REVIEW NOTES FOR LAW ON AGENCY

Define Agency (MANDATO):

Agency is a contract whereby a person binds to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter. (Art. 1868)
Observations: Definition is very broad and therefore defective. As worded, the
definition includes relationship of master and servant of employer and employee of lessor
and independent contractor. The servant, the employee and the independent contractor all
render some work or service in representation or on behalf of another.
NOTE: What the agent really does for the principal is a JURIDICAL ACT, and not
merely a material one. In other words, while an agent may exercise discretionary powers,
the lessess of service ordinarily performs only ministerial functions.
Justice JBL Reyes: The true essence of the distribution, it is submitted lies in that the
agent enters or is designed to enter judicial relations, with or without representation of the
principal.
Basis of Agency:
Agency is also a representation relation. Representation constitutes its basic. By this legal
fiction of representation, the actual absence of the principal is transferred into legal fiction of
representation, the actual absence of the principal is transferred into legal or judicial
presence.
Importance: It enables a man to increase the range of his individual and corporate
activity by enabling him to be constructively present in many places and to carry on diverse
at the same time.
Purpose and Nature of Agency:
The purpose is to extend the personality of the principal. It enables the activity of man which
is naturally limited in its exercise by impositions of his physiological conditions to be
extended, permitting him to perform diverse juridical acts at the same time in different
places.
The relation is fiduciary in character since it is based on trust and confidence. Hence the
agent is estopped from asserting or acquiring a title to the subject matter of the agency
adverse to that or the principal.
Parties to a Contract of Agency:
Principal (Mandante) one whom the agent represent and from whom he derives his
authority, he is the person represented; and
Agent (Mandatario) one who acts for and represents another; he is the person acting in a
representative capacity.
NOTE: The principal is sometime called employer, constituent or chief. The agent is
frequently called attorney, or an attorney in fact. E.g. occasionally is spoken as proxy,
delegate or representative.
Capacity of the parties:
1. Any person who is capacitated to act in his own right may be principal.
2. In the case of the agent, since he assumes no personal liability, he does not have
to possess full capacity to act insofar as third persons are concerned. But persons
who are absolutely incapacitated such as insane persons cannot be agents.
Insofar as his obligations to his principal are concerned, the agent must be
competent to bind himself.
Principal or essential elements of contract of Agency:
1. There is consent, expressed or implied;
2. The object is the execution of juridicial act in relation to a third person;
3. The agent acts as a representative and not for himself;

4. The agent acts within the scope of his authority

CHARACTERISTIC AS A CONTRACT;
Nominate
Consensual
Preparatory
Informal
Personal
Representative
Derivative
Different Kinds or Classification of Agency:
As to form:
a. Oral
b. Written
As to the manner of creation:
a. Express- one where the agent has been actually authorized by the principal either
orally or in writing;
b. Implied one, which implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency.
As to cause:
a. Onerous or compensated one where the agent receives compensation for his
services. Agency is presumed to be for compensation. (art. 1875)
b. Gratuitous one where the agent receives no compensation.
As to extent of business covered:
a. General one which comprises all business of the principal (art. 1876); or
b. Special one which comprises one or specific transactions;
As to authority conferred:
a. Couched in general terms one which is created in general terms and is deemed
comprise only acts of administration (art. 1877)
b. Couched in specific terms one authorizing only one performance of a specific act or
acts (art. 1878)
As to its nature and Effects:
a. Ostensible or representative one where the agent acts in the name and
representation of the principal (art. 1878)
b. Simple or commission one where the agent acts for the account of the principal but
in his own name;
Distinction with other Contracts
Distinguish Agency from Loan:
In loan, a borrower is given money (a) for purpose of his own, in agency, to advance
principals business and he must generally return it whether or not his business is
successful.
Distinguish Agency form lease of service:
The basis of lease of service is employment and the lessor (like a servant ordinarily
performs only ministerial (not discretionary powers) functions.
Distinguish Agency from contract for a piece of work:
The independent contractor exercise his employment independently and not in
representation of the employer.
Distinguish Agency from partnership:

A partner acts not only for his co-partners and the partnership but also as a principal
for himself (in agency, agent acts only for his principal).
Distinguish Agency from negotiorum getio:
Negotiorum gestio is a quasi-contract; the getio acts authority and knowledge of the
owner of the property or business although according to his presumed (not express) will by
exercising all the diligence of a good father of a family. (art. 2145. In both however, there
is representation.
Distinguish Agency from sale;
In sale (as distinguished from agency to sell, the buyer receives the goods as owner,
pays the price (the agent deliver the proceeds of the sale to the principal), can deal with the
thing as he please being the owner (the agent, according to the instructions of the principal)
and as a general rule, cannot return the object sold.
Distinguish agency from brokerage:
A broker is merely an intermediary between the purchaser and the vendor whose
only office is to bring together the parties to the transaction and has nor relation to the thing
he buys or sell, while a (commission) agent maintains a relation not only his principal and
the purchaser or vendor but also with the property the subject matter of the transaction
which is placed and at disposal in accordance with his authority.
Appointment of the Agent:
a. Express one where the agent has been actually authorized by the principal either
orally or in writing.
b. Implied inferred from the a) acts of the principal, b) from principals silence, c)
principals lack of action or d) his failure to repudiate the agency knowing that
another person is acting on his behalf without authority (Art. 1869)
Form: Agency may be oral, unless the law requires specific form.
When forms are required:
For validity:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.

For convenience:
Art. 1358. The following must appear in a public document:
(1) xxxxxxxxx
(2) xxxxxxxxx
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;

When is there implied acceptance of an agency by an agent?

a. As between person present If the principal (personally) delivers his power or
attorney to the agent and the latter receives it without any objection. (Art 1871)
b. As between persons absent
When the principal transmits the power of attorney to the agent, who receives it without any
objection;
When the principal entrust 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 (Art. 1872)
Art. 1873. If a person specially informs another or states by public advertisement that he has given a
power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former
case with respect to the person who received the special information, and in the latter case with
regard to any person.
The power shall continue to be in full force until the notice is rescinded in the same manner in which it
was given.

Informing Other People of the Existence of the agency: Two ways:

a) Special information the person appointed as agent is considered as such with
respect to whom it was given
b) Public advertisement The agent is regarded as such with regard to any person.

Rule in case of revocation: It must be revoked in same manner how the agency was made
known. But revocation made in any manner shall be effective against all persons having
knowledge thereof. Reason according to Justice J.B.L. Reyes is to forestall fraud.
Meaning of Power of Attorney
A written authorization to an agent to perform specific acts in behalf of his principal which
acts, when performed, shall have binding effect on the principal.
Distinguished implied agency from agency by estoppel.
In implied agency, there is an actual agency. The principal alone is liable. In an agency by
estoppel, the authority of the agent is not real but apparent. If the principal causes the
estoppel, he is liable to any third person who relied on the misrepresentation. If the estoppel
is cause by the agent, then only agent is liable (Art. 1911).
As between the principal and the agent:
In implied agency, the agent is true agent, with rights and duties of an agent. In an
agency by estoppel (caused for instance by estoppel on the part of the agent), the agent is
not a true agent; hence he has nor rights as such.
As to third persons:
If the estoppel is caused by the principal, he is liable, but only if the third person
acted on misrepresentation in an implied agency, the principal is always liable.
If the estoppel is caused by the agent, it is only agent who is liable, never the alleged
principal; in an implied agency, the agency is never personally liable.
Authority Discussed:
The right of the agent to effect the legal relations of his principal by the performance
of acts effected in accordance with the principals manifestation of consent.
Kinds of Authority:
1.
2.
3.
4.

Express (here, the authority is clearly defined)

Implied (this includes necessary acts to accomplish the purpose)
General (The agents discretion is COMPLETE)
Apparent (here, the agent or third person was led by the principals conduct or words
to believe that agent was really authorized, when in fact he was not. The effect here
is as if there really was an authority.)

Examples of Implied Authority

If an authorized to collect a debt, he usually is also impliedly authorized to employ an
attorney as counsel, and to bring suit for the enforcement of the payment. If an agent is
authorized to exact the payment of the debt by legal means, he has the right to institute a
legal suit for its recovery.
An agent or attorney in fact who is authorized to pay the debts of the principal and to
employ attorney to defend the interest of the latter is naturally impliedly empowered to pay
fees of the attorney for the services rendered in the interest of said principal.
Examples of Instances where no implied authority.
1. An agent authorized to borrow necessary funds has no authority to pay his own
personal debts therewith.
2. An agent authorized to collect a debt has no right to make a novation of the contract
and to release sureties of the debtor.
3. An agent authorized to collect money belonging to the principal does not posses the
implied authority to indorse the checks which has been received by him in payment.
4. An agent authorized to borrow is not implied authorized to pay loan at maturity nor is
he allowed to give the money received to a third person.

5. Authority to collect does not carry with it authority to receive partial payment, nor
the authority to accept commercial paper as payment of the debt.

PRESUMPTION AS CONSIDERATION
Agency is presumed
contrary. (art. 1875)

to be for compensation, unless there is proof to the

Legal effect of an agency couched in general terms:

Such an agency comprises only acts of administration, (a) even if the principal should state
that the he withholds no power, or (b) that the agent may execute such acts as he may
consider appropriate (c) even though the agency should authorize a general and unlimited
management. (art. 1877)
Examples of Acts of Mere Administration
a. To sue for the collection of debts.
b. To employ workers or servant and employees needed for the conduct of a business.
c. To engage counsel to preserve the ownership and possession of the principals
property.
d. To lease real property to another for one year or less provided the lease is not
registered . (see Art. 1878 No. 8 by implication)
e. To make customary gifts for charity or to employees in business managed by the
agent (see Art. 1878, No. 6)
f. To borrow money if it urgent and indispensable for the preservation of the thing under
administration (see Art. 1878, No.7)
Cases where Special powers of Attorney are required:
1. To make such payment as are not usually considered as act of administration
2. To effect novations which put an end to obligation already in existence at the
at the time the agency was constituted;
3. To compromise, to submit questions to arbitration, to renounce the right to
appeal from the judgment, to waive objections to the venue of an action or to
abandon a prescription already acquired.
4. To waive any obligation gratuitously;
5. To enter into any contract by which the ownership of immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
6. To make gift, except customary ones for charity or those made to employees
in the business management by the agent.
7. To loan or borrow money, unless the latter act be urgent and indispensable for
the preservation of the things which are under administration;
8. To lease any real property to another person for more than one year.
9. To bind the principal to render some service without compensation:
10. To bind the principal in a contract of partnership;
11. To obligate the principal as guarantor or surety.
12. To create or convey real right over immovable property;
13. To accept or repudiate an inheritance
14. To ratify or recognize obligations contracted before the agency; and
15. Any other act of strict dominion. (Art. 1878)

Note:
1. The cases enumerated involve acts of strict dominion or ownership as distinguish
from acts of administration.
2. A special power to sell excludes the power to mortgage; and a special power to
mortgage does not include the power to sell. (Art. 1879).
Power to sell carries with it the power to find a purchaser or to sell directly;
power to deliver the property, power to make the usual representation and
warranty; power to execute the necessary documents; power to fix the
terms of the sale, including the time, place, mode of delivery, price of the
goods, and the mode of payment unless there be a set conditions stipulated
by the principal; and power to sell only for CASH and power to receive the
price unless he was authorized to only solicit orders.

The power to sell does not carry with it the power to barter or to exchange
to mortgage or to pledge.
The power to mortgage does not include the power to sell; or to execute a
second mortgage; to mortgage for the agents personal benefit of any third
person, unless the contrary has been clearly indicated.
A special power to comprise does not authorize submission to arbitration.
(art. 1880) Hence an agent authorized to compromise can do anything,
which the principal himself can do to effect a settlement unless there is
contrary legal provision.
Requisites in order the agent can bind the principal:
1. The agent must act within the scope of his authority, and
2. The agent act in behalf of the principal (see Art. 1881, 1882)
Cases wherein the principal may still be bound by the acts of an agent who exceeded
his authority:
a.
Where the principals act have contributed to decide a third person in good faith
(see Art. 1911
b.
Where the limitations upon the power created by him could not have been
known by the third person (see Art. 1900)
c.
Where the principal has placed in the hands of the agent instruments signed by
him in blank; and
d.
Where the principal has ratified the acts of the agent. (Art. 1901)
The agent is one directly liable to the person with whom he had contracted as if the
transaction were his own. Therefore, the principal and such person have no right of
action against each other. The exception is:
The principal is bound when the contract involves things belonging to him;
the principal may sue the agent for breach of contract. (Art. 1883).
Specific obligation of the agent:
1. To carry out the agency in accordance with its items; otherwise, he shall be liable for
damages. (art. 1884) Reason: He betray the confidence reposed on him by the
principal;
2. To finish the business already begun on the death of the principal should delay entail
any danger. Reason: In such case, the agency is still deemed in full force;
3. To advance the necessary funds if such is the stipulation except when the principal is
insolvent (art. 1886)
4. To act in accordance with the instruction of the principal and in the absence
therefore, to do all that a good father of the family would do, as required by the
nature of the business (art. 1887).
5. Not to carry out the agency if its execution would manifesty result in loss or damage
to the principal (art. 1888) Reason: The duty of the agent is to render service for the
benefit and not to the determined of the principal.
6. There being a conflict, not to prefer his own interest to those of the principal (e.g.
buying goods of the principal or selling his own goods to the principal without
informing the principal); otherwise, he shall be liable for damages. (art. 1889)
Reason: Agency is a fiduciary relation:
7. Not to borrow money from the principal who was authorize him to lend although at
interest, without his consent. (art. 1890) Reason: the agent may prove to be a bad
debtor. But if the agent has been authorize to borrow money he may himself be the
lender at the current rate. Reason: There is no danger of the principal suffering any
damage;
8. To render an account of his transactions and deliver to principal whatever he may
have received by virtue of the agency though it may not be owing to the principal
(art. 1891):
Note: Duty of the Agent to account is mandatory. Hence in an overpriced received by the
agent for goods he was sell at a certain price, he is duty bound to make an account. This
applies even in cases in cases that the money not be owing to the principal but arose
from the transaction involving the contract of agency.

Stipulation exempting from the duty to account is VOID, being contrary to public policy
as it would be conducive to fraud.
Some Doctrines on the duty to account:
1. Whoever administers anothers affairs must render an account because of the
representative relation and because of the fiduciary position.
2. If an agent refuses to account when it is his duty to do so, the principal may at
once terminate the agency and sue for the balance due. If the principal dies,
the agency is extinguished, BUT the duty to account subsists, and can be
demanded by the principals heirs or legal representatives.
3. The principal, or his legal representative, has the right to pass upon the
correctness of the accounting.
4. Corollary to his right to demand an accounting, a principal has the right to
make reasonable inspection of the books of account and memoranda,
including the original entries.
5. An agent, as a consequence of his duty to account, cannot dispute his
principals title to the property in his possession.
6. To be responsible in certain cases for the acts of the substituted appointed by
him (art. 1891).
7. To be responsible for the goods received by him, etc. To sell on credit only with
the consent of the principal, etc. and to collect with due diligence the credits
of the principal (art. 1903-1908); and
8. To answer for his fraud or negligence (art. 1909)
LIABILITY OF AGENT
Liability of two or more agent, even if they may have been appointed simultaneously
is JOINT. (Art. 1894).
Agent is liable for interest on the sums he has applied to his own use from the day with he
converted the said funds and so which owes after the extinguishment of the agency. He is
liable personally in the contract of agency if he expressly binds himself (art. 1897) or if he
exceeded his authority;
EFFECTS OF CONTRACT ENTERED INTO IN EXCESS OF AUTHORITY
The principal is not at all bound, except of course if there is subsequent ratification
by him. Therefore, it shall be VOID refers to the tie between the agent and the third party.
Regarding the principal, other articles are applicable. (art. 1989)
If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware if the limits of the powers granted by the principal. In
this case, however, the agent is liable if he undertook to secure the principals ratifications.
(art. 1989)
Example: An agent was authorized to sell his principals car. The agent sold in the
principals name the principals radio cabinet to third person who knew that the agent was
not authorized. In the above example, even as between the agent and the third person ,
such sale is completely null and void. However, if the agent had promised to obtain the
principals ratification, said agent would be liable in case of failure to obtain such ratification.
If ratification has been obtained, then the principal would be bound.
DISTINGUISH AUTHORITY FROM INSTRUCTIONS:
Authority is the extent or the limitation of the agents power to represent the
principal. Instructions are directions which the principal may give the agent to follow in the
discharge of his duties as such agent.
Third persons dealing with an agent do so at their own risk and are duty bound to
investigate his authority, the principal is not bound. But persons dealing with the agent need
not verify or investigate the instructions of the principal since they concern only the principal
and the agent.
EXAMPLE: P writes to B that A is authorized to buy certain merchandise. P privately
instructions A not to but merely to obtain Bs lowest price. I violation of said instruction, A
buys the merchandise. In this case, the sale is binding upon P because A has authority to
make the purchase although it is not in accordance with the instruction given.

WHO IS A SUB AGENT

A sub-agent (or substitute) is one to whom the agent delegates as his agent, the
performance of an act for the principal which the agent has been empowered to perform.
CASES WHEN THE AGENT IS RESPONSIBLE FOT THE ACTS OF THE SUBSTITUTE APPOINTED
BY HIM:
When he was not give the power to appoint one he cannot be allowed to enrich
himself at the agents expenses. When he was given such power, but without designating
the person, and the person appointed was notoriously incomplete of insolvent; and When he
was prohibited from appointing a substitute. (see Art. 1892)
The agent is bound to the party with whim he contracts:
When he expressly binds himself. When he exceeds the limits of his authority without giving
such party sufficient notice of his powers. (Art. 1897) Reason: The contract being
unenforceable the third person is deprived of any remedy against the principal.
The scope of agents Authority as far as third persons are concerned, if such acts is
within the terms of the power of attorney, as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding between the principal and the
agent (Art. 1800).
Purpose of the rule: To protect the interest of third persons.
Rules when there is multiplicity of agents:
The responsibility of two or more agents is not solidary unless it is expressly stipulated (art.
1894) and if solidarity has been agreed upon, each of them is responsible for the deliberate
non-fulfillment of the of the agency; and the fault of negligence of his fellow agents except
when the latter acted beyond the scope of their authority. (art. 1895)
Who is commission agent?
A commission agent (or factor is one who e business is to receive an d sell goods for
commission and who is entrusted by the principal with the possession of goods to be sold.
He may act in his own name of in that of the principal.
A commission agent is not authorized to sell in credit if not so expressly authorized
(Art. 1905). He also has the duty to place countermarks to goods he handles with different
owners. (art. 1904).
What rights are given to the principal where a sale on credit is made without
authority?
1. Require payment in cash, in which case, any interest or benefit from the sale
shall belong to the agent since the principal or
2. Ratify the sale on credit in which case it will have all the risks and advantages
to him. (art. 1905)
Guarantee commission (Del Credere Commission) is given in return for the risks
the agent will have to bear in the collection of the credit. An agent who receives a
guarantee commission is called del credere agent.
Specific obligation of the principal:
1. To comply with all the obligations which the agent may have contracted within the
scope of his authority (art. 1910, 1881) and in the name of the principal (art. 1868,
1883)
2. To advance to the agent, should the latter so request, the sums necessary to the
execution of the agency (Art. 1912)
3. To reimbursement the agent for all advance made by him provided the agent is free
from fault.
4. To indemnify the agent for all the damages which the execution of the agency may
have caused the latter without fault or negligence on his part. (Art. 1913); and

5. To pay the agent the compensation agreed upon, or if no compensation was specified
the reasonable value of the agents services. (Art. 1875)
The principal is solidarily with the agent even when the latter exceeded his authority
if the principal allowed the agent to act as though he had full powers. (Art. 1911) this
rules is based on the principle of estoppel.
Rules in case two persons contract with regards to the same thing. One of them
with the agent and the other with the principal.
1. If the two contract are compatible to each other, both shall be enforced;
2. If they are incompatible with each other, that of prior date shall be preferred subject
to the provisions of Art. 1544 (Art. 1916)
3. If the agent acted in good faith, the principal shall be liable to the third person whose
agent contract must be rejected; and
4. If the agent acted in bad faith, he alone shall be responsible. (art. 1917)
Rules when there is multiplicity of principals:
When two or more persons have appointed and agent for a common transaction or
understanding they shall solidarily liable to the agent for all the consequences of agency
(art. 1915).
Cases the principal not liable for the expense incurred by the agent.
1. If the agent acted in contravention of the principals instruction, unless the latter
should wish to avail himself, or the benefits derived from the contract;
2. When the expense were due to the fault of the agent.
3. When the agent incurred them with knowledge that the unfavorable result would
ensue, if the principal was not aware thereof, and
4. When it was stipulated that the expenses would be borne by agent, or that he latter
would be allowed only a certain sum.
Extinguishment Of Agent:
1. By its revocation;
2. By the withdrawal of the agent;
3. By the accomplishment of the object or purpose of the agency; and
4. By the expiration of the period for which the agency was constituted. (art. 1919)
Key word: EDWARD
E Expiration
D Death, etc.
W- Withdrawal
A Accomplishment of the agency
R- Revocation
D- Dissolution
Other causes:
Termination by mutual consent, novation, loss of the subject matter of the
agency.
May a contract of agency be revoked?
Expressly; or
Impliedly
1. By the appointment of anew agent for the same business transaction (art.
1923)
2. By direct management by the principal of the business entrusted to agent
(Art. 1944)
3. With respect to a general power of attorney previously granted (e.g. to
manage a business ) as regards the matter involved in the latter (Art. 1926)
Cases when agency is irrevocable
The principal may generally revoke an agency at will. (Art. 1920). In the following
case, he has no right to revoke the agency without incurring liability for damages:

If the agency is coupled with interest, i.e. the agent possesses an interest in the
subject matter of the power conferred and nor merely in the compensation arising from the
exercise of the power (e.g. where the principal pledges his property to the agent as security
for his debt and gives the agent the power to dispose of it should be in default).
Under Art. 1927:
1. If a bilateral contract depends on the agency (e.g. where it is stipulated that
the ownership of the factory sold would be transferred to the buyer only after
payment of the balance of the purchase price and that the seller (principal)
would appoint the agent to manage the factory and that any profit would be
used to pay off the balance.
2. If the agency is means of fulfilling an obligation already contracted (e.g.
agency in favor of creditor to collect sums due debtor- principal) ; and
3. If a partner is appointed manager of a contract of partnership, his appoint
being revocable only upon just and lawful cause and upon the vote of the
partners representing the controlling interest. (see Art. 1927)
4. When there has been waiver by the principal (however, the irrevocability of a
power of attorney cannot affect one who is not party thereto, it being
obligatory only on the principal who created the agency.
5. When the principal is obliged not to revoke. ( here the principal can still revoke
but he can held liable for damages, for breach of contract).
6. When the revocation is done is bad faith. (Here, the principal can still revoke
but innocent third parties should not be prejudiced; moreover the innocent
agent can be entitled to damages from him.
Agency is not terminated immediately by death in the following cases:
1. If the agency is necessary to finish the business already begun on the death of
principal where delay should entail any danger. (1884):
2. If it has been constituted in the common interest of the principal and the agent (art.
1930)
3. If it has constituted in the interest of the third person who has accepted the
stipulation in favor (Art. 1311)
ILLUTRATIVE Cases:
I.
A left his car at shell station, operated by B, to be washed, greased and sprayed.
When the car was being raised in the elevator shaft, it fell from the service platform and as a
result is suffered damage estimated P2,000. Since the car was insured by X insurance Co.,
the latter had to pay P2,000 to A. Upon payment of the amount X, insurance Co. brought an
action against the Shell Company of the Philippines to recover said amount. The defendant
Company interposed the defense that B, operator of the service station, is an independent
contractor, consequently, it cannot be held liable for damages. Is this correct? Reason.
Ruling: The contention of the Shell Philippines is not correct. The Supreme Court ruled
the contract entered between the company and the operator station is a contract of agency.
The operator of a service station is not an independent contractor, but merely and agent of
the Company because even the equipment which he use in his service station are owned by
the Company and oil, gasoline and other products which he sells the public are sold at
commission.
II.

A constituted son as his agent to mortgage parcel of land with the bank. In the
contract of mortgage, there is a provision that the bank can foreclose the mortgage in case
the debtors failure to pay his obligation, the bank foreclosed and sold the same to the
higher bidder. A questioned the sale contending that the authority to mortgage does not
carry with it the power to sell. Is As contention correct? Why?
No. While it is true that Special Power of Attorney to sell does not carry with it the
power of mortgage of the power to mortgage does not carry the power to sell, yet the
stipulation granting an authority to foreclose a mortgage is an ancillary stipulation
supported by the same cause or consideration for the mortgage and forms an essential or
inseparable part of the bilateral agreement.
DOCTRINE OF AGENCY BY NECESSITY

10

Strictly speaking, an agency can never be created by necessity. What is meant by the
phrase agency by necessity is however this: That by virtue of the existence of an
emergency the authority of an agent is correspondingly enlarged in order to cope with the
exigencies or the necessities of the moment.
1.
2.
3.
4.
5.

Five conditions laid down by the Supreme Court for Authority of Agency by Necessity:
The real existence of an emergency;
Inability of the agent to communicate with the principal;
The exercise of the additional authority for the principals own protection;
Adoption of fairly reasonable means, premises duly considered;
The ceasing of the authority the moment the emergency no longer demands the
same.

Example:
If a bus conductor is seriously hurt, the driver is authorized to engage the services of
the physician, in the companys name, sot that the conductor may survive. This is really for
the best interest of all concerned.

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