AGENCY, TRUST, AND

PARTNERSHIP

WWW
September 14, 2016

Morenos beauty, of course you should be able to

resuscitate her.

Classification of Contracts of Agency

1.

As to CREATION
a. It is express when the granting of authority is either oral or
in writing.
b.

It is implied when by reason of the principals silence,

inaction and failure to repudiate the acts of a person,
even though he knows that such person is acting as an
agent for and in his behalf.
If by acts of the principal BY IMPLICATION:
i.
through his lack of action/inaction or his silence,
and
ii.
through his failure in repudiating, knowing that the
agent acted without authority (in effect tolerating
the actions of the agent)

We said that as to creation, agency could be implied. Can it therefore be

presumed?
The contract of agency cannot be presumed.
There is no presumed agency even if implied because there must
always be a basis in the granting of authority. There must be an
intention to grant. Basis is needed to determine whether or not
that authority has been granted.
When we say implied, what are we referring to?
Generally, agency is not presumed. Agency must exist as a fact.
There should be acts done by the agent for the account of his
principal. There must be an intention from the principal granting
an authority to the agent in order for him to act in behalf of the
principal.
Existence of authority in the contract of agency must be specified - the
extent, the nature. Unless these are clear, we cannot presume agency.
By Operation of Law:
Although not presumed, agency could still exist even if there was no
actual authority. How?
1)

Authority by necessity
If Moreno faints, almost at the brink of death, what should
be done? You have the authority to help her. With

Caballero Daileg Gocuan Honoridez Lim Pungos Vergara

2)

Solutio Indebiti
If you rode a taxi and paid P50, but the driver gave you a
change of P450. What will you do?
There is solution indebiti. You not only have the authority,
but also the obligation to return. You need not ask if you
have the authority to return the excess, otherwise, there
would be unjust enrichment.

Although creation may be implied, it does not necessarily mean that the
agent has already agreed. The acceptance of the agent is necessary. It
may be made expressly or impliedly.
There is implied acceptance when both persons are present: when
principal gave his authority and the agent accepted without any
objection.
When both persons are absent: it cannot be said that there was implied
acceptance by the agent except:
1) When the principal gave his authority and there is a notice of
acceptance and the agent did not object.
2) Through telegram/ letter with respect to the business that he is
regularly engaged in and he did not reply to that letter/ telegram.
If your boyfriend texts you, Raisa, can we meet at Starbucks tonight?
Wont you believe it because its just a text message? Dont you believe
me? You will! And if your boyfriend is not there when you went, will you tell
your boyfriend nag text2 ta, ikaw may wala nganhi Will you get mad?
Yes! Sigeg kaboang dinha ako ning gi save, it came from your number It
is now an accepted mode of communication and all you have to do is to
preserve or save that message.
How is an appointment of an agent done?
Appointment of an agent can be done expressly or impliedly.
Expressly, when the principal grants the authority to the agent by
writing or orally.
Impliedly, when the principal grants the authority.
Special Forms of Appointments: advertisement and special notice
If appointment is done by publication, the revocation of such authority
should also be done through publication.

AGENCY, TRUST, AND

PARTNERSHIP

WWW
September 14, 2016

If it is done by special notice to the agent, the manner of

revocation should also be a special notice to the agent.

If done by special notices or information, who are bound by that

appointment?
The parties receiving that appointment
However, if the appointment is done by advertisement?
Any person who knew of that advertisement will be bound by it.
This is done specially in appointments of agents which are corporations or
business entities. If appointed as an agent of a foreign corporation, that
foreign company will come out with a publication in newspapers of
general circulation. Thats an important announcement. It is an indication
that somebody has been appointed as an agent, and therefore, any act
done by the agent will be binding on that appointing principal.
It is an acknowledgement that the public may now deal with the agent
and any transaction entered into by that agent will be acknowledged,
honoured, and duly entertained by the principal.
If its a big insurance company in United Kingdom, for example, appointing
somebody in Cebu as their general agent, the Cebu Community may now
feel comfortable dealing with you. Thats an important publication
because it involves credibility and confidence, and thats the point, the
message being said. With that confidence in the community, where the
publication is done, you feel comfortable dealing with someone whose
name you have read on the papers and now his agent. It Is better than
dealing with someone you really dont know and heard of and suddenly
comes and enters into a transaction. Giilad tingali ko ani kinsa kaha ni
you ask for credentials; you ask for specific appointments; you even ask
for a background. Once published, at least you would feel secure that the
appointment of the agent is valid and binding.
General rule: consensual; Exceptions
In the case of a sale of a real property, the authority of the agent
there must be in writing.
Not only sale or conveyance, but also mortgage
If it is a sale of land, it should be in writing. Otherwise, the
transaction is void. If void, it cannot be ratified.

Caballero Daileg Gocuan Honoridez Lim Pungos Vergara

2.

As to CHARACTER
a. It is gratuitous when the service rendered by the agent is
without compensation at all or there is no expectation of
compensation.
b. It is with compensation or onerous if the service of the
agent is compensated.

When is it gratuitous or onerous?

It is onerous agency if the principal gives compensation to the
agent. It is gratuitous when there is no expectation of
compensation
If it is not indicated whether or not it is gratuitous or onerous, the
agency is presumed to be with compensation or onerous.
Why do you think it is presumed?
Because in agency, there are specific acts that the agent does for
the principal. They must be compensated.
Meaning, nothing is free. Presumption is that nothing is free. When
you are required to do something, it is for a fee, unless of course
there was an agreement on something else.
It is always for compensation. You were authorized to sell the land of
Mejica and this authority was in writing. You were looking for buyers.
However, after two years, you were unable to find a buyer. Despite all the
efforts, woke up 5 oclock in the morning, came home twelve oclock
midnight, woke up again at 5 but despite your efforts you were unable
to sell. Can you demand from Mejica?
No! There is a presumption that a contract of agency is for
compensation, however, the presumption is only prima facie. It
can be proved otherwise
For example, they entered into a contract of agency and the
money involved may not be for payment of services rendered by
the general agent. So it can be proved otherwise that the services
performed by the agent are for compensation.
Although the presumption is that it is for compensation or onerous, this
presumption only applies if the agent is successful. However, if you are
able to sell, and Mejica refuses because you never agreed on
compensation, what can you say?
I can say that even if we did not agree on compensation, you will
have to pay me because the presumption is that the agency is
onerous.

AGENCY, TRUST, AND

PARTNERSHIP

WWW
September 14, 2016

If you were not able to sell, but Sibay instead was able to sell, can Sibay
now demand for compensation? How about you, can you ask Mejica for
compensation?
Only Sibay can demand for compensation. It was through her
efforts that the property was sold.
3.

4.

As to EXTENT of agency/business
a. It is general when it involves all the business of the
principal.
b. It is special when it is limited only to a specific business or
one or more acts or transactions.
As to AUTHORTY CONFERRED
a. It is couched in general terms when it only includes
administration of the business or properties of the
principal.
As an agent, you were authorized to look after all the
properties of the principal in Cebu City, with full power to
administer and manage all these properties, and to
decide whatever you think is necessary to be done with
respect to these properties.
The scope of authority is limited to acts of administration.
An agency couched in general terms comprises only 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 consider appropriate, or even though the
agency should authorize a general and unlimited
management. (Art. 1877)

Can the agent now sell?

No. This requires a Special Power of Attorney, as it is an act of strict
dominion, and the agency is only couched in general terms.
If it is couched in specific terms, it can authorize the execution of
specific acts.
Powers of attorney-in-fact, or a holder of a Special Power of Attorney (SPA)
(Art. 1878)
1) To make such payments as are not usually considered as acts of
administration;
2) To effect novations which put an end to obligations already in
existence at the time the agency was constituted;

Caballero Daileg Gocuan Honoridez Lim Pungos Vergara

3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)

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;
To waive any obligation gratuitously;
To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
To make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
administration;
To lease any real property to another person for more than one
year;
To bind the principal to render some service without
compensation;
To bind the principal in a contract of partnership;
To obligate the principal as a guarantor or surety;
To create or convey real rights over immovable property;
To accept or repudiate an inheritance;
To ratify or recognize obligations contracted before the agency;
Any other act of strict dominion.

These acts require an SPA because they involve transfer of ownership. The
SPA should contain the scope of the authority of the agent and the acts
which he is empowered to execute.
You were empowered by the principal to pay for a certain property in
Cebu City. After making the payment, you brought the property to the
principal. The principal said, I never authorized you to buy! I only
authorized you to pay. Look at this SPA, where does it state that I
authorized you to buy?
It would result to absurdity.
Exactly! Absurd. Gi-authorize na pabayad unya di nako paliton ang akong
gibayran? Absurd! Of course, authority to pay includes authority to buy.
Now you said "I will make Robillos my agent. Robillos, I now authorize you to
borrow. Go to the bank and borrow P10, 000." So, he borrowed P10, 000.
He saw and remembered that you, as the principal, had an outstanding
account with VECO and because he was just near VECO, he went to
VECO and paid your electric bills. He gave P7, 500. You said "Where is the
P2, 500?" He said "I paid your VECO bills." Will you say thank you?
No. Authority to borrow does not include the authority to spend.

AGENCY, TRUST, AND

PARTNERSHIP

WWW
September 14, 2016

When he went to the bank, the bank told Robillos, "Ok, this is the authority
given by Angot, but we need a collateral." And so Robillos said "Anyway, I
have the registration certificate of her car. Will you accept the mortgage
of Angot's car just to secure payment of this P10, 000?" The mortgage was
accepted. Can it be questioned?
Yes. Authority to borrow does not include authority to mortgage.
Compromise does not include arbitration
You were allowed by Regalado to sell her parcel of land for P10, 000,000.
Instead of selling for P10, 000,000, you went to the bank. "Bank, I have the
property of my principal, can I borrow P10, 000,000 and offer this property
as collateral?" The bank accepted. You went home and went to
Regalado. "Kat, you should be happy. How much do you need Kat?
P10,000,000? Here is the P10, 000,000 and the property is still yours because
I did not sell, I only mortgaged."
Authority to sell does not include authority to mortgage.
General rule: Strictly in accordance with the authority given
Exception: If it is more advantageous to the principal
Outright sale of property vs. mortgage (wherein ownership of the property
is retained)
Mortgaging is not necessarily more advantageous. There is risk in
mortgaging property because if the property will be foreclosed, it
will be sold in a public auction and the principal can be held liable
for the deficiency if the property is sold for a lesser value.
Therefore, the agent exceeded his authority when he mortgaged
the property when he was only authorized to sell.
Other types of authority
1) Authority be necessity Even if there is no express authority given,
because of the necessity under the circumstances, you have the
authority to perform necessary acts
2) Agency by estoppel When 3rd persons already relied on the
representation of the principal in representing that such person is
an agent. So he cannot later on repudiate the agency
3) Implied authority Example: Authority to buy is implied from the
authority to pay

Caballero Daileg Gocuan Honoridez Lim Pungos Vergara

No authority could ever exist unless it is expressly given; otherwise, can the
agent act in behalf of the principal?
Generally, the agent cannot act in behalf of the principal without
authority. Moreover, even if he was given authority, but the agent
exceeded his authority, his act will not bind the principal unless it is
more advantageous to the principal.
b.

It is couched in specific terms if it involves specific

transactions or acts.