CHAPTER 1: NATURE, OBJECTIVE, AND KINDS OF
interest, is the agents ability to represent his principal and bring
AGENCY CONTRACTS
Contract of Agency - one whereby a person binds himself to render
ON GOING NATURE: Although Art. 1868 defines agency in terms of
some service or to do something in representation or on behalf of another,
being a contract, it should also be considered as creating between the
with the consent or authority of the latter.
principal and an agent an on-going legal relationship which imposes
personal obligations on both parties.
General rule: No one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to represent him.
(Art. 1317)
General rule: A contract entered into in the name of another by one (a)
who has no authority or legal representation, or (b) who has acted beyond
powers shall be unenforceable.
1. Exception: unless the contract is ratified, expressly or impliedly,
before it is revoked by the other contracting party. (Art. 1317)
DOCTRINE OF REPRESENTATION: when an agency relationship is
established, and the agent acts in the name of the principal, the agent is,
insofar as the world is concerned, essentially the principal acting in the
particular contract or transaction at hand.
The acts of the agent on behalf of the principal within the scope
of the authority have the same legal effect and consequences as
though the principal has been the one so acting in the given
situation.
For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom he interacts. It
is legally incorrect to argue that there could not have been an
agency relationship simply because the principal never confirmed
personally to the third parties the establishment of the agency.
(Doles v. Angeles)
PURPOSE OF AGENCY: the ability, by legal fiction, to extend the
personality of the principal through the facility of the agent; but that the
same can only be effected with the consent of the principal, which must
not, in any way, be compelled by law or by any court.
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The essence of an agency, even with an agency coupled with
about juridical relations between the latter and third persons.
This is in consonance with the personal nature of every contract
of agency.
ELEMENTS OF THE CONTRACT OF AGENCY (Rallos v.
Felix Go Chan)
1. Consent, express of implied, of the parties to establish the
relationship
2. Object, which is the execution of a juridical act in relation
to third parties
3. Agent acts as a representative and not for himself
4. Agent acts within the scope of his authority
Note: the Rallos enumeration lacks cause or consideration of
every contract of agency.
In addition, the last two elements in the Rallos enumeration
should not be understood as essential elements for the perfection
and validity of the contract of agency.
They are matters that go into the performance stage, not
the perfect, of a contract of agency.
The non-existence of these two elements does not affect
the validity of the existing agency, but rather the
enforceability of the contracts entered into by the agent on
behalf of the principal.
Elements 2, 3, and 4 can be summarized into the object of
every contract of agency: the undertaking of the agent to
enter into a juridical act with third parties on behalf of the
principal and within the scope of his authority.
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FIRST ELEMENT: CONSENT relationship in the principals name with a third party, the resulting
Art. 1317 provides that no person may be represented by another without contract is voidable.
his will; and that no person can be compelled against his will to represent
another. AGENT NO LEGAL CAPACITY: If the principal has legal capacity, and
CO-OWNERS NOT AGENTS PER SE: a co-owner does not it is the agent who has no legal capacity, the underlying agency
automatically (i.e., without consent) become an agent of the other co- relationship is voidable, but the resulting contract would be valid, not
owners, and that any exercise of an option to buy a piece of land voidable, for the agents capacity is irrelevant in a contract entered into
transacted with one co-owner does not bind the other co-owners of the for and in behalf of the principal (who has full legal capacity).
land. (Dizon v. CA)
NOTE THOUGH: Under Art. 1919(3), if during the term of the agency,
PRINCIPAL CONSENT AGENT CONSENT the principal or agent suffers from civil interdiction, insanity, or
On the part of the principal, On the part of the agent, there insolvency, the agency is ipso jure extinguished.
there must be an actual must be an intention to accept It is therefore only logical to conclude that if the loss of legal
intention to appoint or an the appointment and act on it, capacity of the agent extinguishes the agency, then necessarily
intention naturally inferable and in the absence of such any of those causes that have the effect of removing legal
from his words or actions. intent, there is generally no capacity on either both of the principal and agent at the time of
agency. perfection would not bring about a contract of agency.
Thus, there is an incongruity when it comes to principles
Exception to rule on consent: agency by estoppel; but note that
involving legal incapacity viz. contracts of agency.
even then, it is by the acts of the purported principal and/or the
purported agent, by which they are brought into the relationship
BRINGING THEM IN HARMONY: it bears remembering that a
insofar as third persons acting in good faith are concerned.
contract of agency is merely a preparatory contract. The public policy
is that third parties who act in good faith with an agent have a right to
CAPACITIES OF THE PARTIES IN AN AGENCY
expect that their contracts would be valid and binding on the principal.
ARRANGEMENT
Therefore, even when by legal cause an agency relationship has
For the validity of a contract of agency, it is required that the principal
terminated, say via insanity of the principal, if the agent and third party
must have capacity to contract. The principal may either be a natural or
enter into contract in good faith, then the various provisions on the Law
juridical person.
on Agency would affirm the validity of the contract.
PARTY CONTRACT
CONTRACT OF SECOND ELEMENT: SUBJECT MATTER
WITHOUT WITH THIRD
AGENCY The object of every contract of agency is service, or the legal undertaking
CAPACITY PARTY
of the agent to enter into juridical acts with third persons on behalf of the
Principal Voidable Voidable principal.
Agent Voidable Valid

PRINCPAL NO LEGAL CAPACITY: If the principal is the one who has

no legal capacity to contract, and his agent enters into a contractual
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THIRD ELEMENT: CONSIDERATION (COMMISSION) AGENTS ENTITLEMENT TO COMMISSION ANCHORED ON
The cause or consideration in agency is the compensation or commission THE RENDERING OF SERVICE
that the principal agreed or committed to pay the agent for the latters The extent and manner by which the agent would be entitled to receive
services. compensation or commission is based on the terms of the contract, or the
meeting of the minds between the principal and the agent.
PRESUMPTION OF CONSIDERATION: Art. 1875 provides that every
agency is presumed to be for a compensation, unless there is proof to the WHEN BASIS IS SERVICE WHEN BASIS IS RESULT
contrary. When the rendering of service If the nature of the service to be
Example: X asks Y to enter into a contract of sale on his behalf. alone, and not the results, is compensated is understood to be
Y says sure thing! Is there a contract of agency, even without a the primordial basis for which based on the results to be
meeting of the minds as to consideration? the compensation is given, achieved (i.e., that a particular
Answer: Yes. The presumption is that their mind have met as to then the proof that services contract with a third party is
compensation by virtue of Art. 1875. In the absence of have been rendered should entered into in behalf of the
specification, their minds have met as to make it onerous. This is entitle the agent to the principal), then mere rendering
in line with the principle that nobody enters into commerce compensation agreed upon. of service without achieving
without expectation of advantage or returns. (i.e., presumption results would not entitle the
that both parties knew that the services of the agent were for agent to the compensation
compensation) agreed upon.
The value of Art. 1875 brings into the Law on Agency is the Example: broker
presumption that every contract of agency is for valuable
considerationthat the agent serves for the benefit of the ESSENTIAL CHARACTERISTICS OF AGENCY
principal expecting to be compensated for his efforts. It is the 1. Nominate and principal
party who avers that the agency is gratuitous who has the burden 2. Consensual
of proving such arrangement. 3. Unilateral and primarily onerous
4. Personal, representative, derivative
ONEROUS OR GRATUITOUS: although agency contracts are 5. Fiduciary and revocable
primarily onerous, they may also be gratuitous. 6. Preparatory and progressive

COMMERCIAL CONTRACT: this rule emphasizes that as a NOMINATE AND PRINCIPAL

commercial contract, agency exhbits one of the three characteristics
common to all commercial contracts, which is that of being customary
and equitable.
It is therefore not critical that the amount and nature of the
compensation be previously agreed upon since the courts are
empowered to apply customs to determine what compensation
the agent is entitled to.
A contract of agency is a principal contract because it can stand on its
own without need of another contract to validated it.
VALUE OF BEING NOMINATE AND PRINCIPAL: it has been set
apart by law and provided with its own set of rules and legal
consequences, that any other arrangement that essentially falls within its
terms shall be considered an agency arrangement and shall be governed

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by the Law on Agency, notwithstanding any intention of the parties to the
contrary. A contract is what the law says it is, and not what the
parties call it.
Manila Memorial Park v. Linsangan: Manila Memorial Park
attempted to prove that Baluyot was not its agent by pointing out
that under its Agency Manager Agreement, an agency manager
such as Baluyot is considered an independent contractor and not
an agent. But in the same contract, Baluyot was authorized to
solicit and remit to MMP offers to purchase interment spaces
belonging to and sold by the latter. The Court held that Baluyot
was an agent, notwithstanding the claim that he was labeled as an
independent contractor, given that she was authorized to solicit for
and in behalf of MMP.
CONSENSUAL
The contract of agency is perfected by mere consent.
It does not need to be performed for the contract to arise.
Art. 1869: an agency may be express or implied from:
(a) The acts of the principal,
(b) His silence or lack of action, or
(c) His failure to repudiate the agency, despite knowing that another
person is acting on his behalf without authority.
Art. 1870: acceptance by the agent may also be express or implied from:
(a) His acts which carry out the agency, or
(b) His silence or inaction, according to the circumstances
General rule: agency may be oral.
Exception: unless the law requires a specific form (i.e., the
power to sell land of another or an interest therein)
UNILATERAL AND PRIMARILY ONEROUS
Ordinarily, an agency is onerous in nature (i.e., for valuable
consideration), where the agent expect compensation for his services in
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the form of commissions. However, an agency may be supported by pure
liberality and thus would be gratuitous.
The burden of proof would be to show that the agency was
constituted gratuitously because an agency is presumed to be for
compensation, unless the contrary is shown.
UNILATERAL
When the agency is clearly When the agency is for valuable
gratuitous, the contract of consideration, I would still be
agency is undoubtedly a characterized as a unilateral
unilateral contract because it contract because it is only the
creates an obligation on the fulfillment of the primary
part of the agent. obligations of the agent to
render some service upon which
the subordinate obligation of
the principal to pay the
compensation agreed upon
arises.
PERSONAL, REPRESENTATIVE, AND DERIVATIVE
Agency is a species of the broad grouping of what we call service
contracts, such as employment, management contracts, contract for a
piece-of-work, and a brokerage agreement. But it is the characteristic of
representation that sets agency apart from other service contracts. Its
main purpose is to allow the agent to enter into contracts with third
parties on behalf of, and which would be binding on, the principal.
WHAT THESE CHARACTERISTICS ENTAIL: the authority of the
agent to act emanates from the powers granted to him by his principal; his
act is the act of the principal if done within the scope of the authority.
CONTROL: one factor which distinguishes agency from other legal
concepts is control: one person (agent) agrees to act under the control or
direction of another (principal).
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PRINCIPLES FLOWING FROM AGENCY AS PERSONAL,
REPRESENTATIVE, AND DERIVATIVE
1. The contract entered into with third persons pertains to the
principal, not the agent
a. Liabilities incurred pertain to the principal, not the
agent
b. The agent has neither rights nor obligations from the
resulting contract
c. The agent has no legal standing to sue upon the
resulting contract
d. The agent who acts as such is not personally liable to
the party with whom he contracts, UNLESS:
i. He expressly binds himself, or
ii. He exceeds the limits of his authority without
giving such party sufficient notice of his powers
e. When an agent purchases the property in bad faith, the
principal is deemed to be a purchaser in good faith.
2. General rule: all acts that the principal can do in person, he may
do through an agent
a. Exception: those which under public policy are strictly
personal to the person of the principal.
3. A suit against the agent in his personal capacity cannot, without
compelling reasons, be considered a suit against the principal.
4. CONSTRUCTIVE NOTICE: notice to the agent should always
be considered as notice binding on the principal, even when in
fact the principal never became aware thereof.
5. CONSTRUCTIVE KNOWLEDGE: knowledge of the agent is
equivalent to the knowledge of the principal, except where:
a. Agents interests are adverse to those of the principal
b. Agents duty it not to disclose the information, as where
he is informed by way of confidential information, and
c. The person claiming the benefit of the rule colludes with
the agent to defraud the principal
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FIDUCIARY AND REVOCABLE
A contract of agency creates a legal relationship of representation by the
agent on behalf of the principal, where the powers of the agent are
essentially derived from the principal. Consequently, it is fiduciary in
character.
LEGAL CONSEQUENCES OF FIDUCIARY NATURE
1. One of the legal consequences of the fiduciary nature of the
contract of agency is that it is revocable in character: neither the
principal nor the agent can be legally made to remain in the
relationship when they choose to have it terminated.
REVOCATION RESCISSION
Based on the will of the parties Based on substantial breach of
(because it is a personal contract
contract of representation
based on trust and confidence)
2. As regards the property forming the subject matter of the agency,
the agent is estopped from asserting or acquiring a title
adverse to that of a principal.
3. In a conflict-of-interest situation, the agent cannot choose a
course that favors himself to the detriment of the principal;
he must choose to the best advantage of the principal.
4. The agent cannot purchase for himself the property of the
principal which has been given to her management for sale or
disposition, UNLESS
a. There is an express consent on the part of the principal
b. If the agent purchases after the agency is terminated
QUESTION: Can you stipulate a durability clause (i.e., that the agency
will last for 5 years), making it irrevocable for the duration?
Said stipulation will not make the contract of agency irrevocable.
A contract of agency is unilateral, where the agent is bound to
render the service to a principal. The agent cannot be compelled
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 to remain in the contract. However, the principal can seek 2. Whether or not it covers litigation matters
revocation and damages. a) Attorney-at-law
Specific performance is not an available remedy because agency b) Attorney-in-fact
is a personal obligation. One cannot be compelled to perform an 3. Whether it covers acts of administration or acts of
obligation to do or not to do. ownership
As a general rule, nothing can prevent the agent from a) General power of attorney
withdrawing from the contract of agency. b) Special power of attorney

Orient Air Services v. CA: lower court ordered the principal BASED ON THE BUSINESS OR TRANSACTIONS COVERED
airline company to reinstate defendant as its general sales agent
for passenger transportation in the Philippines. The Court held GENERAL AGENCY SPECIAL AGENCY
that courts have no authority to compel the principal to reinstate Encompasses all of the Covers only one or more
a contract of agency it has terminated with its agent. An business of the principal specific transactions
agency can only be effected with the consent of the principal Addressed to the general Addressed to a particular person
which must not, in any way, be compelled by law or by any public, and not just a particular or group of persons with whom
court. person or group of persons the agent is to transact
with whom the agent is to
PREPARATORY AND PROGRESSIVE transact
A contract of agency does not exist for its own purpose. It is a NOTE: these classifications are more academic than practical. The
preparatory contract entered into for other purposes that deal with the real distinction in order to distinguish the power of an agent is
public in a particular matter: for the agent to enter into juridical acts with between a general power-of-attorney vs. a special power-of-
the public in the name of the principal. attorney.
An agency contract is merely a tool or medium resorted to
achieve a greater objective of being able to enter into juridical WHETHER OR NOT IT COVERS LITIGATION MATTERS
relations on behalf of the principal. The relation of attorney and client is in many respects one of agency, and
Therefore, considerations that seek to protect the interests of third that the general rules of agency apply to such relation.
parties dealing in good faith with an agent must, in case of
conflict, prevail over principles pertaining to the relationship ATTORNEY-AT-LAW ATTORNEY-AT-FACT
between the principal and agent. (i.e., rule on extinguishment due Means the appointment of an Describes all agents appointed
to incapacity viz. the resulting contract with third parties in good agent to represent the principal by a principal to act on juridical
faith) on legal matters (but not every relations that have nothing to do
attorney-client relationship is with legal matters and do not
KINDS OF AGENCY an agency (i.e., when there is constitute a practice of law on
1. Based on the business or transactions covered no representation involved = the part of the agent
a) General agency mere drafting of legal
b) Special agency documents)
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 Fiduciary - based on the need Fiduciary - based on the doctrine Essentially contractual Relationship between capital
to rely upon the competence of representation and labor is not merely
and integrity of the lawyer contractual; it is impressed with
public interest
NOTE: even in the case of an attorney-at-law representing a client
in a case, there are certain powers which are not inherent in the Purpose is to enter into No element of representation in
position of an attorney-at-law to legally bind the contract such as juridical relationship on behalf contract of employment (no
the power to compromise, to arbitrate, etc. These are matters of the principal with third power to enter into juridical
governed by rule on special powers of attorney parties relations on behalf of the
employer)
WHETHER IT COVERS ACTS OF ADMINISTRATION OR ACTS
OF OWNERSHIP AGENCY VS. CONTRACT FOR A PIECE-OF-WORK
General rule: when the agency is constituted, it only covers the powers
to execute acts of administration in relation to the business, venture, or AGENCY PIECE-OF-WORK
transaction referred to in the commission.
Purpose is to enter into Contractor has no power to
Exception: unless specific powers are granted expressly juridical relationship on behalf represent principal in entering
of the principal with third into juridical acts with third
GENERAL POWER OF SPECIAL POWER OF parties parties
ATTORNEY ATTORNEY
Covers only acts of Covers acts of dominion or Element of control is present No element of control since
administration; power to strict ownership; power to contractor cannot be dictated
pursue the ordinary or regular pursue extraordinary conditions upon by the client on the means
course of business of the or those pursued not in the to accomplish the objective of
principal ordinary course of business the contract (even if description
More on this later in subsequent sections of product is agreed upon)

AGENCY DISTINGUISHED FROM SIMILAR AGENCY VS. MANAGEMENT CONTRACT

CONTRACTS
1. From employment contract AGENCY MANAGEMENT
2. From a contract for a piece-of-work CONTRACT
3. From a management contract Basis is representation Basis is employment
4. From a contract of sale Agent has power to bring Management contract
5. From a contract of brokerage about juridical relations contemplates only material
between the principal and third (non-juridical) acts
AGENCY VS. EMPLOYMENT CONTRACT persons

AGENCY EMPLOYMENT
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AGENCY VS. CONTRACT OF SALE
Art. 1466: in construing a contract containing provisions characteristic of
both the contract of sale and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered.
Essential clauses - refers to stipulations in the contract which
places obligations on the part of the purported agent having to
do with what should be a sellers obligation to transfer ownership
and deliver possession of the subject matter, or the buyers
obligation on the payment of the price.
SALE AGENCY TO SELL
Not unilaterally revocable Revocable (even with
irrevocability clause)
Buyer pays for the price of the Agent is not obliged to pay the
object price; merely obliged to
deliver the price he received
from the buyer
Buyer becomes owner after Agent does not become the
delivery owner after delivery
Seller warrants Agent who effects the sale
generally assumes no personal
liability as long as he acts
within his authority and in the
name of the principal
Seller can claim personal profit Agent cannot claim personal
profit; any profit received
should pertain to the principal
WHY THE DISTINCTION MATTERS:
Statute of Frauds applies Statute of Frauds does not
apply (except when the sale
of a piece of land or any
interest therein is through an
agent, the authority must be
in writing; otherwise, sale is
void)
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Quiroga v. Parsons: Quiroga wanted to revoke the contract on the
ground that the contract was one of agency to sell. The Court
found the arrangement to be one of sale, not agency to sell,
because the contract provided that payment was to be made at the
end of 60 days in cash. By virtue of the contract, the defendant,
on receiving the beds to be sold, was necessarily obliged to pay
the price within the term fixed, without any other consideration
and regardless as to whether he had or had not sold the beds.
In a true agency, the agent who received a thing to sell it does not
pay its price but delivers to the principal the price he obtains from
the sale of the thing to a third person, and he does not succeed in
selling it, returns it. An agent does not assume personal
responsibility for the payment of the price of the object.
As a consequence, the revocation sought to be made by the
principal on the purported agency arrangement was denied by the
Court, the relationship being one of sale. In a sale, what is
involved is the power to rescind, which is available only when the
purported principal is able to show substantial breach on the part
of the purported agent.
Gonzalo Puyat & Sons v. Arco Amusement: The Court found that
the letters between Puyat and Arco clearly stipulated for fixed and
determinate prices on the equipment ordered. Whatever
unforeseen events might have taken place unfavorable to Puyat
(agent) such as change in prices, mistake in the quotation, loss
of the goods, Arco Amusement might still legally hold Puyat to
the prices fixed. This is in a nature of a sale. In agency, the agent
is exempted from all liability provided he acts in accordance with
the instructions of the principal. Although Puyat was to receive
10% commission, the same did not necessarily make him an
agent, and it was only an additional price which Arco bound itself
to pay.
Being an contract of sale, any profits realized by the purported
agent from discounts received from the American supplier pertain
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 to it with no obligation to account for it, much less to turn it Agent has the right of Broker has no right of
over, to the principal. representation: he can give representation: he cannot give
consent on behalf of principal consent to the contract on behalf
Ker v. Lingad: In a contract for consignment, it was stipulated that of the principal
all goods on consignment shall remain the property of the Assumes fiduciary obligations; Does not assume fiduciary
Company until sold by the Distributor to the purchaser, but all liability is based on breach of obligations; if his negligence
sales made by the Distributor shall be made in his name. It was the duty of diligence causes damage to a client, his
further stipulated that the contract does not constitute the liability is based on tort or
Distributor the agent of the Company for any purpose quasi-delict
whatsoever. Here, the Court held that in spite of the disclaimer in Prohibited from taking secret May profit from the transactions
the agreement, the contract was that of agency. The decisive test profits and is bound to account and is not bound to account to
was the retention by the Company of ownership of the goods to principal all sums received principal sums received
delivered to the possession of the Distributor, for resale to Legally incapacitated from Not legally incapacitated to
customers, the price and terms remaining subject to the control purchasing the property of the purchase property of the
of the firm consigning such goods. principal principal
Agent has to be the one to Principal enters into the contract
Sale: The transfer of title or agreement to transfer it for a price enter into contract on behalf of himself; broker may still
paid or promised is the essence of sale. If such transfer puts the the principal to have a right to demand brokers fee on the basis
transferee in the position of an owner and makes him liable to the demand commission of doctrine of procuring and
transferor as a debtor for the agreed price, and not merely as an efficient cause.
agent who must account for the proceeds of a resale, the No personal liability when he No personal liability because he
transaction is a sale. acts in the name of the is a complete stranger to the
principal and within the scope resulting contract of sale (lack
Agency: The essence of an agency to sell is the delivery to an of his authority; protected by of privity); he mere
agent, not as his property, but as the property of the principal, who the Law on Agency intermediates between buyer and
remains the owner and has the right to control the sale, fix the seller for whom he has not
price and terms, demand and receive the proceeds less the agents executed any juridical act
commission.

AGENCY VS. BROKERAGE COMMERCIAL BROKERAGE

AGENCY
End is a contract (purchase,
sale, etc.)
Agency is at perfection stage
BROKERAGE
End is a contract of sale
Brokerage deals with
policitacion stage
MERCHANT
Maintains relations with the
property or subject matter of
the transaction
Has no relation with the thing he
buys or sells: does not acquire
either possession or custody of
the things sold.

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Broker - a person or entitle engaged as a middleman to bring parties
together in matters pertaining to trade, commerce, or navigation.
If a person has not been given the power to enter into the contract
or commerce on behalf of the parties, then he is a broker in the
sense that his job mainly is to bring the parties together to
bargain.
The broker also assumes no fiduciary obligations to either or both
parties.
But when a broker is appointed with powers to enter into juridical
acts on behalf of the principal, he is truly an agent.
A broker may at the same time be an agent, in which case he
really becomes a commission agent if the subject matter
involves goods, when he acts as duly authorized to enter into
juridical acts in the name of the client.
REVOCABLE: the principal has the right to terminate the brokers
authority at will, except only that he may not do it in bad faith and as a
mere device to escape the payment of brokers commissions.
WHERE DISTINCTION MATTERS: the distinction between agent and
broker has been most critical in the issue of entitlement to the
commission or compensation promised by the principal.
BROKERS ENGAGEMENT IN GENERAL: in order to earn his
commission, it is not sufficient to find a prospective buyer, but to find
one who will actually buy the property on the terms and conditions
imposed by the owner.
COMMISSION DETERMINED BY: (1) express stipulation - since a
brokerage relationship is essentially a contract, principles of contract law
also govern the broker-principal relationship. The right of the broker to
the commission promised by the client-principal is primarily governed by
the terms and conditions agreed upon them at the time of the perfection of
the contract, (2) in the absence of clear provisions, the right of the broker
to receive commission is covered by the doctrine of efficient or
procuring cause.
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The doctrine of efficient or procuring cause cannot overcome
express stipulations in the agreement providing when exactly the
broker is entitle to have earned his commission.
DOCTRINE OF EFFICIENT OR PROCURING CAUSE
The broker must be the efficient or procuring cause of the sale. The
means employed by him and his efforts must result in the sale. He must
find the purchaser and the sale must proceed from his efforts acting as
broker.
General rule: there is only one form of service for which the
broker is entitled to his agreed compensation (unless otherwise
stipulated): that his services procured the buyer and which
eventually resulted into a perfected and consummated contract of
sale. A BROKER IS NOT ENTITLED TO COMMISSION IF
THERE IS NO SALE.
Exception: where the services and efforts expended by the
broker were of such sufficient amount that they would have
brought about the sale, but that the principal terminated his
services in bad faith with every intention to proceed with the
sale to the person procured by the broker, the latter is still entitled
to his commission under the doctrine of efficient or procuring
cause.
Procuring cause - means proximate cause or a cause originating a series
of event which, without break in their continuity, result in
accomplishment of the prime objective of the employment of the broker,
that is, producing a purchaser ready, willing, and able to buy the subject
matter on the owners terms.
When there is a close, proximate, and causal connection between
the brokers efforts and the principals sale of his property, the
broker is entitled to a commission.
Manotok Brothers v. CA: an owner of a parcel of land rented by
the City of Manila authorized a broker to negotiate with the City
the sale of the property for not less than P425,000 The registered
owner agreed to pay the broker a 5% commission in the event the
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 sale is finally consummated and paid. The arrangement was
extended several times because of what was perceived to be
successful negotiations by the broker with the city officers. A 180-
day extension was given. The City of Manila eventually
formalized the purchase and paid the price but only after the 180-
day extension had expired.
BROKER OF A SALE VS. BROKER HIMSELF PURCHASING
The distinction is similar to the difference between contract of sale
(broker himself purchasing) and contract of agency to sell (broker of a
sale). These includes differences in transfer of ownership, personal
liability, etc. See the relevant section on contract of agency to sell vs.
contract of sale for a full discussion.

The Court held that, at first sight, it would seem that the broker CHAPTER 2: FORMALITIES OF AN AGENCY
was not successful in consummating the sale during the period.
However, it ruled that the broker fell within the coverage of the DIVIDED INTO TWO PARTS:
exception enunciated in Prats v. CA, and applied the doctrine of 1. How an agency may be constituted (perfection)
efficient or procuring cause to allow the broker to receive the 2. Formal requirements on grant of powers to the agent (extent of
commission he had earned by the nature of his services. powers granted to the agent)

Note: in this case, the Court applied the doctrine of efficient or PART ONE: HOW AGENCY MAY BE CONSTITUTED
procuring cause despite the clear wordings in the contract on The contract of agency is a consensual contract, perfected by mere
the manner of entitlement of the broker to his 5% commission meeting of the minds as to the object (service: to enter into juridical acts
Another note: Even under the cases of Prats and Manotok, the on behalf of the principal) and to the consideration (primarily a valuable
ultimate objective of actual sale being effected must be present for consideration, although it may be the pure liberality of the agent).
the agent or broker to earn his commission. Agency may be express or implied it may be oral, unless the
law requires a specific form. (Art. 1869)
QUESTIONABLE RULINGS ON COMMISSION It is valid and enforceable in whatever form it may have been
In Hahn v. CA and Tan v. Gullas, the Court ruled that an agent receives entered into.
commission upon the successful conclusion of a sale, while a broker See section on consensuality.
earns his commission merely by bringing the buyer and the seller
together, even if no sale is made. There was no legal basis for this PERFECTION FROM SIDE PERFECTION FROM SIDE
doctrine, however. OF PRINCIPAL OF AGENT
1. Acts formally adopt it 1. Express
In Philippine Health-Care Providers v. Estrada, similar to Manotok
2. Silence or inaction 2. Implied
Brothers v. CA, the Court ruled that even terms and conditions agreed
3. Failure to repudiate a) Acts which carry out the
upon in the brokerage contract that undermine the doctrine of efficient or
the agency knowing agency
procuring cause will be brushed aside to allow, under equity principles,
someone is acting in b) Silence or inaction
a broker to collect the commissions he has in fact earned.
his name

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PERFECTION FROM SIDE OF PRINCIPAL Under Articles 1871 and 1872, the power of attorney must constitute a
The ideal form by which the principal is deemed to have entered into a written instrument because in both cases, the principal either delivers or
contract of agency is when he issues a written power of attorney to the transmits his power of attorney to the agent.
person designated as agent. Nonetheless, there is no requirement that for
agency to arise it must be in writing. Under Art. 1869, it may be oral or PERFECTION AS IT AFFECTS THIRD PERSONS
may be deduced from the acts of the principal.
PUBLIC ADVERTISEMENT SPECIAL INFORMATION
PERFECTION FROM SIDE OF AGENT When the principal states by When the principal informs
Note that it may be wrong to presume that the agent has impliedly public advertisement that he has another person that he has given
accepted the appointment, and bound himself to fiduciary duties of given a power of attorney to a a power of attorney to a third
diligence and fidelity, by performing acts that carry out the agency in particular individual (the agent), person (the agent), the latter
certain situations. Example: when he did not accept the agency expressly, the latter becomes a duly thereby becomes a duly
and he pursues a transaction in his own name and on his own behalf, authorized agent with respect to authorized agent with respect to
despite the fact that this transaction was the very object of the agency any person. (Art. 1873) the persons who received the
contract proposed by the principal. special information. (Art.
1873)
INSTANCES OF IMPLIED ACCEPTANCE
When the constitution of the agency is made with both principal and So even if there is no meeting of
agent bring physically present at the time of perfection, the acceptance the minds between the principal
of the agency may be implied if the principal delivers his power of and the agent, an agency
attorney to the agent and the latter receives it without objection. (Art. contract is deemed to have been
1871) perfected with respect to the
third party who has been
When the constitution of the agency is made without the prospective informed by the principal.
principal and the prospective agent being physically present at the time of Both scenarios presume that, ultimately, the agent would have
perfect, there can be no implied acceptance from the silence or accepted the designation of the principal, for it must come to pass
inaction of the agent, except: that he enters into contracts with such third parties in the name of
a) When the principal transmits his power of attorney (i.e., it is in the principal.
writing or some other form) to the agent who receives it without The rules of constitution of agency must be consistent with the rules
objection, or for revocation.
b) When the principal entrusts to the agent by letter or telegram a Revocation of the agency will Revocation of the agency will
power of attorney with respect to the business in which he is not prejudice third persons who not prejudice the third person if
habitually engaged as an agent, and the latter did not reply to the acted in good faith; notice of they were not given notice
letter or telegram. (Art. 1872) revocation in a newspaper of thereof.
general circulation is sufficient
notice to bind third persons.

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RULES ON THE EXISTENCE OF AGENCY AS TO THIRD
PARTIES
Although an agency contract is consensual in nature and generally
requires no formalities or writing to be perfected, valid, and binding, an
agency agreement is never presumed and persons dealing with an agent
must ascertain:
a) The fact of agency, and
b) The nature and extend of the agents authority
DUTY OF THIRD PARTY TO ASCERTAIN: A third person must act
with ordinary prudence and reasonable diligence to ascertain whether the
agent is acting and dealing with him within the scope of his powers. If he
knows or has good reason to believe that the agent is exceeding his
authority, he cannot claim protection.
If the character assumed by the agent is of such a suspicious or
unreasonable nature, or if the authority which he seeks is unusual
or improbable as would put an ordinarily prudent man on his
guard, the party dealing with him should refuse to deal with the
agent or should ascertain from the principal the true conditions of
the affair.
The mere declaration of one that he an agent of another is never
to be accepted at face value, except in those cases where an
agency arises by express provision of law.
A person dealing with an agent is put upon inquiry and must
discover upon his own peril the authority of the agent.
CO-OWNERSHIP: A co-owner does not automatically become the agent
of the other co-owners.
LACK OF WRITTEN POWER OF ATTORNEY: in the absence of a
written power of attorney, the burden of proof to show that an agent acted
within the scope of his authority would be with the third party.
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SUMMARY
a) Third parties must never take the word or representation of the
purported agent at face value. They are mandated to apprise
themselves of the extent of powers of the purported agent.
b) Third parties can take the word, declaration, and representation of
the purported principal with respect to the appointment and
extent of powers of the purported agent. (as evidence in Art. 1873
on public advertisement and special notice, where the designated
agent may even be unaware of his designation as agent)
AGENCY BY ESTOPPEL
General rule: a contract of agency is perfected by the meeting of the
minds (consensual)
Exceptions:
a) Art 1873, where a person specially informs another or states by
public advertisement that he has given a power of attorney to a
third person, the latter becomes a duly authorized agent, even if
previously there has been no meeting of minds between them.
b) Art. 1911, where even when the agent has exceeded his authority,
the principal shall be held solidarily liable with the agent if he
allowed the agent to act as though he had full powers. (doctrine
of apparent authority)
APPARENT AUTHORITY: one who clothes another with apparent
authority as his agent, and holds him out to the public as such person to
act as his agent, cannot be permitted to deny the authority of such person
to act as his agent, to the prejudice of innocent third parties dealing with
such person in good faith.
If by interaction between a purported principal and a purported
agent in the presence of a third person, the latter was given the
impression of the existence of a principal-agency relation, and
the purported principal did nothing to correct the third persons
impression, an agency by estoppel is deemed to have been
constituted. (Naguiat v. CA)
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 REQUISITES FOR AN AGENCY BY ESTOPPEL TO MUST POWERS OF ATTORNEY BE IN WRITING?
EXIST (Litonjua v. Eternit Corp.) Every person dealing with an agent is duty bound to determine the extent
1. The principal manifested a representation of the agents of such agents authority. In other words, a third party is bound to
authority or knowingly allow the agent to assume such exercise due diligence in determining the extent of authority of the agent
authority to bind his principal. A third party who does not exercise due diligence is
2. The third person, in good faith, relied upon such deemed not in good faith and cannot enforce the contract against the
representation principal who has given no such authority to the agent.
3. Relying upon such representation, such third person has
changed his position to his detriment MINIMUM REQUIREMENT OF DUE DILIGENCE: a third party must
demand a written authority coming from the principal; otherwise, it
PROOF OF RELIANCE: an agency of estoppel requires proof of reliance would be grossly and inexcusably negligent for such third party to enter
upon the representations and that, in turn, needs proof that the into a contract with such agent without a written authorization from his
representation predated the action taken in reliance thereto. alleged principal. (Bordador v. Luz)
An exception to this rule is that every agent is deemed to be
PART TWO: FORMALITIES ON GRANT OF POWERS TO THE granted with authority to bind the principal for acts of
AGENT administration. What is contemplated in these issues are acts of
This section deals with the rules that govern the extent of power granted ownership.
to the agent once the agency relationship is established. The discussions That a power of attorney be more in writing therefore is more
are therefore based on the premise that even when an agent has been duly critical to the constitution of a special power of attorney, than to a
appointed by the principal, such agent must still act within the scope of general power of attorney.
his authority in order to make the resulting juridical acts entered into
valid and binding on the principal. GENERAL POWER OF SPECIAL POWER OF
ATTORNEY ATTORNEY
GENERAL PRINCIPLES ON CONTRACTS ENTERED INTO BY Third parties would be less Lacking the written evidence of
AGENTS wary that the contract or what particular power of
The formal requirements pertaining to contracts of agency, and issues transaction they entered into is ownership has been granted to
relating to the powers of agents to enter into contracts in the name of the not within the powers of the the agent, the third party may
principal, go into issues of enforceability, not nullity. (i.e. it is only agent, especially when it is one only reasonably presume that
void as to the principal) which is in the ordinary course the agent is granted powers of
of business administration. Otherwise, he
Power of attorney - an instrument in writing by which one person, as takes the risk that the agent
principal, appoint another as his agent and confers upon him the authority acted in excess of authority.
to perform specified acts or kinds of acts on behalf of the principal.
EVIDENTIARY PURPOSE: agency may be written or oral. However,
when a special power of attorney (i.e., the conferment of powers on the
agent to execute acts of strict ownership on behalf of the principal) is

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done orally, the agency relationship may be valid between the principal As long as the agency relationship exists, then in the absence of the
and the agent, but third parties that deal with the latter must require grant of special power of attorney to the agent, he is deemed to have
written evidence of his power to execute acts of strict ownership. been extended only a general power of attorney, and his powers cover
Otherwise, they are bound to enter into the contract at their own risk. only acts of administration.
While a special power of attorney need not be in writing, it
carries evidentiary weight in court. In its absence, the SPA ACTS OF ADMINISTRATION: acts in the ordinary course of business
must be duly established by evidence other than the self-serving What constitutes an act, transaction, or contract within the
assertion of the agent that such authority was verbally given to ordinary course of business is determined by the nature of the
him. business itself that has been placed under the administration of
the agent
WRITTEN INSTRUMENT IS CRUCIAL IN DETERMINING EXTENT
OF POWERS: today, the rule is that whether what is granted is an ACT OF
ACT OF DOMINION
authority to merely administer (general power of attorney) or to do an act ADMINISTRATION
of strict ownership (special power of attorney) is not determined from When the act, transaction, or When the act, transaction, or
the title of the instrument, but on the nature of the power given under contract in question is a matter contract is of a nature,
the operative provisions of such instrument. that from the nature of the considering the business being
Even when a SPA is granted, it is still a general rule that a power business is expected to occur managed, that is not expected to
of attorney must be strictly construed. The instrument will be and for which action is happen or decided upon in the
held to grant only those powers that are specified, and the agent expected without much day-to-day affairs, then it is
may neither go beyond nor deviate from the power of attorney. changing the course of the extraordinary.
(Olaguer v. Purugganan) business
o In other words, if a special power (i.e. to sell) is granted,
there is no presumption that other special powers (i.e. to Yu Chuck v. Kong Li Po: an officer who has control and
sue) are granted as well, absent a clear grant from the management of the corporations business is deemed to have
principal. power to employ such agents and employees as are usual and
Powers of attorney are generally construed strictly and courts will necessary in the conduct of business, except only where such
not infer or presume broad powers from deeds which did not authority is expressly vested in the Board of Directors. Therefore,
sufficiently include property or subject under which the agent is the manager of the business enterprise does not need a special
to deal. (Woodchild Holdings v. Roxas Electric) power of attorney to validly employ personnel.

GENERAL POWER OF ATTORNEY QUESTIONS:

Art. 1877 provides that an agency couched in general terms comprises
only acts of administration, even if the principal:
a) Should state that he withholds no power from the agent
b) States that the agent may execute acts he considers appropriate
c) Authorizes general and unlimited management
1. Contract says SPECIAL POWER OF ATTORNEY
to grant X the power to exercise acts of dominion on my
behalf. Is this a special power of attorney? NO. Art.
1877 says that an agency couched in general terms

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 comprises only acts of administration. The power, to be a
SPA, must be named.
2. Contract says SPECIAL POWER OF ATTORNEY: I,
A. Buenaventura, grant X. Santos the power to enter into
any contract on my behalf X Santos sells A
Buenaventuras car. Valid? UNENFORCEABLE.
Although the contract is labeled special power of
attorney, it is actually just a general power of attorney
couched in general terms. X can only exercise acts of
administration. In this case, X acted in excess of his
authority when he sold As car.
SPECIAL POWERS OF ATTORNEY
CASES WHERE SPECIAL POWER OF ATTORNEY IS
NECESSARY (Art. 1878)
To make such payments as are not usually
Payment
considered as acts of administration
To effect novations which put an end to
Novation obligations already in existence at the
time the agency was constituted
Compromise To compromise, to submit questions to
Submit questions for arbitrations, to renounce the right to
arbitration appeal from a judgment, to waive
Waiver of right to objections to the venue of an action or to
appeal abandon a prescription already acquired
Waiver of objections
to venue
Abandon prescription
Gratuitous waiver of To waive any obligation gratuitously
obligation
To enter into any contract by which the
ownership of an immovable is transmitted
Ownership of immovables
or acquired either gratuitously or for a
valuable consideration
Gifts 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
be urgent and indispensable for the
Loan or borrow money
preservation of the things which are under
administration
To bind the principal to render some
Service without compensation
service without compensation
To bind the principal in a contract of
Partnership
partnership
To create or convey real rights over
Real rights over immovables
immovable property
Inheritance To accept or repudiate an inheritance
To ratify or recognize obligations
Ratification
contracted before the agency
Others Any other act of strict dominion
Art. 1878 enumerates 14 instances which are described as acts of strict
dominion and which cannot be deemed to be within the scope of
authority of the agent unless it is expressly granted or it is a necessary
ingredient of the powers granted.
The 15th case enumerated actually covers the general rule: a duly
appointed agent has no power to exercise on behalf of the
principal any act of strict dominion unless it is under a special
power of attorney.
Each of the powers enumerated is an act of strict dominion, and
cannot be an implied power. Moreover, a named special power
cannot give the presumption that it includes, under any form of
construction or interpretation, another special power of attorney.
WHAT MAKES AN AGENCY A SPECIAL POWER OF ATTORNEY:
it is not the name or title given in the deed; an agent has special power of
attorney only when the act or contract enumerated under Art. 1878 has
been literally named in the grant of commission by the principal.
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 The terms of the powersuch as to sell, mortgagemust be
written or expressed for the commission to constitute a special
power of attorney.
A document captioned General Power of Attorney does not
preclude the grant of special power of attorney. A general power
of attorney may include a special power, if such special power is
specifically mentioned or referred to in the general power.
MUST SPECIAL POWERS OF ATTORNEY BE IN WRITING? No.
But the power or authority of the agent is deemed to cover only acts of
administration unless there be specific granting of acts of ownership.
The clearest manner to prove that there is specific grant of powers of
strict ownership is a writing instrument; otherwise, the presumption is
that the agent can only pursue acts of administration. (See relevant
section on whether or not powers of attorney must be in writing.)
(1) TO MAKE PAYMENTS AS ARE NOT USUALLY
CONSIDERED AS ACTS OF ADMINISTRATION
Payments made in the ordinary course of business constitute acts of
administration, since they go into mere acts of management and they are
expected to occur on a day-to-day basis.
All other forms of payment for and in behalf of the principal
which are not within the ordinary course of business would
constitute acts of strict dominion, which are not deemed within
the power of an agent unless granted under a special power of
attorney.
Dominion Insurance v. CA: A deed was issued by an insurance
company to its area manager, denominated as a Special Power
of Attorney. Its wordings, however, showed that the insurance
company only sought to establish an agency that comprises all
the business of the principal with the designated locality, but
couched in general terms.
The Court held that the payment of insurance claims was an act
of strict dominion and cannot be deemed with the powers of
administration of the area manager, and that since settlement of
!
claims was not included among the acts enumerated in the SPA,
then a SPA was required before such area manager could settle
insurance claims of the insured.
Consequently, the amounts paid by the area manager to settle
such claims were not allowed to be reimbursed from the
principal insurance company.
(2) TO EFFECT NOVATIONS WHICH PUT AN END TO
OBLIGATIONS ALREADY EXISTING AT THE TIME THE
AGENCY WAS CONSTITUTED
If the obligation was created only during the agency relationship, the
power to create such obligation granted to the agent includes with it the
implied power to novate it.
What happens if the agent is clearly empowered under a special power of
attorney to incur an obligation on behalf of the principal and in the
process of doing so, the agent novates a pre-existing obligation?
Where there terms of power granted to the agent was to the end
that the principal-seller may be able to collect the balance of the
selling price of what the printing establishment sold, such agent
has no power to enter into new sales arrangements with the
buyer nor to novate the terms of the original sale.
(3) SPECIAL POWER OF ATTORNEY WITH RESPECT TO
PRINCIPALS CAUSES OF ACTION
COMPROMISE AND JUDGMENTS: A judgment based on a
compromise entered into by an attorney without specific authority from
the client is void, and such judgment may be impugned and its execution
restrained in any proceeding by the party against whom it is sought to be
enforced.
COMRPOMISE AND CONFESSION OF JUDGMENT: A confession of
judgment stands in the same footing as a compromised and may not be
entered into by counsel except with the knowledge and consent of the
client, or upon his special empowerment.
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COMPROMISE AND ARBITRATION: The power to compromise
excludes the power to submit to arbitration. (Art. 1880) The power to
submit to arbitration does not carry with it the power to compromise.
Cosmic Lumber v. CA: the attorney-in-fact has been authorized in
writing to institute any actions in court to eject all persons found
in a specified parcel of land and for this purpose, to appear at the
pre-trial and enter into any stipulation of facts and/or compromise
agreement but only insofar as this was protective of the rights and
interests of the principal in the property.
The Court held that this did not constitute authority to enter into a
compromise agreement that provides for the sale of the
property to which the defendant in the case thus filed. The
judgment based on the compromise agreement was declared void.
(4) TO WAIVE ANY OBLIGATION GRATUITOUSLY
In the absence of a special power of attorney, an agent cannot condone
or remit the obligation owing to the principal, and if he does, the act is
unenforceable.
This does not mean that every agent would have the power to
waive the principals obligation for valuable consideration
outside of an express authority to do so.
What it means is that when the power to condone is within the
scope of authority of the agent, he may do so as an implied or
incidental power; whereas the power to waive an obligation owed
to the principal gratuitously can only arise as an express power,
not as an implied or incidental power of an agent.
To waive any obligation onerously is equivalent to payment or
performance of the obligation, which act is advantageous to the
principal. Being an act of administration, it is still within the
scope of the agents authority even when done without express
stipulation.
!
(5) TO ENTER INTO ANY CONTRACT BY WHICH THE
OWNERSHIP OF AN IMMOVABLE IS TRANSMITTED
That Art. 1878(5) covers only immovable property does not mean that
every agent has the implied power to transmit or acquire ownership over
movable property on behalf of the principal.
The principle intended to be conveyed is that there can never be
an implied power on the part of the agent to transmit or acquire
ownership over immovable property, whether by onerous or
gratuitous title. Such power must be expressly granted.
When it comes to movables, the power to dispose may be an act
of administration, such as the sale of merchandise in the ordinary
course of business.
General rule: special power of attorney is necessary for contracts
entered into for the transmission or acquisition, whether gratuitous or
onerous, of ownership of immovables. In other words, the sales of
transmission or acquisition of immovable need only be express, rather
than in writing, to be valid. Otherwise, the contract is unenforceable.
(Art. 1878(5))
Exception: a contract of agency for the sale of land or any
interest therein must be (a) expressly granted under a special
power of attorney, and (b) in writing. Otherwise, the resulting
contract is void, not merely unenforceable. (Art. 1874)
SPECIAL POWER TO SPECIAL POWER TO
SELL LAND OR PURCHASE LAND OR
INTEREST THEREIN INTEREST THEREIN
SPA has to be in writing for SPA does not render the
the sale of immovable to be purchase void when the agency
valid. is not in writing. (covered by
Art. 1878)
In all other immovables, other than land or any interest therein,
the fact that the SPA to sell or to purchase is not in writing would
not render the contract of sale or contract of purchase void, but
merely unenforceable.
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PUBLIC INSTRUMENT: a power of attorney to convey real property
need not be in a public instrument.
POWER TO MORTGAGE: A special power to sell excludes the power
to mortgage; and a special power to mortgage does not include the power
to sell. (Art. 1879)
The sale proscribed under Art. 1879 refers to a voluntary sale
effected through the agent; it does not cover the public sale that
happens as part of the foreclosure on the mortgage duly
instituted.
(5-A) SALE OF A PIECE OF LAND THROUGH AN AGENT
Art. 1874: When a sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing; otherwise
the sale is void.
PURCHASE OF LAND OR ANY INTEREST: Art. 1874 does not cover
an agency to purchase a piece of land or an interest therein; and that if the
special power of the agent who acts for the buyer is not in writing, the
resulting sale would still be valid.
ratification.
Pahud v. CA (latest word of SC on the matter): the issue was the
status of a sale by one co-heir of a land owned pro indiviso where
the authority given by the other co-heirs was merely verbal in
character.
The Court ruled that the transaction is valid and unenforceable.
It noted that Art. 1874 plainly provides that when the sale of a
piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise the sale is
void. However, the Court declared that such a sale is void
precisely to protect the interest of an unsuspecting owner from
being prejudiced by the unwarranted act of another.
In other words, the language of Art. 1874 declaring the sale
void, means that it is void as to the principal to protect his
interests from being prejudiced. The net effect of the ruling
considers the sale as being unenforceable, subject to ratification
on the part of the principal.

CONTRACT OF AGENCY CONTRACT OF SALE OF HOW DETAILED MUST THE SPECIAL POWER OF ATTORNEY TO
TO SELL LAND LAND SELL BE?
The oral contract of agency to The contract of sale of land It is the specification of the power to sell that is necessary, rather than
sell a parcel of land is not itself effected through an agent, a specification of the particular piece of land that controls compliance
void, because every contract of without written authority, is with the requirement of the law.
agency is consensual in valid and unenforceable. It is The power of attorney need not contain a specific description of
character, even those SPAs void only as to the principal. the land to be sold, such that giving the agent the power to sell
covered by Art. 1878. (Pahud v. CA) any or all tracts, lots, or parcels of land belonging to the
principal (Strong v. Gutierrez Repide) or the interest I possess
WHAT IS THE STATUS OF A PIECE OF LAND MADE PURSUANT within the municipality of Tarlac (Lian v. Puno) were deemed
TO AN ORAL POWER TO SELL: VOID OR UNENFORCEABLE? adequate.

Escueta v. Lim: The Court held that the lack of a written authority (5-B) AGENT CANNOT VALIDLY PURCHASE PROPERTY OF
only rendered the resulting contract of sale over parcels of land THE PRINCIPAL
unenforceable, not void per se, which can be subject to

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Under Art. 1491(2), an agent cannot purchase the property of his
principal, unless so expressly authorized. Otherwise, the contract of sale
is void. Therefore, even when the agent has been granted a SPA to sell a
piece of land or any interest therein, such power does not include by
implication the power to sell to himself, unless there was such prior
authorization by the principal.
(6) TO MAKE GIFTS
General rule: for an agent to have the power to make gifts or donations
on behalf o f the principal, it would require the same to be in the form of
a special power of attorney
Exceptions:
a) Customary ones for charity, or
b) Those made to employees in the business managed by the
agent
UNENFORCEABLE OR VOID: When a gift or donation is made by an
agent on behalf of the principal without a special power of attorney, it is
unenforceable. A gift or donation is void depending on whether or not it
complies with the formalities required under the Law on Donation, for
every act of donation constitutes a solemn contract.
(7) TO LOAN OR BORROW MONEY
General rule: the power of an agent to either loan or borrow money is an
act of strict ownership, and requires the same to be in the form of a
special power of attorney.
Exception: when the act is urgent and indispensable for the
preservation of the things which are under administration.
WITHOUT PRINCIPALS CONSENT (Art. 1890)
Agent empowered to borrow Agent empowered to lend
money can be the lender at the money at interest cannot be the
current interest rate borrower without consent of the
principal
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SCOPE: Art. 1878(7) covers only the borrowing of money under
mutuum, and does not cover the purchasing of goods on credit on behalf
of the principal, especially when the same is in the ordinary course of
business. (De Villa v. Fabricante)
PNB v. Tan Ong: a power of attorney vested an agent with
authority for me and in my name to sign, seal, and execute, and
as my act and deed, delivery any lease, any other deed for
conveying any real or personal property. The Court held that this
did not carry with it nor imply that the agent has the power to
execute a promissory note or a mortgage to secure its payment.
The authority which the principal has conferred upon the agent is
not to be extended by implication beyond the natural and ordinary
significance of the terms in which that authority has been given;
and that an agent has only such authority as the principal has
chosen to confer upon him.
PNB v. Sta. Maria: the special power to borrow money for the
principal is not implied from the special power of attorney to
mortgage real estate.
(8) TO LEASE REAL PROPERTY FOR MORE THAN ONE YEAR
The lease of real property for more than one year is an act of strict
ownership, since such a lease creates a right in rem. The act of entering
into a contract of lease for one year or less would be considered an act of
administration, and may be in the form of a general power of attorney.
SCOPE: Art. 1878(8) does not cover lease of personal property. But
this only means that, while a lease of real property for more than one year
is an act of ownership which would always require a SPA, when it comes
to personal property, a leader for more than one year may or may not be
an act of administration depending on the circumstances involved or the
nature of the business given to the agent for administration and
management.
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(9) TO BIND THE PRINCIPAL TO RENDER SOME SERVICE
WITHOUT COMPENSATION
Note, that any contract of servicewhether for compensation or notto
be entered into on behalf of a principal should property be considered an
act of strict ownership, for it impinges on obliging the principal to render
a personal obligation, which if he refuses makes him liable for damages.
(10) TO BIND THE PRINCIPAL IN A CONTRACT OF
PARTNERSHIP
Every agreement by the agent on behalf of the principal which has the
effect of obliging the principal to contribute money or industry to a
common fund with the intention of deriving profits therefrom would be
unenforceable without a SPA having been previously given to the agent,
for it in effect makes the principal a partner in a partnership.
(11) TO OBLIGATE THE PRINCIPAL AS GUARANTOR OR
SURETY
Guaranty shall not be presumed; it must be expressed and cannot be
extended beyond its specified limits. By analogy, a power of attorney to
execute a contract of guaranty should not be inferred from vague or
general words, especially when such words have their origin and
explanation in particular powers of a wholly different nature.
STATUTE OF FRAUDS: a contract of guaranty is unenforceable if not
in writing. Thus, when an agent authorized via SPA to enter into a
contract of guaranty on behalf of a principal, the resulting contract must
be in writing.
(12) TO CREATE OR CONVEY REAL RIGHTS OVER
IMMOVABLES
COVERAGE: real rights over immovable property would cover such
contracts as mortgages, usufruct, easements, etc.
(13) TO ACCEPT OR REPUDIATE AN INHERITANCE
(14) TO RATIFY OR RECOGNIZE OBLIGATIONS
CONTRACTED BEFORE THE AGENCY
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RATIFICATION: involves the acceptance of either a voidable or
unenforceable contract. When it comes to unenforceable contracts, they
are ratified by the failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefits under them.
The act of ratifying or cleansing a defective contract (i.e., voidable,
unenforceable) that could validly be enforced against the principal is an
act of strict ownership, and cannot be effected by the agent without SPA.
RECOGNITION: refers to acknowledgment of a natural obligation.
Recognition is an act of strict ownership which can only be performed by
an agent on behalf of the principal who possesses a SPA.
(15) ANY OTHER ACT OF STRICT DOMINION
Those that may be constituted as acts of strict ownership, but not so
specifically named in the first 14 paragraphs, would always need a SPA
to be executed in behalf of the principal by the agent.
But because they are not specifically enumerated, it is possible
that such acts which are normally perceived as acts of strict
ownership may, depending on the circumstances, be shown to
be mere acts of administration, and may be:
o Governed by a general power of attorney, or
o Implied or incidental from express powers or from the
nature of the business covered by the agency agreement
EXAMPLE: the sale or encumbrances of movables may constitute either
acts of administration or acts of strict ownership, depending on the
prevailing circumstances.
DOCTRINE OF IMPLIED POWERS
The grant of express powers or special power of attorney must
necessarily include all powers implied or incidental to such express
powers, even if they amount to an act of ownership or strict dominion.
EXAMPLES:
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 An agent empowered to pay the debts of the principal and
employ legal counsel to defend the principals interest has the
implied power to pay on behalf of the principal the attorneys
fees charged by the lawyer. (Municipality of Iloilo v.
Evangelista)
An agent empowered to sell hemp in a foreign country
necessarily has the power to make a contract of sale on behalf of
the principal. (Robinson Fleming v. Cruz)
SPECIAL POWER OF ATTORNEY EXCLUDES GENERAL
POWER OF ATTORNEY OVER THE SAME MATTER
COVERED
Does the grant of a specific power of attorney (whether general power of
attorney or special power of attorney) exclude from the agent the power
to execute all other acts of administration?
The answers seems to be in the affirmative under the principle
that if the principal specifies the powers he granted to the agent,
then he means to exclude all other powers of administration other
than those that are incidental to those specifically granted.
When an agent has been granted an express power of attorney,
then the agent cannot execute any other act, whether it be an act
of administration, or an act of ownership outside the language of
the power of attorney. (Pineda v. CA)
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CHAPTER 3: POWERS & AUTHORITY, DUTIES &
OBLIGATIONS, AND THE RIGHTS OF THE AGENT
GENERAL OBLIGATION OF AGENT WHO ACCEPTS THE
AGENCY
When an agent accepts the appointment of the principal, a contract of
agency arises, and at that point the agent is legally bound to carry out the
terms of the agency. Otherwise, he shall be liable for damages suffered
by the principal for his non-performance. (Art. 1884)
Art. 1884 expresses the contract principles of consensuality,
mutuality, and obligatory force
The burden is on the person who seeks to make an agent liable to
show that the losses and damage caused were occasioned by the
fault or negligence of the agent. Mere allegation without
substantiation is not enough to make the agent personally liable.
AGENCY AS PERSONAL OBLIGATION: despite the obligatory nature
of every contract of agency, specific performance is not an available
remedy for a personal obligation to do.
DEATH OF PRINCIPAL: although a contract of agency is terminated
ipso jure upon the death of the principal, Art. 1884 expressly provides
that the agent must finish the business already begun upon the death of
principal should delay entail any danger.
The obligatory force of the agents duty to act with diligence
exceeds the formal termination of the agency relationship, which
automatically comes about by the death of the principal.
Emphasizes that agency is a preparatory contract, constituted not
for its own sake by primarily to be the basis by which the agent
may enter into juridical acts on behalf of the principal with
respect to third parties.
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OBLIGATION OF AGENT WHO DECLINES AGENCY
General rule: When a person declines the offer to make him an agent, no
contract of agency arises and thereby no obligation is assumed by such
person to the offeror based on the absence of privity.
Exception: In case a person declines an agency, he is bound to
observe the diligence of a good father of a family in the custody
and preservation of the goods forwarded to him by the owner
until the latter should appoint an agent. (Art. 1885)
o This is a rare instance where a duty of diligence is owed
by a person to another outside of an existing contractual
bond.
The duty of care over goods given in his custody can only cover a
reasonable period because Art. 1885 provides that the owner
shall as soon as practicable either appoint an agent or take charge
of the goods.
GENERAL RULE ON AGENTS POWER AND AUTHORITY
DUTIES OF AN AGENT
1. Duty of obedience
2. Duty of diligence
3. Duty of loyalty
The twin duties of obedience and diligence can be summarized
in the Agency Law doctrine that the agent must act within the
scope of his authority.
DUTY OF OBEDIENCE
An agent must act in accordance with the instructions of the principal.
(Art. 1887)
CONTROL: One factor which most distinguishes agency from other
legal concepts is control; one persons (the agent) agrees to act under the
control or direction of another (the principal).
Since the agent acts in representation of the principal, he must
enter into juridical relations on behalf of the principal where he
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represents the will or consent of the principal, and not the agents
own will.
THREE CONSEQUENCES FOR REFUSAL TO FOLLOW
INSTRUCTIONS:
1. Agent becomes personally liable for damages arising
from a breach of his duty of obedience to the principal.
2. The principal is not personally bound by the terms of
such contract or transactions (since the agent has not
given the principals consent to the contract or
transaction entered into with a third party).
3. Agent may become personally liable for the contract
or transaction with the third party.
QUESTION: In a SPA, X and Y agreed that Y will carry out instructions
1, 2, 3, 4, and 5. It was further stipulated that no further duties shall be
required from the agent. Later on, X says Y must now carry out
instructions 6, 7, and 8. Y refuses. Did Y breach his duty of obedience?
YES. Duty is to be differentiated from obligation. An obligation
arising from a contract is made compulsory via consent of
parties. The duty of obedience, on the other hand, is open-
ended, and fiduciary in character. The duty transcends the four
corners of a written contract.
The stipulation that no further duties shall be required from the
agent is void. Any stipulation that limits what the principal can
requireprovided that new stipulations are not contrary to law,
morals, public order, or public policyis contrary to the very
principles of agency.
EXCEEDING AUTHORITY: If the agent contract in the name of the
principal, exceeding the scope of his authority, and the principal does not
ratify the contract, it shall be unenforceable if the party with whom the
agent contracted is aware of the limits of the powers granted by the
principal. The agent is also liable if he undertook to secure the principals
ratification. (Art. 1898)
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DUTY OF DILIGENCE
In default of guiding instructions, the agent shall do all that a good father
of a family would do, as required by the nature of the business. (Art.
1887)
WHEN NO INSTRUCTIONS: It is not expected that the principal can
cover all contingencies with specific instructions, or that every act of the
principal must be based on detailed instructions of the principal.
The principals actions limit an agents power; and in the absence
of limiting instructions, it is expected that the agent uses his best
judgment to stay within the scope of the principals authority
granted to him.
WHERE THERE ARE INSTRUCTIONS: this is not to say that when the
principal has given detailed instructions to the agent, that the agent is no
longer bound to exercise due diligence.
The agent may do such acts as may be conducive to the
accomplishment of the purpose of the agency. (Art. 1881)
The limits of the agents authority shall not be considered
exceeded should it have been performed in a manner more
advantageous to the principal than that specified by him. (Art.
1882)
In other words, an agent not only has express powers, but also:
(a) implied powers emanating from the express powers granted
to him, and (b) incidental powers necessary in order to achieve
the purpose for which the agency was constituted.
FRAUD AND NEGLIGENCE AS BREACH: in essence, the duty of
diligence requires that the agent act on behalf of the principal while
exercising the due diligence of a good father of a family. He is in breach
of this fiduciary duty when he acts in fraud or in negligence, even when
he pursues the business of the principal.
GUIDELINE OF WHAT IS WITHIN HIS POWER: the agency shall not
carry out the agency if its execution should manifestly result in loss or
damage to the principal. (Art. 1888)
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Use of the word manifestly indicates that the agent cannot be a
guarantor that the principal would suffer no loss or damage in the
pursuit of the agency.
The obligation of the agent is to avoid losses which are clearly
avoidable from the exercise of due diligence of a good father of a
family.
MEASURE OF LIABILITY:
When an agent violates his duty of diligence, he becomes
personally liable to the principal for the damages caused to the
principal by reason of fraud or negligence.
When the agent acts in accordance with the principals
instructions, however, the agent cannot be deemed to have acted
in fraud or negligently, even when damage was caused to the
principal.
o If a duly authorized agent acts in accordance with the
orders of the principal, the principal cannot set up the
ignorance of the agent as to circumstances whereof he
himself was, or ought to have been aware. (Art. 1899)
British Airways v. CA: The Court overturned the ruling of the CA
that a principal airline company (British Airways), which is made
to pay damages to one of its passengers, has no cause of actions to
recover the amount paid from its negligent agent, PAL.
An agent is also responsible for any negligence in the performance
of its functions and is liable for the damages which the principal
may suffer by reason of its negligent act.
Since the passenger was seeking damages for breach of contract of
carriage, its cause of action was only against the principal airline
(British Airways), and not PAL, since the latter was not a party to
the contract. However, this is not to say that PAL is relieved from
any liability due to any of its negligent acts. The third-party
complaint filed by British Airways against PAL was correct for
the purpose of determining who was primarily at fault.
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DUTY OF LOYALTY
The agent shall be liable for damages if, there being a conflict between
his interest and those of the principal, he should prefer his own. (Art.
1889)
RESULTING CONTRACT NOT VOID: when an agent violates his duty
of loyalty, as in cases of conflict-of-interest where he prefers his own
interest over that of the principals, Art. 1889 does not declare the
contract or transaction void, but merely makes the agent liable for
damages suffered by the principal.
MEASURE OF DAMAGES DUE TO PRINCIPAL WHEN AGENT
VIOLATES HIS DUTY OF LOYALTY:
Art. 1891 provides that the agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing to the
principal.
CLAW-BACK DOCTRINE: The principal has the right to
demand that the agent should turn over to him whatever contract,
property, or business has been acquired by the agent in breach of
his duty of loyalty.
ESTOPPEL: the relations of an agent to his principal are
fiduciary and in regard to the property forming the subject matter
of the agency, he is estopped from acquiring or asserting adverse
title against the principal.
o Therefore, an action in personam will lie against an agent
to compel him to return or retransfer to his principal the
real property committed to the agents custody and also
to execute the necessary documents of conveyance to
effect such transfer.
FORFEITURE OF COMMISSION: a guilty agent is made to
forfeit his commission as penalty for violation of his duty of
loyalty.
ESTAFA: an agent who refuses or fails to return to the principal
the funds or property received may be held liable for estafa.
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A. WHEN AGENT CONTRACTS IN HIS OWN NAME ON A
MATTER THAT FALLS WITHIN THE SCOPE OF THE
AGENCY (VALID)
If an agent acts in his own name, the principal has no right of action
against the person with whom the agent has contracted; neither have such
persons against the principal. (Art. 1883)
Principle of relativity in contracts: principal has no legal standing
to sue the third party. Neither do the third parties as against the
principal.
General rule: It is the agent who is directly bound in favor of the
person with him he has contracted, as if the transaction were his
own. Exception: Except when the contract involves things
belonging to the principal.
PREFERRING OWN INTERESTS IS BREACH: If the matters entered
into by the agent in his own name pertain to the business of the principal,
the agent has breached his fiduciary duty of loyalty, by having preferred
his own interests to that of the principals.
Whether the agent has used his own funds or property, or
those of the principals, he would still be in breach of his
fiduciary duty. The agent is thus bound to render an account of
his transactions and to delivery to the principal whatever he may
have received by virtue of the agency, even though it may not be
owing to the principal.
In either case, the principal has the right to demand that the agent
should turnover to him whatever contract, property, or business
has been acquired by the agent in breach of his duty of loyalty.
B. PARTICULAR RULES ON CONFLICT-OF-INTERESTS
SITUATIONS
(1) Purchase of principals property
An agent is prohibited from buying property entrusted to him for
administration or management, unless the principal consents
thereto. Such a sale would be void.
(2) When an agent is empowered to borrow or lend money
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 If empowered to borrow money, he may be the lender at current
interest,
If empowered to lend money, he cannot borrow without
principals consent.
If the agent lends money to the principal and charges interest higher than
the current rate, the difference would have to be returned to the principal.
If the agent borrows for himself the money which the principal has
authorized him to lend out without the latters consent, the agent would
not only be liable for the current interest that the principal would have
earned if the money was lent to a third party, but also damages that the
principal may have suffered.
C. OBLIGATION TO RENDER AN ACCOUNT AND TO TURN-
OVER TO THE PRINCIPAL WHATEVER RECEIVED BY
VIRTUE OF THE AGENCY
Every agent is bound to render an account of his transactions and to
deliver to the principal whatever he may have received by virtue of the
agency, even though it may not be owing to the principal. (Art. 1891)
Exceptions:
1. Agent/broker acted merely as a middleman whose task is to bring
the buyer and seller together
2. Agent informs the principal of the gift or profit he received and
the principal did not object thereto
Domingo v. Domingo: an agent who takes a secret profit in the
nature of a bonus, gratuity, or personal benefit from the vendee
without revealing the same to the principal, the vendor, is guilty of
a breach of his loyalty to the principal and forfeits his right to
collect the commission from his principal, even if:
(1) The principal does not suffer any injury by reason of such
breach of fidelity, or
(2) The principal obtained better results,
(3) The agency is a gratuitious one, or
(4) Usage or customs allow it
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Because the rule is to prevent the possibility of any wrong, not to
remedy or repair an actual damage.
Where a principal has paid an agent a commission while ignorant
of the fact that the latter has been unfaithful, the principal may
recover back the commission paid, since an agent who has been
unfaithful is not entitled to any compensation.
If the agent does not conduct himself with entire fidelity towards
his principal, but is guilty of taking a secret profit or commission
in regard the matter in which he is employed, he loses his right to
compensation on the ground that he has taken a position wholly
inconsistent with that of agent for his employer.
WAIVER OF DUTY TO ACCOUNT: Every stipulation exempting the
agent from the obligation to render an account shall be void. (Art. 1891)
Stressed the highest loyalty that is required of an agent
SPECIFIC OBLIGATION RULES ON FUNDS
1. OBLIGATION TO ADVANCE FUNDS: there is no
common law duty on the part of the agent to advance funds
on behalf of the principal because of the principle that an
agent does not become personally liable for the transactions
pursued on behalf of the principal.
o Exception: express stipulation, unless the principal is
insolvent
2. LIABILITY OF AGENT FOR INTEREST: the agent owes
interest to the principal on the following items:
a) Sums the agent applied to his own use from the time he
used them, and
b) Sums owing the principal which remain outstanding at
the time of extinguishment of the agency, with interest to
run from the time of such extinguishment
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POWER OF AGENT TO APPOINT A SUBSTITUTE
General rule: the agent may appoint a substitute
Exception: if the principal has prohibited him from doing so
RESPONSIBILITY OF FIRST AGENT: the agent will be responsible for
the acts of the substitute:
a) When he was not given the power to appoint one
b) When he was given such power, but without designating the
person, and the person appointed was notoriously incompetent or
insolvent
In either care, the principal may bring an action against the substitute
with respect to the obligations which the latter have contracted under the
substitution.
WHEN THE SUB-AGENT APPOINTED PURSUANT TO
INSTRUCTIONS OF THE PRINCIPAL:
The sub-agent is really an agent of the principal as well, and
privity exists between the principal and the sub-agent
Any act done by the agent or the substitute in behalf of the
principal is deemed the act of the principal
General rule: the agent does not bear personal responsibility for
the fraud or negligence of the sub-agent, for the agent merely
acted with the instructions when he appointed the sub-agent
o Exception: when the agent has been given the power, but
without the principal designating the person, and the
person appointed was notoriously incompetent or
insolvent
WHEN THE SUB-AGENT APPOINTED AGAINST THE
PRINCIPALS PROHIBITION:
All acts of the substituted appointed against the prohibition of the
principal shall be void (unenforceable insofar as the principal
is considered subject to ratification)
Agent is personally liable for the acts of the substitute, as though
the contracts of the substitute were his own
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CONSIDERATION OF THE FIDUCIARY DUTIES OF THE
AGENT AS TO THIRD PARTIES
Art. 1900: so far as third persons are concerned, an act is deemed to have
been performed within the scope of the agents authority, if such act is
within the terms of the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to an understanding
between the principal and the agent.
As to third parties acting in good faith, the written instructions
of the principal are the binding powers of the agent, and cannot
be overcome by non-written instructions of the principals not
made known to them
The powers and duties of an agent are limited to those which are
specified and defined in his written power of attorney, which
limitation is a notice to, and is binding upon, the person
dealing with such agent.
HIGHEST EXPRESSION OF POWERS: Written power of attorney
constitutes the highest form of expression of the extent and limitation of
the powers of the agent, and third parties should contract on the basis of
such written instrument.
Art. 1902 therefore provides that a third person with whom the
agent contracts on behalf of the principal may require the
presentation of the power of attorney, or the instructions as
regards the agency.
Private or secret orders and instructions of the principal do not
prejudice third persons who have relied upon the power of
attorney shown to them.
RISK ON THIRD PARTY: outside of the written power of attorney, third
persons who deal with an agent are not supposed to presume that the
agent is fully authorized.
Rule: every person dealing with an assumed agent is put upon
inquiry and must discover upon his peril, if he would hold the
principal liable, not only the fact of the agency, but the nature
and extent of the authority of the agent.
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1. EFFECTS ON THE AGENT OF CONTRACTS ENTERED INTO
WITHIN THE SCOPE OF HIS AUTHORITY
General rule: agent is not personally liable to third parties.
Exceptions:
a) When the agent expressly makes himself personally liable
b) When the agent is guilty of fraud of negligence
GENERAL RULE: AGENT IS NOT PERSONALLY LIABLE TO
THIRD PARTIES
The agent who acts as such is not personally liable to the party with
whom he contracts. (Art. 1897) This is supplemented by Art. 1910 which
provides that the principal must comply with all the obligations which
the agent may have contracted within the scope of his authority.
Basis: relativity of contracts - a mere representative of another
neither acquires rights nor incurs liabilities arising from a
contract between his principal and another party
Action on the contract must be brought against the principal (real
party in interest), not the agent.
o As agent, he only renders some service or does
something in representation of his principal. The
rendering of such service does not make him party to the
resulting contract.
Conversely, an agent has no authority to bring suit in
contracts entered into in the name of the principal, even if
they rendered some service on behalf of the principal.
o A contract may only be violated by the parties thereto as
against each other.
EXCEPTION: WHEN THE AGENT EXPRESSLY MAKES HIMSELF
PERSONALLY LIABLE
The fact that the agent bound himself does not relieve the principal from
liability. Unless otherwise indicated in the contract, the liability of the
agent with the principal is merely joint, not solidary.
!
When a previous agent binds himself personally liable on the resulting
contract, the new agent is not bound by the assumption undertaken by the
original agent, absent an express stipulation (Benguet v. BCI)
EXCEPTION: WHEN AGENT IS GUILTY OF FRAUD OR
NEGLIGENCE
When an agent, though acting within the scope of his authority, acts with
fraud or negligence, it affects two levels of legal relationships (i.e. two
sets of liabilities):
a) That between the principal and the agent
b) That with third parties, when they have entered into a
contract with the agent in the name of the principal
Example of fraud:
Agent is precluded from doing any positive act which could
prevent performance on the part of his principal; otherwise, the
agent becomes liable also on the contract.
An agent becomes personally liable when by his wrong or
omission, he deprives the third person with whom he contracts of
any remedy against his principal (NAPOCOR v. NAMERCO)
PRINCIPAL AND AGENT ARE SOLIDARILY LIABLE: In this
situation, it is presumed that the fraudulent and negligent acts of the agent
were in fact in pursuit of the business or affairs of the principal. The
principal is not exempted from liability just because the agent becomes
personally liable for the contract tainted with fraud or negligence. On the
contrary, the principal and agent are deemed joint tortfeasors and are
solidarily liable insofar as third parties are concerned.
REMEDY OF PRINCIPAL: sue the agent for damages sustained due to
agents fraudulent or negligent acts.
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2. EFFECTS OF ACTS DONE BY AGENT WITHOUT Exception: agent would
AUTHORITY OR IN EXCESS OF AUTHORITY be personally liable to
General rule: the principal is NOT liable, and the agent may be liable. third party if he
Exceptions: undertook to secure the
a) When the principal ratifies the contract or transactions principals ratification
b) As to third parties who relied upon the terms of the power of
attorney as written, even if in fact the agent has exceeded the EXCEPTIONS: WHEN THE PRINCIPAL MAY BE BOUND
limits of his authority according to an understanding between Art. 1901 provides that a third person cannot set up the fact that the agent
the principal and his agent has exceeded his powers, if the principal has ratified, or signified his
willingness to ratify the agents act.
GENERAL RULE: THE PRINCIPAL IS LIABLE, AND AGENT MAY When the agent exceeds his authority, the matter can be raised
BE LIABLE only by the principal, and when not so raised, recovery can be
The general rule is set under Art. 1317 which provides that No one may made by the third party only against the principal.
contract in the name of another without being authorized by the latter, or Art. 1897 does not hold that in case of excess of authority, both
unless he has by law a right to represent him. A contract entered into in the agent and the principal are liable to the other contracting
the name of another by one who has no authority, or who has acted party.
beyond his powers, shall be unenforceable, unless it is ratified
CONSEQUENCES WHEN AGENT ACTS IN HIS OWN NAME
The liability of an agent who exceeds the scope of his authority General rule: the principal has no right of action against the persons
depends upon whether the third party knew of the limits of the with whom the agent has contracted; and neither such persons have a
powers granted. right or cause of action against the principal. (Art. 1883) The agent is the
THIRD PARTY KNOWS THIRD PARTY DOES one directly bound, as if the transaction were his own.
LIMITS NOT KNOW LIMITS Exception: when the property involved in the contract belongs to
The contract entered into in the The contract shall be the principal; in which case, the principal is bound even when the
name of the principal shall be unenforceable. contract was entered into in the name of the agent.
void as to the principal and the
third party, and even between an WHEN DOES AN AGENT ACT IN HIS OWN NAME: an agent acts in
agent and the third person. his own name when he enters into a contract with a third party without
(NOT LEGALLY BINDING) any indication that he is doing so for and on behalf of the principal.
The agent does not become
personally liable on the contract REMEDY OF PRINCIPAL: cannot sue on the contract between the agent
since the third party has no one and the third party, but can recover damages from the agent (Art. 1883),
to blame but himself, knowing unless the contract involves his property in which case he acquires
fully well the limits to the standing to sue on the contract.
agents authority.

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WHEN TWO OR MORE AGENTS APPOINTED BY THE SAME
PRINCIPAL
Liability is:
a) Joint, when nothing is stipulated, and
b) Solidary, only when so stipulated
When solidarity has been agreed upon, each of the agents is responsible
for the non-fulfillment of the agency, and for the fault or negligence of
his fellow agents, except in the case when the fellow agents acted beyond
the scope of their authority. (Art. 1895)
RULE ON CONSENT: when a person appoints two agents
independently, the consent of one will not be required to validate the acts
of the other, unless that appears positively to have been the principals
intention.
WHEN THIRD PARTY LIABLE TO THE AGENT HIMSELF
A third party would directly be liable to the agent himself when:
a) The agent contracts in his own name, on a matter that is
within the scope of the agency
b) The agent possesses beneficial interest in the subject matter
of the agency (such as a factor selling under a del credere
commission)
c) A third party commits a tort against the agent
SPECIFIC OBLIGATION RULES FOR COMMISSION AGENTS
Commission agent - one whose business it is to receive and sell goods
for commission, and who is entrusted by the principal with the possession
of the goods to be sold, and usually selling in his own name.
An ordinary agent need not have possession of the goods of his
principal, while the commission agent must be in possession.
SPECIFIC OBLIGATIONS OF COMMISSION AGENT
a) TAKE CUSTODY OF THE GOODS
A commission agent is responsible for the goods received by
him in the terms and conditions, and as described in the
consignment, unless upon receiving them he should make a
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written statement of the damage and deterioration suffered by
the same.
b) NOT TO COMMINGLE SIMILAR GOODS BELONGING
TO DIFFERENT PRINCIPAL
Commission agent must distinguish them by countermarks,
and designate the merchandise respectively belonging to each
principal.
c) CANNOT SELL ON CREDIT WITHOUT PRINCIPALS
AUTHORIZATION
If the commission agent sells on credit, the principal may
demand from him payment in cash, but the agent shall be
entitled to any interest or benefit which may result from such
sale.
d) TO INFORM THE PRINCIPAL OF EVERY PRE-
AUTHORIZED SALE ON CREDIT
If he fails to do so, the sale shall be deemed to have been
made for cash insofar as the principal is concerned.
e) SHALL BEAR THE RISK OF COLLECTION UNDER
DEL CREDERE COMMISSION
This is the exception to the general rule that a commission
agent cannot sell on credit. However, the del credere agent
shall bear the risk of collection, and shall pay the principal
the proceeds of the sale on same terms agreed with
purchaser.
f) TO COLLECT CREDITS OF THE PRINCIPAL
A commission agent who does not collect the credits of his
principal at the time when they became due and demandable
shall be liable for damages, unless he process that he
exercised due diligence for that purpose.
g) RESPONSIBILITY TO RETURN GOODS UNSOLD
In consignment of goods for sale, as form of agency, the
agent will be excused from returning goods unsold when they
are lost through force majeure.
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 CHAPTER 4: OBLIGATIONS OF THE PRINCIPAL
OBLIGATORY FORCE: The contract of agency entered into by the
principal and the agent is the law between them and both are bound to
comply with its terms and conditions in good faith.
FIDUCIARY AND PREPARATORY: since the contract of agency is
one of representation and bounded by fiduciary duties on the part of the
agent, then the principal has the power to evolve the relationship
beyond the written terms of the instrument, and the agent under his
fiduciary duty of obedience, must comply with such new instructions of
the principal.
Highlights the characteristic of agency as a preparatory
contract
PRINICIPAL BOUND BY THE CONTRACTS MADE BY THE
AGENT IN HIS BEHALF
The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority. (Art. 1910)
CONSEQUENCES OF DOCTRINE OF REPRESENTATION:
Effects of dishonesty of the agent must be borne by the principal,
not by an innocent third party who has dealt with the agent in
good faith. (Lim Chai Seng v. Trinidad)
Knowledge of agent is generally chargeable as knowledge of
principal (Air France v. CA)
The liability of the principal for acts done by the agent within the
scope of his authority do not exclude those done negligently
Filipinas Life Assurance Co v. Pedroso:
General rule: the principal is responsible for the acts of its agent
done within the scope of its authority, and should bear the damage
caused to third persons. When the agent exceeds his authority, the
agent becomes personally liable for the damage. BUT EVEN
WHEN THE AGENT EXCEEDS HIS AUTHORITY, the
principal is still solidarily liable together with the agent if the
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principal allowed the agent to act as though the agent had full
powers.
In other words, the acts of an agent beyond the scope of his
authority do not bind the principal, unless the principal ratifies
them, expressly or impliedly. Ratification in agency is the
adoption or confirmation by one person of an act performed on his
behalf by another without authority.
Despite the allegation of the insurance company that it was only
a life insurance company and was not engaged in the business of
collecting investing money, it was nonetheless made liable to
persons who invested money with its confirmed agent, when it
was shown that company officers had confirmed the power of the
agent, and the companys official receipts were issued for the
investments.
PRINCIPAL NOT BOUND BY THE CONTRACTS MADE
WITHOUT OR IN EXCESS OF AUTHORITY
General rule: the principal is not bound by contracts made without or in
excess of the agents authority. Said contracts are not void, but
unenforceable.
Exceptions:
a) RATIFICATION: when the principal ratifies such contract,
expressly or impliedly.
b) AGENCY BY ESTOPPEL (principal and agent are solidarily
liable): when the principal has allowed the purported agent as
though he acted with full powers
c) REVOCATION WITHOUT NOTICE TO THIRD PARTY
IN GOOD FAITH: when the principal has revoked the
agency, but the third party has acted in good faith without
notice of such revocation.
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AGENCY BY ESTOPPEL/APPARENT AUTHORITY VIZ.
CORPORATIONS: It is well settled in jurisprudence that where similar
acts have been approved by the directors as a matter of general practice,
custom, and policy, the general manager may bind the company without
formal authorization of the board of directors.
Authority to act for and bind the corporation may be presumed
from acts of recognition in other instances where the power was
in fact exercised.
When, in the usual course of business, an officer has been
allowed in his official capacity to manage the affairs, his
authority to represent the corporation may be implied from the
manner in which he has been permitted by the directors to
manage its business.
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 parties
dealing with that person in good faith.
LIABILITY OF THE PRINCIPAL FOR AGENTS TORT
General rule: the principal is liable to injured third parties for the torts
committed by the agent when the act was in the course of and within the
scope of the agents authority.
But, the agent is also responsible not only for fraud, but also for
negligence. (Art 1909)
OBLIGATIONS OF THE PRINCIPAL TO THE AGENT
1. Commission
2. Expenses
3. Damages sustained by agent
1. TO PAY AGENTS COMMISSION
Agency is presumed to be for a compensation, unless there if proof to the
contrary. (Art. 1875)
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WITH FORMULA: the obligation of the principal to pay the agent shall
be in accordance with the terms and conditions agreed upon when the
agency was constituted.
WITHOUT FORMULA: if no particular formula has been agreed upon
as to the agents compensation, then the following rules shall apply:
a) The principal shall pay the agents commission only on the
legal basis that the agent has complied with his obligations
with the principal
b) The principal shall be liable to the agent for the reasonable
value of the agents services
De Castro v. CA: the terms of the contract of agency constitute
the law between the principal and the agent. The mere fact that
other agents intervened in the consummation of the sale and
were paid their respective commissions could not vary the terms
of the contract of agency providing for a 5% commission.
2. TO ADVANCE SUMS REQUESTED FOR EXECUTION OF
THE AGENCY
General rule: the principal must advance to the agent, should the latter
so request, the sums necessary for the execution of the agency. (Art.
1912)
Exception: agent is only bound to advance sums necessary when
he consents or it is stipulated in the agreement. (Art. 1886) In
such a case, the principal must reimburse the agent therefor, even
if the business or undertaking was not successful, provided that
the agent is free from fault. (Art. 1912)
NOTE: Advance of sums does not destroy the essence of agency which is
representation. It merely makes the contract of agency onerous.
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General rule: principal is liable to reimburse agent for expenses
Exceptions:
a) Agent acted in contravention of the principals instructions,
unless the latter availed of the benefits derived from the
contract
b) Expenses were due to the fault of the agent
c) Agent incurred them with knowledge that an the unfavorable
result would ensure, if the principal was not aware thereof.
d) Express stipulation
3. TO PAY AGENT FOR DAMAGES SUSTAINED
The principal must indemnify the agent for all the damages which the
execution of the agency may have caused the latter, without fault or
negligence on the agents part. (Art. 1913)
Counterbalance to Art. 1884 which provides that the agent is
liable for damages sustained by the principal for the agents
refusal to perform his obligations under the agency.
If the undertaking is one in which several are interested, but only
some create the agency, only the latter are solidarily liable
without prejudice to the effects of negotiorum gestio with respect
to the others
The parties, however, may negate solidary liability by express
stipulation
RIGHTS OF PERSONS WHEN FACED WITH CONFLICTING
CONTRACTS
When two persons contract with regard to the same thing, one of them
with the agent and the other with the principal, and the two contracts are
incompatible, that of prior date shall be preferred, without prejudice to
the provisions of Art. 1544 on double sales. (Art. 1916)
If the agent acted in good faith, the principal shall be liable in damages to
the third person whose contract must be rejected. If the agent acted in bad
faith, he alone shall be responsible. (Art. 1917)

RIGHT OF RETENTION ON THE PART OF THE AGENT

The agent has a right to retain the object of agency in pledge for advances
and damages until payment thereof. (Art. 1914)
This is an exception to the duty of the agent to delivery to the
principal everything he received even if not due to the principal.
(Art. 1891)

OBLIGATIONS OF TWO OR MORE PRINCIPAL TO AGENT

APPOINTED FOR COMMON TRANSACTIONS
If two or more persons have appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to the agent for all the
consequences of the agency. (Art. 1915)
This rule applies even when the appointment of the agent was
made by the principals separately, provided they are for the same
transaction.
o Reason: the solidarity arises from the common interest of
the principals, not from the act of constituting the
agency.

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 CHAPTER 5: EXTINGUISHMENT OF AGENCY BREACH OF CONTRACT: An agreement as to the term of the agency
would not make the principal lose his power to revoke. When the
HOW AND WHEN AGENCY EXTINGUISHED principal revokes the agency before the expiration of the term or before
Agency is extinguished: the accomplishment of the purpose, the agency is terminated, but he
1. Revocation by the principal would be liable for the damages caused by the revocation, including
2. Withdrawal of the agent the compensation due when the revocation was done in bad faith. (i.e.,
3. Death, civil interdiction, insanity, or insolvency of the the revocation was done to avoid the payment of the commission earned
principal or agent by the agent)
4. Dissolution of the firm or corporation which entrusted or
accepted the agency General rule: an agency is revocable at the will of the principal
5. Accomplishment of the object or purpose of the agency (ipso Exception: agency coupled with interest
facto extinguished)
6. Expiration of the period for which the agency was constituted EXPRESS REVOCATION
(ipso fact extinguished) RETURN OF DOCUMENT: the principal may compel the agent to
7. Mutual withdrawal from the relationship by the principal and return the document evidencing agency upon revocation of the agency.
agent This would ensure that the document (i.e. SPA) would not fall into the
8. Happening of a supervening event that makes illegal or hands of third parties who then would be acting in good faith in entering
impossible the objective or purpose for which the agency was into a contract in the name of the principal, believing there is still existing
constituted (i.e. destruction of subject matter) an agency.

PRINCIPALS REVOCATION OF THE AGENCY NOTICE: if the agent fails or refuses to return the power of attorney, it is
The principal may revoke the agency at will and compel the agent to the principals duty to give proper notice to those who may be affected by
return the document evidencing the agency. Such revocation may be the revocation. Otherwise, the third party cannot be prejudiced.
express or implied. (Art. 1920)
This is in keeping with the truism that an agency is a highly SPECIFIC GENERAL
personal relationship and one built upon trust and confidence. If the agency has been If the agent had general powers
Unlike the remedy of rescission which requires substantial entrusted for the purpose of (not directed towards specific
breach of contract, revocation is literally at the will of the contracting with specified persons), notice of the
principal. persons, its revocation shall revocation in a newspaper of
not prejudice the latter if they general circulation is sufficient
TWO OR MORE PRINCIPALS: when two or more principal have were not given notice thereof. to warn third persons.
granted a power of attorney for a common transaction, any one of them
may revoke the same without the consent of the others. (Art. 1925) EXCLUSIVE AGENCY: the grant to a person of an exclusive agency
Consistent with solidary liability of two or more principals in Art. position does not mean that the agency is irrevocable within the period
1915 provided in the contract of agency, but that merely means that the
principal would not appoint another agent to handle the business covered.

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IMPLIED REVOCATION
1. Appointment of new agent for same business
2. Principal directly manages the business
3. SPA revokes a GPA
1. APPOINTMENT OF NEW AGENT FOR SAME BUSINESS
The appointment of a new agent for the same business or transaction
revokes the previous agency from the day on which notice thereof was
given to the former agent.
The effect of revocation is without prejudice to the rights of third
parties who were not aware of or notified of such situation.
Garcia v. De Monzano: whether the father first gave a power of
attorney to his son, and then subsequently to his mother, for the
same business, the Court held that without evidence showing that
the son was informed of the issuance of the power of attorney to
the mother, the transaction effected by the son pursuant to the
power of attorney is valid and binding.
2. PRINCIPAL DIRECTLY MANAGES THE BUSINESS
NOTICE: Unless the agent is aware or given notice that the principal has
directly managed the business which is covered by his power of attorney,
then insofar as the agent is concerned there is as yet no revocation of his
powers.
The direct management of the business by the principal and directly
dealing with third parties shall be deemed to produce the effect of
revocation when such acts would be given with the terms of the power of
attorney previously given to the agent
Continued involvement of the principal in the management of the
business or the property which is the object of the agency does
not automatically mean there is an intent to revoke.
As a matter of fact, agency arrangements are not meant to curtail
the principals power to execute acts of ownership and
administration.
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BAD FAITH: if the purpose of the principal in dealing directly with the
purchaser is to avoid payment of his agents commission, the implied
revocation is deemed made in bad faith and cannot be sanctioned without
according to the agent the commission that is due him.
THE REAL ISSUE: the issue of implied revocation arising when the
principal directly manages the business covered by the power of attorney
really goes into the issue of entitlement of the agent to the commission
agree upon.
The agent must earn through his service or efforts the
commission agreed. If it is the principal himself, through his own
efforts, who is able to effect the transaction contemplated by the
agency arrangement, then the agent would not be entitled to
receive any commission
3. SPECIAL POWER OF ATTORNEY REVOKES GENERAL
POWER OF ATTORNEY
A general power of attorney is revoked by a special power of attorney
granted to another agent, as regards the special matter involved in the
latter.
REVOCATION BASED ON BREACH OF TRUST
The time during which the agent may hold his position is indefinite or
undetermined when no period has been fixed in his commission and so
long as the confidence reposed in him by the principal exists
But, as soon as the confidence disappears, the principal has a
right to revoke the power he conferred upon the agent
IRREVOCABLE AGENCIES
General rule: a contract of agency is revocable at will (even if termed as
irrevocable by the parties)
Exception: agency coupled with interest
a) Bilateral contract depends upon the agency for its fulfillment
b) It is a means of fulfilling an obligation already contracted,
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 c) A partner is appointed managing partner in the contract of
partnership, and the removal from management is
unjustifiable.
Exception to exception: breach of trust
AGENCY COUPLED WITH INTEREST: one that is established for the
mutual benefit of the principal and of the agent, or for the interest of the
principal and of third persons, and cannot be revoked by the principal so
long as the interest of the agent or of third persons subsists.
The agents interest must be in the subject matter of the power
conferred and not merely an interest in the exercise of the power
because it entitles him to compensation.
When an agents interest is confined to earning his agreed
compensation, the agency is not one coupled with an interest,
since an agents interest in obtaining his compensation as such
agent is an ordinary incident of the agency relationship.
NOTE: it is not stipulation of irrevocability that makes an agency
coupled with interest. It is an agency coupled with interest by the
very nature of the agreement and the factual circumstances
surrounding it. What the stipulation does is that, while principal
may still revoke the contract, it would constitute a breach of
contract for which the principle may be held liable for damages.
Perez v. PNB: an example of an agency coupled with interest is
when a power of attorney is constituted in a contract of real estate
mortgage pursuant to the requirement of Act No. 3135, which
would empower the mortgagee upon default of the mortgagor to
effect the sale of the mortgaged property through extrajudicial
foreclosure.
The argument that foreclosure by PNB is barred upon the death of
the debtor, because the agency is extinguished by the death of the
principal, neglects to take into account that the power of
foreclosure is not an ordinary agency that contemplates
exclusively the representation of the principal by the agent but is
primarily an authority conferred upon the mortgagee for the
latters own protection.
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Sevilla v. CA: It appears that Lina Sevilla is a bona fide travel
agent herself, and as such, she had acquired an interest in the
business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily
liable for the payment of rentals. She continued the business,
using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not limited to the
commissions she earned as a result of her business transactions,
but one that extends to the very subject matter of the power of
management delegated to her. It is an agency created for the
mutual interest of the agent and the principal, and therefore cannot
be revoked by the principal at will. Therefore, the revocation by
Tourist World entitled Lina Sevilla to damages.
Valenzuela v. CA: where the appointment of the agent is not
merely for the benefit of the principal, but allows the agent to
build business interests that would yield him gains in terms of
commission on a long-term basis, such as in the case of an
insurance agent, the same is an agency coupled with interest and
cannot just be revoked.
Republic v. Evangelista: an exception to the revocability of a
contract of agency is when a bilateral contract depends upon the
agency.
Reason for irrevocability: the agency becomes part of another
obligation or agreement. It is not solely the rights of the principal
but also that of the agent and third persons which are affected.
This ruling emphasizes the character of agency as a preparatory
contract, such that features like fiduciary and essentially
revocable cannot overcome more important considerations such
as preserving the contractual expectations of third parties who
deal in good faith with the principal through the agent.
In case of agency coupled with interest, the revocable nature of
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 the agency relationship must give way to making effective,
binding, and enforceable any bilateral contract which depends
upon the existence of the agency for its enforcement and
realization.
BREACH OF TRUST: An agency coupled with interest can still be
revoked for a just cause, as when the agent betrays the interest of the
principal. The irrevocability of such an agency cannot be used to shield
the perpetration of bad faith, breach of confidence, or breach of trust by
the agent for that would amount to holding that a power coupled with an
interest authorizes the agent to commit frauds against the principal.
WITHDRAWAL OF THE AGENT FROM THE AGENCY
General rule: The agent may withdraw from the agency by giving due
notice to the principal.
Exception: the agent, even if he should withdraw from the
agency for a valid reason, must continue to act until the principal
has had reasonable opportunity to take the necessary steps to
meet the situation.
General rule: if the principal should suffer any damages by reason of the
withdrawal, the agent must indemnify him therefore
Exception: when the withdrawal is based upon the impossibility
of continuing the performance of the agency without grave
detriment to himself
IMPLIED WITHDRAWAL
Valera v. Velasco: the fact that an agent instituted an action
against his principal for the recovery of the balance in his favor
resulting from the liquidation of the accounts between them
arising from the agency, and rendered a final account of his
operations, was equivalent to an express renunciation of the
agency, and terminated the juridical relation between them.
Although the agent has not expressly told his principal that he
renounced the agency, yet neither dignity nor decorum permits the
latter to continue representing a person who has adopted such
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antagonistic attitude towards him.
DEATH, INCAPACITY, INSOLVENCY OF THE PRINCIPAL
General rule: agency is extinguished by the death of the principal
(because the agent has nobody to represent) without need for the heirs of
the principal to notify the agent of the fact of death (because it was
instantaneously terminated ipso jure or by operation of law)
Exception: when agency is coupled with interest (the agency is
constituted in the common interest of the principal and agent, or
in the interest of a third person who has accepted the stipulation
in his favor) the agency shall remain in full force and effect even
after the death of the principal.
EFFECT OF ACTS DONE BY AGENT WITHOUT KNOWLEDGE OF
THE PRINCIPALS DEATH
Anything done by the agent, without knowledge of the death of the
principal or of any other cause which extinguishes the agency, is valid
and fully effective with respect to third persons who may have
contracted with him in good faith.
If third party is in good faith, the resulting contract is valid
If third party is in bad faith, the resulting contract is void not
merely unenforceable, for lack of the essential element of
consent.
TWO REQUISITES MUST CONCUR, OTHERWISE
UNENFORCEABLE:
a) The agent acted without knowledge of the death of the principal
b) The third person who contracted with the agent himself acted in
good faith
RECKONING POINT OF KNOWLEDGE: lack of knowledge of the
death of the principal must exist at the time of contract with both the
agent and the third parties.
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DEATH, INCAPACITY, OR INSOLVENCY OF THE AGENT
NON-TRANSMISSIBILITY: a contract of agency established a purely
personal relationship between the principal and the agent, such that the
agency is extinguished by the death of the agent, and his rights and
obligations arising from the contract of agency are not transmissible to
his heirs.

NOTICE REQUIRED: unlike in the case where the principal dies, if the
agent dies, his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the
interest of the latter.

IN CASE OF MULTIPLE AGENTS OVER THE SAME BUSINESS

General rule: death of one or more, but not all of them, would not
extinguish the agency, with respect to those who remain living. This rule
applies in case of civil interdiction, insanity, and insolvency.
Exception: when it is clear at the constitution of the agency that
the common agents were intended to be considered as having
capacity as a group and not individually, the death, civil
interdiction, insanity, or insolvency of one would terminate the
agency.

OBLIGATION OF THE AGENT WHEN THE AGENCY IS

EXTINGUISHED
The fiduciary nature of the contract of agency requires that even when the
agency relation is terminated, the agent is bound to keep confidential
such matters and information which he learned in the course of the
agency, when the nature of such matter or information is confidential.

An agent cannot legally terminate an agency in order to take advantage of

the principals condition or to profit by information resulting from his
agency, for such would be in breach of his duty of loyalty.

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