Agency Reviewer

NOTES ON EUGENE TAN
AGENCY
CHAPTER 1
NATURE, FORM AND KINDS OF
AGENCY
Art. 1868. 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. (1709a)
Philippine Civil Code does not make a distinction

between civil agency and commercial agency
Agency defined
Is a legal relationship between 2 parties

whereby one party, the principal, authorizes
another, the agent, to act for and in his behalf in
transactions with 3rd persons.
The agent has a power to affect the legal

relations of the principal. Agency is a consensual
relationship.
Definition of Agency by the Restatement of Agency
Agency is the fiduciary relation which results

from the manifestation of consent by one person
to another that the other shall act on his behalf
and subject to his control, and consent by the
other so to act.
The one for whom action is to be taken is the

principal. The one who is to act is the agent
For agency to exist, principal must generally appoint or
give authority to the agent.
Historical Note on Agency
As a systematic body of rules, agency is a

comparatively modern concept.
Before common law absorbed commercial law,

agent was used to refer to factors, brokers or
attorneys.
Until the 19th century, the rules on agency were

discussed under the concept of Master and
Servant. Blackstone considered it as a 4th
species of servant in a rather superior or
ministerial capacity, such as stewards or bailiffs,
which the law considers as servants pro
tempore.
Agency is primarily a commercial subject but may and
do operate in non-commercial settings.
The Object of Agency
Agency may concern either property of the

principal, of a 3rd person, of the principal & a 3rd
person, or of the principal and agent, but must
not relate solely to the business of the agent.
A contract in relation to an illegal or immoral

transaction cannot be the foundation of a legal
agency.
Essential Requisites of Agency
1. Consent express or implied, of the parties
to establish the relationship
2. Object is the execution of a juridical act in
relation to a 3rd person
3. The agent acts as a representative and not
for himself
Mark Ladores / Jen Laygo / Fred Liong / TJ Tijam [2D 05]
ATTY. J. OBIETA
4.
The agent acts within the scope of his

authority.
Principal
One who has permitted or directed another to

act for his benefit and subject to his direction
and control.
Sometimes referred to as Constituent
By express provision of the Phil Civil Code,

lease of work or service is excluded from the
coverage of agency.
Capacity of the Principal
In order for the principal to be able to appoint an

agent, it is necessary that the act be delegable
and that the principal has the capacity to give a
legally effective consent.
It is not necessary that he has the capacity to

enter into a contract, but if he does not have the
capacity to do the act to be delegated, he does
not have the capacity to authorize an agent to
perform it for him.
Restatement of Agency:
A person who has capacity to affect his

legal relations by giving consent to a
delegable act or transaction has capacity
to authorize an agent to do such act or to
conduct such transaction for him with the
same effect as if he were to act in
person.
If the purported principal, because of insanity or

some other condition, lacks the capacity to give
a legally effective consent, he cannot appoint an
agent.
A minor can appoint an agent for necessaries.
But if the minor appoints the agent for

other than necessaries, any contract
entered into by the agent is voidable. It
can be ratified by the minor upon
reaching the age of majority.
Corporations can only act through agents and

must have capacity to appoint them.
Unincorporated associations cannot consent to

an appointment of an agent since it is not a
separate juridical entity.
NOTE: Difference between Juridical Capacity

and Capacity to Act [Art.37 of Civil Code]
Juridical Capacity: acquired upon birth,

even provisional personality to fetus.
Applies to all persons, even minors.
Capacity to Act: not inherent, must be

attained or conferred and can be lost by
death or valid cause provided by law.
Happens only upon reaching age of
majority.
Classification of Principals
1. Disclosed
Principal is disclosed if the other party
[3rd person] has notice of his identity
There are transactions which may rely
chiefly on the credit and reputation of
the principal, so that the identity of the
agent is unimportant.
Agent is not a party to the contract
unless he & other party specially agree.
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
Partner Partners are agents and also
principals of each other. Every partner acts as a
trustee for his co-partner with regard to any
benefits or profits derived from his act as
partner. Each partner is a general agent for the
other partner.
Corporate Directors corporations can only act

through agents and all the rules on agency apply
to all their officers and employees, except as to
shareholders.
Trustees Fiduciaries who hold legal or

equitable title to property for the benefit of
another.
Escrow Holders When a person receives

something from each of two parties with an
agreement to transfer property of each to the
other upon the happening of an event. He is an
agent of both parties, but until the happening of
the event, he is not an agent of either party.
Corporate Subsidiaries A corporate subsidiary

is not, as such, an agent of the parent company.
One may become an agent, however, if it is
employed by the parent to conduct its
transactions.
Sub-Agent
Agent of agent employed to act for the agent in

performing functions undertaken by the agent for
his principal, and for whose conduct the agent
agrees to be responsible to his principal.
Delegable Acts
All acts that could be done by a person himself

are delegable to an agent except the following
non-delegable acts:
Public policy requiring non-delegability

statements made under oath, voting,
personal signatures by testator and
witnesses
Criminal Acts principal by inducement

is possible, but one who directs another
to do such act is subject to the same civil
liability as if done by himself.
Delegation by a contractor who is not an

agent Example is when a doctor cannot
delegate to another the performance of
medical services, or an artist or an actor.
A contract which calls merely for a
specific result is delegable, but subject to
the liability of the contractor for his
delegates failure to perform.
If personal performance is required, the

doing of the act by another on his behalf
does not constitute performance by him.
Making or Disposition of Will is Strictly Personal
Exception: Amaneunsis Rule wherein instrument

is executed for principal by a 3rd party but in the
presence & under direction of the principal, it is
commonly said not to be an act of agency.
A principal has the right to control the conduct of the
agent with respect to matters entrusted to him.
Authority
Is the privileged power of the agent to bind the

principal, the privilege being based upon the
principals manifestations of a consent to him.
2.
Partially Disclosed
Other party [3rd person] has notice of his
existence but not his identity.
There are also transactions where
identity of the agent is more important.
When principal is partially disclosed, the
other party does not know the identity of
the principal and necessarily relies on
the agent, it is therefore inferred that in
such cases, the agent is a party to the
contract.
But since the other party knows of the
existence of the principal, although he
doesnt know the latters identity, it is
normally considered that the 3rd party
contracts with BOTH the agent and the
principal, wherein both become parties
to the contract.
3. Undisclosed
If the other party has no notice that the
agent is acting for a principal.
Where an agent purports to be
contracting only for himself but in fact is
acting for a principal, the normal rules of
contract would make the agent alone a
party to the contract.
Resulting liabilities are based upon
agency rules.
Corporations can be principals, provided they refer to
those matters within their corporate powers.
Corporations or partnerships may serve either as
agents or principals.
Art.1919 provides that dissolution of firm or

corporation is a ground for termination of agency
as an express recognition of the capacity of
corporations or partnerships to enter into
contracts of agency.
Aliens/Foreigners can be principals
Capacity of Agent
It is not necessary that the agent has the

capacity personally to possess rights or duties.
The only requirement for an agent is that he

must have the physical or mental capacity to do
the very act for which he has been appointed.
A minor may be appointed as an agent,

but he is not subject to the normal
liabilities of the agency because of his
lack of capacity.
Restatement of Agency
Any person has the capacity to hold a

power to act on behalf of another.
The extent to which a person holding

such power is fiduciary and is subject to
duties and liabilities to the principal,
depends upon his capacity.
Special Types of Agents
Attorneys-at-law the relationship of an attorney

with his client is largely governed by agency law.
Attorneys-in-fact those which are acting under

a special power created by deed. All attorneys in
fact are agents but not all agents are attorneys
in fact.
NOTES ON EUGENE TAN
AGENCY
Effective to create rights and liabilities between

the principal and 3rd persons.
Requirements for an Agent to be Authorized:

1. Manifestation of Consent to him by the
principal
2. Principal has capacity to give consent
3. The act must be delegable
4. Any required formalities must have
been performed.
Where all these exist, the principal becomes a

party to the transaction performed by the agent
with the same effect as if conducted by the
principal himself.
It should be noted that an agent may have the privilege
to act but not the power to bind the principal.
Thus, if a formality has not been performed, the

agents privileged act of signing a required deed
does not bind the principal.
Example: oral instruction to convey real property

The Parol Evidence Rule
Although no particular form of authorization is

necessary to create a valid agency, where there
is a particular document evidencing agency, the
parol evidence rule applies.
The rule provides that where the parties have

agreed that that document represents the
complete and final statement of their agreement,
no other evidence of prior or contemporaneous
statements is admissible in any subsequent
action based on that particular document.
Agents Power
Different from Agents authority
An act is w/in the authority of an agent if

the agent is privileged to do that act by
the principal.
An act is w/in the power of the agent if he

has the legal ability to bind the principal
to a 3rd person, even though the act
constitutes a violation of the agents duty
to the principal.
Agents power to subject the principal to

personal liability is the characteristic result of the
agency relation.
Agency relations are fiduciary
An agent is estopped from acquiring or asserting

a title adverse to that of the principal.
Where an agent violates his duty as fiduciary, a
constructive trust arises, although there has been no
antecedent
fiduciary
relation
and
it
arises
contemporaneously with the particular transaction.
No acquisitive prescription in agents favor
Agent doesnt hold propy in concepto de dueo.

Dual Agency
Agents acting for both parties to a transaction. It

is not unlawful if both parties know of and
consent to the dual employment or if the agent
acts as a mere scrivener or middleman whose
function is to bring the parties together,
Distinction between Agent and Servant
Agent is employed in a capacity superior to

servant. Agent is entitled to use his discretion as
to the means to accomplish the end for which he
ATTY. J. OBIETA
is employed, while the servant is directed by the
master not only as to what has to be done but
how it shall be done.
The essential distinction is that the agent is

employed to establish contractual relations
between his principal and 3rd persons while the
servant is not.
Lease of Services distinguished from Agency
Agency
One binds himself to
render service
Basis is Representation
Preparatory Contract
Agent has power to bring
about business relations
between principal and 3rd
persons
Involves Juridical Acts
Will of one party is
sufficient to extinguish the
relation.
Lease of Work/Services
One binds himself to
render service
Basis is Employment
Involves NonJuridical Acts or
Material Acts
Will of both parties is
necessary to
extinguish reciprocal
obligation
Agency distinguished from other contracts/capacities
From Judicial Administrator is appointed by the

court; represents the court, the heirs and the
creditors of the estate; must file a bond before
performing duties; subject to orders of the court
whereas an agent is controlled by the principal
through agreements.
Negotorium Gestio An administration by virtue

of an implied agency derives its origin from a
contract, while the management of anothers
business without the knowledge of the owner is
based solely on a quasi-contract.
Independent Contractor where one party was

authorized to do work according to his own
method and w/o being subject to the other
partys control, except as to the result of the
work, he is an independent contractor and not
an agent.
Agency to Sell v Contract of Sale
Transfer of title or agreement to transfer it for a

price paid or promised is the essence of sale.
If such transfer puts the transferee in the

position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and
not merely as an agent who must account for
the proceeds of the sale, the transaction is a
sale. But the essence of an agency to sell is the
delivery to an agent, not as his property, but as
the property of the principal who remains the
owner and gas the right to control sales, fix the
price, and terms, demand and receive the
proceeds less the agents commission upon
sales made.
Agency distinguished from Contract of Sale or
Dealership
In Agency, only possession of the goods or the

subject matter is transferred to the agent while
ownership is retained by the principal. The agent
must then account for any proceeds from sale of
the goods and return those not sold.
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
Some manifestation of the principals consent
must actually come to the attention of the agent.
But
the
agent
need
not
necessarily
communicate his consent to the principal if,
under the circumstances, embarking on the
purpose of the agency is in itself sufficient
indication of consent.
Power of Attorney
An instrument in writing by which one person, as

principal, appoints another as his agent and
confers upon him the authority to perform certain
specified acts or kinds of acts on behalf of the
principal.
An implied authority cannot arise where there is

an express authority in writing.
A power of attorney must be strictly construed

and strictly pursued.
Power of Attorney need not be acknowledged or

registered
Powers of attorney-in-fact cannot be inferred, it

is necessary that they be clearly and expressly
stated in the power of attorney.
A person dealing with an Attorney-in-Fact or an

agent is under the obligation to inquire into the
authority and scope of power of the agent.
The law indulges in NO Presumption that an agency
exists. Generally, agency is NEVER presumed.
However, a presumption of agency may arise by

operation of law:
Presumption of agency in Partnership

[Art1803]
But there is no inference of agency between

husband and wife from the fact of marriage.
But then, a husband is considered an

agent of the conjugal partnership whose
acts binds the wife as partner.
Lawyers do not have to prove their agency in

courts as the same is presumed.
If it turns out the lawyer is not the real

attorney, he may be cited for contempt.
2 Kinds of Agency
1. Actual Agency
Agency resulting from the oral or

written agreement of the parties.
2. Implied Agency
Agency by Estoppel
May arise from:

1. Acts of the principal
2. Silence or lack of action
3. Failure to repudiate within a
reasonable time
4. Acquiescence or toleration of
principal
5. Receipt of benefits from the
agency by principal
Falsely pretending agency may constitute Estafa under
Art315 by false pretenses in Revised Penal Code.
Prescription for Breach of Agency
If agency contract was oral 6 years
If written 10 years
Presence of commission is not a determining factor in

agency. It may only be an additional price which the
other party bound himself to pay and which stipulation
is not incompatible with purchase and sale.
When depositor of a bank deposits cash, relationship
becomes a debtor-creditor relationship, with the
depositor as creditor and the bank as debtor.
But when check is deposited with the collecting bank,
the relationship created is that of agency.
The depositor becomes the principal of the bank

wherein the bank is to obey the orders of the
checking depositor until the check of depositor is
presented for payment or certification.
Consignment of Goods is a form of Agency
Offer may be made through an agent
Art.1322 of the NCC provides that an offer made

through an agent is accepted from the time
acceptance is communicated to him.
Co-owner considered as agent of his co-owners.
Possession may be acquired or exercised through an
agent. [According to Arts532 and 524]
Tax Return may be filed by taxpayers agent.
Art. 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.
Agency may be oral, unless the law
requires a specific form. (1710a)
Generally, no formalities required for agency relation.
Except for agency to sell a piece of land or any

interest therein. [Art1874] or those in Art. 1878.
Burden of proof is upon the one claiming the

existence of authority.
Usual method is a statement by the principal,

orally or in writing directly to the agent, normally
in the form of a contract between the two.
Acquiescence in acts of the agent is the most

frequent way in which authority is created, as
well as Ratification.
Ratification of Acts of the agent results in

express agency.
Failure of principal w/ knowledge of conduct, to

object to its continuance constitutes authority.
Consent of Principal and Agent
2 fundamental elements for the creation of the

agency relationship:
1. Manifestation or indication by the principal
to the agent that he consents to the agents
acting on his behalf
2. Consent by agent to act for the principal.
Agency relationship can only arise when there is

mutual consent between the 2 parties.
However, consent may be inferred from words or

conduct, including acquiescence.
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
Paragraph 1 requires more than mere failure to reply.

There must be no objection and the agent must
actually receive the power of attorney.
Paragraph 2 requires that the power of attorney
entrusted to the proposed agent by letter or telegram
be with respect to the business in which he is
habitually engaged as an agent.
The law disputably presumes that a letter duly directed
and mailed was received in the regular course of mail.
Art. 1870. Acceptance by the agent may also be

express, or implied from his acts which carry
out the agency, or from his silence or inaction
according to the circumstances. (n)
Appointment of an agent must be communicated to

him. It may also be necessary that acceptance of the
agency be communicated to the principal.
As a rule, if the agent proceeds to act under the

appointment, it is unnecessary to give the
principal express notice of the acceptance.
This will be regarded as tacit acceptance and

even if he has written to his principal refusing
the agency, it will be regarded as acceptance.
Agency may be implied from acts or circumstances or
established by the agents admission.
Admission of agency by the agent is evidence of
agency as far as relying 3rd party is concerned.
The rules is that where it is necessary to

determine whether the 3rd party to a transaction
dealt with the alleged agent in his capacity as
agent or a principal, the declarations of the
agent asserting his relationship to the principal
are admissible.
Art. 1871. Between persons who are present, the

acceptance of the agency may also be implied
if the principal delivers his power of attorney
to the agent and the latter receives it without
any objection. (n)
Articles 1871 and 1872 are rules of evidence.
They are applicable only when there is a need to

prove the existence of the agency relationship in
court.
Delivery of the power of attorney by the proposed
principal is personal because both the proposed
principal and agent are present.
1871 gives the disputable presumption of acceptance
of the proposed agency. Acceptance is implied
because ordinarily, a person receiving the power of
attorney should object to the appointment.
Art. 1873. If a person specially informs another or

states by public advertisement that he has
given a power of attorney to a third person, the
latter thereby becomes a duly authorized
agent, in the former case with respect to the
person who received the special information,
and in the latter case with regard to any
person.
The power shall continue to be in full
force until the notice is rescinded in the same
manner in which it was given. (n)
Art. 1874. When a sale of a piece of land or any interest

therein is through an agent, the authority of
the latter shall be in writing; otherwise, the
sale shall be void. (n)
Art. 1872. Between persons who are absent, the

acceptance of the agency cannot be implied
from the silence of the agent, except:
(1) When the principal transmits his power of
attorney to the agent, who receives it
without any objection;
(2) When the principal entrusts to him by
letter or telegram a power of attorney with
respect to the business in which he is
habitually engaged as an agent, and he
did not reply to the letter or telegram. (n)
The agency may be announced either:

1. By Special Information agent becomes such
with respect to the recipient of the special
information only.
2. By Public Advertisement agent is such with
respect to any person.
The revocation or termination of agency shall be done
in the same manner in which it was given.
A 3rd party notified of agency by special information
must similarly be notified of agency termination.
Principal who informs a 3 rd

party of the
appointment of the agent has the duty of
notifying the same 3rd party when the agency is
terminated, otherwise he will be held liable to 3 rd
parties acting in good faith.
Agency or authority to sell is warranted by public
advertisement of sale.
Meaning of Authority to Sell Land
Authority to sell contemplates only a sale for a

money consideration, and unless otherwise
agreed, it includes only authority to sell at
private sale, and not at an auction.
Authority to sell does not include authority to

mortgage. For authority to sell land, written
authority may be required for conveyance. If the
transaction has been completed, the agent has
no power to rescind it except where there is
fraud or mistake.
Specific Written Authority required
Must be conferred in writing
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
Once agency is established, it is presumed to be

onerous.
Presence of commission does not necessarily convert
transaction into agency.
Consideration is not one of the required elements for
the creation of the agency relation.
The fact that an agent is acting w/o

compensation has no effect upon his rights,
duties, liabilities and powers with reference to 3rd
parties or his principal.
However, generally a gratuitous agency may be

terminated at any time w/o giving cause of
action to either party.
Obligation to pay compensation
Whenever a person engages an agent, it is

inferred that the principal has a duty to
compensate the agent.
But when the other person performs services for

the principal w/o the latters request or
acquiescence, the principal has no duty to
compensate the other even if he was benefited.
Where the agent agrees to work for nothing,

even though the principal expects to pay for the
agents services, the agent is not entitled to
compensation.
When the agency has already been terminated

or has expired and the agent continues to render
service to the principal, even if with the tacit
consent of the latter, the agent cannot recover
compensation based on quantum meruit,
ignoring the terms of the contract.
Agents right to compensation depends on compliance
with the contract,
Agency compensation may be in kind.
When does commission or compensation accrue
Broker in a sale must be the efficient agent or

the procuring cause of the sale. A broker is not
entitled to commissions for unsuccessful efforts.
Unless it is clearly stipulated in the agreement

with the owner, the broker is not entitled to his
commission from the perfection of the contract
of sale if no sale is finally consummated.
Amount of Compensation
Inferred that the parties intended that

compensation should be at the rate customarily
paid for such services. Otherwise, agent is
entitled to a reasonable sum.
If a principal makes advances to an agent, in

excess of the commissions earned by the agent,
it is generally held that, unless otherwise
agreed, the agent is not liable for the excess.
Amount of Commission is a matter of proof
Agent does not have to prove the principals promise to
pay compensation for his agency services because the
presumption applies. An agent does not have to prove
that his agency is for compensation.
In sale of real property, it is owner and not buyer who
must pay commission to agent.
Unlike an agent, an administrator or officious manager
is not entitled to compensation.
When an agent commits a breach of duty, he is not
entitled to the commissions arising from an annulled
sale. Same rule applies when agent takes secret profit
Must give agent specific authority, either to

conduct the general business of the principal or
to execute a binding contract containing the
terms and conditions which are in the contract of
sale he executed.
A special power of attorney is required to enter

into a contract by which ownership of immovable
property is transmitted or acquired. [Art1878(5)]
Express Power to Sell
The express mandate required by law to

enable an appointee of an agency stated in
general terms only to sell must be one that
expressly mentions a sale or that includes a sale
as a necessary ingredient of the act mentioned.
Agency to sell real estate should be in clear and

unmistakable language.
The requirement of writing refers to sale of piece

of land or any interest therein and not just any
kind of real property.
The law does not require that agency to sell be

subscribed by the party sought to be charged.
To have
adequate
safeguards
against
irregularities, frauds, losses or concealment.
Authority to manage or administer does not

include the authority to sell.
Power of Attorney to Sell does not need to be
notarized, it need only be in writing.
Contract of Sale is VOID if agents authority is not in
writing, UNLESS afterwards ratified and adopted by
the owner.
But a conveyance of conjugal property by

husband [as agent of CPG] without the wifes
consent is merely voidable.
Oral Agency to Sell Land may amount to a nonexistent agency or lack of authority.
Written authority is needed only to SELL land, not for
an agency to purchase land.
It was held in a case that the Repurchase of a piece of
land partakes of the nature of a sale and hence, when
effected through an agent, the agency should be in
writing to make the repurchase valid.
Ratification of an unauthorized writing must be written.
Oral approval by principal of the sale by agent

with written authority, but sold by the latter at
terms other than those in the written authority, is
unavailing. To sell upon different terms requires
a new and further authority which must also be
in writing and signed by the principal [According
to the Statute of Frauds]
If a person in representation of another sells or
alienates a thing, he cannot subsequently set up his
own title as against the buyer.
Agreement for sale of real property or of an interest
therein is unenforceable unless the Statute of Frauds
is complied with. [Art1403]
Art.
1875. Agency is presumed to be for a

compensation, unless there is proof to the
contrary. (n)
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
An agent has implied authority to do acts not specified

in the power of attorney
Those which are usually or customarily done in

business
An agent to manage, supervise or oversee the

business of his principal has powers coextensive
in scope with the business entrusted to him.
Agents authority to sell carries with it the authority to
make and enter into the usual and customary contracts
Authority to manage or administer does not include the
authority to sell.
Authority to collect does not generally include authority
to endorse in principals name the checks collected.
But if a collecting agent is authorized to deduct

his commission from the amount received, he
has authority to indorse for this purpose.
Agency to collect may include authority to bring suit
Nature of Office of an Indentor
A broker through which a local company can

order from a foreign company without the latter
having to procure a license to do business in the
country.
Universal Agent agent authorized to transact all the
business of the principal of every kind and do all
delegable acts for him. It must be created in clear and
unequivocal language.
w/o revealing it to his principal, even if the principal

suffers no injury or was benefited by such act.
Where a principal has paid an agent, not knowing of
the breach of the agents loyalty, the principal can
recover what he has paid.
When agent takes unlawful compensation, he acts as
a trustee and may be compelled to account to his
principal for all profits.
Attorney shall be entitled to recover from his client no
more than reasonable compensation, w/ a view to the
importance of the subject matter of the controversy,
extent of the services rendered, and the professional
standing of the lawyer. Contingent fees are allowed.
Gratuitous or Uncompensated Agent
Agent in the full sense with all the powers, rights

and liability of those who are paid even though
he has no obligation to continue to act.
However, a gratuitous agent is not exempted

from duty of loyalty.
Rule prohibiting agent from dealing w/ himself or

taking advantage of his position to make profit
for himself at expense of principal, or having
compensation from both parties, applies.
A gratuitous agent is not liable for NONFEASANCE but is liable for MIS-FEASANCE.
However, 1884 says that agent is bound by his

acceptance to carry out the agency, and is liable
for damages w/c through his non-performance,
the principal may suffer.
Art. 1876. An agency is either general or special.

The former comprises all the business
of the principal. The latter, one or more
specific transactions. (1712)
Art. 1877. 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. (n)
Classification of Agency under Art1876 refers to

Quantity of Transactions Comprised
As distinguished from Art1877 which is based on

nature of agency power or authority.
Hence, general agency is different from agency

couched in general terms Likewise, a special
agency is not necessarily agency couched in
specific terms or special power of attorney.
General Agent
Agent authorized to conduct a series of

transactions involving a continuity of service
Special Agent
Agent authorized to conduct a single transaction

or a series of transactions not involving
continuity of service.
The distinction between the two has to do with
continuity of service rather than breadth or scope of
the agents powers.
Presumption of General Agency
An agency for a specific purpose is not

presumed; and proof of former special agency
does not raise a presumption of agency as to
any subsequent transaction. Where agency is
proved, w/o showing its extent, it is presumed to
be general, rather than special.
Classification of agency according to nature of

authority:
1. Agency couched in general terms
Only includes acts of administration
In order to compromise, alienate,
mortgage or execute any other act of
strict ownership, an express mandate
is required.
2. Agency couched in specific terms
Authority of agent is clearly stipulated
There is an implied authority of the agent to pay the
principals debts in order to preserve the business/
thing under his care.
Right to commence action for collection of debts owing
to principal is an act of administration and not an
incident of strict ownership.
Art. 1878. Special powers of attorney are necessary in

the following cases:
(1) To make such payments as are not
usually
considered
as
acts
of
administration;
(2) To effect novations which put an end to
obligations already in existence at the
time the agency was constituted;
NOTES ON EUGENE TAN
AGENCY
(3) To compromise, to submit questions to

arbitration, to renounce the right to
appeal from a judgment, to waive
objections to the venue of an action or
to abandon a prescription already
acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
ownership
of
an
immovable
is
transmitted
or
acquired
either
gratuitously
or
for
a
valuable
consideration;
(6) To make gifts, except customary ones for
charity or those made to employees in
the business managed by the agent;
(7) To loan or borrow money, unless the latter
act be urgent and indispensable for the
preservation of the things which are
under administration;
(8) To lease any real property to another
person for more than one year;
(9) To bind the principal to render some
service without compensation;
(10) To bind the principal in a contract of
partnership;
(11) To obligate the principal as a guarantor
or surety;
(12) To create or convey real rights over
immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations
contracted before the agency;
(15) Any other act of strict dominion. (n)
Special Power of Attorney refers to an explicit or clear

mandate specifically authorizing the performance of an
act by the agent for the principal.
There is no law prohibiting principals from executing
special powers of attorney for acts of mere
administration.
[1] Payments
Art1232: Payment means not only the delivery of

money but also the performance, in any other
manner, of an obligation.
[2] Novations
Art1291 defines novation. Obligations may be

modified by:
1. Changing their object or principal
conditions
2. Substituting the person of the debtor
3. Subrogating a 3rd person in the right
of the creditor
The obligations to be novated by the agent must

refer to those already in existence at the
constitution of the agency.
[3] Compromise
Special power to compromise does not include

power to submit questions to arbitration
Art2023 defines compromise: as a contract

whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to
one already commenced.
ATTY. J. OBIETA
Art6 governs waivers: Rights may be waived,
unless the waiver is contrary to law, public order,
public policy, morals or good customs or
prejudicial to a 3rd person w/ a right recognized
by law.
Lawyers must have special authority to

compromise their clients litigation, or receive
anything in discharge of clients claims but the
full amount in cash.
[4] Gratuitous Waiver of Obligations
Art1270: Condonation or Remission is

essentially gratuitous and requires acceptance
by the obligor. It may be made expressly or
impliedly. Express condonation shall comply with
the forms of donation.
[5] Transmission of Ownership of Immovable
Involved here is the acquisition or transmission

of ownership and not merely possession of an
immovable and not merely of an interest therein.
When the transaction involves a sale of a piece

of land, agency must be in writing.
Art1878 [5] and [12] refer to sales by agent for

principal and not to sales made by owner
personally to another.
An express authority to sell is necessary

[6] Gifts
Art725 defines donation as: an act of liberality

whereby a person disposes gratuitously of a
thing or right in favor of another, who accepts it.
An agency to make gifts or donation must be in

a special power of attorney unless it refers to
customary gifts for charity or those made to
employees in the business.
Art745 provides that the donee must accept the

donation personally, or through an authorized
person w/ a special power for the purpose or
with a general and sufficient power; otherwise
the donation shall be void.
[7] Loan/Borrow Money
Lending or borrowing money is always onerous.
This paragraph involves money and not fungible

things.
A special power of attorney is still necessary

even if the loan of money is urgent and
indispensable for the preservation of the things
under administration.
[8] Lease
Applies to lease of real property to, and not

from, another person for more than 1 year.
Although a lease of real property especially if it

is not registered is an act of administration,
under this paragraph such lease becomes an
act of strict dominion if it is more than 1 year.
Inference of Authority to Lease:
Inferred from authority to manage the

subject matter if leasing is the usual
method of dealing with it
Not inferred from an authority to sell the

subject matter, to take charge of it or to
receive the rents from it.
Agreement for leasing for longer period than

1year of real property is unenforceable unless
Statute of Frauds is complied with.
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
Special power to mortgage excludes the power to

execute a second mortgage,
Agent cannot buy for himself
Unless w/ permission of principal, agent cannot

sell to himself what he has been ordered to buy.
[9] Service w/o compensation
Service here refers to contractual service

[10] Partnership
Special power of attorney is needed because

partners incur substantial obligations under the
law on partnership
[11] Guarantor/Surety
Art2047 provides that: By guarantee a person

binds himself to the creditor to fulfill the
obligations of the principal debtor in case the
latter shall fail to do so.
Art1827 declares that suretyship [and guaranty]

shall not be presumed, it must be expressed,
and cannot extend beyond its specified limits.
[12] Create/Convey Real Rights over Immovables
Refers to instances such as mortgage of a real

estate or to create a usufruct or an easement of
right of way.
[13] Inheritance
A person having free disposal of his property

may accept or repudiate an inheritance.
Lawful
representatives
of
corporations,
associations, institutions and entities qualified to
acquire property may accept any inheritance left
to the latter, but in order to repudiate it, the
approval of the court is necessary.
Deaf-mutes who can read and write may accept

or repudiate the inheritance personally or
through an agent.
[14] Obligations contracted before agency
Agency to ratify or recognize obligations refers

to those contracted before the constitution of the
agency relation.
[15] Other act of Strict Dominion
Effect of Lack of Special Power of Attorney
Merely unenforceable, not void.
Art. 1880. A special power to compromise does not

authorize submission to arbitration. (1713a)
Art. 1881. The agent must act within the scope of his
authority. He may do such acts as may be
conducive to the accomplishment of the
purpose of the agency. (1714a)
Art. 1879. A special power to sell excludes the power to

mortgage; and a special power to mortgage
does not include the power to sell. (n)
What is included in Authority to Sell
Find a seller to whom principal may sell; make a

contract for the sale; accept or make a
conveyance for the principal; agree upon terms;
demand or to make usual representations and
warranties; receive or execute instruments
required for transfer; make such promises
operating as warranties as are usual in such
transactions; authority to secure professionals/
other assistants required
Authority to sell at private sale and not at auction
But authority to purchase includes

purchase at private sake or auction.
Limits of Authority to Sell
Does not include mortgage, pledge, barter,

exchange property, donate, grant option to
purchase, or partition.
Compromise
A contract whereby parties, by making reciprocal

concessions, avoid litigation or put an end to
one already commenced.
Under 1878 [3], an agent, in order to compromise,
alienate, mortgage or to execute any other act of strict
ownership must have an express commission to do so.
A Special Power of Compromise is Necessary.
A client failing to object or repudiate promptly the
actions of his attorney to compromise of a judgment,
ratification will be presumed.
Submission to arbitration is an extraordinary method of
settlement because the discretion of the agent is
substituted by the discretion of the arbitrator.
Effect of Lack of Special power of Attorney to
Compromise
Compromise is merely unenforceable, not void.
Authority
Privileged power of agent to bind the principal. It

is the creation of rights and liabilities between
the principal and 3rd persons by the agent.
Remember: Agent may have privilege to act but

has no power to bind the principal [meaning
agent has no authority].
Meaning of Scope of Authority
As far as 3rd persons are concerned, an agents

scope of authority includes the authorization
actually conferred to him as well as those
apparently delegated to him.
Classification of Authority
1. Express Authority
Conferred by formal power of

attorney in which authority is spelled
out minutely or by a verbal
command
2. Implied Authority
Principal merely states in general

terms what an agent is to do
Ex: Principal says Manage my

business,
agent
has
implied
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
An execution of a power according to its terms may be

valid to the extent of the actual interest of the principal,
even though the power may be broader than the
interest of the principal.
authority to do acts consistent w/

that direction.
There is no difference in effect of

express and implied authority.
3. Apparent Authority
Results from the conduct by the

principal which causes a 3rd person
reasonably to believe that a
particular person is an agent.
To bind the principal, 3rd person must

prove that principal was responsible
for the appearance of authority
which was misleading.
Agents authority cannot be inferred. A person dealing
with an attorney-in-fact has obligation to inquire into
authority of the latter.
Presumption of Agents Authority
When the fact of agency is uncontroverted or

admitted, and an agent was apparently acting
for his principal, a presumption arises that the
agent was acting w/in the scope of his authority.
When an agency is proved w/o showing its
extent, it is presumed that a general authority
has been given.
Preliminary correspondence between supposed
principal and agent, w/o meeting of the minds, does
not confer authority
Implied
authority
arising
from
emergencies/
Emergency Authority
If a situation arises which the agent reasonably

believes was unforeseen by the principal, he
may have the authority to do acts in excess or
even contrary to his specific instructions if
necessary to protect the principals interests.
To apply, agent must reasonably believe that:

1) Principal failed to foresee event
2) It is not feasible to communicate w/
principal
3) It is necessary to run counter to or exceed
his authority
4) If the principal knew the facts, he would
desire the agent to act.
5) Action taken is the best method to protect
interests of principal/carry out purpose of
agency.
Agency by Necessity v Agency from Necessity
Agency by Necessity emergency authority
Agency from necessity as between husband

and wife, when wife can impose obligation on
husband even against the latters will, like in the
case of power to purchase necessaries which
husband has neglected to furnish the wife.
Forged powers of attorney are null and void
Art. 1882. 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 him. (1715)
Arts1881 & 1882 are sources of Agency by Necessity
Art. 1883. If an agent acts in his own name, the

principal has no right of action against the
persons with whom the agent has contracted;
neither have such persons against the
principal.
In such case the agent is the one
directly bound in favor of the person with
whom he has contracted, as if the transaction
were his own, except when the contract
involves things belonging to the principal.
The provisions of this article shall be
understood to be without prejudice to the
actions between the principal and agent.
(1717)
Art1883 applies only when the agent has in fact been

authorized to enter into the particular transaction but
instead of contracting for the principal, he acts in his
own name.
1883 is not applicable where the 3 rd person knows of
the existence of the agency.
Authority to Disclose Principal
Unless otherwise agreed, agent is authorized to

disclose the existence and identity of principal.
But customs sometimes dictate non-disclosure

of principal, like in case of stock brokers or
auctioneers
3rd person with whom agent contracts in principals
name has right of action against principal
notwithstanding principals denial of commission or
authority of agent.
When acting in his own name w/o disclosing principal,
agent is personally bound.
Does seller have option to sue either the agent or
principal for contract made in agents name?
When the agent buys in his own name but really

on account of his principal, the seller can
recover from either.
Unless:
1) He trusted the agent exclusively
2) By the usage and understanding of the
business, only the agent is held.
3) Unless the special circumstances show
that the agent only was intended to be
bound and the seller knew or should have
known it.
An agent acting for a disclosed principal is not liable.
Ownership of property acquired in undisclosed agency
belongs to the undisclosed principal,
Realty acquired with funds of the principal and at

his instance belongs to him, even if the agent
did not disclose existence of the principal to the
3rd person.
When agent contracts w/ 3rd person in his own name
but involves things belonging to the principal, the latter
is bound.
10
NOTES ON EUGENE TAN
AGENCY
Can both the principal and agent be sued for contracts

involving things belonging to principal?
Yes. 3rd person has right of action against both

when rights and obligations cannot be legally
determined w/o hearing both of them.
A class suit, being a representative one, may involve
agency.
A Principal may sue the agent acting in his own name.
Where merchandise is purchased from an agent

w/ an undisclosed principal and w/o the
knowledge of purchaser that vendor is merely an
agent, purchaser takes title to the merchandise
and principal cannot maintain action of recovery
but can only proceed against the agent.
CHAPTER 2
OBLIGATIONS OF THE AGENT
Art. 1884. The agent is bound by his acceptance to
carry out the agency, and is liable for the
damages which, through his non-performance,
the principal may suffer.
He must also finish the business
already begun on the death of the principal,
should delay entail any danger. (1718)
An instance of agents liability for damages

Once an agent accepts the appointment of agency, he
is bound to perform the same; he agrees that he will
exercise reasonable skill, and that he will take the
usual precautions
Liabilities of agent: that which the principal may suffer
as well as fraud or negligence
Principals action against agent is for breach of
contract of agency
Agent not liable for the remote consequences of

his breach
After notice of principals death, the agent has power to
act in order to protect the interests of the estate
Emergency powers on matters as to which

failure to act would be seriously harmful
Art. 1885. In case a person declines an agency, he is

bound to observe the diligence of a good
father of a family in the custody and
preservation of the goods forwarded to him by
the owner until the latter should appoint an
agent or take charge of the goods. (n)
Another instance of liability of the supposed agent who

declines an agency
Owner means the principal
Until the latter should appoint an agent or take charge
of the goods should have been until the latter should
appoint an agent to take charge of the goods.
In relation to Article 1163: Every person obliged to
give something is also obliged to take care of it with
the proper diligence of a good father of a family, unless
ATTY. J. OBIETA
the law or the stipulation of the parties requires
another standard of care.
Art. 1886. Should there be a stipulation that the agent

shall advance the necessary funds, he shall be
bound to do so except when the principal is
insolvent. (n)
General rule:
principal shoulders the expenses of the agent

But the principal and agent can always stipulate that
the agent shall advance the necessary funds
If the principal is insolvent the agent has no

more obligation to comply with such stipulation
Art. 1887. In the execution of the agency, the agent
shall act in accordance with the instructions of
the principal.
In default thereof, he shall do all that a
good father of a family would do, as required
by the nature of the business. (1719)
The agent must not only act within the scope of

authority but also comply with the principals
instructions; otherwise, he is liable to the principal for
any loss which the latter may sustain
Principal is bound by the acts of agent performed in
accordance with principals express authority or
instruction
Authority: the sum total of the powers permitted to the
agent by the principal which may be limited in scope
Instructions: directions for the manner of transacting
the authorized business
Contemplates only a private rule of guidance to

the agent and are independent and distinct in
character
Among the duties of agent are:
Duty not to disobey
Duty of good conduct
Duty to give information
Duty not to compete with principal
Duty not to disclose confidential information
Duties of care and skill
Duty to account/ to account for profits
Duty not to act adversely
Duty not to act for an adverse party without the

principals consent
Duty not to confuse or appear to own the

property of the principal
An agent cannot be held accountable for his failure to
obey instructions to perform acts which are illegal or
immoral, or which would work a fraud upon others
Instructions prevail over custom or usage
Art. 1888. An agent shall not carry out an agency if its

execution would manifestly result in loss or
damage to the principal. (n)
An agency is for the benefit of the principal
11
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
An agent employed to make loans does not impliedly

warrant the safety of his loans or the solvency of the
borrower
The agent may only do such acts as may be conducive

to the accomplishment of the agency purpose
Take note of the word manifestly
Agents duty not to attempt the impossible
Agency may be terminated by change of conditions
When there is a basic change in the

circumstances surrounding the transaction,
which would reasonably lead the agent to
believe that the principal would not desire him to
act, the authority of the agent is terminated
Once the original circumstances are restored

within a reasonable period, the authority may be
revived
Agent may adopt necessary steps to avoid substantial
or manifest prejudice to the principal
Art. 1889. The agent shall be liable for damages if,
there being a conflict between his interests
and those of the principal, he should prefer his
own. (n)
Another instance when an agent may be held liable for

damages
The agents duties of loyalty and obedience require
him to submerge his personal interests
If a damaging condition has been created by his

breach of duty to the principal, he cannot prefer
his own interests
It is the duty of the agent not to place himself in a
position where his own interests may conflict with the
interests of the principal
But where the agents interests are superior,

such as where he has a security interest in the
principals property, he may protect his interest
When the principal employs an agent, the law
presumes that he does so in order to secure to himself
the benefits of the agents skill and experience
The law presumes that the principal expects that

the agent will endeavor to further the principals
interests
The principal may however waive the benefit of

this rule
Agent cannot generally compete with the principals
business nor represent conflicting interests
An agent acting adversely to principals interests may
be considered exceeding his authority
Art. 1891. Every agent is bound 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.
Every stipulation exempting the agent
from the obligation to render an account shall
be void. (1720a)
Art. 1890. If the agent has been empowered to borrow

money, he may himself be the lender at the
current rate of interest. If he has been
authorized to lend money at interest, he
cannot borrow it without the consent of the
principal. (n)
To be correlated with Article 1878 on the need for a

special power of attorney to loan or borrow money
An agency to borrow money does not disqualify the
agent from being the lender
Unless the principal has specified from whom the
agent is to borrow ad what he is to borrow, the agent
may borrow from any lender
General rule: all agents have the obligation to render

an account of their transactions and to deliver to their
principals whatever they may have received as a result
of agency
Exceptions: attorneys lien and the right of

pledge of the agents
It appears that the principal and agent may validly
make a stipulation exempting the agent from the
obligation to deliver anything he may have received by
virtue of the agency
If the agent in discharging his duty gets a good bargain
or make profits which are the fruits of the agency, the
gain or profit belongs to the principal
It is immaterial whether the profit or advantage is

the result of the performance or of the violation
of the agents duty, if it be the fruit of the agency
An agent who takes secret profit in the form of bonus
form the vendee, without revealing the same to his
principal, the vendor is guilty of a breach of his loyalty
and forfeits his right to collect the commission from his
principal, even if the principal does not suffer any injury
Report: statement of collections
Accounting: settling of accounts of administration or
agency on the part of a trustee/agent; delivery of
payment coming into the hands of the agent;
submission of a statement of receipts and
disbursement with the trust funds
Place of accounting: usually at the principals

place of business
Once agents accounts are approved by principal, the
latter cannot ask for revision
Upon collecting money for his principal, the agent
should give the principal notice of the collection within
a reasonable time
When agent may retain money received
If agents salary has not been paid by the

principal
The company principal was indebted to him for

commissions on policies secured by him
There were still unadjusted accounts of previous

transactions between the two
Failure to account upon demand constitutes
circumstantial evidence of misappropriation
Art. 1892. The agent may appoint a substitute if the

principal has not prohibited him from doing
12
NOTES ON EUGENE TAN
AGENCY
so; but he shall be responsible for the acts of

the substitute:
(1) When he was not given the power to
appoint one;
(2) When he was given such power, but
without designating the person, and the
person
appointed
was
notoriously
incompetent or insolvent.
All acts of the substitute appointed
against the prohibition of the principal shall be
void. (1721)
Implied authority of agent to delegate authority

depending upon the surrounding circumstances, in the
absence of prohibition
Whether a person appointed to act for the principal is
an agent or a sub-agent of the principal depends upon
the interpretation of the agents authority, or, since
there can be apparent authority to appoint agents,
upon the apparent authority
Authority of the sub-agent may be greater than or
different from the authority of the appointing agent
In general, an agent cannot delegate those acts

which require personal skill, direction or
judgment
Where the substitution is authorized by the principal,
the agent ceases to exercise his representative
function
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the

preceding
article,
the
principal
may
furthermore bring an action against the
substitute with respect to the obligations
which the latter has contracted under the
substitution. (1722a)
This right of action against the sub-agent is an

exception to the rule of privity of contracts
Art. 1894. The responsibility of two or more agents,

even though they have been appointed
simultaneously, is not solidary, if solidarity has
not been expressly stipulated. (1723)
This Article provides for a joint agency

Joint agency Is not affected by the simultaneous
appointment of the agents by the principal
Where the principal has conferred authority on two or
more agents to act in a given transaction, they can
only act jointly, unless they are authorized to delegate
simple ministerial functions to one of the group
Where two or more agents are authorized to act jointly,
the death of one of them will terminate the authority of
the others
fulfillment of agency, and for the fault or

negligence of his fellows agents, except in the
latter case when the fellow agents acted
beyond the scope of their authority. (n)
This Article provides for the rule on solidary agency,

which should be expressly stipulated
Each agent is liable for the non-fulfillment of the

agency and for the fault or negligence of the
other agents acting within the scope of authority
Art. 1896. The agent owes interest on the sums he has

applied to his own use from the day on which
he did so, and on those which he still owes
after the extinguishment of the agency. (1724a)
Even if the sums have not been used, the agent would
still be liable for interest thereon if they are still owing
after the termination of agency
Agent is not liable for interest if there is no evidence of
conversion to his own use
Art. 1897. The agent who acts as such is not personally

liable to the party with whom he contracts,
unless he expressly binds himself or exceeds
the limits of his authority without giving such
party sufficient notice of his powers. (1725)
An agent acting as such may be held personally liable

if he expressly binds himself or exceeds the authority
without the third party having notice of his powers
If the third party knows, the contract would be

void, unless the principal ratifies it
Article 1403 (1): Contracts are unenforceable if

the ones who execute them in the name of
another act beyond their powers
There is an inference that the agent is not, and that the
principal is, a party to a contract made for a disclosed
principal; therefore, the agent is not bound in disclosed
agency
If the agents act is open to two constructions, one of
which binds him, and the other binds the principal, it is
said that the law prefers binding the principal
Art. 1898. If the agent contracts in the name of the

principal, exceeding the scope of his authority,
and the principal does not ratify the contract, it
shall be void if the party with whom the agent
contracted is aware of the limits of the powers
granted by the principal. In this case, however,
the agent is liable if he undertook to secure
the principal's ratification. (n)
Art. 1895. If solidarity has been agreed upon, each of

the agents is responsible for the non-
ATTY. J. OBIETA
This Article refers to the agents liability towards the

third person
13
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
If the principal has reason to believe that his

knowledge is relevant, and his failure to reveal it
causes harm, he is liable to the person harmed
because of his own fault
Example: when an employer authorizes an

agent to sell goods, knowing that the agent is
ignorant of hidden defects, the resulting sale is
fraudulent
The principal is not bound by relevant knowledge
which he should communicate to the agent, if he has
no opportunity to do so after acquiring the knowledge
and before the agent acts
Even if the agent acting in the principals name

exceeds his authority, the contract binds the agent to
the third person unless such third person knows of the
excess of authority in which case the contract is void
If the principal ratifies, the third person could not set up
the fact of excess of authority, and the contract would
still be valid
Rationale of ratification rule: a person who consents
that another should act on his behalf, can acquire
rights and be subjected to liability by the others
conduct, with the further idea that the consent might
come after such an act has been done by the other
and with much the same effect as if it had been given
before the act was done
Requirements for valid ratification

1. The contract by the agent must be one
which would have been valid and legal had
the agent been authorized
2. The purported principal must have been
existing and legally competent at the time
of perfection
3. The contract must purport to be on behalf
of a principal
4. The same formality is required for
ratification as for original authorization
5. The principal must have full knowledge of
material facts
There can be no ratification of a non-delegable act
Ratification rule does not apply on agent acting within
his powers
Effect of ratification on agent
As regards third persons, the agent is subject to

no liability if the principal ratifies before harm is
done to such third persons
Effect of ratification on principal
Ratification allows the third party to bring an

action against the principal, since the third party
can treat the transaction as though it were
originally authorized
Art. 1899. If a duly authorized agent acts in accordance

with the orders of the principal, the latter
cannot set up the ignorance of the agent as to
circumstances whereof he himself was, or
ought to have been, aware. (n)
The principal cannot avoid his obligations by setting up

the ignorance of the agent
The principal is bound by the mistakes or ignorance of
his agent
Art. 1900. So far as third persons are concerned, an act

is deemed to have been performed within the
scope of the agent's authority, if such act is
within the terms of the power of attorney, as
written, even if the agent has in fact exceeded
the limits of his authority according to an
understanding between the principal and the
agent. (n)
This Article presupposes that the agents authority is in

writing
Power of Attorney is the best evidence of the extent
and scope of authority of the agent. Although third
parties dealing with the agent are bound to inquire into
the latters authority they are not required to go beyond
the power of attorney
Restates or compliments Art. 1898, this article must be
logically interpreted to mean that third persons have
no knowledge that agent has in fact exceeded the
limits of his authority according to an understanding
between the principal and agent.
3rd persons are not prejudiced by private
understanding between the principal and the agent
concerning the limits of the agents authority and the
principals private or secret orders and instructions.
Art. 1901. A third person cannot set up the fact that the
agent has exceeded his powers, if the
principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
General Rule on 3rd persons claim of excess of

authority of agent:
14
NOTES ON EUGENE TAN
AGENCY
The third person can set up the fact of excess of

authority
Exception:
Unless the principal has ratified, or has

signified his willingness to ratify the
agents acts, or had allowed the agent to
act as though the latter had authority
In this case, only the principal can raise

the question of excess of authority of the
agent
General rule on Exceeding of authority by agent:
If the agent exceeds his authority, the principal is

not bound and only such agent is bound.
Exception:
The principal may be bound inspite of the

excess of authority if he ratifies, or has
signified his willingness to ratify the
agents acts.
Third party cannot question excess of authority in case
of ratification
damage and deterioration suffered by the

same. (n)
Art. 1902. A third person with whom the agent wishes

to contract on behalf of the principal may
require the presentation of the power of
attorney, or the instructions as regards the
agency. Private or secret orders and
instructions of the principal do not prejudice
third persons who have relied upon the power
of attorney or instructions shown them. (n)
Third parties dealing with agents acting on behalf of

their principals may require the presentation of the
power of attorney, or the agency instructions
If the principal has given the agent a power of attorney,
the agent has apparent authority to the extent of the
third partys reasonable interpretation of the document,
even though the agent was not authorized to show it to
third parties
Where there is no written authorization, he may reveal
the extent of his authority to the third party except that
he may not repeat statements of the principal which
are not generally revealed to third parties, such as the
maximum price the principal is willing to pay
Any secret instructions to the agent from the principal
are ineffective against third parties if the agent has
apparent authority
This rule applies because the third party is bound to
ascertain existence and extent of agency authority
Art. 1903. The commission agent shall be responsible

for the goods received by him in the terms and
conditions and as described in the
consignment, unless upon receiving them he
should make a written statement of the
ATTY. J. OBIETA
Under this article, the commission agent is disputably

presumed to have received the goods in the terms and
conditions stated in the consignment in the absence of
his written statement of damage or loss upon receipt of
such goods
Definition of Commission Agent
A commission agent or merchant (factor) is a

person engaged in the purchase and sale of
goods for a principal pursuant to his trade or
business
The goods have to be placed in his possession

and at his disposal
Definition of factors
Persons who received goods from a number of

principals and sell them on commission
Are authorized to sell the goods for the best

price obtainable for cash or its equivalent, and
with representations and warranties usual in a
particular trade and locality
To sell at the place where he does his business

and only if unable to sell profitably, should
reconsign the goods to another
If not presently saleable, they are authorized to

provide suitable storage, as they have a duty to
do
They have no authority to sell on credit unless

this is customary in the trade, or to rescind after
the completed sale
Del credere factors
Factors that frequently either guarantee the

account or substitute their credit for that of the
purchaser
No general implied authority to barter but, in the

sale of articles of substantial value, such as
automobiles, it has become customary to accept
second hand articles of the same nature in
partial satisfaction of the purchase price
This custom may be the basis of apparent

authority
Definition of Broker
Essential feature of a broker is the fact that he

acts not for himself but for a third person
Includes all persons, other than importers,

manufacturers, producers, or bona fide
employees, who for compensation or profit, sell
or bring about sales or purchases of merchants
for other persons. Term include commission
merchants
Difference
between
commercial
broker
from
commission merchants (factor) or agent because
commercial broker is:
Different from a commission agent because he

has no relation with the thing he sells or buys,
he is merely an intermediary between the
purchaser and vendor
Acquires neither possession nor the custody of

the things sold
Only office is to bring together the parties to the

transaction
15
NOTES ON EUGENE TAN
AGENCY
A Broker does not have the custody of the goods

and his office is to act as a go-between between
the sellers and buyers
Commercial broker distinguished from other agents
The chief feature which distinguishes a broker

from other classes of agents is that it is
intermediary or middleman, and in effecting a
sale or exchange of property, acts in a certain
sense as the agent of both parties to the
transaction
Distinguished from a clerk
A broker there is a holding out of oneself

generally for employment in matters of
trade, commerce, navigation
The authority of independent merchants not in
possession of the goods is substantially the same as
that of factors as to the terms of sales transactions, the
goods being shipped directly from the principals
warehouse
Classification of factors
Foreign factor
one who acts for a principal in another

country
Domestic factor
Acts in the same country with his

principal
ATTY. J. OBIETA
Art. 1905. The commission agent cannot, without the

express or implied consent of the principal,
sell on credit. Should he do so, the principal
may demand from him payment in cash, but
the commission agent shall be entitled to any
interest or benefit, which may result from such
sale. (n)
Art. 1904. The commission agent who handles goods

of the same kind and mark, which belong to
different owners, shall distinguish them by
countermarks, and designate the merchandise
respectively belonging to each principal. (n)
This obligation is in keeping with his obligation to

render an account and with accounting and
bookkeeping law and practices
Agents duty not to confuse principals things,
commingle the goods of different principals
General Rule:
The agent should not mix his principals funds

with that of his own
Exception:
Some types of agents are permitted to mingle

funds of the principal with their own, as is true of
a bank collecting checks for a depositor
Effects if agent mixed principals fund with his own
If the funds are lost, the agent will be liable for

their loss
If they cannot be separated, or his own cannot

be identified, the principal may claim the whole
mass
Rules to apply when goods belonging to different
owners inseparably mixed
If, by the will of their owners, two things of

identical or dissimilar nature are mixed, or if the
mixture occurs accidentally, if in the latter case
the things cannot be separated without injury,
each owner shall acquire a right in the mixture
proportionate to the part belonging to him
according to the value of the things mixed or

commingled
Must pertain to the original owners in the
proportion of the original amounts owned by
each one of them
First instance when a principal can demand cash

payment for sale on credit
If the agent pays cash to the principal, he legally
ceases to be an agent with respect to the goods sold
on credit and paid for by him in cash. Hence he
should be entitled to any interest or benefit, which may
result from such sale on credit
Agency to sell generally means for cash
Authority exists only during the period in which, from
the manifestations of the principal and the happening
of events which the agent has notice, the agent
reasonable believes that the principal desires him to
act
Agent has a duty to account for profits as a direct
result for the transaction conducted by him, whether or
not in violation of his duties as agent, unless otherwise
agreed
Sale on credit does not necessarily constitute a
conversion of the property
Art. 1906. Should the commission agent, with authority

of the principal, sell on credit, he shall so
inform the principal, with a statement of the
names of the buyers. Should he fail to do so,
the sale shall be deemed to have been made
for cash insofar as the principal is concerned.
(n)
Second instance when a principal can demand cash

Art. 1907. Should the commission agent receive on a

sale, in addition to the ordinary commission,
another called a guarantee commission, he
shall bear the risk of collection and shall pay
the principal the proceeds of the sale on the
same terms agreed upon with the purchaser.
(n)
Third instance when a principal can demand cash

16
NOTES ON EUGENE TAN
AGENCY
By receiving a guaranty or del credere commission,

the commission agent is converted into a guarantor in
the payment of sale proceeds
Definition of del credere agents
Agents selling chattels who warrant the solvency

of purchasers from them who are in effect
sureties for the purchase
Such an agent is not necessarily a party to a

contract, he has the defenses of a surety in an
action by the principal
This article applies on sales on credit or by
installments or cash sales having short term or period.
Art. 1908. The commission agent who does not collect

the credits of his principal at the time when
they become due and demandable shall be
liable for damages, unless he proves that he
exercised due diligence for that purpose. (n)
Another instance where agents are liable for damages

Despite due diligence in his attempts to collect, a
commission agent may still be liable for non-payment
of the credits of his principal if he is a del credere
agent
Duties of collecting agent

1. Exercise due care & competence in doing so
2. To collect the debt only in the customary
medium of payment, this is normally money.
When debtor is insolvent, may be
authorized to receive other property
3. To refrain from destroying the principals
goodwill with the debtor
4. To exercise due care to protect the received
money or other property from the debtor
while in his possession
5. Where he makes a profit from it, must
account to the principal for that profit
6. To remit the property to his principal on
demand, and if he fails to do so may be
liable for conversion
7. To notify the principal of the collection and to
remit the same to him in a reasonable time
8. To remit in the safest, quickest and least
expensive manner
9. Where he conceals the fact of collection, he
is liable to the principal, for any losses
suffered as a result
Art. 1909. The agent is responsible not only for fraud,

but also for negligence, which shall be judged
with more or less rigor by the courts,
according to whether the agency was or was
not for a compensation. (1726)
ATTY. J. OBIETA
An agent is liable for damages arising from his fraud or

negligence
The law assumes the agency is onerous, therefore
judicial award for damages will be based upon this
consideration
An agent must not only act within the scope of his
authority but also in accordance with the instruction of
his principal
In default of instructions, he shall do all that a good
father of a family would do, as required by the nature
of business
Rule here compliments Articles 1170,1171,1172, 1173
and 2202 of the Civil Code.
CHAPTER 3
OBLIGATIONS OF THE PRINCIPAL
Art. 1910. The principal must comply with all the

obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the
agent has exceeded his power, the principal is
not bound except when he ratifies it expressly
or tacitly. (1727)
In this article the agent acts not only within the scope
of his authority but also in the principals name
Duties of a Principal
1. To act in a manner not harmful to the agents
reputation or self-esteem
2. To provide means of service to agent
3. Not to interfere with agents work
4. To perform the contract
5. To give information to agent
6. To keep accounts
7. Not to terminate by anticipatory repudiation of
contract of agency without due course
because principal may be in breach of
contract
17
NOTES ON EUGENE TAN
AGENCY
8. A principal is also privileged to compete unless

he has given an agent an exclusive agency or
power
Article refers to actual or real authority
Definition of actual authority
Simply the fact presupposed in the ordinary

concept of agency, namely that a person called
a principal has manifested to another person,
called an agent, his willingness that the agent
act on his behalf in some specified way in some
specified transaction
Types:
Express express and explicit language

makes clear to the agent his willingness
or desire that the act in question be done
Incidental authority to do things

normally incident to the authority to do a
particular act or occupy a particular
status
Implied actual authority evidenced by

conduct, conduct of the principal to justify
in finding that the agent has actual
authority
To bind the principal for agents acts, power of attorney
need not registered
Sale by agent to himself does not bind principal
Principal may be liable for tortuous conduct of his
agent
therefor, even if the business or undertaking

was not successful, provided the agent is free
from all fault.
The reimbursement shall include
interest on the sums advanced, from the day
on which the advance was made. (1728)
Under this article, both the agent and the principal are
liable and their liability is solidary. This article applies
even if the agent does not exceed his authority
Apparent authority definition
The power to affect the legal relations of another

person by transactions with third persons,
professedly as agent for the other, arising from
and in accordance with the other manifestations
to such third persons
No apparent authority when principal is

undisclosed
To apply principle of apparent authority, the

apparent authority must exist before the act in
controversy
Article applies only if there is representation as agent
Art. 1912. The principal must advance to the agent,

should the latter so request, the sums
necessary for the execution of the agency.
Should the agent have advanced
them, the principal must reimburse him
The reimbursement shall include interest on the

expense advances, to run from the day on which the
advances were made, if principal fails to reimburse,
Art. 1914 applies. Interest obligation of principal is
similar to that in Art. 1896.
The principal is not liable for the expenses incurred by
the agent under Art. 1918
Art. 1913. The principal must also indemnify the agent

for all the damages which the execution of the
agency may have caused the latter, without
fault or negligence on his part. (1729)
Art. 1911. Even when the agent has exceeded his

authority, the principal is solidarily liable with
the agent if the former allowed the latter to act
as though he had full powers. (n)
ATTY. J. OBIETA
The principals obligation of indemnity refers to the

agents damages caused by the execution of agency.
On the agents part, he is also liable to the principal for
damages due to his non-performance, or to fraud or
negligence
An agent seeking indemnity against the principal
should notify the principal within a reasonable time
after the agent has reason to know the facts
Physical injuries sustained by the agent in the service
of principal may result in liability on principals part in
favor of the agent
A principal is not liable for the agents losses caused
by unauthorized acts which do not inure to his benefit,
losses caused by the agents negligence, or those due
to his financial condition
Nor can the agent recover for losses for authorized
but illegal acts or for expenses due to independent and
unexpected wrongful acts of third persons
Art. 1914. The agent may retain in pledge the things

which are the object of the agency until the
principal effects the reimbursement and pays
the indemnity set forth in the two preceding
articles. (1730)
Article to be considered as providing a sort of pledge

by operation of law, the RIGHT OF RETENTION
Every agent is bound 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 be owing to the principal
However an agent may have a right of retention by
way of lawyers lien, or of pledge
An agent may retain in pledge the things which are the
subject of agency until the principal effects the
reimbursement of the advances of the agent with
interest
18
NOTES ON EUGENE TAN
AGENCY
If Movable Property - Ownership shall

be transferred to the person who
may have FIRST taken possession
thereof in GOOD FAITH
If Immovable Property - Ownership
shall belong to the person acquiring it
who in GOOD FAITH FIRST
recorded it in the Registry of Property
If no inscription - Ownership shall pertain
to the person who in GOOD FAITH was
FIRST in the possession.
In the Absence thereof, to the person
who presents the oldest title,
provided there is GOOD FAITH
Or pays the damages which the execution of the

agency may have caused the agent, without fault or
negligence on the latters part
The provisions on pledge may be considered

applicable insofar as they are consistent with the
law on agency
Art. 1915. 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 consequences of the
agency. (1731)
An instance of solidary liability. Each of the principal is

solidarily liable to the agent for all the consequences of
the agency
One of the principals may revoke the agency without
the consent of the others
The liability of two or more agents to the principal,
even
though
they
have
been
appointed
simultaneously, is not solidary, if solidarity has not
been expressly stipulated
Inferred that there is an authority to act only upon
matters of common interest.
It two principals
separately employ an agent, it is inferred that he is not
authorized to make them joint parties to the transaction
There exists a right of principal for contribution or
indemnity from other principals if all of them are
equally responsible for the agents conduct or in case
of indemnity, if the other breached a duty to a third
person who was injured by the agents conduct
Agents knowledge binds common principals.
However, where the agent represents several
individual principals, only the one or ones to whom he
owes the duty is or are bound by the information
Death or loss of capacity of one of common principals
terminates the authority of the agent to act on their
joint account to the same extent as the loss of capacity
of a single principal
Art. 1916. When two persons contract with regard to

the same thing, one of them with the agent and
the other with the principal, and the two
contracts are incompatible with each other,
that of prior date shall be preferred, without
prejudice to the provisions of Article 1544. (n)
Contemplates a situation where

1. Both agent and his principal
2. Contract separately with regards to the
SAME thing
3. With a third party/s
2 SITUATIONS:
A. If contracts are compatible no issue
B. If contracts are incompatible
(1)
Different
Vendees
ATTY. J. OBIETA
Interference of Principal
General Rule: Principal may compete with agent

either by accomplishing the required results
himself or by others
DUTY of Principal:
Principal has a duty to furnish the agent with an

opportunity to work and not to interfere
UNREASONABLY with the work of the agent
EXCLUSIVE AGENCY/ EXCLUSIVE power of sale
Principal cannot appoint another person to

compete with agent
Compensation is not a promise of exclusive

agency
EXCEPTION to Gen Rule: A stipulation as to

restrict the principal from competing with agent
Art. 1917. In the case referred to in the preceding

article, if the agent has acted in good faith, the
principal shall be liable in damages to the third
person whose contract must be rejected. If the
agent acted in bad faith, he alone shall be
responsible. (n)
In terms of liability for the circumstances in Art 1916

If agent acted in good faith
Principal shall be liable in damages to

the 3rd person whose contract must be
rejected
If agent acted in bad faith
agent alone shall be responsible.
Art. 1918. The principal is not liable for the expenses

incurred by the agent in the following cases:
(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;
19
NOTES ON EUGENE TAN
AGENCY
(3) When the agent incurred them with

knowledge that an unfavorable result
would ensue, if the principal was not
aware thereof;
(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.
(n)
(6) By the expiration of the period for which

the agency was constituted. (1732a)
General Rule:
A principal is subject to liability to an agent for

expenses incurred by him in the prosecution of
the principals business
Exceptions
UNLESS the circumstances indicate that such

expenses are to be borne by the agent as a part
of the service which he has agreed to render
UNLESS
the
agents compensation
is
dependent upon and proportionate to his
success, it is ordinarily inferred that the principal
is to pay expenditures necessarily made in the
course of performing the business
It may be agreed that the Principal is to pay for

incidental
expenses
(traveling
salesmen
regularly employed)
If principal commits a breach of contract by terminating
the agency before the agreed time, the EXPENSES
incurred by the agent may be elements of DAMAGE in
an action against the principal for breach of contract.
If the action is the result of a REASONABLE MISTAKE
of LAW or FACT by the third person, it is within the
risks attendant upon authorizing the conduct and one
which the principal customarily assumes
The principal has no duty to indemnify the agent for
loss caused solely by the agents NEGLIGENCE,
whether or not the negligence constitutes a breach of
duty to the principal.
If the loss suffered by the agent is increased by his
negligence or other fault, the liability of the principal
may be reduced accordingly, in accordance with the
general principles applicable to contractual and
restitutional liability.
PRESUMPTION
An agency once proved continues to exist

Termination of sub-agency uses the same modes as
Art 1919.
POWER AND RIGHT TO REVOKE
The principal has always the power to revoke

BUT not the right in cases where he has
AGREED not to exercise his power for a certain
period
Rationale: the essence of the agency is the

agents duty of obedience not to act in the
principals affairs EXCEPT in accordance with
the principals desires. Principal can terminate
the authority at any time, irrespective of his
contractual obligations to the agent.
A SPECIFIC AGREEMENT that the authority is

irrevocable or can only be revoked in a specific
manner or after giving notice for a specific
period is INEFFECTIVE.
If there is a contractual violation due to

termination of the agency, principal may be held
liable for damages due to the violation or for any
wrong inflicted on the agent, not the termination.
Agent must be made aware of revocation of agency
1) brought to agent in person
2) delivered a statement at the place where
agent receives his mail
3) by any method agreed upon
Implied Revocation (Art 1924)
the agency is revoked if the principal directly

manages the business entrusted to the agent,
dealing directly with the third person.
Revocation by principal occurs when notice is
received by agent
Revocation by operation of law instantaneous
WITHDRAWAL OR RENUNCIATION BY AGENT
Important legal issue: as to the interpretation of

the agents communication. Whether it was
intended as a termination of the relationship and
whether this was a breach of contract by the
agent.
Express Renunciation by agent the filing of a

complaint by an agent against his principal for
the collection of balance in his favor resulting
from a liquidation of the agency accounts
between them and his rendering of a final
account of his operations are equivalent to an
express renunciation.
DEATH OF PRINCIPAL OR AGENT
Death of either party terminates agency by

operation of law.
EXCEPTIONS:
1. Art 1930 when the agency is coupled
with an interests
2. Art 1931 when the agent performed an
act for the principal without the
knowledge of the principals death and
CHAPTER 4
MODES OF EXTINGUISHMENT
OF AGENCY
Art. 1919. Agency is extinguished:

(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or
corporation which entrusted or accepted
the agency;
(5) By the accomplishment of the object or
purpose of the agency;
ATTY. J. OBIETA
20
NOTES ON EUGENE TAN
AGENCY
the 3rd person who contracted with him in

good faith
LOSS OF CAPACITY
Insanity
Condition resulting from a disease of the

brain, not merely the delirium caused by
pain.
Temporary insanity suspends authority during its

existence
Insolvency bankruptcy of either principal or

agent
Civil Interdiction loss of rights of parental

authority or guardianship, either as to the person
or property of any ward, of marital authority, of
the right to manage his property and of the right
to dispose of such property by any act or any
conveyance inter vivos
ACCOMPLISHMENT
Upon completion of the agent of his part, the

relationship is deemed extinguished
EXPIRATION OF THE PERIOD
Parties may EXPRESSLY agree that the agents

authority is to terminate at a SPECIFIED TIME.
(Provided the agreement is VALID). If there is
no expressed stipulation will terminate at the
end of a reasonable time. Reasonable time
depends on the nature of the transaction, the
likelihood of changes in the principals purposes
or the subject matter of the transaction and other
relevant factors
Agency with a period cannot be terminated

without a just cause a wrongful discharge may
give the agent an action for damages.
War may terminate agency sometimes
Agency will continue where I is the manifest

interest of the principal that the agency,
constituted before the war, should continue. The
circumstances must disclose the principals
assent, express or implied, to the continuance of
the authority upon the occurrence of war.
DESTRUCTION, LOSS OR SALE OF SUBJECT

MATTER
Will terminate the agency as a matter of

necessity.
Art. 1920. The principal may revoke the agency at will,

and compel the agent to return the document
evidencing the agency. Such revocation may
be express or implied. (1733a)
Gen Rule:
An agency, whether onerous or gratuitous, is

essentially revocable at will by the principal.
Exception:
(Art 1927) an agency cannot be revoked if a

bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already
ATTY. J. OBIETA
contracted, or if a partner is appointed manager
of a partnership in the contract of partnership
and his removal from the management is
unjustifiable.
Gen Rule
The principal is not liable for damages for

revoking the agency
Exception:
he may be liable in case of abuse of right or bad

faith.
Implied Revocations:
1) Article 1923 The appointment of a new
agent for the same business or transaction
revokes the previous agency from the day on
which notice thereof was given to the former
agent, without prejudice to the provisions of
the two preceding articles.
2) Article 1924 the agency is revoked if the
principle directly manages the business
entrusted to the agent, dealing directly with
third persons.
3) Article 1926 A general power of attorney is
revoked by a special one granted to another
agent, as regards the special manner
involved in the latter.
Revocation may be because of loss of confidence
Must not be done in bad faith
EXCEPTIONS to general principle of revocability of
agency
1. Art 1922 - If the agent had general powers,
revocation of the agency does not prejudice
third persons who acted in good faith and
without knowledge of the revocation.
2. Art 1921 - If the agency has been entrusted
for the purpose of contracting with specified
persons, its revocation shall not prejudice the
latter if they were not given notice thereof.
3. Art 1972 - An agency cannot be revoked if a
bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already
contracted, or if a partner is appointed
manager of a partnership in the contract of
partnership and his removal from the
management is unjustifiable.
4. Art 1931 - Anything done by the agent,
without the knowledge of the death of the
principal or of any other cause which
extinguishes the agency, is valid and shall be
fully effective with respect to third persons
who may have contracted with him in good
faith.
Discharge of agent by the principal before agreed

termination date if:
1) Agent has materially breached the
employment contract or failed to perform
substantially
2) Agent has become physically or mentally
unable to continue performance
Where the principal has grounds for discharging the

agent but is unaware of them at the time of discharge,
21
NOTES ON EUGENE TAN
AGENCY
he is protected from liability to the agent for wrongful

discharge.
Where the principal elects not to discharge the agent
where there has been a breach of contract, he is held
to CONDONE it; such breach may NOT be used by the
principal as the SOLE ground for a subsequent
discharge.
Art. 1925. When two or more principals have granted a

power of attorney for a common transaction,
any one of them may revoke the same without
the consent of the others. (n)
Art. 1921. If the agency has been entrusted for the

purpose of contracting with specified persons,
its revocation shall not prejudice the latter if
they were not given notice thereof. (1734)
Art. 1922. If the agent had general powers, revocation
of the agency does not prejudice third persons
who acted in good faith and without
knowledge of the revocation. Notice of the
revocation in a newspaper of general
circulation is a sufficient warning to third
persons. (n)
Both articles state that 3rd persons must be notified of

the revocation of agency otherwise, they shall not be
bound.
Art. 1923. The appointment of a new agent for the same

business or transaction revokes the previous
agency from the day on which notice thereof
was given to the former agent, without
prejudice to the provisions of the two
preceding articles. (1735a)
IMPLIED REVOCATION
To effect revocation in this Article, the agencies

of both the first and new agents must be
INCOMPATIBLE with each other. Moreover, the
first agent must be NOTIFIED of the new agency
as the revocation only commences from the day
on which notice thereof was given to the former
agent.
This article cannot affect third persons who are

in good faith and without knowledge of the new
agency
See Article 1920 and Article 1916 (exclusivity)
Knowledge is the belief in a truth.
Truth is
determined by the courts for the purpose of the
particular case in which the inquiry is made.
Presumption does not apply to a 2nd lawyer
Art. 1924. The agency is revoked if the principal

directly manages the business entrusted to
the agent, dealing directly with third persons.
(n)
IMPLIED REVOCATION
Differentiated from Article 1916. Article 1924 is

an implied revocation
ATTY. J. OBIETA
If two or more principals have appointed an agent for a

common transaction or undertaking, they shall be
solidarily liable to the agent to all consequences of the
agency. Consequently, any one of these principals
may revoke the agency without the consent of the
others.
Art. 1926. A general power of attorney is revoked by a

special one granted to another agent, as
regards the special matter involved in the
latter. (n)
IMPLIED REVOCATION
A particular intent will control a general one that is
inconsistent with it.
Art. 1927. An agency cannot be revoked if a bilateral

contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or
if a partner is appointed manager of a
partnership in the contract of partnership and
his removal from the management is
unjustifiable. (n)
EXCEPTION to the power of revocation by the

principal.
All partners are presumed as agents
For a partner appointed manager in partnership may
execute all acts of administration despite the
opposition of his partners, UNLESS he should act in
bad faith, AND his powers are IRREVOCABLE without
JUST and LAWFUL CAUSE. The vote of the partners
representing controlling interest shall be necessary for
such revocation of power.
Exceptions:
1. Coupled with an interest it is necessary that the
interest shall be in the subject matter of the power,
and not in the proceeds which will arise from the
exercise of the power. To constitute a power
coupled with an interest, it is necessary tat there
should co-exist in the agent, along with the power
given him, an interest or estate in the thing to be
disposed of, or managed under the power.
2. Power given as security- is a power to affect the
legal relations of another, created in the form of an
agency authority, but held for the benefit of the
power holder or a duty to protect a title, either
legal r equitable, such power being given when
the duty or title is created or given for
consideration.
22
NOTES ON EUGENE TAN

3.
AGENCY
Coupled with an obligation an authority may

become irrevocable, if its continuance is
necessary to secure the agent against liability
already incurred in favor of a third person.
the occurrence of an event from which the

inference reasonably would be drawn:
a) by the principal, that the agent does not
consent to act
b) by the agent, that the principal does not
consent to the act or would not if he
knew the facts
c) by either, that the transaction has
become impossible of execution
because of incapacity of the parties,
destruction of the subject matter, or
illegality.
Right to compensation not necessarily power coupled

with interest. bestows an interest in the proceeds if
the subject matter rather than the subject matter itself.
Also the interest does not co-exist with the power since
it arises only by reason of the exercise and
extinguishment of the power.
Irrevocable power of attorney cannot be used for fraud
may not be used to shield the perpetration of acts in
bad faith, breach of confidence, or betrayal of trust.
Irrevocable power of attorney not a true agency power.
Irrevocable power of attorney can only be terminated
1. As agreed upon in the transaction by which
it was created or if it becomes otherwise
ineffective, as where the subject matter of
the power is destroyed.
2. If the beneficiary of the power, whether it is
the holder or a third party, is of full capacity
and surrenders control of the power.
It is generally not terminated by death or loss of
capacity of either the donor of the power or the holder
of the same.
Termination of powers given as security
1. Unless otherwise agreed, a power given as
security is NOT terminated by:
a. Revocation by the creator of the power
b. Surrender by the holder of the power, if
he holds for the benefit of another
c. The loss of capacity during the lifetime of
either the creator of the power or the
holder of the power
d. The death of the holder of the power, or,
if the power is given as security for a duty
which does not terminate at the death of
the creator of the power, by his death.
2. A power given as security is TERMINATED by
a. its surrender by the beneficiary, if of full
capacity; or
b. by the happening of events which, by its
terms,
discharges
the
obligations
secured by it or which makes its
execution illegal or impossible.
Art. 1928. The agent may withdraw from the agency by
giving due notice to the principal. If the latter
should suffer any damage by reason of the
withdrawal, the agent must indemnify him
therefor, unless the agent should base his
withdrawal
upon
the
impossibility
of
continuing the performance of the agency
without grave detriment to himself. (1736a)
Art. 1929. The agent, even if he should withdraw from

the agency for a valid reason, must continue
to act until the principal has had reasonable
opportunity to take the necessary steps to
meet the situation. (1737a)
REVOCATION BY AGENT [See article 1920]

NOTICE of termination of authority
UNLESS the parties have manifested otherwise

to each other, a principal or agent has notice
that authority to do an act has terminated or is
suspended if he knows, has reason to know,
should know, or has been given a notification of
Despite a valid and justifiable withdrawal, the agent is

required to continue to act until his principal has had
reasonable opportunity to take the necessary steps to
meet the situation
Provides an extraordinary obligation because once an
agent withdraws, the agency is suppose to be
extinguished but this article provides that the agent
may still be liable.
Art. 1930. The agency shall remain in full force and

effect even after the death of the principal, if it
has been constituted in the common interest
of the latter and of the agent, or in the interest
of a third person who has accepted the
stipulation in his favor. (n)
EXCEPTION to death extinguishes agency. [art 1919

(3)]
See art 1927 coupled with an interest
Art. 1931. Anything done by the agent, without

knowledge of the death of the principal or of
any other cause which extinguishes the
agency, is valid and shall be fully effective with
respect to third persons who may have
contracted with him in good faith. (1738)
ATTY. J. OBIETA
EXCEPTION to death extinguishes agency [art

1919(3)]
Under the law, the agent is obliged to finish the
business already begun on the death of the principal,
should DELAY entail any danger.
Duties of agent after termination of agency
General rule no duty
23
NOTES ON EUGENE TAN
AGENCY
ATTY. J. OBIETA
Exception where there is disclosure of any

confidential information (such as trade secrets or
client-lawyer secrets) or when there is a contract or
stipulation
Art. 1932. If the agent dies, his heirs must notify the
principal thereof, and in the meantime adopt
such measures as the circumstances may
demand in the interest of the latter. (1739)
In a lawyer-client relationship, death of the lawyer

terminates the contract due to PERSONAL
RELATIONSHIP
Death of an agent terminates agency despite nonexpiration period of agency.
~ END OF REVIEWER ~
24

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NOTES ON EUGENE TAN

Philippine Civil Code does not make a distinction

Is a legal relationship between 2 parties

The agent has a power to affect the legal

Agency is the fiduciary relation which results

The one for whom action is to be taken is the

As a systematic body of rules, agency is a

Before common law absorbed commercial law,

Until the 19th century, the rules on agency were

Agency may concern either property of the

A contract in relation to an illegal or immoral

Mark Ladores / Jen Laygo / Fred Liong / TJ Tijam [2D 05]

The agent acts within the scope of his

One who has permitted or directed another to

Sometimes referred to as Constituent

By express provision of the Phil Civil Code,

In order for the principal to be able to appoint an

It is not necessary that he has the capacity to

A person who has capacity to affect his

If the purported principal, because of insanity or

A minor can appoint an agent for necessaries.

But if the minor appoints the agent for

Corporations can only act through agents and

Unincorporated associations cannot consent to

NOTE: Difference between Juridical Capacity

Juridical Capacity: acquired upon birth,

Capacity to Act: not inherent, must be

NOTES ON EUGENE TAN

Corporate Directors corporations can only act

Trustees Fiduciaries who hold legal or

Escrow Holders When a person receives

Corporate Subsidiaries A corporate subsidiary

Agent of agent employed to act for the agent in

All acts that could be done by a person himself

Public policy requiring non-delegability

Criminal Acts principal by inducement

Delegation by a contractor who is not an

If personal performance is required, the

Exception: Amaneunsis Rule wherein instrument

Is the privileged power of the agent to bind the

Art.1919 provides that dissolution of firm or

It is not necessary that the agent has the

The only requirement for an agent is that he

A minor may be appointed as an agent,

Any person has the capacity to hold a

The extent to which a person holding

Attorneys-at-law the relationship of an attorney

Attorneys-in-fact those which are acting under

Mark Ladores / Jen Laygo / Fred Liong / TJ Tijam [2D 05]

NOTES ON EUGENE TAN

Effective to create rights and liabilities between

Requirements for an Agent to be Authorized:

Where all these exist, the principal becomes a

Thus, if a formality has not been performed, the

Example: oral instruction to convey real property

Although no particular form of authorization is

The rule provides that where the parties have

Different from Agents authority

An act is w/in the authority of an agent if

An act is w/in the power of the agent if he

Agents power to subject the principal to

An agent is estopped from acquiring or asserting

Agent doesnt hold propy in concepto de dueo.

Agents acting for both parties to a transaction. It