de Jesus - 2B/Pineda Notes
Agency, Trust, and Partnership
TITLE X
AGENCY
CHAPTER 1
NATURE, FORM, AND KINDS OF AGENCY
Article 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.
Definition
—> definition in the provision is defective since it is very broad that it
covers relationship between master and servant, employer and
employee, lessor and independent contractor.
—> The servant, employee, and subsequent contractor all render some
works or service in representation or on behalf of another — yet they
are not agents.
Other Definitions (Paras)
—> a contract either express or implied upon a consideration, or a
gratuitous undertaking, by which one of the parties confides to the
other, the management of some business to be transacted in his name
or on his account, or assumes to do the business and renders an
account of it.**
—> it is the relationship 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 consented by the other so to act.**
—> an act which one person gives to another the power to do
something for the principal and in his name.**
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Distinguish between agency and other forms of services
—> basis is representation, as distinguished from employment in other
contacts
Feature of control, categorizing agency.
*Victorias Milling Co. Inc., v CA
—> On the part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his words or actions;
—> On the part of the agent, there must be an intention to accept the
appointment and act on it, and in the absence of such intent, there is
generally no agency
—> one factor which most clearly distinguishes from other legal
concepts is control ==> the agent agrees to act under the control or
direction of the principal.
Phrase “for and in our behalf” does not necessarily establish an
agency
—> depends on the intention of the parties as gathered from the whole
scope and effect of the language employed.
Essential Elements of the Contract of Agency
1) Consent - express or implied, on the part of the parties to establish
the agency;
2) Object - is the execution of a juridical act in relation to a third
person;
3) Representation - agent acts as a representative and not for himself;
4) Agent acts within the scope of his authority
—> Commercial agency is already non-existent by virtue of the repeal
of the Code of Commerce by the Civil Code.
Special Agent
—> the state is responsible in like manner when it acts through a
special agent, but not when the damage has been caused by the
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Agency, Trust, and Partnership
official to whom the task done properly pertains, in which case what is
provided in Art. 21761 is applicable.
Lastly, teachers or heads of establishments of arts and trades shall be
liable for damages caused by their pupils and students or apprentices,
—> Matters involving special agents of the state are governed by Art.
so long as they remain in their custody.
2180 on vicarious /imputed liability

The responsibility treated of in this article shall cease when the persons
Article 2180. The obligation imposed by article 2176 is demandable herein mentioned prove that they observed all the diligence of a good
not only for one's own acts or omissions, but also for those of persons father of a family to prevent damage. (1903a)
for whom one is responsible.

The father and, in case of his death or incapacity, the mother, are
Characteristics of an agency contract
responsible for the damages caused by the minor children who live in
1) Nominate - given a specific name;
their company.
2) Bilateral - involves two or more parties;
3) Preparatory - in preparation for the execution of a juridical act in
Guardians are liable for damages caused by the minors or
relation to a third person;
incapacitated persons who are under their authority and live in their
4) Representative Relation - it is not a personal relation in relation to
company.
third persons

The owners and managers of an establishment or enterprise are

Parties
likewise responsible for damages caused by their employees in the
1) Principal - he is the party represented by the agent. The agent
service of the branches in which the latter are employed or on the
derives his authority from him;
occasion of their functions.
2) Agent - he is the party who represents the principal on behalf of
the former;
Employers shall be liable for the damages caused by their employees
3) Sub-agent - agent of the agent. However, the contract of agency
and household helpers acting within the scope of their assigned tasks,
may prohibit the appointment of a sub-agent.
even though the former are not engaged in any business or industry.

Purpose/Economic Significance
The State is responsible in like manner when it acts through a special
—> The principal can expand his individual and corporate activities by
agent; but not when the damage has been caused by the official to
enabling him to be present constructively in many places and thus be
whom the task done properly pertains, in which case what is provided
able to carry on diverse activities at the same time.
in article 2176 shall be applicable.

1Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (1902a)
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Agency, Trust, and Partnership

Capacity Agency Lease of Services

—> insofar as third persons are concerned, it suffices that the principal 3 parties are involved only 2 parties are involved
is capacitated to enter into the contract since the agent, as a general
rule assumes no personal liability. 4) Lease of property
Agency Negotiorum Gestio
CASE DOCTRINE: Mendoza v de Guzman
meeting of the minds present no meeting of the minds
—> The agent B (minor) is deemed to be an extension of the
personality of of A (principal) who is of legal age. Consequently, A agent is under the principal’s officious manager acts according
cannot avoid the contract on the ground of his agent’s incapacity. control to his sound discretion

created by agreeement created by law as a safeguard

AGENCY DISTINGUISHED FROM OTHER CONTRACTS against unjust enrichment

1) Partnership - an agent acts not for himself, but for his principal; a 5) Trust
partner acts for himself, for his form, and or his partners Agency Trust
(partnership may be considered as a branch of agency
arises from contract may be by contract or not
2) Lease of Property
Agency Lease of Property ordinarily, the agent holds no title trustee may hold title over the
proeprty
agent acts under the principal’s does not act under the principal’s
control control may not involve a property involves control of property

agent binds the principal lessee cannot bind the lessor

—> a co-owner can appoint an agent to sell his or her share
subject matter may be things other only property which may be the
than property subject matter of the lease
Article 1869. Agency may be express, or implied from the acts of the
3) Lease of Services
principal, from his silence or lack of action, or his failure to repudiate
Agency Lease of Services the agency, knowing that another person is acting on his behalf
without authority.
agent represents the principal worker does not represent his
employer Agency may
be oral, unless the law requires a specific form. (1710a)
agent exercises discretionary w o r ke r e x e rc i s e s m i n i s t e r i a l
powers functions as instructed

revocable at will of either party or revocable/terminates only upon

both of the parties the will of both parties
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Agency, Trust, and Partnership
Classes of Agency As to extent of transactions covered
**Note that the enumeration is not exclusive. 1) General - comprises all transactions of the principal; and
2) Special - comprises one or more specific transactions
1) Express - that kind where the agent is actually clothed by the As to management
principal with authority: 1) Agency couched in general terms - only acts of administration are
a) In writing; or included; and
b) Oral 2) Agency couched in specific terms - comprises acts of dominion or
2) Implied - that kind where the agency created is deduced from ownership and which needs a special power of attorney to bind the
a) Acts or conduct of the principal; principal
b) Silence or lack of action; and As to manner of appointment
c) Failure to repudiate the agency 1) Direct - where the principal has appointed the agent directly; and
—> in all of these cases, the principal knows that a person is acting on 2) Indirect - appointment of the agent was through another person
his won behalf without express authority.
Form of contract
Jurisprudence doctrines/examples —> Following Art. 13562, no form is necessary. The authority of the
a) Ratification may produce an express agency; agent may be in writing or verbal. If in writing, public or private.
b) There can be agency by estoppel so as not to prejudice innocent However, when the law requires a specific form, that form must be
third persons; observed.
c) Acquiescence of a principal to the acts of an agent for a long
period of time + appropriation to his own use the benefits of the
Article 1870. Acceptance by the agent may also be express, or
agents acts should be considered in deciding whether or not
implied from his acts which carry out the agency, or from his silence or
agency exists
inaction according to the circumstances. (n)

Other Kinds of Agencies

As to nature Acceptance
1) Conventional - created by agreement; and —> a person has a right to represent or reject his appointment as an
2) Legal - formed by operation of law (examples: Arts. 1893, 1884, agent.
etc.) —> It is only in legal agencies that he can refuse the creation of the
As to consideration agency because the law dictates.
1) Gratuitous - agent does not receive compensation; and
2) Onerous - agent receives compensation

2 Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be
in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following
article cannot be exercised. (1278a)
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Agency, Trust, and Partnership
Implied acceptance Implied agency between those who are personally present
1) Acts of the agent which carry out the agency, —> the acceptance of the agency may be implied if the principal
2) Silence or inaction delivers his power of attorney to the agent and the latter receives it
a) Where persons are present (Art. 1871); and without any objection.
b) Where persons are absent (Art. 1872) **The acceptance is implied since there is statement in whatever form
that he is accepting the agency
>> He received the appointment without comment, neither was there
Article 1871. Between persons who are present, the acceptance of
any objection.
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.
>> If both are absent, the silence of the person being appointed as
(n)
agent will not imply the creation of agency.
Exception: see 2 cases in Article 1872
Concept of Power of Attorney
—> an instrument in writing whereby one person, as principal, appoints **In the first exception3 , the principal transmits the power of attorney
another as his agent and confers authority to perform certain specified to the person. After receipt, the agent offered no objection,
acts or kinds of acts in behalf of the principal. establishing an implied agency. In contrast, Article 1871 contemplates
a situation where both are present, hence a personal meeting. In
Purpose transmitting the same, it is presupposed that they are both absent at
—> evidence the authority of the agent to third parties with whom the the place of transmission.
agent deals and not to define the authority as between the agent and **In the second exception4, the person is entrusted with a letter or
principal. telegram empowering him to transact business on behalf of the
—> the person holding a power of attorney is designated as attorney- principal in which business the person is habitually engaged as agent.
in-fact, as distinguished from attorney-at-law The failure to reply presupposes such implied acceptance.
>> In both cases, the parties are both absent, but there is an implied
NOTA BENE: agency by means of silence or inaction of the agent.
—> except when required by statute, a power of attorney is valid even if
no notary public intervened in its execution.
Article 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;

3 (1) When the principal transmits his power of attorney to the agent, who receives it without any objection;

4 (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)
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Agency, Trust, and Partnership
Admission by silence - An Act or declaration made in the presence and
within the hearing or observation of a party who does or says nothing
(2) When the principal entrusts to him by letter or telegram a power of
when the act or declaration is such as naturally to call for action or
attorney with respect to the business in which he is habitually engaged
comment if not true, and when proper and possible for him to do so,
as an agent, and he did not reply to the letter or telegram. (n)
may be given in evidence against him. 5

Application Acceptance of the agency is not compulsory

—> this provision applies only when persons involved are both absent. —> if the agent wants to refuse or decline appointment, he must react
—> General Rule: silence (of agent) =/= acceptance immediately so that the principal may be put on notice. Such reaction
—> the two cases are exceptions where silence = acceptance is necessary so that his silence may not be interpreted as the silence
contemplated in this provision.

Basis Article 1871 Article 1872

CASE DOCTRINE: Calibo, Jr. v CA
Condition When created, both W h e n c r e a t e d , b o t h —> For an agency relationship to be deemed as implied, the principal
of creation principal and agent are principal and agent are must know that another person is acting on his behalf without his
present absent authority. In view of the appellee’s lack of knowledge of Mike’s
pledging the tractor without any authority from him, it stands to reason
Manner of P A i s p e r s o n a l l y PA is not personally that the former could not have allowed the latter to pledge the tractor
delivery d e l i v e r e d b y t h e delivered and is merely as if he had full powers to do so.
principal to the agent transmitted by
messenger, letter, or
telephone
Article 1873. If a person specially informs another or states by public
Similarity There is no objection or reply given by the agent advertisement that he has given a power of attorney to a third person,
to the principal, creating the presumption of the latter thereby becomes a duly authorized agent, in the former case
implied acceptance. with respect to the person who received the special information, and
in the latter case with regard to any person.
PINEDA’S OPINION The power
—> the general rule on the silence on Article 1872 (i.e., silence =/= shall continue to be in full force until the notice is rescinded in the
acceptance) contradicts the rule on silence in the law on evidence. The same manner in which it was given. (n)
exceptions follow the general rule on evidence.

5 Rule 130, Section 2 of the Rules of Court

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Agency, Trust, and Partnership
Effects of Special Information
—> if a person specially informs another such as by letter, that he has
given power of attorney to a third person, and the recipient, relying in
good faith on the information contracted with the third person, the
latter becomes an agent of the informant who now becomes liable as a
principal.
CASE DOCTRINE: Macke, et al. v Camps
—> One who clothes another with apparent authority as hi agent, and
holds him out to the public as such, cannot be permitted to deny the
authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person and in the honest
belief that he is what he appears to be
CASE DOCTRINE: Rallos, et al. v Yangco
—> Having advertised the fact that Collates was his agent and having
given special notice to the plaintiffs of such fact, and having given
them a special invitation to deal with such agent, it was the duty of the
defendant on the termination of the relationship to give due and
timely notice thereof to the plaintiffs.
Effect of Public Advertisement
—> if through a public advertisement, a person states that he has a
power of attorney to a third person, and another person, relying on the
advertisement in good faith, contracted with third persons, the latter
becomes the agent of the advertiser who in turn becomes a principal
(agency by estoppel)
Manner of Termination or Rescission of Agency
—> if agency is created under Article 1873, it shall continue to exist and
be effective until the notice (given through information or
advertisement) had been rescinded in the same manner in which it
was given.
—> If it is through letter, it must be rescinded through letter as well.
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CASE DOCTRINE: Union Bank and Trust Co. v Long Pole Lumber Co.
—> On the termination of an agency, persons who have dealt with the
principal through the agent may continue to do so, in the absence of
knowledge of the fact of termination, and the principal will be bound
by the acts of the former agent as fully as if his authority had not
ceased.
—> The duty of the principal to notify third persons of information re
the termination of the agency is of the same character and requires the
same degree of certainty as that which the law imposes upon
members of a co-partnership in the case of dissolution as a measure of
protection from liability by reason of subsequent acts of the former
members of the dissolved firm
Implied Agency & Agency by estoppel, distinguished
Implied Agency Agency by estoppel
There is actual agency, hence There is no actual agency, hence
vesting the agent the rights and he has no rights and duties as an
duties as such agent
The principal is liable alone, not the If caused by the principal, he alone
agent. is responsible.*
If caused by the agent, he alone is
responsible.*
*provided third persons acted in good faith.
Article 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)
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Agency, Trust, and Partnership
Applicability
—> applies only to the sale of a piece of land or any other interest
thereto (e.g., usufruct, mortgage, etc.
—> this provision extends to repurchase, since the same is also a sale.
Reconciling Articles 1874 and 1403(2)
—> If the owner himself sells a parcel of land or an interest therein, if
not made in writing, the contract of sale is unenforceable, pursuant to
Art. 1403(2)6 . It is not void, and may be subject to ratification
—> However, if the sale of a piece of land is through an agent and is
not in writing, the sale is void. Hence, it may not be ratified.
Article 1875. Agency is presumed to be for a compensation, unless
there is proof to the contrary. (n)
—> This followed the principle enshrined in Article 277 of the Code of
Commerce. However, such presumption is rebuttable.
Concept of Gratuitous Agency
—> when the service rendered is undertaken to be gratuitous, the law
does not raise an implied promise to pay for it even if the service can
be considered as valuable.
—> an agent is entitled to compensation only after he has completely
or substantially completed his obligation as an agent.
Right of a broker to commission
—> after the contract of sale which has been produced by the broker is
concluded, the broker has a vested interest in or right to commission
for the period fixed therein which is not affected by the execution of a
6 Article 1403. The following contracts are unenforceable, unless they are ratified.
xxx
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
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second contract shortening such period and reducing the
consideration thereof, unless he acquiesces or consents thereto.
—> it may be stipulated that compensation be dependent upon the
realization of profit for the principal.
—> amount dependent upon the agreement. In the absence thereof,
the agent is entitled to receive compensation on quantum meruit basis
CASE DOCTRINE: Quijano v Soriano
—> While a contract of sale is perfected from a moment there is an
agreement as to the thing to be sold and its price, this does not mean
that a broker is entitled to his commission from the perfection of the
contract even if no sale is consummated.
—> If the sale does not materalize because the purchaser backed out, it
would be absurd to insist that the broker is entitled to commission
from the owner who receives nothing since there was no sale.
CASE DOCTRINE: Prats v CA
—> If a broker/agent is not the efficient procuring cause in bringing
about the sale of the property, he is not entitled to compensation.
CASE DOCTRINE: Fontanilla v Limqueco
—> for a broker to succeed in his claim for collection, he must show
that he had been able to find a buyer, ready and willing and able to
buy at the price dictated by the principal, otherwise the broker cannot
be said to have complied with his end of the bargain.
Concept of ‘Efficient Procuring Cause’
CASE DOCTRINE: Medrano v CA
—> refers to a cause originating a series of events which, without break
in their continuity, result in accomplishment of prime objective of the
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Agency, Trust, and Partnership
employment of the broker producing a purchaser ready, willing and
able to buy real estate on the owner’s terms
—> if his efforts are the foundation on which the negotiations resulting
in a sale begun.
—> the means employed by the broker and his efforts must result in the
sale.
When Labor of the Agent is the Proximate Cause of the Contract
—> if his labor had set in motion the intervention of the third party that
produced the sale, there is a close proximate and reasonable causal
connection between the agent’s efforts and the principal’s sale of his
property.
Preparation of documents
—> a broker engaged in the sale of real estate is not limited to bring
vendor and vendee together and arranging the terms and conditions
of a sale of real estate. Since sales of real estate must be in writing, the
preparation of the documents is part of the broker’s functions.
CASE DOCTRINE: LG Marquez et al., v Varela
—> where there was no understanding, express or implied, between
the principal and his agent, that no part of the agent’s compensation
can be paid to his sub-agent, the latter may be joined with the agent as
a party to a case for recovery of compensation despite the fact that the
principal never dealt with the sub-agent directly or indirectly.
NOTA BENE: receipt of commission does not necessarily mean one is
an agent.
—> the agent or broker cannot be deprived of agreed commission by
the principal by dealing directly with the buyer
—> an agency cannot be revoked after the agent consummated the
transaction.
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Legality of Double Agency
—> an agent acting simultaneously for both the seller and buyer is
exercising double agency. It is improper unless the agent is acting with
full knowledge and consent of the principal parties or unless his task is
merely to bring the parties together.
—> in any other case, the agent is not entitled to any compensation
Right of the Principal to Terminate Agent’s Authority When No
Time is Fixed
—> either party is at liberty to terminate it at will, subject only to the
ordinary requirements of good faith
—> the right of the principal to terminate his authority is absolute and
unrestricted, except only that he may not do so in bad faith as a ploy to
escape payment of the commission.
CASE DOCTRINE: Fontanilla v Limqueco
—> the business of a real estate broker/agent is only to find a
purchaser, and the rule is that in the absence of an express contract,
the implication is that the broker becomes entitled to the usual
commissions whenever he brings to the principal a party who is able
and willing to take the property and enter into a valid contract upon
the terms then named by the principal, although the particulars may
be arranged and the matter negotiated and completed between the
principal and the buyer directly.
Exclusive Sales Agency
—> the seller my grant the agent such indefinitely or within a limited
period. They may agree that should the property be sold by the seller
to a third person or a persons submitted by the agent even without the
further aid of the agent, commission would still be given.
NOTA BENE:
General Rule: The agent’s commission is paid by the party represented
by the agent. By agreement, it can be paid by both or either party.
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Exception: When there is no agreement, it is the owner of the property
sold who must pay. A special agent is authorized to do only one or more specific acts in
pursuance of particular instructions or restrictions necessarily implied
Broker Agent from the act done.

a negotiator between the parties.
He does not act in his own name
and is a middleman or for some
purposes, the agent of the parties.
represents only one party, as a rule.
He is acting in the name of his
principal and possesses a power of
attorney.
Universal Agency
—> one where the agent is authorized to do all acts for his principal
which can be legally delegated to him.

Article 1877. An agency couched in general terms comprises only

Article 1876. An agency is either general or special.
 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
The former comprises all the business of the principal. The latter, one consider appropriate, or even though the agency should authorize a
or more specific transactions. (1712) general and unlimited management. (n)

—> the classification of agency into general or special is based on the
scope of business or transaction covered where the agent represents
the principal.
Concept of General Agency
—> all the business of the principal are covered
—> the general agent is usually authorised to do all acts connected
with the business or employment in which he is engaged.
A general agent is one authorized to do all acts pertaining to a
business of a certain kind or at a particular place, or all acts pertaining
to a business of a particular class or series. He usually has authority
either conferred in general terms or in effect made general by the
usages, customs, or nature of the business which he was authorized to
transact.
Effects of General Agency
—> covers only acts of administration.
—> general power permits the agent to do all acts which the law does
not require a specific power
—> even if the principal has stated n the special power of authority that
he withholds no power to the agent or that the latter may execute such
acts as he may consider appropriate or that he is given general and
unlimited management, only acts of administration are authorized to
be done.
EXCEPTION
—> With respect to the power of a managing partner in a partnership,
he may perform acts affecting ownership if the same are necessary to
promote or accomplish a declared object of the partnership.
Otherwise, he is not allowed although he is a managing partner.

Concept of Special Agency

—> only one or more specific transactions (not all) are covered by the
agent’s authority.
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Agency, Trust, and Partnership

Article 1877. Article 1878. Special powers of attorney are necessary in

Concept of General Power of Attorney
the following cases:
—> an authority granted to the agent to do all acts of a particular
(1) To make such payments as are not usually considered as acts of
character.
administration;
Example: to alienate or dispose of all the immovable properties of the
(2) To effect novations which put an end to obligations already in
principal.
existence at the time the agency was constituted;
—> the agent can sell one or all immovable properties of the principal.
(3) To compromise, to submit questions to arbitration, to renounce the
right to appeal from a judgment, to waive objections to the venue of
NOTA BENE: a special power can be included in a general power of
an action or to abandon a prescription already acquired;
attorney, either by giving authority for all acts of a particular character
(4) To waive any obligation gratuitously;
or by specifying therein the act or transaction for which a special
(5) To enter into any contract by which the ownership of an immovable
power is needed.
is transmitted or acquired either gratuitously or for a valuable
—> Hence, when in a general power, the agent is authorized to sell the
consideration;
principal’s immovable, such agent is empowered to sell any real
(6) To make gifts, except customary ones for charity or those made to
property of the principal, without the necessity of a special power to
employees in the business managed by the agent;
sell for every specific property.
(7) To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
—> an express power is necessary to perform any act of strict
administration;
ownership. A general power permits the agent to do all acts for which
(8) To lease any real property to another person for more than one
the law does not require a special power.
year;
(9) To bind the principal to render some service without compensation;
15 Acts Necessitating Special power of Attorney for Validity
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(1) To make such payments as are not usually considered as acts of
(12) To create or convey real rights over immovable property;
administration;
(13) To accept or repudiate an inheritance;
—> note that payments when made in the ordinary course of
(14)To ratify or recognize obligations contracted before the agency;
management are merely acts of administration are included in an
(15) Any other act of strict dominion. (n)
agency couched in general terms

Concept of Special Power of Attorney
—> it is an authority granted by the principal to the agent where the act
for which it is drawn is expressly mentioned.
Example: an authority to sell a particular lot which is especially
described to distinguish it from other properties of the principal.
(2) To effect novations which put an end to obligations already in
existence at the time the agency was constituted;
—> the subsisting obligations of a principal arising from the agency
cannot be modified without a special power executed by him in favor
of the agent.
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(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;
—> A compromise is a contract whereby the parties, to avoid a
litigation or terminate a pending one, make reciprocal concessions.
—> By arbitration, the parties submit their controversies to one or more
arbitrators for decision.
—> To compromise and to submit to arbitration are in effect acts of
alienation. These are acts of ownership and not administration.
An agent cannot waive: 1) right to appeal from a judgment; 2)
objections to venue; 2) prescription already acquired by the principal.
(4) To waive any obligation gratuitously;
—> a debtor may have a debt or obligation to do in favor of her
principal. The agent cannot waive such credit gratuitously. Such will
constitute remission or condonation.
(5) To enter into any contract by which the ownership of an immovable
is transmitted or acquired either gratuitously or for a valuable
consideration;
—> the conveyance of an immovable, whether for a valuable
consideration gratuitously, is an act of ownership, not an act of
administration. Special power of attorney is needed to validly effect
such conveyances.
(6) To make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
—> Gifts are donations. It is an act of liberality whereby a person
disposes of a thing or right in favor of another who accepts it. It is a
gratuitous conveyance, an act of ownership which necessitates a
special power of attorney, except gifts which are customary for charity
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or given to employees in the business managed by the agent such as
Christmas gifts.
(7) To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
administration;
—> Involves money.
—> The agent may have in his possession funds or money of the
principal which he may lend to third persons which may lead to abuse.
The law remedies such by requiring a special power of attorney as a
necessary means to control such act.
—> If no SPA = principal is not bound
—> The agent cannot borrow money without an SPA except when
funds are necessary for the preservation of the property being
administered by the agent.
—> An SPA to mortgage real estate does not include the power to
contract loan for the principal.
(8) To lease any real property to another person for more than one year;
—> necessary because a lease for more than 1 year creates a real right.
—> it not more than one year, it is an act of administration provided it is
not registered.
(9) To bind the principal to render some service without compensation;
—> the agent cannot, without authority bind his principal, to do some
service gratuitously without an SPA since the same amounts to
involuntary servitude.
(10) To bind the principal in a contract of partnership;
—> without an SPA, an agent cannot bind his principal in a contract of
partnership for that will mean binding his principal to contribute
money, property, or industry to the partnership, which are acts of
ownership. Moreover, the basis of partnership is trust and confidence
which the principal may not have with the firm’s partners
de Jesus - 2B/Pineda Notes
Agency, Trust, and Partnership
(11) To obligate the principal as a guarantor or surety;
—> In a guaranty, the grantor binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail do so >>
act of ownership since it may require payment of cash or property.
—> In suretyship, the surety binds himself solidarily with the principal
debtor which is an act of strict ownership.
(12) To create or convey real rights over immovable property;
—> An agent cannot create real rights over immovables without an
SPA, being acts of strict ownership. Moreover, there is more reason
why he cannot convey such real rights.
(13) To accept or repudiate an inheritance;
—> A hereditary heir has the right to accept or repudiate his
inheritance since both are acts of strict ownership.
(14)To ratify or recognize obligations contracted before the agency;
—> The agent was not yet the principal’s representative when the
obligations arose. There is no justification for the agent to recognize
obligations which may bind the principal and which obligations were
incurred before the existence of the agency.
(15) Any other act of strict dominion. (n)
—> all those not mentioned in the list
Article 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)
The Power to Sell =/= Power to Mortgage
—> even if the former is more onerous, it does not include the latter
and vice versa.
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—> If the agent executes a mortgage on the real estate of his principal
without the latter’s express authority, he is personally liable for the
consequences.
—> a special power to mortgage does not include the power to
contract loans unless the contrary is shown.
Article 1880. A special power to compromise does not authorize
submission to arbitration. (1713a)
—> The reason is that while the principal may have the trust and
confidence in the judgment of his agent, he may not have the same
trust and confidence on the designated arbitrators.
—> governed by RA 9285 (Alternative Dispute Resolution Act)
—> if equipped with an SPA, the arbitral award binds the principal as
long as the agent acted within the scope of his authority.
NOTA BENE: if the principal specified/designated the arbitrators, the
agent cannot submit the matter to other arbitrators.
—> GENERAL RULE: an agent authorized to compromise can do
anything which the principal may do to effect a settlement.
EXCEPTION: if there is a contrary legal provision.
—> Rationale: a principal may authorize his agent to compromise
because of absolute confidence in the latter’s judgment and discretion
to protect the former’s rights and obtain the best bargain in the
transaction. If the transaction would be left at the hands of an
arbitrator, the arbitrator may not have the principal’s trust, contrary to
the fiduciary nature of agency.
Article 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)
de Jesus - 2B/Pineda Notes
Agency, Trust, and Partnership
‘Within the scope of authority’ means Delegated Authority
—> delegated authority is the power of the agent to act within the
scope of his assignment on behalf of his principal with binding effect
on the latter.
—> it may be express (when specifically defined orally or in writing) or
implied (when its performance is deemed included in an express
power or is necessary for the accomplishment of the agency’s
purpose)
Example: the right to collect payments includes the right to institute a
suit for its recovery.
Authority and power, distinguished
—> Authority is the cause, power is the effect.
—> authority springs from the principal who delegates the same to the
agent which empowers the latter to perform the act authorized to be
done.
Concept of attorney-in-fact
—> agent granted special or general power of attorney who is not
necessarily a lawyer
Basic Principles in Agency
1) The agent must act within the scope of his authority (see whether
general or special power); and
2) The agent must act on behalf of his principal and not on his own
behalf.
When agent has authority but acts on behalf of himself
Effect: agent has recourse only against the third person and vice versa.
The principal and the third person have no recourse against the other
unless the transaction involves things belonging to the principal.
Page 14 of 15
When agent has no authority but acts on behalf of another
Effect: the transaction is unauthorized and unenforceable. Only the
supposed agent is bound unless the principal ratifies the
representation made on his behalf, which excuses the agent from
liability.
When the agent has no authority and acts on his own name
Effect: the transaction is valid between the agent and the third person
if the agent could transfer the ownership of the thing at the time of the
delivery. Here, only the agent is bound.
Concept of Agent by necessity
—>if there is an emergency, the authority of the agent is expanded to
cover the exigencies of the moment.
Requisites:
a) existence of an actual emergency;
b) inability of the agent to timely communicate with the principal;
c) exercise of the additional authority is for the principal’s own
protection;
d) adoption of reasonable means to cope with the situation; and
e) stoppage of the authority from the cessation of the emergency
Prohibited acts
—> agent cannot buy, even at a public auction, property entrusted to
him by the principal for sale or administration; and
—> the agent cannot be a lessee or mortgagee of such property
Article 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)
—> although the agent did not exactly follow the limits of his authority,
however, if his performance of the agency proved to be more
de Jesus - 2B/Pineda Notes
Agency, Trust, and Partnership
advantageous to the principal than that specified in the authority, the
performance is considered as authorized.
EXCEPTION: an administrator of a piece of land cannot sell the land
even at a better price if the agent has no SPA.
Article 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)
Concept of Disclosed Principal
—> one who at the time of the transaction contracted by the agent, the
other party dealing with the agent has known that the agent is acting
for a principal whose identity is revealed.
Concept of Undisclosed Principal
—> one whom the other party dealing with the agent has no notice of
the fact that said agent is acting for a principal.
Agent Personally Liable
—> see basic principles on page 14
—> when the agent acts in his own name, he is not acting on behalf of
the principal, hence, the resulting contract is between him and the
third person, making him personally and directly bound by the
7 Section 13, Rule 3 of the Rules of Court
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contract and the principal has no cause of action with the third person
and vice versa.
Application
—> applies when the agent is given authority by the principal.
However, the agent, instead of disclosing, acted on his own name in
dealing with third persons.
EXCEPTION: if the contract involves thing belonging to the principal.
This is in order to protect third persons against possible collusion
between the agent and the principal. It applies only when the agent
has been authorized by the agent to enter into a transaction, but the
agent, instead of contracting for and in behalf of the principal, acts in
his own name.
Ability to sue
—> the agent who made a contract in their own names may sue the
third person
—> the agent who acts as such may sue or be sued in his individual
capacity, there being no action for or against the undisclosed principal.
If disclosed, the action must be filed by or against the principal
—> since he is the real party-in-interest.
Remedy of third person in case of doubtful authority of the agent
—> include the agent as party defendant in the action (suit against
alternative party defendants) 7
Remedy of an undisclosed principal
—> the principal cannot maintain an action against the buyer who has
no knowledge that the seller is merely an agent, but can proceed
against the agent since the contract was concluded by the agent in his
own name.