all partners, even an industrial partner, shall be liable pro rata with all their property and after all the partnership assets have been exhausted. • No, because the withdrawing partner is entitled to payment of his separate debts.

34. 31. What is the consequence of a limited partnership formed without substantially complying with formal • A general partnership is formed with respect to third persons but as between the partners the limited liability agreed upon will remain in force. • A limited partnership is nevertheless formed provided that the partners have acted in good faith and no third party is prejudice thereby. • A limited partnership is formed since persons who are partners to each other are partners to third persons and a partnership may be constituted in any form except where immovable property or real rights are contributed. • No partnership is created and no separate juridical personality is created

35. 32. Mr. Smith, an American, was convinced by Sara Tentadora to contribute capital to a partnership to engage in the warehousing business. He agreed provided that he only participates as a limited partner and will not be in anyway involved in the management of the business. Unknown to him, Sara registered their partnership as Tentadora & Smith, Co. to make the business name sound “foreign” and to give it an international luster. What is the consequence to Mr. Smith? • He will not be a general partner with Sara Tentadora nor bound by her obligations provided that upon learning of what Sara did he promptly renounces all profits which he has still to receive. • He will be liable as a general partner even if he is only a limited partner since his surname appears in the partnership name contrary to the provisions of the law which states that a limited partner shall not appear in the partnership name. • He will be a general partner and a limited partner at the same time in a limited partnership which is specifically provided in the law. • He will not be a general partner simply be exercising any of the rights of a partner but is still a limited partner and is entitled as such, but he should promptly return any profits which he has received as a general partner upon learning of the mistake.

36. 33. Naranjal Trading is a general partnership duly constituted and registered with the Securities and Exchange Commission in the year 1995. On January 5, 2010, Alfred Has was duly constituted and appointed by the partners as the manager of the partnership. Alfred’s power to manage • is irrevocable • is revocable after the period fixed in the appointment has expired and if no period is fixed only be amendment of the articles of partnership duly ratified in accordance with law. • can only be revoked but the intervention of the court must be sought for the revocation to be valid • may be revoked at any time.

37. 34. Where land is contributed to a partnership and a dispute arose between the partner who contributed the land and the partner who did not contribute the land. The former claiming that the latter did not fully contribute the cash promised and the latter claiming huge losses in the venture due to the poor location of the property. What will be the effect if an inventory of the land is not made, signed by the parties and attached to the public instrument in relation to the dispute of the parties? • There can be no dispute on the land as it cannot be deemed to have been validly contributed to the partnership. • The effect of failing to comply with the formal requisites involving immovable property does not apply where it is the partners themselves who are making a claim on the partnership agreement. • The partnership is void for failure to make the inventory, but no damages will be due as the Court will not extricate parties from stipulations that may turn out to be financially disadvantageous. • The partnership is void but the parties disadvantage by the failed contract can claim damages to the party who has cause the contract to fail.

38. 35. Several persons were enticed by a single promoter to form a corporation. The latter was entrusted to incorporate, but did not do so because he never intended to form the corporation. How will the rule on corporation by estoppel apply as between the parties to the failed corporation? • All the parties shall be liable for their contributions as such as the law will not extricate parties from their failure to act with due diligence. • No de facto partnership shall be deemed to be formed as between the parties as their purpose is that no partnership shall exist. • All persons who assume to act as a corporation when there is no authority to do so shall be liable as partners. • No claim may be made by any one party against the other as a de facto partnership can only exist for the protection of third persons.

39. 36. Juan Cruz is a messenger who works in Equis, Cruz & Porciento Law Office. Atty. Julio Cruz is the managing partner of the firm and although he has the same family name with Juan they are not related. Juan Cruz wears a barong which is a uniform provided by the law office. Because of his outfit, Juan Cruz is sometimes mistaken for an attorney who is related to Atty. Julio Cruz. There were times when he was addressed as Atty. Cruz, or addressed as “manager”. The partners of the firm, Atty. Julio Cruz, Atty. Juan Equis and Atty. Pedro Porciento, found this amusing and never bothered to correct strangers who made this mistake. Subsequently, Rick’s Law Bookstore, Inc., a regular supplier of law books to the law office presented several sets of expensive American law books to Juan Cruz. The personnel of Rick’s Law Bookstore, Inc. have always believed Juan Cruz to be the office manager who is somehow related to Atty. Julio Cruz. Atty. Julio Cruz never corrected the impression because, as earlier stated, he found it amusing.

40. Juan Cruz, in a rather expansive mood accepted delivery of the American law books and signed the delivery receipt and the “Confirmation of Purchase Order” for the books on behalf of the law firm. The books were put on the shelves of the law firm without anyone noticing it and it was in fact used by the lawyers of the firm. In the meantime, the law firm had a loan facility with Metered Bank allowing the firm to draw cash from time to time as needed. The bank’s staff, like Rick’s Law Bookstore thinking that Juan Cruz is an office manager of the firm. Upon Juan’s instructions, they allowed Juan to draw Php20,000 from the loan facility. Juan signs a receipt which simply reads: “Received from Metered Bank the sum of Php20,000. signed Juan Cruz.” The acts of Juan with respect the books and the Php20,000 was discovered only six months later, and Juan had already resigned from the law firm by then. Which of the following is the correct conclusion?

41. Neither Rick’s Law Bookstore, Inc. nor Metered Bank can bind the law firm under the concept of agency since Juan’s action are void ab initio being done without authority of the principal. But the book supplier can collect payment for the books under the principle of unjust enrichment. • Rick’s Law Bookstore, Inc. and Metered Bank can both hold the law firm liable because by the silence and inaction of the partners of the firm they have held Juan out to the public as their duly authorized agent. • The acceptance of the American law books by Juan binds the firm but not the Php20,000 from Metered Bank because the former was accepted on behalf of the firm while in the latter case, the receipt shows that Juan received the funds in his own personal capacity. It is only in the former case that an implied agency was constituted due to the silence and inaction of the principal, i.e., the partners of the law firm. • There is no recourse for either Rick’s Law Bookstore, Inc. or Metered Bank. Third persons dealing with agents do so at their own peril and it was easy enough for Rick’s Law Bookstore, Inc. and Metered Bank to check on the authority of Juan Cruz as both Rick’s Law Bookstore, Inc. and Metered Bank have regular dealings with the law firm.

42. 37. Carlos owns a piece of idle land along C-5. Jude, a person with connections with the banks, agreed with Carlos to shoulder 50% of the costs of putting up a three-storey commercial building on the land. The other 50% will be shouldered by Carlos through a bank loan through the help of Jude. Jude, who is also an architect and owns an engineering firm, agreed to likewise design and construct the building. It was agreed that the building to be constructed will be owned by Carlos. After the building is constructed Carlos and Jude are to share the rental proceeds equally, that is, 50-50. Carlos then executed a special power of attorney to Jude to mortgage the land and to borrow money from the bank and also to manage the building and collect rentals from the tenants.

43. As things would have it, without Carlos’ knowledge, Jude borrowed from the bank the entire cost of the building and did not spend a single centavo on its construction although he did design it and his engineering firm did put up the building under Jude’s careful supervision. After the building was done, Jude was always late in remitting Carlos’ share in the rentals and even pocketed about 75% of the rental proceeds instead of the 50% share he was entitled to. Carlos eventually discovered what Jude had done. Carlos now wants to take over the management of the building and remove Jude, can he do so?

44. No, Carlos may not, the agency is coupled with interest and, therefore, it cannot be revoked at will as a bilateral contract depends upon it. • Yes, because the principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. • No, effectively there was a partnership formed with Jude as the appointed manager. Jude as such may execute all acts of administration despite opposition of his partner Carlos. • Yes, the irrevocability of the power of attorney to manage the building may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent.

45. 38. St. John Enterprises (SJE) was to buy factory scraps for rag making from Ropa Garments Inc. In a letter addressed to Ropa Garments Inc., Juan, president of St. John Enterprises stated: “This is to inform you that as President of St. John Enterprises, that I have authorized the bearer, LINA ZETA to be my lawful representative in the withdrawal of the scrap cloth awarded to me. For this reason, I have given her the ORIGINAL COPY of the AWARD, dated Aug. 5, 2008 and O.R. No. 8706855 which will indicate my waiver of rights, interests and participation in favor of Lina Zeta.” A controversy arose as to the alleged short delivery of the scrap cloth by Ropa Factory and Lina Zeta sued. Does Lina Zeta have standing to sue in her own name?

46. No, because Lina is a mere agent of SJE as the word “representative” indicates in the first sentence of the letter above and it is “for this reason” in the second sentence thereof that she has been given the award so that as an agent she can withdraw the scrap cloth No, because Lina has not been given the authority to file suit on behalf of SJE. Yes, the second sentence stating that that the award has been given to Lina Zeta and indicating that there is a waiver of rights in favor of Lina clarifies that Lina is an assignee not an agent. Yes, since there is no statement in the letter above indicating that Lina is an agent or attorney in fact.

47. 39. PortaInc. was appointed by India Air to represent India Air as general sales agent (GSA) to represent India Air in Cebu. Passengers from Cebu who wish to fly India Air may purchase tickets from Porta Inc. and payment is made at the offices of Porta Inc. in Cebu. The GSA contract provides that “"either party may terminate the Agreement without cause by giving the other 30 days' notice in writing." Because of alleged non-remittance of proceeds of ticket sales by Porta Inc. India Air terminated the GSA contract with the requisite 30 days notice. India Air then sued Porta Inc. for accounting. Porta Inc.’s defense was that she has not been paid its commissions. The court awards Porta Inc. the unpaid commission but orders Porta Inc. to remit the proceeds of the ticket sales. In the meantime, the GSA contract was reinstated. Do you agree with the court’s decision with respect the reinstatement of the agency?

48. No, because an agent must first fulfill its obligations under the contract of agency, in this instance the full remittance of the proceeds of the ticket sales before the agency may be reinstated. No, because to compel India Air to extend its personality to Porta Inc. without its consent would be violative of the essence of a contact of agency. Yes because this is one case where the agency cannot be revoked at will, it being coupled with interest. Yes, because the GSA was constituted for the common interest of both parties and once essence of the obligation has been restored, i.e. the remittance of the proceeds of the ticket sales and the payment of the commissions, the agency must perforce be reconstituted.

49. 40. Pedro Mandante bought a plane ticket from Air Serbia to go to Belgrade. He had to board a Quiapo Pacific flight to HongKong and from there took a flight to Belgrade. The ticket issued to him by Air Serbia provides that “carriage to be performed hereunder by several successive carriers is regarded as a single operation.” Upon reaching Belgrade he found that his baggage was lost. After futile attempts in demanding compensation, Pedro Mandante filed a case against Air Serbia. Air Serbia’s defense was that the luggage was lost by Quiapo Pacific, thus Air Serbia impleaded Quiapo Pacific in the suit by way of a claim for damages to be paid to Air Serbia should the court find that Pedro has a cause of action. What would be the correct ruling with respect to the inclusion of Quiapo Pacific by Air Serbia?

50. Air Serbia can bring suit against Quiapo Pacific but it must amend its third party complaint as the case must be brought in the name and on behalf of the principal, in this case Pedro Mandante, the plaintiff in the case. The fact that the contract was based on breach of contract between Pedro Mandante and Air Serbia, Quiapo Pacific cannot be impleaded because it is not party to the contract. Air Serbia is the principal in this case and Quiapo Pacific its agent, hence Air Serbia can file suit against Quiapo Pacific for the latter’s negligent acts or omissions in the performance of its duties. It is not logical fair or equitable to allow Air Serbia to sue Quiapo Pacific for a mishap that happened on its air ticket, since as stated in the condition of the ticket which Air Serbia issued, the performance of the contract of carriage by successive carriers is to be deemed a single operation.