Agency

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

Parties:

1. Principal- one who gives an authority or delegates a particular act

2. Agent-person designated to perform act/given authority

Essential elements of a contract of agency:

a. There is consent, express or implied, of the parties to establish the relationship of agency;

b. The object is the execution of a juridical act in relation to a third person; (PURPOSE OF
AGENCY: THE AGENT, ACTING ON BEHALF OF THE PRINCIPAL, TRANSACTS WITH ANOTHER
PERSON ON FOR HIMSELF BUT MERELY AS A REPRESENTATIVE)

c. The agent acts as a representative and not for himself;

d. The agent acts within the scope of his authority

FIRST ELEMENT:

Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the
agency, or from his silence, or inaction according to the circumstances. (EXPRESS OR IMPLID
AGENCIES)

Art. 1871. Between the persons who are present, the acceptance of the agency may also be implied if
the principal delivers his power of attorney to the agent and the latter receives it without any
objection. (IMPLIED AGENCY) (the persons are present; either face to face or conversing with each
other through phone.)

Art. 1872. Between persons who are absent the acceptance of the agency cannot be implied from the
silence of the agent except:

1. When the principal transmits his power of attorney to the agent, who receives it without any
objection; (ex. Letter acknowledging the receipt of the offer)
2. When the principal entrust to him by letter or telegram a power of attorney with respect to
the business in which he is habitually engaged as an agent, and he did not reply to the letter or
telegram.

WHAT IF THE PERSON DECLINES AGENCY: ART. 1885. 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. The owner
shall as soon as practicable either appoint an agent or take charge of the goods.

THIRD AND FOURTH ELEMENT:

***ART. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceed the limits of his authority without giving such
party sufficient notice of his powers. (represents the principal and not himself)

ART. 1881. The agent must act within the scope of his authority. He may do such act as may be
conducive to the accomplishment of the purpose of the agency.

AUTHORITY vs. POWER= Authority refers to the mandate(order or command)by the principal while
Power is the extent mandate or agency. Authority is the cause and power is the effect.
Four Instance may arise:

I. WITH AUTHORITY:

a. IN PRINCIPALs behalf-VALID; the principal is bound; agent not personally liable unless
he bound himself

b. IN AGENTs behalf- ART. 1883. Generally not binding on principal; agent and stranger
(3rd person) are the only parties, except regarding things belonging to the principal
(principal can have recourse against the third person and the third person has recourse
also against the principal)

II. WITHOUT AUTHORITY:

a. IN PRINCIPALs behalf- UNAUTHORIZED and UNENFORCEABLE but may be RATIFIED

b. IN AGENTs behalf- VALID, whether or not the subject matter belongs to the principal,
provided that at the time delivery is to be made, the agent can transfer legally the
ownership of the thing. Otherwise, he will be held liable for breach of warranty
against eviction.

CONTRACTS ENTERED INTO IN EXCESS OF AUTHORITY: Art. 1898. If the agent contracts in the name of
the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it
shall be void if the party with whom the agent contracted is aware of the limits of the powers granted
by the principal. In this case, however, the agent is liable if he undertook to secure the principals
ratification.

ART. 1882. 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.

Importance of Agency: It enables a man to increase the range of his individual and corporate activity by
enabling him to be constructively present in many places and to carry on diverse activities at the same
time.

CHARACTERISTICS: principal, nominate, bilateral, preparatory, commutative and generally onerous

contract

CAPACITY OF THE PRINCIPAL-If he is capacitated to act for himself, he can act thru an agent; capacitated
to give consent; legal capacity; natural or juridical

CAPACITY OF THE AGENT- he must be able to bind himself but insofar as his obligations to his principal is
concerned however it is enough that his agent be the one capacitated, for generally an agent assumes
no persona liability.

Example: P appoints A, a minor, as his agent to sell certain goods. A sells the goods to a buyer B.
P afterwards seeks to disaffirm the sale, and brings in action to recover the goods on the ground that As
act was void, as a minor cannot be an agent.

Judgment should be for the buyer B and against the principal P. The agent A is deemed
to be an extension of the personality of the principal, who himself is of legal age. Hence, P cannot avoid
the contract on the ground of the agents incapacity.

I. AGENCY vs. PARTNERSHIP=An agent acts not for himself but for his principal; a partner acts
for himself, for his firm and for his partners
II. AGENCY vs. LOAN= An agent may be given funds by the principal to advance the latters
business, while a borrower is given money for his own purposes and he must generally
return it, whether or not his own business is successful.
III. AGENCY vs. GUARDIANSHIP= The agent represents a capacitated person while a guardian
represents an incapacitated person; The agent is appointed by the principal and can be
 removed by the latter while a guardian is appointed by the court; The agent can make the
principal personally liable while the guardian has no power to impose personal liability on
the ward.
IV. AGENCY vs. NEGOTIORIUM GESTIO= There is a contract caused by the meeting of the minds
in an agency either expressly or impliedly while in Negotiorium gestio there is only a quasi
contract, there having been no meeting of the minds. Hence, the representation was not
agreed upon. Upon agreement or ratification, there arises an express agency. Agent is
controlled by the principal while the officious manager follows his judgment and presumed
will of the owner. The legal relation is created by the parties while the legal relation is
created by law.
V. AGENCY to SELL vs. SALE= Ownership of the goods is not transferred to the agent while in
sale, ownership is transferred. The agent delivers the price while the buyer pas the price.

KINDS OF AGENCY:
I. According to Manner of Constitution:
A. Express
B. Implied (THE PRINCIPAL KNOWS THAT ANOTHER PERSON IS ACTING ON HIS BEHALF WITHOUT
AUTHORITY):
1. Acts of the principal
2. Principals silence
3. Principals lac of action
4. Principals failure to repudiate the agency

II. ACCORDING TO FORM:

a. Oral
b. Written= Art. 1874. When a sale of a piece of land or any interest (usufruct, easement) therein is
through an agent, the authority of the latter shall be in writing; otherwise , the sale shall be void.

III. AS TO CAUSE:
a. Onerous(for compensation)
b. Gratuitous(no compensation)

IV. AS TO EXTENT:
a. General- when it comprises all of the business of the principal
b. Special- When it comprises one or more specific transactions

AGENCY BY ESTOPPEL

If a person leads someone to believe that a person is his agent when in fact he is not, and a person acts
because of such misrepresentation. In such scenario, the person who lead someone to believe such
cannot disclaim liability. That person cannot later on deny the authority to the prejudice of innocent
third parties.

AGENCY BY ESTOPPEL vs. IMPLIED AGENCY

In Implied Agency, the agent is a true agent, with rights and duties of an agent while in an
agency by estoppel, the agent is not a true agent, hence he has no rights as such.

Art. 1878 Cases where Special Power of Attorney is necessary

The acts referred to in this article could be reduced into three:

a. Acts of strict dominion or ownership(not like those couched in general terms where only acts of
administration are allowed)

b. Gratuitous contracts;

c. Contracts where personal trust or confidence is of the essence of the agreement

Art. 1879. A special power to sell excludes the power to mortgage and a special power to mortgage
does not include power to sell. (ONE DOES NOT INCLUDE THE OTHER. THE OTHER EXCLUDES
ANOTHER.)

Art. 1880. A special power to compromise does not authorize submission to arbitration. (REASON: A
principal may authorize an agent to compromise because of absolute confidence in the latters
judgment and discretion to protect the formers rights and obtain for him the best bargain in the
transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy
the trust of the principal. A fundamental principle of agency shall have been violated, namely, that an
agent must possess the trust and confidence of the principal.

DOCTRINE OF AGENCY BY NECESSITY: By virtue of the existence of an emergency, the authority of an

agent is correspondingly enlarged in order to cope with the exigencies or the necessities of the
moment.

5 conditions:

1. The real existence of an emergency;

2. Inability of the agent to communicate with the principal;

3. The exercise of the additional authority for the principals own protection;

4. The adoption of fairly reasonable means, premises duly considered;

5. The ceasing of the authority the moment the emergency no longer demands the same.

PART II. OBLIGATIONS OF THE AGENT

The most fundamental obligations of an agent are:

a. To carry out the agency;

b. To act within the scope of his authority;

c. To act on behalf of his principal

Art. 1889. 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.

ARTICLE 1890. If the agent has been empowered to borrow money, he may himself be the lender at
the current rate of interest. Principal suffers no injury. If he has been authorized to lend money at
interest, he cannot borrow it without the consent of the principal.

ARTICLE 1891. Every agent is bound to render an account of his transaction 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. (bonus, gratuity, personal benefit; breach of loyalty to principal) (agent not to profit on
his own account) (because of representative position and fiduciary relation)

Every stipulation exempting the agent from the obligation to render an account shall be VOID.
(against publc policy because it would be conducive to fraud.)

(AN AGENT, AS CONSEQUENCE OF HIS DUTY TO ACCOUNT, CANNOT DISPUTE HIS PRINCIPALS TITLE
TO THE PROPERTTY IN HIS POSSESSION.)

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
(valid) but he shall be responsible for the acts of the substitute:
 1. When he was not given the power to appoint one;

2. When he was given such power but without designating the person, and the person was
notoriously incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

Art. 1894. RESPONSIBILITY OF AGENTS TOWARDS THE PRINCIPAL: JOINT LIABILITY

SOLIDARY: upon express agreement; liable except when the fellow agents acted beyond the scope of
their authority;

COMMISSION AGENT= one who is engaged in the business of buying and selling for a principal of
personal property, which for this purpose is placed in his possession and at his disposal.

ORDINARY COMMISSION= fee or compensation for the sale of goods which are placed in his
possession at his disposal

GUARANTEE COMMSSION= additional compensation for risk of collection

PART III: OBLIGATIONS OF THE PRINCIPAL

LIABILITY OF PRINCIPAL BECAUSE OF ESTOPPEL-principal allows agent to act as though he had full
powers; solidary liability; failed to adopt measures to prevent misrepresentation

ART. 1914. The agent may retain in pledge the things which are the object of the agency until the
principal effects reimbursement and pays the indemnity.

SOLIDARY LIABILITY OF PRINCIPALS- IF FOR COMMN TRANSACTION OR UNDERTAKING

PART IV: MODES OF EXTINGUISHMENT OF AGENCY (Art. 1919)

E-xpiration of the period for which the agency was constituted

D-eath, civil interdiction, insanity or insolvenccy
W-ithdrawal of the agent
A-ccomplishment of the object or purpose of agency
R-evocation (initiated by Principal)
D-issolution of the firm or corporation which entrusted or accepted the agency

Other causes: Mutual consent, novation, loss of subject matter of agency

I. Revocation at will- trust and confidence may have been lost;

II. WHEN AGENCY CANNOT BE REVOKED AT THE PRINCIPALS WILL: bad faith, waiver, coupled
with interest (art. 1927)

III. APPOINTMENT OF A NEW AGENT: only in case of incompatibility; if the first agent is not
notified, then it still exists

IV. PRINCIPAL DIRECTLY MANAGES THE BUSINESS

ART. 1931. ANYTHING DONE BY THE AGENT, WITHOUT KNOWLEDGE OF TE DEATH OF THE PRINCIPAL
OR OF ANY OTHER CAUSE WHICH EXTINGUISHES THE AGENCY, IS VALID AND SHALL BE FULLY
EFFECTIVE WITH RESPECT TO THIRS PERSONS WHO MAY HAVE CONTRACTED WITH HIM IN GOOD
FAITH.

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