AGENCY

- Involves two persons: principal and agent

- The agent represents the principal to:
a. Render some service
b. Do something in behalf of the principal
Characteristics of contract of agency:
(1) Consensual perfected by mere consent
(2) Commutative both parties receive values that are
equivalent to each other
(3) Principal can stand by itself without the need of
another contract
(4) Preparatory means to an end
(5) Bilateral creates obligations for both of the parties
(6) Onerous there exists a consideration
(7) Nominate it has its own name
Essential Elements:
1. Consent express or implied
2. Object execution of juridical act
3. Agent acts as a representative of the principal
4. Agent acts within the scope of his authority
Capacity of the Parties
Article 78 Juridical Capacity (inherent)
Article 38 Capacity to act with legal effect
Defective Contract:
Minority
Insanity
State of being deaf/mute R&W
Prodigality
Civil Interdiction
The law does not require that the agent must possess
full capacity to bind the contracts entered by him.
However, he must possess mental capacity such that
insane persons cannot represent the principal.
Note: The contract entered by an incapacitated agent
and principal (contract of agency) is voidable but the
contract entered by the third person and agent in behalf
of the principal is valid.
The relationship of the agent and principal is fiduciary
it is a relationship built with trust and good faith. That is
why; no written agreement is needed.
Matters that can be delegated:
Any act can be delegated to the agent except:
a. Personal Acts i.e. obligations of husband and wife
b. Acts Prohibited by Law i.e. illegal & criminal acts
Agency as distinguished from other contracts
Agency
Partnership
An agent acts for his A partner acts for himself,
principal and not for his firm and his partners
himself
Agency
Loan
An agent may be given Borrower is given money
funds by the principal to for purposes of his own
advance
the
latters and he must generally
business
return it

Agency
Agent
represents
capacitated person

Agent is appointed by the

principal
and
is
not
permanent
Agent is subjected to the
directions of the principal

Agent can make the

principal personally liable
Agency
Agent is appointed by the
principal

Guardianship
Guardian represents
incapacitated person

an

Guardian is appointed by
the court
Guardian is not subject to
the direction of the ward
but must act for the benefit
of the ward
Guardian has no power to
impose personal liability on
the ward
Juridical Administration
Judicial administrator is
appointed by the court

Agent represent principal

He represents the court,

the heir and creditors of
the estate

Agent is controlled by the

principal through their
agreement
Agency
Agent is controlled by the
principal

His acts are subject to

specific orders from court

May involve other things

than the property

It is involved with property

only

Agent
can
bind
the
principal
Agency
Agent represents principal

Lessor cannot bind the

lessee
Lease of Services
Worker does not represent
his employer

Contract
may
be
terminated at the will of
either parties

Contract
can
be
terminated only at the will
of both

Agent
exercises
discretionary powers
Agency
There is a contract caused
by meeting of the minds

Worker has ministerial

functions
Negotiorum Gestio
There is no meeting of the
minds and only a quasicontract (Representation is
not agreed upon)

Created by parties
Agency to Sell
Ownership of goods is not
transferred to agent

Relation is created by law

Sale
Ownership is transferred to
the buyer

Lease of Property
Lease is not controlled by
the lessor

Agent delivers the price

Agency to Buy
Agent acquires ownership
in behalf of principal

Buyer pays the price

Sale
Buyer acquires ownership
for himself

Agent delivers the price

Buyer pays the price

Article 1869
Kinds of Agency according to manner of creation:
1. Express either oral or written
2. Implied
a. From principals silence
b. From principals lack of action
c. From principals failure to repudiate the agency
Contract of agency may be formed through:
1. Appointment
2. Ratification (w/o authority but principal benefitted)
3. Estoppel (w/o authority but parties are present)
4. Necessity
Article 1870
Acceptance of the agent:
Acceptance of the agent may be expressed or
implied (from his acts, his silence or inaction)
Article 1871
Implied acceptance can be distinguished into two:
1. Parties are present
2. Parties are absent
Both being present, implied acceptance is also
noted when the agent receives a power of attorney
from the principal himself without any objection
Power of Attorney: written authorization to an agent
to perform specified acts in behalf of his principal
which acts, when performed shall have binding
effect on the principal
Article 1872
Appointment of Agent through special information
Between persons who are absent, acceptance of
the agent cannot be implied from silence except:
1. the principal transmits his power of attorney to
the agent who receives it w/o objection
2. the principal entrusts to him by letter a power of
attorney with respect to the business in w/c he
is habitually engaged as an agent and did not
reply to the letter
Note that a mere failure to give a reply does not
mean the agency has been accepted. The agent
must write a letter acknowledging the receipt of the
power of attorney but offers no objection.
Revocation must be through special information
Article 1873
Appointment of Agent through public advertisement
Any form of advertisement used by a principal
informing that he has given a power of attorney to a
third person is binding
Revocation must be made through public
advertisement
Article 1874
Sale of a piece of land through an agent

Agency must be in writing otherwise sale is void

Purchase of a piece of land through an agent
Agency does not need to be in writing but the agent
must have special power of attorney.

Article 1878
Special Power of Attorney
This refers to a clear mandate specifically authorizing
the performance of the act. A general power of attorney
comprises only acts of administration.
This is necessary in following cases:
(1) to make such payments as are not usually
considered as acts of administration
(2) to effect novation to put an end to obligations
already existing at the time the agency was made
(3) to compromise, arbitrate, renounce the right to
appeal judgment, waive, abandon prescription
(4) condonation and remission
(5) ownership of an immovable property
(6) donation
(7) loan or borrow money
(8) lease any real property for more than one year
(9) render some service without compensation
(10) contract of partnership
(11) principal as guarantor
(12) create real rights over immovable property
(13) accept or repudiate an inheritance
(14) ratify obligation contracted before the agency
(15) other act of strict dominion
Article 1881
Principles of Agency
Contract of agency is a contract of representation
-An agent must perform within scope of authority
-He must act in representation or in behalf of principal
Article 1882
If an agent performs an act, technically exceeded his
scope of authority but is beneficial to the principal, it is
not deemed to have exceeded its authority
Effects:
1. With authority and in principals behalf
Valid contract; principal is bound and agent is
not personally liable
2. With authority and in agents behalf
Article 1883 Not binding on the principal except
when it involves the property of the principal
3. Without authority and in principals behalf
Unenforceable contract between principal and
third party but can be ratified when the principal
accepted the consideration/ when he benefitted.
1898. If the third party is aware, contract is void
4. Without authority and in agents behalf
Valid contract between agent and third party
Obligations of the Agent
Article 1884

To carry out the agency in accordance w/ its terms

To answer for damages with through his
nonperformance the principal may suffer
To finish the business already begun on the death
of the principal

Article 1885
Person declines the agency
A person is free to refuse to be an agent however he
must observe the diligence of a good father of a family in
the goods or property forwarded to him and return them.
Article 1929
Agent withdraws from agency
-The agent may withdraw for a valid reason but he must
continue to act until the principal appointed a new
agent
-If there will be damages, the agent is liable. However,
withdrawal is justifiable, the agent is not liable.
-There must be notice given to the principal
Article 1886
Advance necessary funds
Agent is authorized to give advances in representation of
the principal. However, he must be reimbursed except
when the principal is insolvent. In case of the principals
insolvency, it is a ground for extinguishment of agency.
Failure of the principal to reimburse: agent is bound for
redemption
Article 1887
Follow instructions
The agent is bound to follow instructions of the principal.
Authority
Instruction
2Extent of agents power Conerns only the principal
to represent the principal
and agent since hese are
e.g. lease of property
private orders given to
agents
e.g. lease to foreigners
The third party does not need to know the instructions of
the principal to the agent. If the agent did not follow, the
agent is bound to the principal but the principal is still
bound to the third party.
Article 1890
Borrowing and lending of the principal
If the authority given is to lend money, the agent is not
allowed to be the borrower.
If the authority given is to borrow money, the agent is
allowed to be the lender.
Article 1892
Substitute/Sub-agent
If it is prohibited:
Appointment of the sub-agent is void
All acts of the sub-agent is void.
Principal can go against the sub-agent or agent for
any damages to his part

If the contract is silent

The agent is solely responsible for the sub-agent
If authorized
a. Agent appointed the sub-agent
Agent will not be liable unless sub-agent is
notoriously incompetent or insolvent
b. Principal appointed the sub-agent
Agent is not liable even if sub-agent is
notoriously incompetent or insolvent
Article 1894
2 or more agents with joint liability
Each agent will be responsible for his own act thus an
agent will not be liable for the fault of another. If both are
at fault, liability is joint (divided equally)
Article 1895
2 or more agents with agreed solidary liability
Agreement for solidary agents is allowed. Thus an act of
one is an act of the other. In case one of the agents is at
fault, the principal can go against any of the agent and
can recover the entire damages
Exception: In case one exceeded his authority, only the
agent at fault is liable.
Article 1903
Commission Agent
Commission/ Factor Agent
Broker
Receives commission upon Broker earns his pay
the successful conclusion of merely by bringing the
the sale
buyer & seller together
1905. Commission Agent cannot, without the consent
of the principal, sell on credit. If he does so, the
principal may demand from him payment in cash but
he is entitled to any interest or benefit which may
result from sale
If there is authority from the principal to sell on credit,
agent must inform the principal with a statement of
the names of the buyers. Failure to do so, the sale
shall be deemed made for cash
1907. Del Credere Commission Agent receives
additional payment to warrants the performance of
the third party and bears risk of collection of payment.
Obligations of the Principal
Article 1910
To comply with all the obligations which the agent may
have contracted within the scope of his authority
Article 1912
Advances made by an agent
The principal must advance to the agent the sums
necessary for the execution of the agency. Should the
agent have advanced them, the principal must reimburse
him even if the business was not successful provided the
agent is free from all faults. Reimbursement shall include
interest on the sums advanced from the day the advance
was made.
The principal is liable for expenses incurred by the agent

Exception:
1. agent acted n excess of authority given
2. expenses are due to the fault of agent
3. agent incurred expenses even if he is aware that
it is prejudicial to the principal
4. there is agreement that agent will be liable

Article 1916
Incompatible Contracts
When two persons contract with regard to the same
thing, one with the agent and the other with the principal,
that of prior date shall be preferred, without prejudice to
the provision of Article 1544.
Article 1544 Double Sales
1. Movable Property
a. Possessor in Good Faith
b. Oldest Title in Good Faith
2. Immovable Property
a. Registrant in Good Faith
b. Possessor in Good Faith
c. Oldest Title in Good Faith
The other one that is not preferred can demand
damages against:
1. If agent is aware of sale of principal and still sold
the property (Agent is in Bad Faith) agent is liable
2. If agent is in good faith principal is liable
Extinguishment of Agency
E expiration
D death, civil interdiction, insanity, insolvency of P&A
W withdrawal of the agent
A accomplishment of the purpose of agency
R revocation
D dissolution of the firm or corporation
Expiration
Special power of attorney is valid until revoked or until it
falls under one of the modes of extinguishment
Death of the Principal
Article 1930
Even after the death of the principal, agency is not
terminated given the following:
a. mutual benefit of the parties
b. benefit of the third party who approved of the sale

Article 1931
Without knowledge of death of the principal
Any act of the agent, without the knowledge of the death
of the principal is valid and shall be fully effective.
Death of the Agent
Article 1932
The heirs must notify the principal.
Revocation
Article 1920
The principal may revoke the agency at will and compel
the agent to return the document evidencing the agency
through express or implied. Agent is bound to recover
damages from the principal.
Implied revocation:
a. Appointment of a new agent (there must be a
notice to the former agent)
b. Principal directly manages the business
entrusted to the agent
c. A special power of attorney revokes a general
power of attorney
Revocation is not allowed:
1. Bilateral contract depends on the contract of agency
e.g. P sold the property to A on installments. P
authorized A to manage the building where the salary
is payment for the remaining installment
2. Agency is a means to fulfill another contract
e.g. P has a loan from A. P authorized A to collect
from X because X is indebted to P.
Article 1922
Notice of Revocation
-If the agency has been entrusted for the purpose of
contracting with specified persons, revocation will not
prejudice the third person until notice is given.
-If there is not notice and the third person entered into the
contract, principal is bound to the third person.
-If the third party is not aware but there is a publication,
the principal is still bound.
Article 1923
-If the agency has been entrusted for the purpose of
contracting with the general public, the principal is not
bound to notify in case of revocation