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Contract of agency include all situations in which one
person is employed to render service for another,
excludes, however, from its concept the relationship of
employer and employee, of master and servant, and of
employer and independent contractor
Agency is a fiduciary relationship which implies a power
in an agent to contract with a third person on behalf of a
It is this power to effect the principals contractual
relations with third persons that differentiates the agent
from the employee, the servant, and the independent
Agency relates to commercial or business transactions.
Agency relationship may also arise in non-business
situations, example, a person returns an article to a
lender for a borrower friend
All agencies are governed by the Civil Code
Term used in other senses
Agency is sometimes used in a sense other than to
denote the relationship of principal and agent
1. Place at which the business is transacted
The relationship of the principal and agent is not
necessarily implied
2. Used in the sense of instrumentality by which a thing
is done
3. Exclusive right of a person to sell a product of
another in a specific territory
Characteristics of a contract of agency
1. Consensual it is based on the agreement of the
parties, which is perfected by mere consent
2. Principal it can stand by itself without need of
another contract
3. Nominate it has its own name
4. Unilateral if it is gratuitous because it creates
obligations for only one of the parties, i.e., the agent
Bilateral if it is for compensation because it gives
rise to reciprocal rights and obligations
5. Preparatory it is entered into as a means to an
end, i.e., the creation of other transactions or

Nature, basis and purpose of agency

The word agency when used in its broadest meaning is
both a contract and a representative relation.
Since an agency is a contract, it is essential that the
minds of the parties should meet in making it

The principal must intend that the agent shall act

for him, the agent must intend to accept the
authority and act on it
Such intention of the parties must find
expression either in words or conduct between
Without such intention, there is generally no

In acting for the principal, the agent, by legal fiction,

becomes the principal authorized to perform all acts
which the latter would have him do.
Such a relationship can only be effected with the
consent or authority of the principal which cannot, in
any way be compelled by law or by any court
Although the agency relationship is usually a contractual
one, either express or implied, based upon a
consideration, this is not necessarily so; that is, the
relationship may be created by operations of law
(agency by estoppel), or a person who acts for another
as principal may do so gratuitously
Without a contract or a consideration, there can be
an agency or agency powers
The legal consequence of agency may attach where
one person acts for another without authority or in
excess of his authority, and the latter subsequently
ratifies it
Agency is also a representative relation. Its basis is
representation. The agent renders some service or does
something in representation or on behalf of another
As it is a personal contract of representation based on
trust and confidence reposed by the principal on his
agent, agency is generally revocable
The acts of the agent on behalf of the principal within the
scope of his authority produce the same legal and
binding effects as if they were personally done by the
He who acts through another acts himself.
He who does a thing by an agent is considered as doing
it himself.
The actual or real absence of the principal is converted
into his legal or juridical presence.
Notice to the agent is, to all legal intents and purposes,
notice to the principal.
The purpose of the agency is to extend the personality of
the principal through the facility of the agent.