Reviewer for RFBT ♡ (2) Illegal or unlawful acts may not be

validly delegated.
LAW ON AGENCY
Note: Agency is not always contractual.
Sometimes, even if some of the elements are
Contract of Agency
missing, agency may still be created by
> By the contract of agency a person (called
operation of law.
the agent) binds himself to render some
service or to do something in
4.) Agents acts within the scope of his
representation or on behalf of another
authority.
(called the principal), with the consent or
authority of the latter.
Presumption of Agency
Nature of Agency
GR: Agency is never presumed, neither is
created by the mere use of the word in a
● The essence of agency is
trade or business name. He who alleges
representation.
that it exists has the burden of proof.
ETR:
“What a man may do in person, he
(1) Agency by operation of law
may do through another.”
● The agent must finish the
business already begun on the
● Agency is basically personal,
death of the principal, should
representative, and derivative in
delay entail any danger;
nature. The authority of the agent to
● The agent, even if he should
act emanates from the powers
withdraw from the agency for a
granted to him by his principal; his
valid reason, must continue to
act is the act of the principal if done
act until the principal has had
within the scope of the authority.
reasonable opportunity to take
● Qui facit per alium facit se. “He who
the necessary steps to meet
acts through another acts himself.”
the situation.
● The agency shall remain in full
Characteristics of Agency
force and effect even after the
death of the principal, if it has
been constituted in the
Agency Assignment common interest of the latter
and of the agent, or in the
In agency, the In assignment, interest of a third person who
agent acts not on there is total
his own behalf but transfer or has accepted the stipulation in
on behalf of his relinquishment of his favor.
principal. right by the ● Anything done by the agent,
assignor to the without the knowledge of the
assignee. The principal or any other cause
assignee takes the which extinguishes the agency,
place of the
is valid and shall be fully
assignor and is no
longer bound to the effective with respect to third
latter. persons who may have
contracted him in good faith.

(2) Agency is presumed to prevent unjust

Elements of Agency enrichment.

1.) Consent - express or implied, of the Parties to a contract of Agency

parties to establish the relationship;
2.) Object - the execution of a juridical Principal – The principal may be a natural
act in relation to a third person; or juridical person. He must be capacitated.
3.) Agent - acts as representative and The rule is if a person is capacitated to act
not for himself; and for himself or in his own right, he can act
ETR: through an agent.
(1) Peculiarly personal acts may not be
delegated; and
Agent – Insofar as third persons are ● Absent
concerned, it is enough that the principal is GR: Agency cannot be implied from the
capacitated. But insofar as his obligations silence of the agent.
to his principal are concerned, the agent ETR:
must be able to bind himself. (1) When the principal transmits his
power of attorney to the agent, who
Classifications of Agency receives it without any objection.
(2) When the principal entrusts to him by
As to manner of creation: letter or telegram a power of attorney
with respect to the business in which
a. Actual agency (Express) – an he is habitually engage as an agent,
agent-principal relationship actually exists and he did not reply to the letter or
and consent was given. telegram

★ CONTRACTS b. Ostensible Agency (Agency by

Estoppel or Implied) – where the agency is
GR: No form is required. It may be oral or not the result of consent but by the actions
written of a principal or an employer in somehow
ETR: misleading the public into believing that
(1) When the agency relates to a sale of the relationship or the authority exists.
piece of land or any interest therein,
the authority of the agent must be in Requisites:
writing. (1) The principal manifested a
representation of the agent’s
(2) A corporation may act only through authority or knowingly allowed the
its board of directors or, when agent to assume such authority;
authorized either by its bylaws or its (2) The third person, in good faith, relied
board resolution, through its officers upon such representation; and
or agents in the normal course of (3) Relying upon such representation,
business. such third person has changed his
position to his detriment.
★ ACCEPTANCE
★ BY SPECIAL INFORMATION
(1) Express - Oral or written ● If a person specially informs
(2) Implied - Silence or inaction according another that he has given a
to circumstances power of attorney to a third
● Present person, the latter thereby
- Between persons who are becomes a duly authorized
present, acceptance of agency agent with respect to the
is implied if the principal person who received the
delivers his power of attorney special information.
to the agent and the latter
receives it without any ★ BY PUBLIC ADVERTISEMENT
objection. ● If a person states by public
- It is an instrument in writing by advertisement that he has
which a person, as principal, given a power of attorney to a
appoints another as his agent third person, the latter thereby
and confers upon him the becomes a duly authorized
authority to perform certain agent with regard to any
specified acts on behalf of the person.
principal.
NOTE: Such power shall continue to be in
Note: It must be strictly construed and full force until the notice is rescinded in the
pursued. The instrument will be held to same manner in which it was given.
grant only the powers which are specified
therein, and the agent may neither go “ In an agency by estoppel, there is no
beyond or deviate from the power of agency at all, but the one assuming to act
attorney. as agent has apparent authority, to
represent another, although not real.”
★ CONTRACTS (3) To compromise, to submit questions
to arbitrations, to renounce the right
From: to appeal from a judgment, to waive
● The acts of the principal, objections to the venue of an action
● His silence or lack of action, or or abandon a prescription already
● His failure to repudiate the acquired;
agency knowing that another (4) To waive any obligation gratuitously;
person is acting on his behalf (5) To enter into any contract by which
without authority. the ownership of an immovable is
transmitted or acquired either
gratuitously or for a valuable
As to quantity of transaction or extent of consideration;
business covered: (6) To make gifts, except customary ones
a. General agency for charity or those made to
- it comprises of all the business of the employees in the business managed
principal. by the agent;
(7) To loan or borrow money, unless the
b. Special agency latter act be urgent and
- it comprises of one or more specific indispensable for the preservation of
transactions. the things which are under
administration;
Implied Agency Agency by Estoppel
(8) To lease any real property to another
Actual agency. No actual agency. person for more than one year;
Only the presence (9) To bind the principal to render some
of an apparent service without compensation;
authority. (10) To bind the principal in a contract of
partnership;
(11) To obligate the principal as a
A third party’s A third party’s guarantor or surety;
reliance in the reliance in the (12) To create or convey real rights over
representation is representation is immovable property;
not necessary since necessary to invoke (13) To accept or repudiate an
there is an actual agency by estoppel. inheritance;
agency.
(14) To ratify or recognize obligations
contracted before the agency; and
AGENCY COUCHED IN GENERAL TERM (15) Any other act of strict dominion.
● Acts of Administration (no authority
to alienate) Note:
(1) special power to sell excludes the power
Even if: to mortgage; and a special power to
(a) The principal should state that hi mortgage does not include the power to
withholds no power or that the agent sell; and
may execute such acts as he may (2) the power to compromise does not
consider appropriate; or authorize submission to arbitration.
(b) Or even though the agency should
authorize a general and unlimited “Every grant of power implies and carries
management. with it, as an incident, authority to do acts,
or use whatever means are reasonably
vis-à-vis necessary and proper to the
accomplishment of the purpose for which
AGENCY COUCHED IN SPECIFIC TERM the agency was created, unless the
● Acts of Strict Dominion (ownership) inference of such power is expressly
excluded by the instrument creating the
(1) To make such payments as are not agency or by the circumstances of the
usually considered as acts of business to which the agency relates.”
administration;
(2) To effect novation which put an end
to obligations already in existence at
the time the agency was constituted;
Obligations of the Agent though it may not be owing to the
principal.
1.) To act within the scope of authority
- It means acting according to the NOTE: A stipulation exempting the agent
instructions of the principal and form the obligation to render an account
performance of his obligation with shall be void
the diligence of a good father of the
family. 5.) To pay interest
- The agent owns interest on:
The following acts performed by the agent ● The sums he has applied to his
shall be deemed within the scope of his own use from the day on which
authority: he did so; and
● Those which he still owes after
● Acts that may be conducive to the the extinguishment of the
accomplishment of the purpose of agency.
the agency.
● Acts performed in a manner more 6.) To be liable for fraud and negligence
advantageous to the principal than - The agent is also liable for fraud and
that specified by him; negligence. In this case, negligence
● So far as third person are concerned, shall be judged with more or less
acts within the terms of the written rigor by the courts, according to
power of attorney, even if the agent whether the agency was or was not
has in fact exceeded the limits of his for compensation.
authority according to the
understanding between the principal Other Obligations of the Agent
and the agent.
Duty to advance necessary funds
2.) To carry out the agency - Only if stipulated. However, even if
- Be liable for the damages caused to there is such stipulation, the agent
the principal through his cannot be compelled to advance the
non-performance; necessary funds if the principal is
- Finish the business already begun on insolvent.
the death of the principal, should
delay entail danger. Rules on sale by commission Agent
- Even if the agent withdraws, continue GR: liable for damages for failure to collect.
to act as agent until the principal ETR: if he can prove that he exercised due
has had reasonable opportunity to diligence for such purpose.
take the necessary steps to meet the
situation. Duties on care of goods:
(1) Agent shall be responsible for the
3.) To prefer the interest of the goods received by him in the terms
principal over his own. and conditions and as described in
- Manifested in two ways: the consignment, unless upon
● An agent shall be liable for receiving them he should make a
damages if, there being written statement of the damage and
conflict between his interests deterioration suffered by the same.
and those of the principal, he (2) A commission agent who handles
should prefer his own. goods of the same kind and mark,
● An agent, who has been which belongs to different owners,
**authorized to lend money, shall distinguish them by
may not borrow it without the countermarks, and designate the
consent of the principal. merchandise respectively belonging
to each principal.
**Authorized to borrow money, agent can be
the lender at the current rate of interest.

4.) To render account and to deliver

- Agent must render an account of his
transactions and deliver to the
principal whatever he may have
received by virtue of the agency, even
Rules on sale on credit Prohibited
The acts of the substitute shall not be
(1) With authority from the principal: enforceable against the principal unless
● the agent shall inform the principal, the same are ratified by the latter
with a statement of the names of
buyers. If he fails to do so, the sale Liability of two or more Agents
shall be deemed to have been made GR: The liability of two or more agent is
for cash insofar as the principal is merely joint.
concerned. ETR: If solidarity is stipulated.

(2) Without consent of the principal: Effect of solidarity:

● the principal may demand - Each of the agent is responsible for
from the agent payment in the non-fulfillment of the agency, and
cash, but the commission for the fault or negligence of his
agent shall be entitled to any fellow agents, except in the latter
interest or benefit, which may case when the fellow agents acted
result from the sale. beyond the scope of their authority.

Del Credere Agent

Definition: A commission agent who Obligations of the Principal
receives a guaranty commission.
1.) To pay compensation
- A del credere agent bears the risk of - Agency is presumed to be for
collection and he shall pay the compensation, unless there is proof
principal the proceeds of the sale on to contrary.
the same terms agreed upon with the
purchaser. - Doctrine of Procuring Cause – In
order for an agent to be entitled to
- Nevertheless, the liability of the del be entitled to a commission , he must
credere agent does not preclude the be the procuring cause of the sale,
principal from resorting to the which simply means that the
purchaser to obtain payment, at any measures employed by him and the
time before the debt is paid. efforts he exerted must result in a
sale.

Substitutes 2.) To advance necessary funds

- In the absence of stipulation that the
Appointment of Substitute: agent shall advance the funds
necessary to carry out the agency,
GR: An agent may appoint a substitute. the same must be advanced by the
ETR: Principal prohibits the agent from principal, should the agent so
doing so. In this case, all substitute’s acts request.
shall be void.
Instances where principal not liable for
expenses incurred by agent:
Allowed: (1) If the agent acted in contravention of
GR: Acts of the substitute binds the the principal’s instructions, unless
principal and the agent is not liable to the the latter should wish to avail himself
acts of the substitute whether the latter is of the benefits derived from the
chosen by the agent or the principal. contract;
ETR: the substitute appointed by the agent (2) When the expenses were due to the
is notoriously incompetent or insolvent. fault of the agent;
(3) When the agent incurred them with
the knowledge that an unfavourable
Not Allowed but not prohibited result would ensue, if the principal
The acts of the substitute will bind the was not aware thereof; or
principal but the agent is liable for the acts (4) When it was stipulated that the
of the substitute. The principal may further expenses would be borne by the
bring an action against the substitute with agent or that the latter would be
respect to the obligations which the latter allowed only a certain sum.
has contracted under the substitution.
3.) To indemnify agent for damages only the principal becomes liable to the
GR: Principal must**indemnify the agent for third person;
all the damages which the execution of the when the principal allowed the agent to act
agency may have caused the latter. as though he had full powers, the principal
ETR: Principal is not liable if the damages becomes solidarily liable with the agent.
were occasioned by the fault or negligence
on the part of the agent. NOTE: In case of sale of parcel of land, the
sale is void.
**Agent’s Lien
The agent may retain in pledge the things GR: The agent is liable to the third party
which are the object of the agency until the within whom he contracted with if he acted
principal effect the reimbursement and beyond the scope of his authority.
pays the indemnity, which the he may have ETR: If he notified the third person of the
incurred. limits of his authority, he is not liable to
such third person
The lien may be enforced in the same way ETE: If he undertook to secure the
as a pledge, that is, by having the property principal’s ratification.
sold at public auction, in the manner
prescribed by law. Agent contracted in his name
GR: If an agent acts in his own name, the
Liability of two or more principals principal has no right of action against the
- If two or more persons have third person with whom the agent has
appointed an agent for a common contracted; neither have such persons
transaction or undertaking, they against the principal.
shall be jointly and severally liable to In such case, the agent is the one directly
the agent for all the consequences of bound in favor of the person with whom he
the agency. has contracted, as if the transaction were
his own.
LIABILITIES OF PARTIES IN RELATION TO
THIRD PERSONS ETR: When the contract involves things
belonging to the principal, hence, the
Liability for contracts entered by Agent: contract must be considered as entered
into between the principal and the third
Agent acted within the scope of his person. This does not apply where the
authority. agent has exceeded his authority.
GR: it is the principal who is liable to the
third person while the agent is completely Liability for Delict or Quasi-delict
absolved of any liability. committed by the agent
ETR: Agent becomes liable to third person - So long as the agent acts within the
even if he acted within the scope of his scope of his authority, the principal
authority when: is liable for the delict or quasi-delict
(1) He expressly binds himself; or of his agent.
(2) He is guilty of fraud or negligence.
Liability in Agency by Estoppel
Liability of the Third Person - It is the principal who is liable
- The liability of the third person is to
the principal and not to the agent. Modes of Extinguishment
The agent has neither rights nor
liabilities as against the third party. Revocation

Agent acted beyond the scope of his GR: The agency may be revoked by the
authority principal at will, and compel the agent to
GR: The contract is unenforceable if not return the document evidencing the
ratified by the principal, thus it is not agency.
binding to the latter. ETR: When the agency is coupled with
ETR: Principal becomes liable even if the interest, as in the following cases:
agent has exceeded his powers in the (1) A bilateral contract depends upon it;
following instances: (2) If it is the means of fulfilling an
When the principal ratifies the contract obligation already contracted; or
either expressly or impliedly, in which case,
(3) If a partner is appointed manager of **Death, Civil Interdiction, Insanity, or
partnership and his removal from the Insolvency of the Principal or of the agent.
management is unjustifiable.
Effect of Death
When agency is deemed revoked: GR: Agency is extinguished by the death of
the principal or the agent.
(1) When a new agent is appointed for ETR:
the same business or transaction, the (a) Agency shall remain in full force
previous agency is revoked from the and effect even after the death of the
day on which notice thereof was principal, it is has been constituted in the
given to the former agent; common interest of the latter and of the
(2) When the principal directly manages agent, or in the interest of a third person
the business entrusted to the agent, who has accepted the stipulation in his
dealing directly with third persons; or favor; and
(3) A general power of attorney is (b) anything done by the agent,
revoked b a special matter involved in without knowledge of the death of the
the latter. principal or of any other cause which
extinguishes the agency, is valid and shall
Necessity of Notice be fully effective with respect to third
- Between principal and agent: for persons who may have contracted with him
revocation to be effective, the agent in good faith
must be duly notified.
- Between principal and third person: Dissolution of the firm or corporation
Whether specific or general power is
which entrusted or accepted the
given to the agent, third persons will
agency
not be bound by the revocation if
they were not notified of the same.
Accomplishment of the object or
NOTE: Notice of revocation in a newspaper purpose of the agency
of general circulation is a sufficient warning
to third persons. Expiration of the period for which the
agency was constituted

Withdrawal by the Agent Any other modes provided by general

- Agent may **withdraw from the law for the extinction of obligations, so
agency by giving due notice to the far as applicable.
principal.

** Duty of Agent Upon Withdrawal

- The agent must continue to act until
the principal has had reasonable
opportunity to take the necessary
steps to meet the situation, even if he
should withdraw from the agency. .

Liability for Damages:

- if the principal should suffer any

damage by reason of the withdrawal
by the agent, the latter must
indemnify the principal therefor,
unless the agent should base his
withdrawal upon the impossibility of
continuing the performance of the
agency without grave detriment to
himself.