Manner of contract is subject to ratification, or inaction according to the
Establishment/Formation of which cleanses it of all defects as circumstances.
Agency though it was perfected without Note: flaws. Note: the discussion hereunder are The contract of agency, being a premised on the fact that the Q: How Agency may be consensual contract, is perfected by purported principal in the contract constituted? mere consent, or merely by the that have been entered into in his A: Article 1869 and Article 1870 meeting of the minds on the object name alleges that the agent was provides how agency may be (service: to enter into juridical acts never appointed or that the agent constituted. on behalf of the principal) and upon was appointed but acted beyond his the consideration agreed upon, scope of authority. Article 1869 – Agency may be which primarily is a valuable express or implied from the acts of The issues relating to the extent of consideration or may be pure the principal, from his silence or the power and authority of the liberality on the part of the agent. lack of action, or his failure to agent, should arise only when the repudiate the agency, knowing that Lim VS. CA – the SC noted that there principal denies being bound by the another person is acting on his are some provisions of law which contracts entered into by the agent behalf without authority. Agency require certain formalities for with 3rd parties. may be oral, unless the law requires particular contracts: Even if in fact agent acted without a specific form. When the form is required or in excess authority, or there is no Article 1870 – Acceptance by the for the validity of the reasonable to prove the extent of agent may also be express, or contract his power and authority, if the implied from his acts which carry When it is required to make principal accepts or ratifies the out the agency, or from his silence the contract effective as contract, then there is no issue to against 3rd parties such as be resolved. Every unenforceable those mentioned in Article attorney to the person designated 2. Perfection from the Side of the 1357 and 1358 of the NCC as agent; nonetheless, there is no Agent When the form is required requirement that for agency to arise On the side of the agent, Article for the purpose of proving it must be in writing, for in fact 1870 of the NCC provides that his the existence of the contract, Article 1869 says it may be oral or acceptance of the agency (e.g. such as those provided by may be deduced from the act of the agent has given his consent to the the Statue of Frauds in principal. agency arrangement) may be Article 1403 Illustrations express or implied form his acts 1. Perfection from the Side of the which carry out the agency, or from 1. Equitable PCI – Bank VS. Ku – the Principal his silence or inaction according to court ruled that where the law firm the circumstances On the side of the principal, Article allowed the employee of its client 1869 of the NCC provides that an to occasionally receive its mail, and Note: agency is constituted (e.g. principal having formally objected to the From a transactional point of view, has given his consent to the agency receipt by said employee of a court every act of the agent in pursuance arrangement) from his acts formally process, or taken any steps to put a of the agency is always express, it adopting it, or from his silence or in stop to it, it was construed to mean never have been implied because action, or particularly from his that an agency relationship had the requirement is that he must failure to repudiate the agency been established, to which receipt enter into a contract in the name of knowing someone is acting in his of the court process by said the principal. Thus, whenever any name. employee was legally deemed to be agent enters into any contract in service to the law firm. Certainly, the ideal form by which pursuance of the agency, his the principal is deemed to have acceptance of his designation as an entered into a contract of agency is agent is never implied nor when he issues a written power of presumed, for precisely he enters unto such contract clearly in the commercial ends in the sense that never presume that a designated name of the principal. one who accepts an agency is from person has accepted the agency by that time on bound by the fiduciary mere silence so that he should be There seems to be an indication in duties of diligence and fidelity, such vigilant in protecting his rights. Article 1870 that there such a thing that if it fails to act when the as implied acceptance of the 3. Instances When there is deemed circumstances required that he appointment on the part of the to be a meeting of the minds should have so acted to protect the agent from his silence or inaction between the Principal and the interest of the principal, he can be according to the circumstances. Agent made liable for breach of duty, and Since a contract of agency is cannot claim later on that he had no Article 1871 – Between persons essentially a preparatory contract, it accepted the designation. In the who are PRESENT, the acceptance is hard to imagine that there is a same way, it would be wrong for an of the agency may also be implied constituted contract of agency by agent to take advantage of if the principal delivers his power the mere silence or inaction of the confidential information or trade of attorney to the agent and the agent. In fact, the proper secrets relayed to him by the latter receives it without any interpretation of the silence or principal, and in order to avoid objection inaction of the designated agent is liability, he should claim that he that he has accepted the Article 1872 – Between persons never accepted the appointment appointment, and that is the reason who are ABSENT, the acceptance of since he entered into the why he has not acted one way or the agency cannot be implied from transaction in his own name. the other. the silence of the agent, EXCEPT: But, always take note, the policy is However, the usefulness of not well – served under the broad When the principal providing presumptive rules of transmits his power of and all-encompassing provision of implied acceptance on the part of attorney to the agent, who Article 1870, since the better rule the agent do serve some would be that a principal should receives it without any Article 1870 be deleted entirely, as power of attorney to a 3rd person, objection Article 1872 provides for the better the latter thereby becomes a duly When the principal entrusts rule. authorized agent, in the former to him by letter or telegram case with respect to the person The language used in Article 1871 a power of attorney with who received the special and 1872 indicate that the “power respect to the business in information, and in the latter case of attorney” must constitute a which he is habitually with regard to any person. The written instrument, because in both engaged as an agent, and he power shall continue to be in full cases the articles refer to situations did not reply to the letter or force until the notice is rescinded where the principal delivers his telegram. in the same manner in which it was power of attorney to the agent, and given. Note: The general rule under Article when the principal transmits his 1872 of no implied acceptance on power of attorney to the agent, Article 1921 – if the agency has the part of the agent, is actually which require that it must be in been entrusted for the purpose of contrary to the implied acceptance writing, which today would include contracting with specified persons, rule laid down in Article 1870 that electronic document and mail, its revocation shall not prejudice “acceptance by the agent may also which are considered to be the latter if they were not given be implied from his silence or equivalent to a written instrument notice thereof. inaction according to all under the Electronic Commerce Article 1922 – If the agent had circumstances.” Under Article 1872, Law. general powers, revocation of the other than the two circumstances 4. Perfection of the Contract of agency does not prejudice 3rd laid out therein, courts should not Agency as it affects 3rd persons persons who acted in good faith draw any conclusion of implied and without knowledge of the acceptance on the part of the Article 1873 – If a person specially revocation. Notice of the purported agent by his silence or informs another or states by public revocation in a newspaper of inaction. It would be better that advertisement that he has given a general circulation is a sufficient 1. Rules on the Existence of So, if the character assumed by the warning to 3rd persons. Agency, as to 3rd parties agent is of such a suspicious or unreasonable nature, or if the Note: Rallos VS. Yangco case held Although an agency contract is authority which he seeks is of such that a long – standing client, acting consensual in nature and generally an unusual or improbable character, in good faith and without requires no formality to be the party dealing with him may not knowledge, having sent goods to perfected, valid and binding, the SC shut his eyes to the real state of the sell on commission to the former has stressed in Lopez VS Tioco, that case but should refuse to deal with agent of the defendant, could an agency arrangement is never the agent at all, or should ascertain recover damages from the presumed; and Yoshizaki VS Joy from the principal the true defendant, when no previous notice Training Center of Aurora, Inc. that condition of affairs. of the termination of agency was persons dealing with an agent must given to the said client. It was the ascertain not only the fact of People VS Yabut – held that duty of the defendant on the agency, but also the nature and although the perfection of a termination of the relationship of extent of the agent’s authority. contract of agency may take an principal and agent to give due and implied form, the existence of an Thus, jurisprudence provides that a timely notice thereof to the agency relationship is never 3rd person must act with ordinary plaintiffs. Failing to do so, the presumed. The relationship of prudence and reasonable diligence defendant was held responsible to principal and agent cannot be to ascertain whether the agent is them for whatever goods may have inferred from mere family acting and dealing with him within been in good faith and without relationship; for the relation to exist the scope of his powers. Obviously, negligence sent to the agent there must be consent by both if he knows or has good reason to without knowledge, actual or parties. The law makes no believe that the agent is exceeding constructive of the termination of presumption of agency. his authority, he cannot claim the relationship. protection. Recio VS Heirs of the Spouse Aguedo whom such declaration has been 2. Agency by Estoppel and Maria Altamirano – reiterates made. Article 1873 – if a person specially that when a 3rd party relied upon Thus, what is clear therefore is that informs another or states by public the words of the purposed agent 3rd parties must NEVER take the advertisement that he has given a without securing a copy of the word or representation of the power of attorney to a 3rd person, special power of attorney, such 3rd purported agent at face value; they the latter thereby becomes a duly party was bound by the risk are mandated to apprise authorized agent, in the former accompanying such trust on the themselves of the extent of powers case with respect to the person mere assurance of the purported of the purported agent. who received the special agent. Thus, in the absence of a information, and in the latter case written power of attorney, the On the other hand, 3rd parties can with regard to any person. The burden of proof to show that an take the word, declaration and power shall continue to be in full agent acted within the scope of his representation of the purported force until the notice is rescinded authority would be with such 3rd PRINCIPAL with respect ot the in the same manner in which it was party. appointment and extent of powers given. of the purported agent. On the other hand, Article 1873 of Article 1911 - Even when the agent the NCC provides that the The principle is self – evident from has exceeded his authority, the declaration by a person that he has the nature of agency as a relation principal is solidarily liable with the appointed another as his agent is of representation – that an agent agent if the former allowed the deemed to have constituted such acts as though he were the latter to act as though he had full person as an agent (even when the principal – and therefore if the powers. designated person is at that point principal himself says so, then it is unaware of his designation as taken at face value as a contractual Note: Under Article 1873 of the agent), insofar as the person to commitment. NCC, if a person specially informs another or states by public advertisement that he has given a similar to the doctrine of apparent Formal Requirements on Grant of power of attorney to a 3rd person, authority, requires proof of reliance Powers To Agent the latter thereby becomes a duly upon the representations, and that, The discussions are in this section is authorized agent, even if previously in turn, needs proof that the based on the premise that even there was never a meeting of minds representations predated the action when an agent has been duly between them. taken in reliance thereto. Thus, it appointed by the principal, such was held that implied agency is Litonjua, Jr. VS. Eternit Corp., - it agent must still act within the derived from the acts of the was held that for an agency by scope of his authority in order to principal, from his silence or lack of estoppel to exist, the following make the resulting juridical acts action, or his failure to repudiate must elements must be established: entered into in the name of the the agency, knowing that another principal, valid and binding on the The principal manifested a person is acting on his behalf latter. This is consistent with the representation of the agent’s without authority. In agency by duty of obedience owed by the authority or knowingly estoppel, there is no agency at all, agent to the principal. allowed the agent to assume but the one assuming to act as such authority; agent has apparent, although not Article 1317 – No one may contract The 3rd person, in good faith, real, authority to represent in the name of another without relied upon such another. The law makes no being authorized by the latter, or representation; presumption of agency and proving unless he has by law a right to Relying upon such its existence, nature and extent is represent him. representation, such 3rd incumbent (mandatory) upon the A contract entered into in the person has changed his person alleging its existence. name of another by one who has position to his detriment. no authority or legal Yun Kwan Byung VS. PAGCOR – an representation, or who has acted agency by estoppel, which is beyond his powers, shall be unenforceable, unless it is ratified, scope of authority is non – existent a general power of attorney, and his expressly or impliedly, by the or void powers cover only acts of person on whose behalf it has been administration. From the view point of the court – executed, before it is revoked by the contract is not void but merely The term “acts of administration” the other contracting party. unenforceable. has the same legal significance as Article 1403 – the following “to act in the ordinary course of General Powers of Attorney contracts are unenforceable, unless business.” What constitutes an act, they are ratified. Article 1877 – An agency couched transaction or contract that is in general terms comprises ONLY within the ordinary course of Those entered into in the acts of administration, even if the business is determined by the name of another person by principal should nature of the business itself that one who has been given no has been placed under the authority or legal States that he withholds no administration of the agent representation, or who has power or that the agent acted beyond his powers States that the agent may Example: if the act, transactions or executed such acts as he contract in question is a matter that Note: A careful consideration of the may consider appropriate, from the nature of the business is formal requirements pertaining to or expected to occur and for which contracts of agency, it goes into Authorizes general and action is expected without much issues of “enforceability” and not unlimited management. changing the course of the into issues of “nullity” business, then it is a mere act of Note: The general rule is that in the administration. From the view point of the absence of the grant of special principal – a contract that has been power of attorney, the agent is On the other hand, if the act, entered in his name by another deemed to have been granted only transaction or contract, is of a without the consent or outside the nature, considering the business being managed, as something that writing; otherwise, the presumption given no such authority to is not expected to happen or under Article 1877 of the Civil Code the agent. Except, that every decided upon in the day – to – day must prevail, that the agent can agent is presumed to be affairs, then it would constitute an only pursue acts of administration. granted with authority to act of ownership or strict dominion, bind the principal for acts of Note: one which is extraordinary, and not administration. in the ordinary course of business. A person dealing with an Q: How such 3rd party shall be agent is put upon inquiry and *Today, the power to sue is deemed to have acted with due must discover upon his peril considered a power of “Strict diligence? the authority of the agent. ownership” Example: the power of Every person dealing with an A: The 3rd party should the agent to “exact the payment of agent is duty bound to sums of money by legal means” Demand a written authority determine the extent of such coming from the principal; *Today, the power to employ agent’s authority. otherwise, it would be personnel, is not strict ownership, Thus, a 3rd party is bound to grossly and inexcusably and does not need a special power exercise due diligence in negligent for such 3rd party of attorney to validly employer determining the extent of to enter into a contract with personnel. Thus, it is considered as authority of the agent to such agent “without a general powers of the agent. bind his principal. written authorization from A 3rd party who does not Q: Must Powers of Attorney Be in his alleged principal” exercise the modicum of Writing? diligence is deemed not to be Note: The power of attorney be in A: The clearest manner by which dealing in good faith and he writing is to be more critical to the there is specific grant of power of cannot enforce the contract constitution of a special power of strict ownership is that it be in against the principal who has attorney, but it is not critical in a agent to execute acts of strict every authority to pursue the general powers of attorney. ownership on behalf of the resulting contract (if he ratifies the principal, is done orally, the agency same) and the 3rd party – would be Thus – when what was constituted relationship is valid between the estopped from refusing to comply was general power of attorney, it principal and the agent, but not to with a contract he willingly entered covers only acts of administration. the 3rd party, the latter must require into absent the written authority of On the other hand, when what was written evidence of his power to the agent. constituted was an oral power execute acts of strict ownership, special power of attorney, then Q: How do the courts interpret the otherwise, they are bound to enter lacking the written evidence if written contract of agency? into a contract at their own risk. what particular power of A: It must be interpreted in ownership has been granted to the Article 1878 does not state that the accordance with the language used agent, the 3rd party may only special power of attorney be in by the parties. The real intention of reasonably presume that the agent writing; but the same must be duly the parties is primarily to be is granted powers of established by evidence other than determined form the language administration. self – serving assertion of the party used. The intention is to be claiming that such authority was Thus, Article 1878 of the NCC gathered from the whole verbally given him. The Rules of provides that a special power of instrument. If there is doubt as to Court requires for attorneys to attorney is necessary to confer the interpretation of the contract, compromise the litigation of their power in the agency that would resort would be interpreted as the client a “special power of authority” constitute acts of ownership; ideally regards to the situation, - Jurisprudence. the agency contract must be in surroundings and relations of the writing A verbal special power of attorney parties. would not be void, but rather When, a special power of attorney, unenforceable for the principal has or the conferment of powers to the Note: Jurisprudence holds that in a of strict construction still prevails – Be that as it may, the authority power of attorney where the Jurisprudence. must be duly established by intention of the principal is only to competent and convincing Q: What is a “Power of Attorney?” confer powers of administration, it evidence other than the self – would be dangerous to use words A: it is an instrument in writing by serving assertion of the party that have always been associated which one person, as principal, claiming that such authority was with powers of strict dominion, appoints another as his agent and verbally given. such as confers upon him the authority to Article 1878 – Special Powers of perform certain specified acts or To sell Attorney are necessary in the kinds of acts on behalf of the To purchase following cases: principal. To borrow To make such payment as To mortgage The written authorization itself is are not usually considered the power of attorney and it usually The current rule is that whether as acts of administration. called as “letter of attorney” what is granted is an authority to To effect novations which merely general power of attorney Note: It is practically reiterated the put an end to obligations or special power of attorney is not principle that the only reliable already in existence at the determined from the title given to manner by which to prove the time the agency was the instrument, but on the nature existence of a special power of constituted. of the power given under the attorney is through a written To compromise, to submit operative provisions of such instrument signed by the principal. questions to arbitrations, to instrument. Thus, when what is The court unequivocaby declared renounce the right to appeal granted to the agent is entitled a that the requirement under Article from judgement, to waive general power of attorney or a 1878 refers to the nature of the objections to the avenue of special power of attorney, the rule authorization and not to its form. an action or to abandon a prescription already To bind principal in a Note: acquired. contract of partnership Article 1878 of the NCC enumerates To waive any obligation To obligation the principal as 14 instances which described as gratuitously. guarantor or surety. “acts of strict dominion” and which To enter into any contract To create or convey real cannot be deemed to be within the by which the ownership of rights over immovable scope of authority of the agent an immovable is transmitted property unless expressly granted. or acquired either To accept or repudiate an gratuitously or for a valuable inheritance The 15 case enumerated in Article consideration To ratify or recognize 1878 actually cover the general To make gifts, except obligations contracted rule: A duly appointed agent has no customary ones for charity before the agency power to exercise on behalf of the or those made to employees Any other act of strict principal any act of strict dominion in the business managed by dominion unless it is under a special power of the agent attorney. Article 1879 – a special power to To loan or borrow money, sell excludes the power to Failure to meet the requirement unless the latter act be mortgage; and a special power to that it be in writing through a urgent and indispensable for mortgage does not include the special power of attorney would the preservation of the power to sell. make the situation NOT VOID BUT things which are to under MERELY UNENFORCEABLE since the administration Article 1880 – a special power to principal may ratify the same. To bind the principal to compromise does not authorize render some service without submission to arbitration. What makes an agency a “special compensation power of Attorney” An agent has special power of proscribed (prohibited) under power to attorney refers to attorney only when the act or Article 1879 refer to a voluntary “transmit or acquire” ownership of contract enumerated specifically sale affected through the agent, it immovable. under Article 1878 has been literally does not cover the public sale that Q: Is an oral contract of agency to “named” in the grant of commission happens as part of the foreclosure sell a parcel of land itself void? by the principal must literally be on the mortgage duly constituted. written or expressed for the A: No, for essentially every contract Note: Sale of A Piece of Land commission to constitute a special of agency is consensual in Through an Agent power of attorney. character, even those special power Article 1874, when a sale of a piece of attorney covered by Article 1878, Note: A general power of attorney of land or any interest therein is which need only be formally may include a special power if such through an agent, the authority of expressed or “named” by the special power is mentioned in the the latter shall be in writing; principle for the powers to arise, general power. otherwise, the sale shall be void. and can never be presumed from Q: Does the grant of special power (whether the sale is gratuitously or the fact of appointment of the to sell include the power to for a valuable consideration) agent, or from the nature of the mortgage, and vice versa? business assigned under powers of Q: Does Article 1874 Cover Agency administration. A: No, under Article 1879, “A special to Purchase Land or any interest power to sell excludes the power to therein? Q: Is sale of a piece of land mortgage, and a special power to pursuant to an Oral Special Power A: No, jurisprudence holds that the mortgage does not include the to sell void or unenforceable? coverage of Article 1874 refers only power to sell. to agency to sell or dispose of A: recent decisions of the SC convey It should be noted however that immovable whereas the language of clear implication that a special Jurisprudence provides that the sale Article 1878 (5) covers a special power of attorney required under Article 1878 in the conveyance of agent is liable if he undertook to such power does not include by immovable property must be that secure the principal’s ratification. implication the power to sell to which is writing as mandated under himself, unless there was such Article 1901 – A 3rd person cannot Article 1874 for the sale of a piece prior authorization given by the set up the fact that the agent has of land. principal. exceeded his powers, if the A special power of attorney is principal has ratified or has Q: What are the necessary to enter into any contract signified his willingness to ratify consequences/implications of “To by which the ownership of an the same. lease Real Property for more than 1 immovable is transmitted or year” by the agent. Q: How Detailed must be the acquired for a valuable special power of Attorney? A: consideration, without an authority in writing, it could not validly sell A: other than the requirement be in The lease of real property for the subject property and hence writing, no other formality is more than 1 year is an act of void. required for the special power of strict ownership since a lease attorney under Article 1874. Thus, of more than 1 year creates a Article 1898 – If the agent contracts specific description of the land to be right in rem. Thus, a special in the name of the principal, sold is not necessary – power attorney is needed. exceeding the scope of his Jurisprudence The lease of real property for authority, and the principal does 1 year or less would be not ratify the contract, it shall be Note: an agent cannot validly considered an act of void if the party with whom the purchase the property of the administration and may be in agent contracted is aware of the principal held for sale even when the form of general power of limits of the powers granted by the the agent has been granted a attorney. principal. In this case, however, the special power of attorney to sell a pieice of land or any interest in it, Q: What is the Doctrine of Implied principal might or could have done powers of administration other than Powers flowing from express if personally present, is deemed those that are incidental to those powers? authorized to engage the services of specifically granted. a lawyer to preserve the ownership A: the rule on the Doctrine of Thus, it covered the principle that and possess of the properties of the Implied powers provides that even when an agent has been granted an principal. when the rule on special power of express power of attorney, then the attorney is that in any of the cases Special Power of Attorney Excludes agent cannot execute any other act, covered within the first 14 General Power of Attorney over whether it be an act of paragraphs of Article 1878 are the Matter Covered administration, or an act of deemed to have been granted to ownership outside the language of Article 1926 – A general power of the agent ONLY when so “named” the power of attorney. attorney is revoked by a special or “expressly granted” by the one granted to another agent, as principal, there is still applicable the regards the special matter involved doctrine of “implied powers” – that in the latter. the grant of express powers or special powers of attorney must Q: Does the grant of specific power necessarily include all power of attorney (whether general or implied or incidental to such special) exclude from the agent the express power, even if they power to execute all other acts of amount to acts of ownership or administration? strict dominion. A: Yes, under the principle that if Example: an agent granted under a the principal decide to detail the power of attorney the authority to powers he grants to the agent, then deal with property which the he means to exclude all other