Agency

Nature, Form and Kinds of Agency

(Art. 1868 Art. 1883)
Art. 1868
By the contract of agency a person binds himself to render some services or
to do something in representation or on behalf of another, with the consent or
authority of the latter.
-

Definition is very broad and defective Paras

Should have excluded;
i.
Master and servant (1680)
ii.
Employer and employee (1700)
iii.
employer and independent contractor (1713)
Agent enters or is designed to enter juridical relations,
with or without representation of the principal

Characteristics of Agency
1.
2.
3.
4.

Consensual perfected by mere consent

Principal stand by itself without need of another contract
Nominate has its own name
Unilateral if it is gratuitous because it creates obligation for only
one of the parties
5. Bilateral if for compensation, reciprocal rights and obligations
6. Preparatory means to an end
7. Fiduciary relation based on trust and confidence
-

Parties to the Contract

a. Principal / employer / chief

He whom the agent represents and from whom he derives

authority
He is the one primarily concerned in the contract

Capacity of the Principal

He in capacitated to act for himself, he can act thru an
agent
He must therefore be capacitated to give consent
May be natural or a juridical person
b. Agent / Attorney-in-fact / representative

One who acts for and represents another

Person acting in a representative capacity

Capacity of the Agent

He must be able to bind himself, but only in so far as

his obligation to his principal is concerned

With respect to 3rd persons, it is enough that his

principal be one capacitated for generally an agent
assumes no personal liability
usually, the contract with a stranger is
valid, even if the agent be a minor so long
as his principal was capacitated

however, minor-agent can set up his

minority as defense
Agent who assumes to contract in the
name of a principal without contractual
capacity renders himself liable to third
person

c. Third party

A party with whom the business is transacted

Elements of agency
1. There is consent, express or implied, of the parties to establish the
relationship
2. Object is the execution of a juridical act in relation to third persons
3. Agent acts as a representative and not for himself
4. Agent acts within the scope of his authority
Distinguish agency from
a. Lease service
b. Independent contract
c. Brokerage
d. Sale
e. Guardianship
f. Trust
g. Partnership
h. Negostiorum gestio
Art. 1869
Kinds of Agency
1. As to manner of its creation
a. Express
- one where the agent has been actually authorized
by the principal, either orally or in writing
b. Implied
- one which is implied from the acts of the principal,
from his silence or lack of action,
- his failure to repudiate the agency knowing that
another person is acting on his own behalf without
authority
- from the acts of the agent which carry out the
agency
- from his silence or inaction according to the
circumstances

2. As to character
a. Gratuitous
b. Compensated or onerous
3. Extend of business covered
a. General
b. Special
4. Authority conferred
a. Couched in general terms
b. Couched in specific terms
5. Nature and effects
a. Ostensible or representative
b. Simple or commission
6. As to form
a. Oral
b. Written

Art. 1870
Acceptance of the agent
o
o

Express or implied
Silence or inaction

Art. 1871
Between persons who are present - face to face
Acceptance implied - receives it without objection

Art. 1872
Between parties who are absent
- Just because the offeree did not reply does not mean that the agency has
been accepted (no difference 1 and 2)
(1) good instance is when the offeree writes a letter acknowledging the
receipt of the offer but offer no objection to the agency; if he does not
write such letter, he may have ignored it, forgotten or undecided, not
presumed acceptance
Example.
A, from lapu-lapu city, wrote a letter to B, who is in Cebu City,
authorizing the latter to sell his book to C. Without any reply, does B
become an agent of A?
-

B acted? = there is an implied acceptance inferred from the acts

Art. 1873
Two ways given:
a. Special information

b. Public advertisement
Example:
ABC company wrote a circular letter to its customers introducing X as
its agent. One customer, P, dealt with the company thru X. One day, Xs
authority was revoked, but P continued to deal thru X since it never was
informed revocation. Is the company liable for Xs acts even after revocation?
What should have been done by ABC company?
Agency by estoppel
o One who clothes another with apparent authority as his agent and
holds him out to the public as such, cannot be permitted to deny
the authority of such person to act as his agent, to the prejudice of
innocent third person dealing with such person in good faith
Distinguish Agency by Estoppel from Implied Agency
a. As to principal and the agent
-

Implied agency, the agent is true agent, with rights and duties of an agent
In AE, agent not true agent, no rights as such

b. As to 3rd persons
-

caused by principal:
Estoppel = he is liable, only
misrepresentation
Implied A = principal always liable

when

3 rd

person

acted

on

caused by agent:
Estoppel = agent only liable
Implied A = agent not personally liable

Art. 1874
Agency to sell land / Interest
= only land and interest not building
Effect if article voided
= not void but enforceable because the principal can ratify it (Art.
1901/1910(2))
Example.
A wrote a letter to B authorizing the latter to sell a parcel of land
owned by A. The land was purchased by X but the proceeds thereof were not
forwarded by B tp A. A now wanted to recover the land alleging that the sale is void
considering that B has no authority to sell the land or if there is, the same was not
in public instrument which is needed in transactions regarding land /immovable
properties.
It is enough that authority is in writing. The same is valid..
Art. 1875
Presumption of compensation

agent is entitled to compensation only after he has

completely or substantially completed his obligation as agent

Different from brokerage

= BROKER
one who in behalf of others and for a commission or fee,
negotiates contracts relative to property
a negotiator between parties, never acting on his own name
but in the name of those who employ him
strictly a middleman and an agent of both parties
whose occupation is to bring parties together to bargain
AGENCY

BROKERAGE

= engage in the purchase or sale for

another of personal property placed
in his possession at his disposal
= maintains a relation only to the
principal and purchaser but also with
the property subject of transaction

= no relation with the thing

= merely an intermediary between
the purchaser and vendor
= acquires neither custody nor
possession of the thing he sells

= agent receives commission upon

successful conclusion of a transaction
= agent usually can recover the
expenses he incurred

= broker earns his pay merely by

bringing the buyer and the seller
together, even if no sale is eventually
made
= not entitled to recover his expenses

Art. 1876
General Agency = comprises all the business of the principal
Special Agency = one or more specific transactions

the

differences depends on the extent of the business

Art. 1877
Kinds of agency according to Power or Authority:
a. couched in general terms (Art. 1877)
comprises only acts of administration (even if the
management is unlimited or principal withholds no power
from agent)
EXAMPLE
A made B as his agent for all his properties. A gave B a power of
attorney stating he can do whatever he wants to do in order to effect all
things necessary for the disposal of As properties. B dealt with X. B sold a
parcel of land to X. Does b have authority to do so?
b. couched in specific terms (special power of attorney Art. 1878)

A authorized B to sell all his properties. Same Answer?

Art. 1878
Special power of Attorney is needed (J.B.L. Reyes)
clear mandate specifically authorizing the performance of the
act and must therefore be distinguished from an agency
couched in general terms
a. acts of strict dominion or ownership (distinguished from acts of
administration)
b. gratuitous contracts
c. contracts where personal trust or confidence is of the essence of the
agreement
Art. 1879
Power to sell =/= to power to mortgage
Power to
a.
b.
c.
d.
e.
f.
g.

sell includes:
power to find purchaser
deliver property
make the usual representation and warranty
to execute the necessary transfer documents
fix the terms of the sale
sell only for cash (not on credit)
power to receive the price

Power to sell does not include:

a. to barter or exchange
b. mortgage or pledge
Power to
a.
b.
c.

Mortgage does not include:

to sell
execute a second mortgage
mortgage for the benefit of the agent or any 3 rd person

Art. 1880
Special Power to compromise
does not authorize submission to arbitration
Art. 1881
Principles of agency
a. agent must act within the scope of his authority
b. must act in behalf of his principal
Scenarios that may arise:
a. Agent acts with authority and in behalf of the principal
b. Agent acts with authority but in behalf of himself (not for principal)

c. Agent acts without authority but in behalf of the principal

d. Agent acts without authority and in his own behalf
Effects:
1. With authority
a. In principals behalf
Valid
Principal is bound
Agent not personally liable unless he bound himself
EXAMPLE
A authorized B to sell car. A sold cal in Bs name.
Transaction is valid. A assumes no personal liability.
b. In agents behalf
Apply 1883
Generally, not binding on the principal
Agent and stranger are the only parties except things
belonging to principal
EXAMPLE
A asked B to borrow money from C. B did not disclose to C
that he was borrowing money in As behalf; he borrowed in his
own name. Can C ask A to pay the debt? (No, B only has duty to
pay Juan)
2. Without authority
a. In principals behalf
Unauthorized and unenforceable (1403 no. 1)
May be ratified which may be validated
EXAMPLE
Without authority, B sold As car to a buyer in As behalf.
The transaction as far as B is concerned is unauthorized hence,
unenforceable. A is not bound by the contract unless A ratifies
the contract. Without the ratification, the buyer has no recourse
against A.
b. In agents behalf
Valid
Whether or not the subject matter belongs to the
principal
Provided at the time of delivery is to be made, the
agent can transfer legally the ownership of the thing
Otherwise, agent will be held liable for breach of
warranty against eviction
EXAMPLE

B, without authority from A, and representing himself to

be the owner of As car, sold it to C. B is without authority.
o B acted on his own behalf
o Transaction is valid provided that at the delivery
is to be made, the agent can transfer legally the
ownership of the thing
o Otherwise, he will be liable for breach of
warranty against eviction
o B can only be held liable
*Authority

Right of the agent to effect the legal relations of his principal

by the performance of acts effectuated in accordance with
the principals manifestation of consent

*Agency by Necessity
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 monet
Condition required:
a. Real existence of an emergency
b. Inability of the agent to communicate with the principal
c. Exercise of the additional authority for the principals own
protection
d. Adoption of fairly reasonable means, premises duly
considered
e. Ceasing of the authority the moment the emergency no
longer demands the same

Art. 1882 (Bar Question)

Limits of agents authority not deemed exceeded
If performed in the manner more advantageous to the
principal that that specified by him
EXAMPLE
A authorized B to sell his car in installment basis for 1M. If B was able
to sell the car for 1M in cash basis, he is deemed not to have exceeded his
authority.
A was specifically authorized by B to sell 3 parcels of land owned by
the latter. B prepared an inventory indicating therein the value of each of the
properties. A, acting by virtue of such authority, sold the properties double
the value of that which appeared in the inventory. Did A exceeded in his
authority?
Art. 1883
See Art. 1881
A