3.

Agent can’t act for an adverse party (unless he acts with

CHAPTER 1 NATURE, FORM, AND KINDS OF AGENCY the knowledge and consent of both)
(1868 – 1884) 4. Agent must not use or disclose secret information

1868 – Definition of Agency Agency Distinguished from the Following Contracts:

Five Characteristics of Agency: 1. Loan

1. Consensual 2. Lease of Service
2. Principal 3. Independent Contact
3. Nominate 4. Partnership
4. Unilateral 5. Negotiorum Gestio
5. Preparatory 6. Brokerage
7. Sale
Five Essential Elements of Agency:
1. Consent 1869 – Kinds of Agency
2. Object
3. Representative Kinds of Agency are differentiated from the following general
4. Acted within Authority denominations:
5. Competent to be a principal and agent
1. Creation
Agency character in Jurisprudence: 2. Character
3. Extent of Business Covered
1. Personal 4. Authority Conferred
2. Representative 5. Nature and Effects
3. Derivative
1870 Form of Acceptance of Agent
Capacity Requirement:
1. Express
1. Principals – Any person who is capacitated before the 2. Implied from his acts which carry out the agency
eyes of the law (1327; 1329) (subdivided to 1871 and 1872)
2. Agents – No need to possess full capacity, as long as not 3. Silence
totally incapacitated; Must be competent to bind himself 4. Inaction according to the circumstances

Two General Acts that can’t be delegated to agents: 1871 – Acceptance between present persons (personal
delivery of Principal)
1. Personal Acts – if personal performance is required by law or
public policy or the agreement of the parties, the doing of the act 1872 – Acceptance when absent (transmittal only of the
by a person on behalf of another does not constitute performance Principal)
by the latter.
1. When Principal transmits power of attorney and it was
Ex: received without objection
a. Right to vote during an election in a corporation under 2. When Principal entrusts by letter or telegram a power
section 25 of the Corporation Code of attorney to the agent with which he was habitually
b. Making of a will pursuant to Art. 784 engaged in and did not reply to it
c. Statements which are required to be done personally
d. A member of the board of directors acting in proxy 1873 – Communication or Giving of Notice of Agency
capacity B.P. 68
e. An agent can’t delegate to sub-agent performance of 1. By way of special information, the person appointed
acts where he was appointed to do in person 1892 – as agent is considered such with respect to the person
1893 to whom it was given; or
2. If by public advertisement, the agent is considered as
2. Criminal Acts or Acts Not Allowed by Law – An attempt to such with regard to any person. Public advertisement
delegate to another authority to do an act which, if done by the may be made in any form (newspaper, radio, posters,
principal would be illegal, is void. billboards)

Ex: Agency presumed to exist whether there is actually an agency or

a. Ownership of an alien of a land in the country through a not
Filipino agent is against the law (Article 12 sec. 3, 7)
b. Persons prohibited from acquiring property because of Manner of revocation us be done in the same manner it was
their relation with the persons under their charge 1491 conferred.

Nature of Relations Between Agent and Principal 1874 – sale of piece of land without authority in writing is
void
1. Fiduciary in Nature (based on trust and confidence)
2. Agent estopped from asserting adverse interest to the unenforceable, not necessarily void – Article 1403 2 (e) [need for
principal proof through written, otherwise unenforceable]
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 e. Sale of immovable
1875 – Agency Presumed for Compensation f. Make gifts, other than customary ones (or gifts to
employees)
1876- Kind of agency as to extent of business covered g. Loan
h. Lease more than a year
Three Classifications of Agent: i. Gratuitous service
j. Contract of Partnership
1. Universal agent – authorized to do all acts that the principal k. Obligation principal as guarantor or surety
may personal do, and which he can lawfully delegate to another l. Create or convey real rights over immovable property
the power of doing, presumed to have universal authority without special power
m. Accept or repudiate an inheritance
2. General agent – authorized to transact all the business of his n. Ratify obligations contracted before the agency
principal in relation to a particular trade, business or o. Strict Dominion
employment
1879 – Vice versa rule on mortgage and sale through agent
3. Special Agent – one authorized to act in one or more specific
transactions/ particular occasion only 1880 – exclusion of arbitration from power to compromise

Special types of Agent: 1881 – definition of authority of agent

1. Attorney at law – represents client in legal matters 1882 – acts beneficial even if beyond instruction to the
2. Auctioneer – business is to sell property for others principal
3. Broker – one whose business is to act as intermediary
between two parties such as insurance and real estate Authority of the agent – power of the agent to affect the legal
brokers relations of the principal by acts done in accordance with the
4. Factor – one whose business is to receive and sell goods principal’s manifestation of consent to him
for a commission (entrusted with possession)
5. Cashier in Bank – represents a banking institution in its Distinguish Authority from Power
financial transactions
6. Attorney-in-fact – given authority to do a particular act 1. Authority – Source i.e. Authority from Principal to sell
not of legal character. 2. Power – Effect i.e. Authority from principal gives the
agent the power to sell.
1877 – Agency couched in General Terms
Kinds or Types of Authority
Agency couched in general terms may be general agency or
special agency (1876) 1. Actual – Actually granted (express or implied)
2. Express – conferred by words (1869)
Agency couched in general terms grants only acts of 3. Implied – incidental to the transaction or reasonable
administration even if the principal would state: necessary to accomplish the purpose of the agency
4. apparent or ostensible – conferred by conduct or even
1. He withholds no power from the exercise of the agent by silence (another name for authority by estoppel)
2. Agent may execute acts appropriate to carry out the [also an implied form]
agency 5. General – covers all business of the principal
3. Authorizes a general or unlimited management 6. Special – particular transaction
7. By necessity – demanded by virtue of the existence of an
Acts of Administration is a question of fact, because the agency emergency
relationship sometimes exists for a specific business, that, even if
it were required of the agent to produce an SPA, an act may done When may Principal be Bound by Acts of Agent:
not as act of strict dominion but mere act of administration
1. Standard Requisites:
Ex: a. Agent acts within the scope of authority
a. Person employed to sell goods in a retail store may sell b. He acted on behalf of the principal
the goods without need of a special power of attorney 2. Ratification by principal
because the ‘selling’ is the act of administration 3. Acts more advantageous to principal
b. Attorney-in-fact authorized to pay debts and employ
services of a lawyers to defend the principal’s interest When Principal Bound by Acts of Agent beyond his Powers:
impliedly authorized to pay for attorney’s fees for
services 1. The acts of the principal contributed to deceive third
persons in good faith
1878 – SPECIAL POWER OF ATTORNEY 2. Limitations upon the power created by him could not
have been known by the third person
a. Payment (1232) 3. Principal placed to the agent instruments signed by P in
b. Novation blank
c. Compromise (2028) (arbitration 2042) and the three 4. Ratified the acts
waivers
d. Waive obligation gratuitously
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1883 – Kinds of Principal (and also agent acting as per
identity)
Kinds of Principal:
1. Disclosed principal – if at the time of the transaction contracted
by the agent, the other party thereto has notice that the agent is
acting for a principal and of the principal’s identity
2. Partially disclosed – if the other party has notice that the agent
is or may be acting for a principal but has no notice of the
principal’s identity
3. Undisclosed – The other party has no notice of the principal
AGENCY WITH UNDISCLOSED PRINCIPAL; Effects
1. Agent directly responsible
a. Agent authorized to act on behalf of the principal
b. Acts in agent’s own name
10. To render an account of his transactions and to deliver
to the principal whatever he may have received by
virtue of the agency (1891)
11. Distinguish goods by countermarks and designate the
merchandise respectively belonging to each principal, in
the case of a commission agent who handles goods of
the same kind and mark, which belong to different
owners (1904)
12. To be responsible in certain cases for the acts of the
substitute appointed by him (1892)
13. To pay interest on funds he has applied to his own use
(1896)
14. TO inform the principal, where an authorized sale of
credit has been made, of such sale (1906)
15. To bear the risk of collection, should he receive also on a
sale, a guarantee commission (1907)
16. To indemnify the principal for damages for his failure to
collect the credits of his principal at the time that they
become due (1908)
17. To answer for his fraud or negligence (1909)
1885 – obligations of person who declines an agency

Thus, the Principal reserves no right of action against Agent or It also creates an obligation on the owner to act as soon as
Third persons practicable to:
1. Appoint a new agent; or
UNLESS, contract involves things belonging to principal, 2. Taking charge of the goods
PRINCIPAL IS BOUND
1886 – Stipulation of advancing
CHAPTER 2 OBLIGATIONS OF THE AGENT
(1884 – 1909) 1887 – agent bound by the instruction of the principal

1884 – agent bound by his acceptance to carry out the agency Instructions – private direction which the principal may give the
and is liable for non performance agent in regard to the manner of performing his duties as such
agent but of which a third party is ignorant. They are said to be
General Obligations: secret if the principal intended them not to be made known to
such party.
1. Good faith and loyalty to his trust
2. Obedience to principal’s instruction Duty of Obedience – it is the fundamental duty of the agent to
3. Exercise of reasonable care obey all the reasonable and lawful instructions given to him by
his principal.
Specific Obligations of the Principal
Liability for loss or damage – If the agent exceeds or violates the
1. To carry out the agency according to its terms 1884 instructions, he will be liable.
2. To answer for the damages which through his non
performance the principal may suffer 1884 1888 – Do not carry out the agency if it shall result to loss or
3. To finish the business already begun on the death of the damage to principal
principal, should delay detail any danger 1884
4. To observe the diligence of a good father of a family in 1889 – agent’s liability for damages if he prefers his own
the custody and preservation of the goods forwarded to interest
him by the owner in case he declines an agency, until
agent is appointed 1885 1890 – Obligation not to loan
5. To advance the necessary funds should there be a
stipulation to that effect 1886 1891 – Duty to Account
6. To act in accordance with the instructions of the
principal 1887 1892 – SUBAGENTS
7. Not to carry out the agency if its execution would
manifestly result in loss or damage to the principal Liability against him if he:
(1888) 1. He was not given the power to appoint one
8. To answer for damages should he prefer in case of 2. When he was given such power, but without
conflict, his own interests to those of the principal designating the person, and the person appointed was
(1889) notoriously incompetent or insolvent
9. Not to loan to himself without the consent of the
principal when he has bee authorized to lend at interest 1893 – An action against the sub agent
(1890)

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Subagent – is a person to whom the agent delegates as his agent, 2. To advance to the agent, should the latter so request,
the performance of an act for the principal which the agent has the sums necessary for the execution of the agency
been empowered to perform through his representative (1912)
3. To reimburse the agent for all advances made by him
Effects of Substitution provided the agent is free from fault
4. To indemnify the agent for all the damages which the
1. Substitution prohibited execution of the agency ay have caused the latter
2. Substitution authorized without fault or negligence on his part (1913)
3. Substitution not authorized, but not prohibited 5. To pay the agent the compensation agreed upon, or if no
compensation was specified, the reasonable value of the
1894 – Agents jointly liable, not solidary agent’s services (1875, 1306)
1895 – condition on solidary liability
1896 – Agent owes interest on the sums he has applied to his Ratification – is the adoption by a person of a prior act which did
own use from the day on which he did so not bind him, but which was done or professed to be done on his
account thus giving effect to the acts as if originally authorized by
Necessity of demand principle him

1897 – Personal liability of the agent VOID ACTS CANNOT BE RATIFIED, IT BEING INOPERATIVE
1898 – agent contracting in the name of the principal FROM ITS INCEPTION
1899 – Effect of ignorance of agent
1900 – Scope of agent’s authority as to third persons Acts that may be ratified:
1901 – Agent’s lack of authority; when not as defense
1902 – presentation of power of attorney 1. Valid acts
1903 – Commission agent as to goods received 2. Voidable acts
1904 – obligation of commission agent against co-mingling 3. Unrevoked acts of the third party

1905 – right of principal where sale on credit was without
authority
1. He may require payment in cash, in which case, any
interest or benefit from the sale shall belong to the
agent since the principal cannot be allowed to enrich
himself at the agent’s expense; or
2. He may ratify the sale on credit in which case it will
have all the risks and advantages to him
1906 – authorized sale on credit
1907 – guarantee commission
Guarantee commission – (del credere commission) is one where
in consideration of an increased commission the factor or
commission agent guarantees to the principal the payment of
debts arising through his agency.
Its purpose is to compensate the agent for the risks he will have
to bear in the collection of the credit due the principal
1908 – Obligation of commission agent to collect credits of
principal
1911 – solidary liability of principal and agent when agent
exceeds authority yet principal allowed him to act as if he
were authorized
This rule establishes the concept of agency by estoppel
Distinguish Estoppel from Apparent Authority and Implied
Agency
Apparent Authority – is that which though not actually granted,
the principal knowingly permits the agent to exercise or holds
him out as possessing
Authority by Estoppel – arises in those cases where the principal
by his culpable negligence permits his agent to exercise powers
not granted to him, even though the principal may have no notice
or knowledge of the conduct of the agent
Implied Agency – is an actual and existing agency relationship
distinguished by the manner in which it was created
1912 – advancing of funds (importan review)
1913 – Obligation to indemnify agent

1909 – Liability of agent for fraud and negligence 1914 – Right of retention

CHAPTER 3 OBLIGATIONS OF THE PRINCIPAL For failing to reimburse based from 1912 and 1913, the agent
(1910 – 1918) may retain in pledge the object of the agency as a right over the
thing prior to being reimbursed.
1910 – Compliance of the Principal to the contracted
obligations of the agent 1915 – When Principals solidarily liable to agency

Specific Obligations of Principal to Agent Three requisites:

1. There are two or more principals
1. Comply with all the obligations which the agent may 2. The principals have all concurred in he appointment of
have contracted within the scope of his authority (1910, the same agent; and
1881) and in the name of the principal (1868, 1883) 3. The agent is appointed for a common transaction or
undertaking

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1916 Two persons contract separately with agent and
principal Other causes may exist for the extinguishment of the Agency
Relationship
Two persons may contract separately with the agent and the
principal with regard to the same thing. If the two contracts are Other modes:
incompatible with each other, the one of prior date shall be
preferred. Subject to the rules under 1544: 1. Extinguishment of the obligation
2. War
If the same thing should have been sold to different vendees, the 3. Legal Impossibility
ownership shall be transferred to the person who may have first 4. Termination of the sub-agent’s authority from the
taken possession thereof in good faith if it should be movable termination of the agent
property. Should it be immovable property, the ownership shall 5. Occurrence of a specified event
belong to the person acquiring it who in good faith first recorded
it in the Registry of Property. Should there be no inscription, the
ownership shall pertain to the person who in good faith, was the 1920 – Revocation of the Agency by the Principal
first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith. Revocation – is the act of the Principal which is done by
terminating the agency relationship in accordance with his will.
1917 – Liability to third persons of agent or principal

Principal’s Revocation of the Agency:

1918 – Principal; when excused from liability
1. 1920 – Revocation
1. If the agent acted in contravention of the principal’s 2. 1925 – Two Principal Rule
instructions, unless the latter should wish to avail
himself of the benefits derived from the contract; Express Revocation:
2. When the expenses were due to the fault of the agent;
3. When the agent incurred them with knowledge that an 1. 1921 – contracting with specified persons
unfavorable result would ensue, if the principal was not 2. 1922 – Third party with no knowledge of the revocation
aware thereof;
4. When it was stipulated that the expenses would be Implied Revocation:
borne by the agent, or that the latter would be allowed
only a certain sum. 1. 1923 – New Agent appointed for the same business
2. 1924 – Direct management (exemption: if interest is to manage
it together with the agent
CHAPTER 4 MODES OF EXTINGUISHMENT OF AGENCY 3. 1926 – Revocation of GPA by SPA
(1919 – 1932)
1926 – GPA v SPA on special matters
1919 – 6 LISTED MODES
1927 – When is agency irrevocable
Contract of Agency may be extinguished by this list but it is not
exclusive. 1. Agency cannot be revoked if a bilateral contract
depends upon it,
It may, therefore, be generally extinguished by the following 2. It is the means of fulfilling an obligation already
general denominations: contracted
3. Partner is appointed manager of a partnership
1. Agreement
2. Subsequent Acts of the parties Agency Coupled with an Interest
3. Operation of Law
An agency coupled with an interest is when the agent receives an
Rules on Determination of Confidential Information: estate or interest in the property that is the subject of the agency.
The agent in this relationship holds or controls the principal's
1. Whether the knowledge or information, the use of property and has legal rights against interference by outside parties.
which the complainant seeks to enjoin, is confidential;
2. Whether it be confidential in whole or in part, its use Stated differently, an agency is deemed as one coupled with an
ought to be prevented interest where it is established for the mutual benefit of the
principal and of the agent, or for the interest of the principal and of
third persons, and it cannot be revoked by the principal so long as
the interest of the agent or of a third person subsists. In an agency
Rules on Destruction of Thing: coupled with an interest, the agents interest must be in the subject
1. General Rule – absence of the agreement, the agency matter of the power conferred and not merely an interest in the
terminates;
exercise of the power because it entitles him to compensation.
2. Exceptions –
When an agents interest is confined to earning his agreed
a. If substitution is possible;
compensation, the agency is not one coupled with an interest, since
b. Partial loss or destruction of the subject
matter
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an agents interest in obtaining his compensation as such agent is an
ordinary incident of the agency relationship (Lim v Saban)

1928 - Renunciation

1. Without just cause – duty to notify renunciation and

bears damages;
2. With Just cause

1929 – Continuing management after renunciation

When Agency Persists Despite Death of Principal

1. 1930 constitution for: (1) common interest of the

principal and agent; (2) Interest of a third person who
has accepted the stipulation in his favor
2. 1931 – Done without knowledge of death of Principal

1932 – Duty to notify principal by the heirs of the agent

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