Continuation of the discussion on the elements of a
contract…
Elements of a contract:
1. Consent
2. Cause or consideration – the why of the
contract. In a contract of agency, the cause, on
the part of the principal is the convenience or
the act done by the agent on behalf of the
principal. On the part of the agent, it could
either be gratuity or the compensation he
receives for his services.
 Ma’am: In certain situations (recall
Ma’am’s example of the student who
would not give up his slot for a
blockmate who gave him valuable
help), an agent’s gratuity does not
seem to play a factor. It has to be
based on “utang na loob” so there is
still something owed.
 Suppose that a principal hires
someone to construct a building.
How can you tell if the person hired is
an independent contract, employee,
or agent?
Independent
Employee Agent
Contractor
He furnishes his He is given a Same situation
own materials plan and the as an employee
and is given employer but is also given
absolutely free supplies the the authority to
reign to do it materials. purchase any
and is paid for additional
the finished materials which
product. the principal
would be liable
for.
 If control is to be used as the sole
determining factor as to whether
there is a contract of agency, it would
seem that the employee and the
agent are under the same degree of
control in so far as the principal is
dictating how the work is to be done.
In that sense, control is not the
controlling factor.
 A better determining factor is the
level of discretionary power given by
a person to another. The employee,
in the example given, was not given
discretionary powers while the agent
was authorized to purchase more
materials should he deem it
necessary.
i. Recall that the point of
agency is representation.
Only the agent was given
the authority to represent
the principal and bind him.
3. Object
 In a contract of agency, the subject is
the representation made by the
agent on behalf of the principal.
i. But the agent cannot do
personal acts, criminal acts,
and prohibited acts.
Rallos v. Felix Go Chan
Facts:
Two sisters co-owned a parcel of land. They executed a
special power of attorney in favour of Simeon, their
brother, authorizing him to sell the lot. Simeon sold the
undivided share of the lot to the respondent. The
administrator of the estate of one of the sisters filed a
case alleging that the sale was unenforceable as the sale
was made after the death of one of the sisters. The CFI
granted the petition but the CA reversed.
Held:
The essential elements of agency are: (1) the consent,
express or implied, of the parties, (2) the object is the
execution of a juridical act in relation to a third person,
(3) the agent acts as a representative and not for himself,
and (4) the agent acts within the scope of his authority.
By reason of the very nature of the relation between the
principal and the agent, agency is extinguished by the
death of the principal or the agent. By legal fiction, the
agent’s exercise of authority is regarded as an execution
of the principal’s continuing will. With death, the
principal’s will ceases.
The exception to the general rule that the death of the
principal extinguished the contract is that the agent acted
without the knowledge of the death of the principal and
that the third person who contracted with the agent
acted in good faith. But the exception does not apply
because Simeon already knew of the death of the
principal when he sold the latter’s share in the lot.
 Ma’am (re the difference between the
elements in a contract of agency a contract in
general): beyond the contract of agency being
simply a contract, there are certain additional
characteristics of agency which make it a little
bit different from a standard contract.