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Agent
a. Insofar as the third persons are
CHAPTER 1: NATURE, FORM AND KINDS OF concerned, it is enough that the principal
AGENCY is capacitated.
b. Insofar as his obligations to his principal
are concerned, the agent must be able to
Contract of Agency is a contract whereby a person bind himself.
binds himself to render some service or to do c. But as an agent, some mental capacity is
something in representation or on behalf of another, necessary, so, those who are absolutely
with the consent or authority of the latter. (Art. 1868) incapacitated (ex. Insane persons)
cannot be agents.
Art. 1875. Agency is presumed to be for a Art. 1870. Acceptance by the agent may also be
compensation, unless there is proof to the express, or implied from his acts which carry out
contrary. (n) the agency, or from his silence or inaction
according to the circumstances. (n)
• The agent does not have to prove that the Art. 1871. Between persons who are present, the
agency is for compensation. acceptance of the agency may also be implied if
• But, the prima facie presumption that the the principal delivers his power of attorney to the
agency is for a compensation may be agent and the latter receives it without any
contradicted by contrary evidence objection. (n)
Broker: Negotiate contracts relative to property in Art. 1872. Between persons who are absent, the
behalf of others and for a compensation/fee acceptance of the agency cannot be implied from
the silence of the agent, except:
When Broker Entitled to Compensation: 1. When the principal transmits his power of
• Whenever he brings to his principal a party who attorney to the agent, who receives it
is able and willing to take the property, and without any objection;
enter into a valid contract upon the terms 2. When the principal entrusts to him by
named by the principal, although the particulars letter or telegram a power of attorney with
may be arranged and the matter negotiated and respect to the business in which he is
completed between the principal and the habitually engaged as an agent, and he
did not reply to the letter or telegram. (n) The power shall continue to be in full force
until the notice is rescinded in the same manner
in which it was given. (n)
Forms of Acceptance by Agent:
1. Express - when it is oral or written
2. Implied -when it can be inferred from the Way of Giving Notice of Agency & Its Effect:
acts of the agent which carry out the agency, 1. By special information - the person
or from his silence of inaction according to appointed as agent is considered such with
the circumstances respect to the person to whom it was given.
a. Between persons who are present
– implied acceptance if the principal 2. By public advertisement - the agent is
delivers his power of attorney to the considered such with regard to any person
agent and the latter receives it
without any objection How do you revoke an agency?
b. Between persons who are absent In the same manner as it was constituted.
– acceptance not deemed implied However, constitution by Special Information may be
from the silence of the agent. revoked by notice in a daily newspaper, provided it
Exceptions: can be proven that 3rd persons in question read the
i. When the principal transmits his revocation
power of attorney to the agent
who receives it without any What is an agency by estoppel?
objection There is really no agency at all, but the alleged
ii. When the principal entrusts to agent seemed to have apparent or ostensible,
him by letter or telegram a power although no real authority to represent another.
of attorney with respect to the
business in which he is habitually Distinction between Agency by Estoppel and
engaged as an agent, and he did Implied Agency
not reply to the letter or telegram Agency by Implied Agency
Estoppel
What is meant by “present”?
Generally, “face to face”, but includes people Existence
conversing directly through technology (ex. over the There is an actual
of actual No agency at all
telephone). agency
agency
Can be invoked
Power of Attorney: Instrument in writing by which only by a 3rd
one person, as principal, appoints another as his Reliance by person who in
agent and confers upon him the authority to perform Such reliance in
3rd persons good faith relied
certain specified acts or kinds of acts on behalf of the not needed, since
on the conduct of
principal; primary purpose is to evidence agent’s the agent is a real
the principal in
authority to third parties within whom the agent deals agent
holding the agent
out as being
Construction of Power of Attorney: authorized
General Rule: Strictly construed and strictly pursued; An agent by
held to grant only those specified powers estoppel has
Exception: when strict construction will destroy none of the rights An agent by
the very purpose of the power Nature of of an agent, implied
Authority except where the appointment has
principal’s all the rights and
Art. 1873. If a person specially informs another or conduct are such liabilities of an
states by public advertisement that he has given that the agent agent, i.e. has
a power of attorney to a third person, the latter reasonably actual authority to
thereby becomes a duly authorized agent, in the believed that the act on behalf of
former case with respect to the person who principal intended the principal
received the special information, and in the latter him to act as an
case with regard to any person. agent
instructions
Apparent Duty imposed
authority does upon the third
Art. 1874. When a sale of a piece of land or any
not terminate by party to inquire
interest therein is through an agent, the authority
Termination the mere makes
of the latter shall be in writing; otherwise, the sale
of Authority revocation of his termination of the
shall be void. (n)
authority without relationship as
Art. 1876. An agency is either general or special. notice to the third between the
The former comprises all the business of the party principal and
principal. The latter, one or more specific agent effective as
transactions. (1712) to such third party
unless the agency
Art. 1877. An agency couched in general terms has been
comprises only acts of administration, even if the entrusted for the
principal should state that he withholds no power purpose of
or that the agent may execute such acts as he contracting with
may consider appropriate, or even though the such third party
agency should authorize a general and unlimited
management. (n) Construction Merely advisory Strictly construed
of in nature as they limit the
Principal’s agent’s authority
Will an authority embodied in a letter be Instructions
sufficient?
Yes. (Jimenez v. Rabot, 38 Phil 387 [1918]) Agency Couched in General Terms: Covers only
MERE ACTS OF ADMINISTRATION even if:
Attorney-In-Fact: a. The principal should state that he withholds
• One who is given authority by his principal to no power
do a particular act not of a legal character b. The agent may execute such acts as he may
• The term is, in loose language, used to consider appropriate
include agents of all kinds, but in its strict c. The agency should authorize a general and
sense, it means an agent having a special unlimited management
authority created by a deed.
How are contracts of agency construed?
Distinctions between a General Agent and a • Contracts of agency, as well as general
Special Agent powers of attorney, must be interpreted in
General Agent Special Agent accordance with the language used by the
All acts Specific acts in parties.
Scope of connected with pursuance of • The real intention of the parties is primarily
Authority the business or particular determined from the language used and
employment in instructions or gathered from the whole instrument.
which he is with restrictions • In case of doubt, resort must be had to the
engaged necessarily situation, surroundings ad relations of the
implied from the parties. The intention of the parties must be
act to be done sustained rather than defeated.
Nature of InvolvesQuickTime™ and a
No continuity of • So if the contract be open to constructions,
Service continuity
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service one of which would uphold the intention while
Authorized service the other would overthrow it, the former is to
May bind his Can not bind his be chosen.
principal by an principal in a
Extent to act within the manner beyond or
Which scope of his outside the
Agent May authority specific acts
Bind the although it may which he is
Principal be contrary to the authorized to Art. 1878. Special powers of attorney are
latter’s special perform necessary in the following cases:
1. To make such payments as are not
usually considered as acts of Powers Not Included in the Power to Mortgage:
administration; 1. To sell
2. To effect novations which put an end to 2. To execute a second mortgage
obligations already in existence at the 3. To mortgage for the agent’s or any 3rd
time the agency was constituted; persons’ benefit, UNLESS clearly indicated
3. To compromise, to submit questions to
arbitration, to renounce the right to Powers Not Included in the Power to Compromise
appeal from a judgment, to waive Submission to Arbitration
objections to the venue of an action or to Rationale:
abandon a prescription already acquired; • A principal may authorize his agent to
4. To waive any obligation gratuitously; compromise because of absolute confidence
5. To enter into any contract by which the in the latter’s judgment and discretion to
ownership of an immovable is transmitted protect the former’s rights and obtain for him
or acquired either gratuitously or for a the best bargain in the transaction.
valuable consideration; • If the transaction would be left in the hands of
6. To make gifts, except customary ones for an arbitrator, said arbitrator may not enjoy
charity or those made to employees in the the trust of the principal.
business managed by the agent;
7. To loan or borrow money, unless the
latter act be urgent and indispensable for Art. 1881. The agent must act within the scope of
the preservation of the things which are his authority. He may do such acts as may be
under administration; conducive to the accomplishment of the purpose
8. To lease any real property to another of the agency. (1714a)
person for more than one year;
9. To bind the principal to render some Art. 1882. The limits of the agent's authority shall
service without compensation; not be considered exceeded should it have been
10. To bind the principal in a contract of performed in a manner more advantageous to the
partnership; principal than that specified by him. (1715)
11. To obligate the principal as a guarantor or
surety; Art. 1883. If an agent acts in his own name, the
12. To create or convey real rights over principal has no right of action against the
immovable property; persons with whom the agent has contracted;
13. To accept or repudiate an inheritance; neither have such persons against the principal.
14. To ratify or recognize obligations In such case the agent is the one directly
contracted before the agency; bound in favor of the person with whom he has
15. Any other act of strict dominion. (n) contracted, as if the transaction were his own,
except when the contract involves things
Art. 1879. A special power to sell excludes the belonging to the principal.
power to mortgage; and a special power to The provisions of this article shall be
mortgage does not include the power to sell. (n) understood to be without prejudice to the actions
between the principal and agent. (1717)
Art. 1880. A special power to compromise does
not authorize submission to arbitration. (1713a)
Requisites for Principal to be Bound by Act of
Agent:
Special Power of Attorney: an instrument in writing 1. The agent must act in behalf of the principal
by which one person, as principal, appoints another 2. The agent must act within the scope of his
as his agent and confers upon him the authority to authority
perform certain specified acts or kinds of acts on
behalf of the principal. When a principal NOT BOUND by act of agent:
• The special power of attorney can be 1. The latter acts without or beyond the scope
included in the general power when it of his authority in the former’s name
specifies therein the act or transaction for Exceptions:
which the special power is required. a. Where the acts of the principal have
contributed to deceive a 3rd person in consent or authority of the latter. Contracts entered
good faith; into in the name of another person by one who has
b. Where the limitations upon the power been given no authority or legal representation or
created by the principal could not who has acted beyond his powers are classified as
have been known by the 3rd person; unauthorized contracts and are declared
c. Where the principal has placed in the unenforceable, unless ratified.
hands of the agent instruments
signed by him in blank; Generally, the agency may be oral, unless the law
d. Where the principal has ratified the requires a specific form. A special power of attorney
acts of the agent is necessary for an agent to, as in this case, borrow
2. The latter acts within the scope of his money, unless it is urgent and indispensable for the
authority but in his own name, EXCEPT preservation of the things which are under
when the transaction involves things administration. Since nothing in this case involves
belonging to the principal the preservation of things under administration, a
determination of whether Soriano had the special
authority to borrow money on behalf of respondent is
Jesus M. Gozun v. Jose Teofilo T. Mercado a.k.a.
in order.
‘Don Pepito Mercado,’ G.R. No. 167812 (19
December 2006) In the case at bar, there was not enough evidence
establishing that the loan was made on behalf of Don
Facts: Pepito. Gozun’s testimony, during trial, failed to
In the 1995 elections, Don Pepito vied for the categorically state whether the loan was on behalf of
gubernatorial post in Pampanga. The latter’s wife the respondent or his wife. The receipt signed by
transacted with Gozun, the owner of JMG Publishing Lilian was also in her name alone, without
House, for the printing of campaign paraphernalia. indicating that she was acting on behalf of Don
Don Pepito’s wife had told Gozun that the former has Pepito; she thus bound herself in her personal
already given his approval and that the latter could capacity and not as an agent of the respondent or
already start printing. Gozun thereafter availed of the anyone for that matter.
services of two other publishing houses to be able to
meet the deadline. The printed materials were then As to the issue on whether or not Gozun can collect
delivered to Don Pepito’s headquarters. the cost of the printing due to the other publishing
houses, the Court held that Gozun is the real party in
Meanwhile, Don Pepito’s sister-in-law, Lilian Soriano, interest insofar as the recovery of the cost of
obtained from Gozun a “cash advance” allegedly for campaign materials is concerned. The Court was not
the allowances of poll watchers. Lilian acknowledged persuaded by Don Pepito’s theory that the campaign
on petitioner’s 1995 Diary receipt of the amount materials delivered to him were donations from his
without thereby indicating that she was obataining friends and supporters; if so, such fact should have
such amount on behalf of Don Pepito. been printed on the face of the materials as required
by the Comelec rules.
Gozun sent a Statement of Account for the printing,
including the amount due the other publishing houses
plus the amount of the loan given to Lilia. Don NOTE: The agent is not deemed to have exceeded
Pepito’s wife made a partial payment to Gozun. the limits of his authority should he perform the
Despite repeated demands, respondent failed to agency in a manner more advantageous to the
settle the balance. Hence, a collection case was principal than that indicated by him, since he is
instituted by Gozun. authorized to do such acts as may be conducive to
Issue: Whether or not QuickTime™
Don Pepito should be held the accomplishment of the purpose of the agency.
and a
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Art. 1899. If a duly authorized agent acts in When 3rd person repudiate the contract
accordance with the orders of the principal, the • Before actual ratification by the principal, or
latter cannot set up the ignorance of the agent as before the principal has signified his willingness
to circumstances whereof he himself was, or to ratify the agent’s acts.
ought to have been, aware. (n)
Effect of the principal receiving the benefits of
Art. 1900. So far as third persons are concerned, the transaction:
an act is deemed to have been performed within • He is deemed to have ratified it. A principal may
the scope of the agent's authority, if such act is not accept the benefits of a transaction and at the
within the terms of the power of attorney, as same time repudiate its burdens
written, even if the agent has in fact exceeded the
limits of his authority according to an Conditions for Ratification
understanding between the principal and the 1. The principal must have capacity and power
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to ratify
2. He must have had knowledge of material
Art. 1901. A third person cannot set up the fact facts
that the agent has exceeded his powers, if the 3. He must ratify the acts in its entirety
principal has ratified, or has signified his 4. The act must be capable of ratification
willingness to ratify the agent's acts. (n) 5. The act must be done in behalf of the
principal
Art. 1902. A third person with whom the agent • To be effective, ratification need not be
wishes to contract on behalf of the principal may communicated or made known to the
require the presentation of the power of attorney, agent or the third party. The act or
conduct of the principal rather than his
communication is the key. But before Robinson v. Borse
ratification, the third party is free to Ratification is spelled out when the principal brings
revoke the unauthorized contract. legal proceedings to enforce the contract entered into
by the unauthorized agent, subject to qualification,
Effects of Ratification however, that the bringing of legal proceedings is not
1. With respect to agent - relieves the agent from deemed ratification where the principal’s action is
liability to the third party for the unauthorized undertaken to avert a greater loss rather than to
transaction, and to his principal for acting without assert a gain.
authority; may recover compensation
2. With respect to principal - assumes
responsibility for the unauthorized act, as fully as
if the agent had acted under original authority but NOTE: Agent always liable for fraud but not for
not liable for acts outside the authority approved negligence, which shall be judged with more or less
by his ratification rigor by the courts, according to whether the agency
3. With respect to 3rd persons - bound by was or was not for compensation.
ratification to the same extent as if the ratified act
had been authorized; cannot raise the question
of the agent’s authority to do the ratified act
4.
Acts of the Agent Effect Exception(s)
1. Binds principal; Agent liable if he:
In behalf of the principal, 2. Agent not personally liable 1. Expressly makes himself liable
within the scope of authority 2. Exceeds the limits of his authority
without giving the parties sufficient
notice of his powers
Binding on the principal when:
Contract is unenforceable as against
Without or beyond scope of 1. Ratified or
the principal but binds the agent to
authority 2. The principal allowed the agent to act
the third person
as though he had full powers
When the transaction involves things
Within the scope of authority 1. Not binding on the principal; belonging to the principal:
but in the agent’s name 2. Principal has no cause of action 1. Remedy of the principal - damages for
against the 3rd parties and vice agent’s failure to comply with the
versa agency
2. Remedies of the third person
• If the case falls under the general rule,
he can sue the agent.
• But when the contract involves things
belonging to the principal, he can sue
the principal.
• But if it cannot be determined without
litigation who is liable, he can sue both.
Has a relation with Maintains no relation with Art. 1913. The principal must also indemnify the
principal, buyer or seller, the thing which he agent for all the damages which the execution of
and property which is the purchases or sells the agency may have caused the latter, without
object of the transaction fault or negligence on his part. (1729)
Obligations of a Commission Agent: Art. 1915. If two or more persons have appointed
an agent for a common transaction or
1. Responsible for the goods received by him, as
undertaking, they shall be solidarily liable to the
described in the consignment, UNLESS upon
agent for all the consequences of the agency.
receiving them he should make a written
(1731)
statement of the damage and deterioration
suffered by the same
Art. 1916. When two persons contract with regard
2. If goods are of the same kind and mark but
to the same thing, one of them with the agent and
belonging to different owners, make a
the other with the principal, and the two contracts
distinction by counter marks and designate the
are incompatible with each other, that of prior
merchandise respectively belonging to each
date shall be preferred, without prejudice to the
principal cannot, without consent of the
provisions of Article 1544. (n)
principal, sell on credit; should he do, principal
may demand payment in cash, but the
Art. 1917. In the case referred to in the preceding
commission agent entitled to any
article, if the agent has acted in good faith, the
interest/benefit which may result from such
principal shall be liable in damages to the third
sale
person whose contract must be rejected. If the
3. If an agent receiving guarantee commission (a agent acted in bad faith, he alone shall be
del credere agent), bears the risk of collection responsible. (n)
and pay the principal the proceeds of the sale
on the same terms agreed upon with the
purchaser liable for damages if agent does not Obligations of the Principal to the Agent:
collect the credits of his principal at the time 1. Comply with all the obligations agent
when they become due and demandable, contracted in representation of the principal
UNLESS he proves, that he exercised due 2. Advance sums necessary for the execution
diligence for that purpose. of the agency, when agent so requests; liable
for reimbursement regardless of the
CHAPTER 3: OBLIGATIONS OF THE PRINCIPAL undertaking’s success whenever agent had
advanced & has no fault; includes interest
3. Reimburse the agent for all advances made
by him provided the agent is free from fault
4. Indemnify the agent for all the damages
which the execution of the agency may have Art. 1914. The agent may retain in pledge the
caused the latter without fault or negligence things which are the object of the agency until
on his part the principal effects the reimbursement and pays
5. Pay the agent the compensation agreed the indemnity set forth in the two preceding
upon or the reasonable value of the latter’s articles. (1730)
services
Art. 1920. The principal may revoke the agency at Art. 1929. The agent, even if he should withdraw
will, and compel the agent to return the document from the agency for a valid reason, must continue
evidencing the agency. Such revocation may be to act until the principal has had reasonable
express or implied. (1733a) opportunity to take the necessary steps to meet
the situation. (1737a)
Art. 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they Revocation: Termination of the agency by the
were not given notice thereof. (1734) subsequent act of the principal
Art. 1922. If the agent had general powers, Renunciation/Withdrawal: Termination of the
revocation of the agency does not prejudice third agency by the subsequent act of the agent
persons who acted in good faith and without
knowledge of the revocation. Notice of the May the agency be extinguished at will?
revocation in a newspaper of general circulation
is a sufficient warning to third persons. (n) A. AGENT may do so but subject to the contractual
obligations owing the principal (i.e. fixed period of
Art. 1923. The appointment of a new agent for the time for the agency or purpose not yet
same business or transaction revokes the accomplished);
previous agency from the day on which notice 1. Expressly or impliedly
thereof was given to the former agent, without a. conducted himself in a manner
prejudice to the provisions of the two preceding incompatible with his duties;
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for himself in committing a fraud upon his
Art. 1924. The agency is revoked if the principal principal;
directly manages the business entrusted to the c. he files a complaint against the principal
agent, dealing directly with third persons. (n) and adopts an antagonistic attitude
towards him
Art. 1925. When two or more principals have with just cause - give due notice
granted a power of attorney for a common without just cause - liable for
transaction, any one of them may revoke the damages if agent suffers
same without the consent of the others. (n) damages thereby UNLESS the
agent should base his withdrawal
upon the impossibility of Necessity of Notice of Revocation
continuing the performance of 1. As to the agent - express notice always
the agency without grave necessary; sufficient notice if the party to be
detriment to himself notified actually knows, or has reason to know, a
2. The mere fact that the agent violates his fact indicating that his authority has been
instructions does not amount to renunciation, terminated/suspended; revocation without notice
and although he may thus render himself to the agent will not render invalid an act done in
liable to the principal, he does not cease to pursuance of the authority
become an agent. 2. As to 3rd persons – express notice necessary
3. As to former customers - actual notice must be
B. PRINCIPAL may also revoke the agency at will given to them because they always assume the
Exception: agency coupled with interest continuance of the agency relationship
a. When a bilateral contract depends 4. As to other persons - notice by publication is
upon the agency enough
b. When the agency is the means of
fulfilling an obligation already Effect of Extinguishment Without Notice
contracted • Act of agent deemed valid insofar as 3rd parties
c. When a partner is appointed as acting in good faith and without knowledge of
manager of a partnership in the revocation
contract of partnership and his
removal from the management is
unjustifiable.
Exception to the exception: when the
agent acts to defraud the principal