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AGENCY
1 NATURE, CONCEPT & PURPOSE
1.1 Nature
1.1.1 Contract of Agency
1.1.1.1 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.
1.1.1.2 Art. 1318
1.1.2 Representative Relation
Agency is basically personal, representative and derivative in nature. (Rallos v. Felix Go
Chan)
1.1.2.1 GENERAL RULE
The agent is not privy to the contract he entered into, in behalf of his principal, with
third persons.
1.1.2.1.1 Uy v. CA
An agent is not a party to the contract he entered into in behalf of his principal with
third persons.
1.1.2.1.2 Angeles v. PNR
Where agency exists, the third party's liability on a contract is to the principal and
not to the agent and the relationship of the third party to the principal is the same
as that in a contract in which there is no agent. Normally, the agent has neither
rights nor liabilities as against third party. He cannot thus sue or be sued on the
contract. Since a contract may be violated only by the parties thereto as against
each other, the real party-in-interest, either as plaintiff or defendant in an action
upon that contract must, generally, be a contracting party.
1.1.2.2 EXCEPTION
1.1.2.2.1 Agent is an assignee.
If the agent is constituted as an assignee, he may, in his own behalf, sue on a
contract made for his principal, as an assignee of such contract. (Angeles v. PNR)
1.1.3 Elements
1) There is consent, express or implied, of the parties to establish the relationship; 2) the
object is the execution of a juridical act in relation to third persons; 3) the agent acts as a
representative and not for himself; and 4) the agent acts within the scope of his
authority. (Rallos v. Felix Go Chan)
1.1.3.1 Consent
1.1.3.1.1 Orient Air Service & Hotel Representatives v. CA
Agency can only be effected "with the consent or authority" of the principal which
cannot, in any way be compelled by law or by any court.
1.1.3.1.2 Capacity
1.1.3.1.2.1 Principal
1.1.3.1.2.2 Agent
The principal is not bound by the acts of an agent beyond his limited powers.
1.1.3.5.2.1.2 EXCEPTIONS
1.1.3.5.2.1.2.1 The acts were conducive to the accomplishment or
purpose of the agency. (Art. 1881)
1.1.3.5.2.1.2.2 The acts were more advantageous to the principal than
that specified him. (Art. 1882)
1.1.3.5.2.1.2.3 The principal contributed to deceive a third person in good
faith. (Doctrine of Estoppel)
1.1.3.5.2.1.2.3.1 Prudential Bank v. CA
The agent's apparent representation yield to the principal's true
representation and the contract is considered as entered into between
the principal and the third person. In this case, the bank was made liable
to the innocent third person because, even though the agent was
secretly abusing his authority and attempting to perpetrate a fraud upon
his principal or some other person for his ultimate benefit, the
representation was made in the course of its business by an agent
acting within his general scope of authority. Also, the Supreme Court
found that despite the obvious irregularity committed by the banks
personnel, the bank sought to gloss over the anomaly in its own
operations, instead of repairing the injury.
1.1.3.5.2.1.2.4 The agent has instruments signed by the principal in
blank. (Art. 1887)
1.1.3.5.2.1.2.5 The principal ratifies the acts of the agent. (Art. 1901)
1.1.3.5.2.2 agent acted within the scope of his authority but in his own name
1.1.3.5.2.3 person acted without authority and in his own name
1.1.3.5.3 Corporate Acts
1.1.3.5.3.1 AF Realty v. Dieselman Freight
Contracts or acts of a corporation must be made either by the board of directors
or by corporate agent duly authorized by the board. Absent such valid delegation
the rule is that the declarations of an individual director relating to the affairs of
the corporation, but not in the course of, or connected with, the performance of
authorized duties of such director, are held not binding on the corporation.
1.1.3.5.3.2 Vicente v. Geraldez
In order to ratify the unauthorized act of an agent and make it binding on the
corporation, it must be shown that the governing body or officer authorized to
ratify had full and complete knowledge of all the material facts connected with
the transaction to which it relates.
1.1.3.6 Form
1.1.3.6.1 GENERAL RULE
Agency may be oral, unless the law requires a specific form. (Art. 1869(2))
1.1.3.6.2 MUST BE IN WRITING
1.1.3.6.2.1 Sale of Piece of Land
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 shall be void. (Art.
1874)
1.2.2 Principal
1.2.3 Nominate
1.2.4 Unilateral/Bilateral
1.2.5 Preparatory
1.3 Basis
Representation constitutes the basis of agency. (De Leon)
1.3.1 Qui facit per alium facit per se.
"He who acts through another acts himself." (Rallos v. Felix Go Chan)
1.4 Purpose
1.4.1 Orient Air Service & Hotel Representatives v. CA
The purpose of agency is to extend the personality of the principal through the facility of
the agent.
1.5 Agency distinguished/compared with other relations.
The agent's power to bring about the business relations between the principal and third
persons is the most derivative mark of the agent, as contrasted with others who act in
representative capacities but are not agents. (De Leon)
1.5.1 Partnership
A contract of partnership is a contract of agency, and it differs from a pure agency in that
while an agent acts only for his principal, a partner acts not only for his co-partners and
the partnership but also as principal of himself. (De Leon)
1.5.2 Lease of Work/Service
While both agency and lease of services involve the rendition of services, agency is
distinguished from lease of work/service in that the basis of agency is representation,
whereas in lease of work the basis is employment. (Vitug)
1.5.3 Independent Contractor
1.5.3.1 Fressel v. Mariano Uy Chaco Sons & Co.
Where one party to a contract was authorized to do work according to his own method
and without being subject to the other party's control, except as to the result of the
work, he is an independent contractor and not an agent.
1.5.4 Negotorium Gestio
1.5.5 Loan
1.5.6 Sale
1.5.7 Trusteeship
In a trust, the title and control of the property under the trust instrument passes to the
trustee who acts in his own name, while the agent represents and acts for his principal.
1.5.8 Broker
While a broker, being an intermediary between a seller and buyer, is not an agent, he
may bear, however, the responsibilities of an agent to his employer. (Vitug)
1.5.8.1 Hahn v. CA
An agent receives a commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the buyer and seller together,
intended as to the manner the agency was to be carried out or in the place where it
was to be executed, a general agency is constituted.
2.1.2.2.3 Katigbak v. Tai Hing Co.
The power of attorney given by the principal authorized the agent to sell any kind
of of realty that "might belong" to the principal. The phrase "might belong" means
that the authority given by the principal referred not only to the property he had at
the time the power was conferred, but also to such as he might afterwards have
during the time the power of attorney was in force.
2.1.2.3 SPECIAL
A special agency comprises only of one or more specific transactions.
2.1.2.3.1 Art. 1878
Special powers of attorney are necessary in the following cases: (1) To make such
payments as are not usually considered as acts of administration; (2) To effect
novations which put an end to obligations already in existence at the time the
agency was constituted; (3) To compromise, to submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive objections to the venue of
an action or to abandon a prescription already acquired; (4) To waive any obligation
gratuitously; (5) To enter into any contract by which the ownership of an immovable
is transmitted or acquired either gratuitously or for a valuable consideration; (6) To
make gifts, except customary ones for charity or those made to employees in the
business managed by the agent; (7) To loan or borrow money, unless the latter act
be urgent and indispensable for the preservation of the things which are under
administration; (8) To lease any real property to another person for more than one
year; (9) To bind the principal to render some service without compensation; (10) To
bind the principal in a contract of partnership; (11) To obligate the principal as a
guarantor or surety; (12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations
contracted before the agency; (15) Any other act of strict dominion.
2.1.2.3.1.1 Art. 1879
A special power to sell excludes the power to mortgage; and a special power to
mortgage does not include the power to sell.
2.1.2.3.1.1.1 Bicol Savings v. CA
A special power to mortgage includes the power to allow the extra-judicial
foreclosure of the mortgaged property.
2.1.2.3.1.1.2 PNB v. Sta. Maria
A special power of attorney to mortgage real estate does not include power to
contract loans for the principal.
2.1.2.3.1.2 Art. 1880
A special power to compromise does not authorize submission to arbitration.
2.1.2.3.1.3 Hodges v. Salas
A special power of attorney to borrow money does not necessarily imply that the
agent is allowed to convert the money obtained by him to his personal use,
unless otherwise stipulated.
2.1.2.3.1.4 Chua v. IAC
Where the lease contract entered into by an agent is for more than one year, the
agent must be armed with a special power of attorney.
2.1.2.3.1.5 Vicente v. Geraldez
3.1.1.4 Insolvency
3.1.1.5 Dissolution of the Firm or Corporation
3.1.2 by stipulation of the parties
3.1.2.1 Accomplishment of the Object
3.1.2.2 Expiration of the Period
3.1.3 by subsequent acts
3.1.3.1 by mutual consent
3.1.3.2 by the unilateral act of one of them
3.1.3.2.1 Revocation of the Principal
This is an exception to the rule that the validity or compliance of a contract cannot
be left to the will of one of the parties. (De Leon)
3.1.3.2.1.1 GENERAL RULE
The principal may revoke the agency at will - at any time, at his mere option,
with or without reason. (Art. 1920)
3.1.3.2.1.1.1 Barreto v. Sta. Maria
The contract of agency can subsist only so long as the principal has
confidence in his agent because from the moment such confidence disappears
and although there be a fixed period for the exercise of of the office of the
agent, a principal has a perfect right to revoke the power that he had
conferred upon the agent owing to the confidence he had in him and which for
sound reasons had ceased to exist.
3.1.3.2.1.2 EXCEPTIONS
3.1.3.2.1.2.1 bilateral contract depends on it
3.1.3.2.1.2.2 means of fulfilling an obligation already contracted
3.1.3.2.1.2.3 managing partner is removed unjustifiably
3.1.3.2.1.2.4 Diolosa v. CA
Where the agency contract stipulated that the agent is authorized to dispose
the subdivided property until the same is fully disposed of, the authority to
sell continues until all the lots are sold. The contract cannot be terminated by
the landowner before then.
3.1.3.2.1.3 How Revoked
3.1.3.2.1.3.1 Express
3.1.3.2.1.3.2 Implied
3.1.3.2.1.3.2.1 by appointment of new agent
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. (Art. 1923) There is no implied revocation where
the appointment of another agent is not incompatible with the continuation
of a like authority in the first agent, or the first agent is not given notice of
the appointment of the new agent. (Garcia v. De Manzano)
3.1.3.2.1.3.2.2 by direct management of business by principal himself
The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons. (Art. 1924)
Unless the only desire of the principal is for him and the agent to manage
the business together, the effect of the direct management of the business
by the principal himself is to revoke the agency for there would no longer
be any basis for the representation previously conferred. (11 Manresa 574)
3.1.3.2.1.3.2.3 partial revocation of general power by a special power
A general power of attorney is revoked by a special one granted to another
agent, as regards the special matter involved in the latter. (Art. 1926)
3.1.3.2.1.3.2.3.1 Dy Buncio & Co. v. Ong Guan Gan
The making and accepting of the new power of attorney, whether it
enlarges or decreases the power of the agent under the a prior power of
attorney, must be held to supplant and revoke the latter when the two
are inconsistent. If the special power of attorney does not revoke the
general power of attorney, the execution of the former would be a mere
futile gesture.
3.1.3.2.1.4 Notice of Revocation
Notice of revocation effectuates the revocation. (De Leon) If the party to be
notified actually knows, or has reason to know, facts indicating that his or the
agent's authority has been terminated or is suspended, there is sufficient notice.
3.1.3.2.1.4.1 as to agent
3.1.3.2.1.4.2 as to third persons
3.1.3.2.1.4.2.1 specified persons
If the agency has been entrusted for the purpose of contracting with
specified persons, its revocation shall not prejudice the latter if they were
not given notice thereof. (Art. 1921)
3.1.3.2.1.4.2.2 pubic in general
If the agent had general powers, revocation of the agency does not
prejudice third persons who acted in good faith and without knowledge of
the revocation. Notice of the revocation in a newspaper of general
circulation is a sufficient warning to third persons. (Art. 1922)
3.1.3.2.1.5 Revocation by One of Two or More Principals
When two or more principals have 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)
3.1.3.2.2 Withdrawal of the Agent
The agent may withdraw from the agency by giving due notice to the principal.
(Art. 1928)
3.1.3.2.2.1 with just cause
3.1.3.2.2.1.1 impossibility of of continuing with the agency without grave
detriement to the agent
3.1.3.2.2.1.2 fortuitous event
3.1.3.2.2.2 without just cause
3.1.3.2.2.2.1 Liability for Breach of Contract
3.1.3.2.2.2.2 Liability to Indemnify Damages
3.1.3.2.2.3 Obligation of Agent to Continue to Act After Withdrawal
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