Accountable agent

The relationship between the parties to a contract depends on the kind of contract they entered into or the true nature of their transaction. For instance, the delivery of certain goods from one person to another may not always connote that such delivery is pursuant to a contract of sale between them. Consider the case of Benny, for example.

Benny was a local businessman with vast commercial connections. Among his contacts was a manufacturer of automotive spare parts in the United States. Sometime in the seventies, the US company’s top executive decided to expand its operations and to penetrate the Philippine market. They saw the bright potential of their products in the country which was on its upward economic trend. For that purpose, they offered Benny to be their local distributor. In the contract between them, it was stipulated that the US corporation would remain the owner of the spare parts to be sold. No transfer of ownership to Benny shall be effected and the price must follow the quotation prescribed by the company. But the ultimate paragraph expressly stipulated that Benny was not an agent and therefore could not bind the company for his acts.

As anticipated, the venture boomed and profits started to come in. Thus more consignments followed and many more profits were realized. Business grew but Benny’s remittance of the payments slackened. He used the amount for himself and his family and still continued to order for more supply for the spare parts.

When a series of requests for Benny to first account for his activities remained unheeded, the company filed an action in court to compel Benny to account for his transactions and to remit the payment of the spare parts sold. In his defense, Benny countered that pursuant to the ultimate paragraph of their agreement, the company did not make him its agent so that he was actually a purchaser of those spare parts shipped making him the absolute owner thereof. The company therefore had no control or supervision over him nor the right to force him to account for all moneys he had received. As seller, it has only to wait for payments of the articles he actually bought.

Was he correct?

No.

The contract entered into between Benny and the US corporation was not a contract of sale but one of Agency to Sell. The disclaimer in the ultimate paragraph of their agreement was superfluity, for after all the company retained ownership over the goods and the price was subject to its control not-withstanding the fact that it delivered the goods to Benny. In the eyes of the law, therefore, it exercised the power of control and supervision over Benny to which the latter is deemed to have submitted himself from the very beginning (Ker and co. Ltd. vs. Lingad, 38 SCRA 524).