Agency; doctrine of apparent authority.

The doctrine of apparent authority

in respect of government contracts, has been restated to mean that the
government is NOT bound by unauthorized acts of its agents, even though
within the apparent scope of their authority. Under the law on agency,
however, “apparent authority” is defined as the power to affect the legal
relations of another person by transactions with third persons arising from
the other’s manifestations to such third person such that the liability of the
principal for the acts and contracts of his agent extends to those which are
within the apparent scope of the authority conferred on him, although no
actual authority to do such acts or to make such contracts has been
conferred.

Apparent authority, or what is sometimes referred to as the “holding out”

theory, or doctrine of ostensible agency, imposes liability, not as the result
of the reality of a contractual relationship, but rather because of the
actions of a principal or an employer in somehow misleading the public into
believing that the relationship or the authority exists. The existence of
apparent authority may be ascertained through (1) the general manner in
which the corporation holds out an officer or agent as having the power to
act or, in other words, the apparent authority to act in general, with which
it clothes him; or (2) the acquiescence in his acts of a particular nature,
with actual or constructive knowledge thereof, whether within or beyond
the scope of his ordinary powers. It requires presentation of evidence of
similar act(s) executed either in its favor or in favor of other parties.

Easily discernible from the foregoing is that apparent authority is

determined only by the acts of the principal and not by the acts of the
agent. The principal is, therefore, not responsible where the agent’s own
conduct and statements have created the apparent authority.
In this case, not a single act of respondent, acting through its Board of
Directors, was cited as having clothed its general manager with apparent
authority to execute the contract with it. Sargasso Construction &
Development Corporation / Pick & Shovel, Inc./Atlantic Erectors, Inc./ Joint
Venture vs. Philippine Ports Authority, G.R. No. 170530, July 5, 2010.

There are generally three kinds of estoppel: (1) estoppel in pais; (2)
estoppel by deed; and (3) estoppel by laches. In the first classification, a
person is considered in estoppel if by his conduct, representations or
admissions or silence when he ought to speak out, whether intentionally or
through culpable negligence, causes another to believe certain facts to
exist and such other rightfully relies and acts on such belief, as a
consequence of which he would be prejudiced if the former is permitted to
deny the existence of such facts. Estoppel by deed, on the other hand,
occurs when a party to a deed and his privies are precluded from denying
any material fact stated in the said deed as against the other party and his
privies. Estoppel by laches is considered an equitable estoppel wherein a
person who failed or neglected to assert a right for an unreasonable and
unexplained length of time is presumed to have abandoned or otherwise
declined to assert such right and cannot later on seek to enforce the same,
to the prejudice of the other party, who has no notice or knowledge that
the former would assert such rights and whose condition has so changed
that the latter cannot, without injury or prejudice, be restored to his former
state.

The essential elements of estoppel in pais. It said that the essential elements of
estoppel in pais are considered in relation to the party to be estopped, and to the
party invoking the estoppel in his favor. For the party to be estopped, such party
(1) commits conduct amounting to false representation or concealment of
material facts or at least calculated to convey the impression that the facts are
inconsistent with those which the party subsequently attempts to assert; (2) has
the intent, or at least expectation that his conduct shall at least influence the
other party; and (3) has knowledge, actual or constructive, of the real facts. On
the party claiming the estoppel, such party (1) has lack of knowledge and of the
means of knowledge of the truth on the facts in question; ((2) has relied, in good
faith, on the conduct or statements of the party to be estopped; (3) has acted or
refrained from acting based on such conduct or statements as to change the
position or status of the party claiming the estoppel, to his injury, detriment or
prejudice. (PNB vs. CA, 308 SCRA 229; Kalalo vs. Luz, 34 SCRA 337; PBC vs. CA, 289
SCRA 178; Republic Glass Corp., et al., vs. Qua, G.R. No. 144413, July 30, 2004).

DOCTRINE OF APARENT AUTHORITY

This doctrine, in the realm of government contracts, has been restated to

mean that the government is NOT bound by unauthorized acts of its agents, even
though within the apparent scope of their authority. ]Under the law on agency,
however, apparent authority is defined as the power to affect the legal relations of
another person by transactions with third persons arising from the others
manifestations to such third person such that the liability of the principal for the
acts and contracts of his agent extends to those which are within the apparent scope
of the authority conferred on him, although no actual authority to do such acts or to
make such contracts has been conferred.

Apparent authority, or what is sometimes referred to as the holding out

theory, or doctrine of ostensible agency, imposes liability, not as the result of the
reality of a contractual relationship, but rather because of the actions of a principal
or an employer in somehow misleading the public into believing that the
relationship or the authority exists. The existence of apparent authority may be
ascertained through (1) the general manner in which the corporation holds out an
officer or agent as having the power to act or, in other words, the apparent
authority to act in general, with which it clothes him; or (2) the acquiescence in his
acts of a particular nature, with actual or constructive knowledge thereof, whether
within or beyond the scope of his ordinary powers. It requires presentation of
evidence of similar act(s) executed either in its favor or in favor of other parties.[41]

Easily discernible from the foregoing is that apparent authority is determined

only by the acts of the principal and not by the acts of the agent. The principal is,
therefore, not responsible where the agents own conduct and statements have
created the apparent authority. (G.R. NO. 170530)

Under the doctrine of apparent authority, acts and contracts of the agent, as
are within the apparent scope of the authority conferred on him, although no
actual authority to do such acts or to make such contracts has been conferred,
bind the principal. The principals liability, however, is limited only to third
persons who have been led reasonably to believe by the conduct of the
principal that such actual authority exists, although none was given. In other
words, apparent authority is determined only by the acts of the principal and not
by the acts of the agent. There can be no apparent authority of an agent without
acts or conduct on the part of the principal; such acts or conduct must have been
known and relied upon in good faith as a result of the exercise of reasonable
prudence by a third party as claimant, and such acts or conduct must have
produced a change of position to the third party’s detriment. (G.R. No. 163825)