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Contract of agency: where a person binds
himself,
1. to render some service, or
2. to do something in representation
or on behalf of another, with the
latters consent or authority. (Art.
1868, CC)
AGENCY is a relationship which implies a
power in an agent to contract with a 3rd
person on behalf of a principal. [Humble
Oil & Refining v Beu Tex. Cir. App.]
AGENCY is personal, representative, and
derivative in nature. The authority 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. [Rallos v Felix Go Chan & Sons
Realty, 1978]
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Since agency is a contract, there must
consent, object, and cause.
The purpose of agency is to extend the
principals personality.
General rule: What a man may do in person,
he may do thru another.
Exceptions: There are acts which the agent
may not do for the principal:
1. Personal acts, and
2. Criminal acts.
Knowledge of the agent is imputed to the
principal.
Exceptions: 1. Agents interests are adverse
to those of the principal;
2. Agents duty is not to disclose
information; and
3. 3rd person claiming the benefit
of the rule colludes with agent to
defraud principal.
The theory of imputed knowledge ascribes the
knowledge of the agent, to the principal, not
the other way around. The knowledge of the
principal cant be imputed to its agent
(Sunace Internatl Mgt. Services v. NLRC,
2006).
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1. Consensual: Perfected by mere consent.
General Rule: On the part of the principal,
there must be an actual intention to appoint
or an intention naturally inferable from his
words or actions; and on the part of the
agent, there must be an intention to accept
the appointment and act on it, and in the
absence of such intent, there is generally no
agency. [Victorias Milling v CA, 2000]
Exception: One who clothes another with
apparent authority as his agent, and holds
him out to the public as such, cant 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. [Macke v Camps, 1907]
2. Nominate: Has its own name.
3. Preparatory: Entered into as a means to an
end.
4. Principal: Can stand by itself without need
of another contract:
5. If gratuitous, unilateral: Creates obligations
for only one of the parties. If for
compensation, bilateral: Gives rise to
reciprocal rights and obligations. (CNPPU/B)
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1. Consent, express or implied
2. Object of the contract, which is the
execution of a juridical act in relation to
third persons;
3. Agent acts as a representative; and
4. Agent acts within the scope of his
authority. (Rallos v Felix Go Chan & Sons
Realty, 1978)
The agent may also be called an attorney,
proxy, delegate or representative. (Angeles
v. PNR, 2006)
Relationship between the parties is fiduciary:
With respect to the property that is subject
matter of the agency, the agent is estopped
from asserting an interest adverse to the
interest of the principal. The agent cannot
bind the principal where the agent has an
adverse interest.
Exception:
1. If agent acts with the knowledge
and consent of both, in which case
either party may repudiate the
transaction.
2. If agent is mere intermediary
with no independent initiative.
The agent must not use or divulge confidential
information. After agency terminates, the
agent is no longer under a duty to abstain
from competition and may use general
information (not acquired in violation of his
duty as agent).
While acting as an agent of his employer, an
employee owes the duty of fidelity and
loyalty. Being a fiduciary, he cant solicit his
employers customers or co-employees for
himself or for a business competitor of his
employer. (Molina v. Pacific Plans, 2006)
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The rules on service of process make service
on "agent", whether general or special,
sufficient even if agent has limited authority.
An employee of a corporation may not be
deemed an agent under the above rule unless
his/her duties are so integrated to the
business that his/her absence or presence
wont toll the business operations (Aboitiz
Internatl Forwarders, Inc. v. CA, 2006).
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1. Designation by parties is not
controlling.
2. Fact of existence: if relations that
constitute agency exist, there is
agency regardless of WON parties
understood the exact nature of the
relation.
3. No presumption of existence: agency
must exist as a fact.
Exceptions:
a) When agency arises ipso jure
b) To prevent unjust enrichment
4. Intention of the parties to create
relationship. As between principal and
3rd person, agency may exist without
the direct assent of the agent.
Against the principal, the agent has
the obligation to determine
existence and scope of agency.
Against the agent, the third person
has the obligation to determine
existence and scope of agency.The
person dealing with the agent must
also act with ordinary prudence and
reasonable diligence. If he knows
or has good reason to believe that
the agent is exceeding his
authority, he cannot claim
protection. [Harry Keeler Electric v
Rodriguez, 1922]
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1. Partnership
a. An agent acts only for his principal; a
partner acts for his partners, the
partnership, and for himself.
b. Parity of standing test: A partnership
generally presupposes a parity of standing
between the partners-- equal proprietary
interest in the capital or property and
exercises equal rights in the conduct of the
business.
2. Independent contractor
Agent independent
contractor
Represents his
principal.
Employed by the
employer.
Acts under the
principals control
and instruction.
Acts according to his
own method.
Principal is liable for
torts committed by
the agent within the
scope of his
authority.
Employer not liable
for torts committed
by the independent
contractor.
3. Lease
agency lease of service
Based on
representation.
Based on
employment.
Agent exercises
discretionary
powers.
Lessor ordinarily
performs only
ministerial
functions.
3 parties: Principal,
agent and the 3rd
person with whom
the agent contracts.
2 parties: Lessor
and lessee.
Relates to
commercial or
business
transactions.
Relates more to
matters of mere
manual or
mechanical
execution.
agency lease of property
Agent is controlled
by the principal.
Lessee is not
controlled by the
lessor.
Agency may involve
things other than
property.
Lease of property
involves property..
Agent can bind the
principal.
Lessee cannot bind
the lessor.
4. Contract of sale
agency to sell sale
Agent receives the
goods as the
principals goods.
Buyer receives the
goods as owner.
Agent delivers the
proceeds of the sale.
Buyer pays the price.
Agent can return the
object in case he is
unable to sell the
same to a 3rd
person.
Buyer, as a general
rule, cannot return
the object sold.
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Agent in dealing with
the thing received is
bound to act
according to the
instructions of his
principal.
Buyer can deal with
the thing as he
pleases, being the
owner.
5. Guardianship
agency guardianship
Agent represents a
capacitated person.
A guardian
represents an
incapacitated
person.
Agent is appointed
by the principal and
can be removed by
the latter.
Guardian is
appointed by the
court and stands in
loco parentis.
Agent is subject to
the directions of the
principal.
Guardian is not
subject to the
directions of the
ward but must act
for the benefit of the
latter
Agent can make the
principal personally
liable.
Guardian has no
power to impose
personal liability on
the ward.
In agency, the agent acts not on his own
behalf but on behalf of his principal. In
assignment, there is total transfer or
relinquishment of right by the assignor to the
assignee. (Apex Mining Co. v. Southeast Asia
Mindanao Gold Mining, Corp., 2006)
@6-?A
1. As to manner of creation
a. Express: where the agent has been
actually authorized by the
principal,
i. Orally, or
ii. In writing. (Art. 1869, CC)
b. Implied: where the agency created is
deduced from the
i. Acts or conduct of the
principal;
ii. Silence or lack of action of the
principal;
iii. Principals failure to repudiate
the agency; (Art.
1869, CC)
iv. Agents acts which carry out
the agency; or
v. Agents silence or inaction.
(Art. 1870, CC) 2 situations
of implied acceptance from
silence -
a. The persons are present:
if the principal delivers his
power of attorney to the
agent, who receives it
without any objection
(Art. 1871, CC); and
b. The persons are absent:
acceptance isnt implied
from the agents silence,
except
1. When the principal
transmits his power of
atty. to the agent, who
receives it without any
objection;
2. When the principal
entrusts to him by
letter/telegram a power
of atty. with respect to
the business in which
hes habitually engaged
as an agent, and he
didnt reply (Art. 1872,
CC).
By special notification: The person appointed
as agent is considered such with respect to
the person to whom it was given. (Art. 1873,
CC)
By public advertisement: The agent is
considered such with regard to any person.
(Art. 1873, CC)
2. As to formalities
Gen. Rule: No formal requirements
governing the appointment of an agent.
Except: When the law requires a specific
form, i.e. if the sale of a piece of land or any
interest therein is through an agent, the
agents authority shall be in writing, or the
sale is void. (Art. 1874, CC)
Note: If the owner himself sells
realty/interest therein, if not made in
writing, the contract of sale is unenforceable
but subject to ratification (Art. 1403, par.
2(e), CC).
3. As to cause or consideration
a. Gratuitous
b. Onerous: there is
compensation. Agency is
presumed to be for
compensation (Art. 1875, CC)
4. As to extent of business covered
a. General: comprises all the
business of the principal; or
b. Special: comprises one or more
specific transactions. (Art.
1876, CC)
Universal agent: authorized to do all acts that
the principal may personally do, and which he
can lawfully delegate to another the power of
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doing. (Mechem, Sec. 58)
general
agent
special
agent
Scope of
authority
All acts
connected
with the
business or
employment
in which he is
engaged.
Specific acts
in pursuance
of particular
instructions
or with
restrictions
necessarily
implied from
the act to be
done.
Nature of
service
authorized
Involves
continuity of
service.
No continuity
of service.
Extent to
which agent
may bind the
principal
May bind his
principal by
an act within
the scope of
his authority
although it
may be
contrary to
the latters
special
instructions.
Cannot bind
his principal
in a manner
beyond or
outside the
specific acts
which he is
authorized to
perform.
Termination
of authority
Apparent
authority
does not
terminate by
the mere
revocation of
his authority
without
notice to the
3rd party.
Duty imposed
upon the 3rd
party to
inquire
makes
termination
of the
relationship
as between
the principal
and agent
effective as
to such 3rd
party, unless
the agency
has been
entrusted for
the purpose
of contracting
with such 3rd
party.
Construction
of principals
instructions
Merely
advisory in
nature.
Strictly
construed as
they limit the
agents
authority.
5. As to authority conferred
a. Couched in general terms:
comprise only acts of
administration, even if -
i. the principal states that he
withholds no power,
ii. that the agent may execute
such acts as he may
consider appropriate, or
iii. the agency authorizes a
general and unlimited
management. (Art. 1877,
CC)
b. Couched in specific terms:
authorizing only the
performance of a specific act/s.
(Art. 1878, CC)
Power of attorney: a written authorization to
an agent to perform specified acts in behalf of
his principal which acts, when performed,
shall have binding effect on the principal (2
Am. Jur. 30).
Purpose: Not to define the agents
authority, but to evidence such
authority to 3rd parties
Interpretation: Strictly construed
Exception: When strict construction will
destroy the very purpose of the power.
Special power of attorney: an authority
granted by the principal to the agent where
the act for which it is drawn is expressly
mentioned. (Strong v. Repide) A special
power can be included in a gen. power of
attorney, either by giving authority for all acts
of a particular character or by specifying
therein the act/transaction for which a special
power is needed. (Tolentino)
When special powers are necessary: for acts
of strict dominion/ownership -
a. To make payments;
b. To effect novations;
c. To compromise, submit questions for
arbitration, renounce the right to
appeal from judgment, waive
objections to venue of actions, or
abandon a prescription already
acquired;
d. To effect remission/condonation;
e. To enter into any contract by which the
ownership of an immovable is
transmitted/acquired;
f. To make gifts;
g. To loan or borrow money;
h. To lese any realty to another for more
than a year;
i. To bind the principal to render some
service without compensation;
j. To bind the principal in a contract of
partnership;
k. To obligate the principal as a
guarantor or surety;
l. To create or convey real rights over
immovables;
m. To accept or repudiate an inheritance;
n. To ratify or recognize obligations
contracted before the agency; and
o. Any other act of strict dominion. (Art.
1878, CC)
6. As to nature and effects
a. Ostensible or Representative
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b. Simple or commission: agent acts in
his own name but for the principals
account. (Art. 1883, CC)
c. Agency by estoppel: there is no
agency, and the alleged agent seemed
to have apparent or ostensible, but not
real, authority to represent another.
apparent
authority
authority by
estoppel
Though not actually
granted, principal
knowingly permits
or holds out the
agent as possessing
the necessary
powers to act in a
certain way.
Where the principal,
by his negligence,
permits his agent to
exercise powers not
granted to him,
even though the
principal may have
no notice or
knowledge of the
conduct of the
agent.
Implied Agency Agency by
Estoppel
1. There is actual
agency; thus
with rights &
duties as an
agent.
1. There is no actual
agency; thus
without rights &
duties as an agent.
2. Principal alone
is liable.
2. If caused by the
principal, he is
responsible. If
caused by the agent,
he is responsible.
Provided, 3
rd
person
in good faith.
One professing to act as agent for another is
estopped to deny his agency both as against
his asserted principal and third persons
interested in the transaction which he
engaged in. (Angeles v. PNR, 2006)
In general, a hospital isnt liable for the
negligence of an independent contractor-
physician. The exception is if the physician is
the hospitals "ostensible agent.
Under the doctrine of apparent authority a
hospital can be held vicariously liable for the
negligent acts of a physician, WON the
physician is an independent contractor, unless
the patient knows, or shouldve known that
the physician is an independent contractor.
This doctrine involves 2 factors to determine
liability. The first factor focuses on the
hospitals manifestations, whether the hospital
acted in a manner which would lead a
reasonable person to conclude that the
individual who was alleged to be negligent
was an employee or agent of the hospital. The
hospital need not make express
representations to the patient that the
treating physician is an employee of the
hospital; a representation may be general and
implied. The second factor focuses on the
patients reliance-whether the plaintiff relied
upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence.
(Nogales v. Capitol Medical Center, 2006)
Apparent authority/doctrine of ostensible
agency/agency by estoppel, imposes liability
because of the actions of a principal/
employer in misleading the public into
believing that the relationship or the authority
exists. The question is whether the principal
has by his voluntary act placed the agent in
such a situation that a person of ordinary
prudence, conversant with business usages
and the nature of the particular business, is
justified in presuming that such agent has
authority to perform the particular act in
question. In cases where it can be shown that
a hospital, by its actions, has held out a
particular physician as its agent and/or
employee and that a patient has accepted
treatment from that physician in the
reasonable belief that it is being rendered in
behalf of the hospital, then the hospital will be
liable for the physicians negligence.
(Professional Services Inc v. Agana, 2007)
d. Agency by Ratification
Conditions for ratification:
1. The principal must have
capacity and power to ratify.
2. He must have had knowledge of
material facts.
3. He must ratify the acts in its
entirety.
4. The act must be capable of
ratification.
5. The act must be done in behalf
of the principal.
Ratification need not be expressed to the
agent or 3rd party. Before ratification, the 3rd
party may revoke the unauthorized contract.
Effects of ratification:
1. With respect to the agent: It
relieves the agent from liability. He
may also recover compensation.
2. With respect to the principal: He
assumes responsibility for the
unauthorized act, as fully as if the
agent had acted under original
authority; but he is not liable for acts
outside the authority approved by his
ratification.
3. With respect to 3rd persons: They
are bound by ratification. They cannot
question agents authority.
Ratification Estoppel
Rests on intention. Rests on prejudice.
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Affects the entire
transaction from the
beginning.
Affects only
relevant parts of
the transaction.
The substance of
ratification is
confirmation of
unauthorized acts or
conduct after it has
been done.
The substance of
estoppel is the
principals
inducement to
another to act to
his prejudice.
7. Kinds of principal
a. Disclosed
b. Partially disclosed third is unaware of
the principals identity.
c. Undisclosed
General rule: If the principal is
undisclosed, the agent is directly liable to
the person with whom he had contracted
as if the transaction were his own. (Art.
1883, CC)
Rationale: There is no representation.
Exception: When the contract involves
things belonging to the principal, in
order to protect 3rd persons against
possible collusion between the agent
and the principal. (Art. 1883, CC)
The agents who made a contract in their
own names may sue the third person.
(Behn Mayer & Co. v. Banco Espaol-Fil.)
The undisclosed principal cant sue the
third person on a contract concluded by
the agent in his own name (Smith Bell &
Co. v. Sotto Matti). His recourse is against
the agent.
21$"'%0"2)4 23 0V( %'()0
a) To carry out the agency he
accepted
Acceptance of agency: person is free to
refuse the agency, but once he accepts hes
bound to carry it out (Art. 1884, CC) in
accordance with its terms in good faith and
following the principals instructions.
Obligation to answer for damages: the agent
is liable for damages suffered by the principal
due to his non-performance (Art. 1884, CC).
Obligation to finish business upon principals
death: if delay will entail any danger to the
subject of the agency/principal, the agent
must finish the transaction/business already
begun on the principals death (Art. 1884,
CC). This is an exception to the gen. rule that
death extinguishes agency.
Obligation of person who declines an agency:
under equity he is still bound to observe bono
paterfamilias in the custody and preservation
of the property forwarded to him by the
owner. However, the owner must act as soon
as practicable either by appointing an agent or
by taking charge of the property. (Art. 1885,
CC)
When agency shouldnt be carried out: if its
execution would manifestly result in
loss/damage to the principal (Art. 1888, CC).
b) To act within the scope of
authority
The agent must act within the scope of his
authority (Art. 1881, CC): authority is the
power to act within the scope of his
assignment on his principals behalf with
binding effect on the latter. But the agent isnt
deemed to have exceeded the limits of his
authority should he perform the agency in a
manner more advantageous to the principal
(Art. 1882, CC) since hes authorized to do
such acts as may be conducive to the
accomplishment of the agencys purpose (Art.
1881, CC).
c) To advance the necessary funds
Obligation to advance funds: when the
contract stipulates that the agent shall
advance the necessary funds. (Art. 1886,
CC)
Basis: principals obligation to
reimburse the agent
Exception: insolvent principal (Art.
1886, CC)
d) To act in accordance with
instructions
When departure from instructions is justified:
a. In sudden emergencies
b. If there are ambiguous instructions
c. Insubstantial departures
Absence of instructions: agent shall exercise
the diligence of a good father of a family as
required by the nature of the
business/transaction (Art. 1888, CC)
Authority Instructions
The sum total of the
powers committed or
permitted to the
agent
Only a private rule
of guidance to the
agent
Relates to the
subject
(biz/transaction)
with which the agent
is empowered to
deal or act.
Refers to the
manner or mode of
agents action with
respect to matters
within the permitted
scope of action.
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Limits of authority
operate vs those
who have/are
charged with
knowledge of them.
Binding only on the
principal and agent
e) To be loyal
Obligation not to prefer own interest: agent is
liable for damages if, there being a conflict of
interests, he prefers his own (Art. 1889,
CC).
Exception:
a. The principal waives the benefit of the rule,
provided he does so with full knowledge of the
facts.
b. The interests of the agent are superior.
f) To borrow money
a. Agent empowered to borrow money:
agent may himself be the lender at
current rate of interest (Art. 1890, CC),
for there is no danger of damage to
principal.
b. Agent authorized to lend money: needs
the principals consent (Art. 1890, CC)
for he may be a bad debtor.
g) To render accounts and
deliver things received by virtue
of the agency
Obligation to render accounts: agents duty to
account for and deliver to the principal all
money and property received by virtue of the
agency (Art. 1891, CC). If he fails to do so
or uses the money/property for his own use,
the agent is liable for estafa (Art. 315, RPC).
Stipulation exempting the agent from this
duty is void (Art. 1891, CC).
Inapplicability:
a. The agent or broker acted only as a
middleman (Domingo v. Domingo)
b. The agent or broker informed the principal
of the gift or bonus or profit he received from
the vendee, and the principal did not object.
c. A right of lien exists in favor of the agent.
d. Solutio indebiti
h) To be responsible for
substitutes
Sub-agent: Person to whom the agent
delegates, as his agent, the performance of an
act for the principal which the agent has been
empowered to perform through his
representative. (Restatement of the Law
on Agency, Sec. 5)
Power to appoint sub-agent/substitute: unless
prohibited by the principal, the agent may
appoint one (Art. 1892, CC). The principal
has a right of action against both the agent
and substitute (Art. 1893, CC).
Effects of Substitution:
a. Substitution prohibited - all the
substitutes acts are void (Art. 1892,
CC)
b. Substitution authorized - agent is
released from responsibility unless
substitute is notoriously incompetent
or insolvent (Art. 1892, CC).
- if the substitute is the one designated
by the principal, agent is absolutely
exempted
c. Substitution not authorized, not
prohibited - valid if beneficial to the
principal
- if caused damage to principal, agent
is responsible for substitutes acts
(Art. 1892, CC) and principal with
right of action against substitute (Art.
1893).
Relation among the principal, agent and sub-
agent:
a. If sub-agent is appointed by the agent on
the agents sole account, the sub-agent is a
stranger to the original principal.
b. If sub-agent is appointed by the agent with
the principals authority, the relation of
principal-agent generally exists between the
original principal and the sub-agent.
Effect of death of the original agent:
a. If the authority of the sub-agent proceeds
from the principal- not terminated.
b. If the sub-agent is a substitute for, acts
under the authority of, and is accountable to,
the agent, the sub-agents authority is
terminated even if the power of substitution is
given in the original power.
Applying the law to the SPA executed by
Rubio in favor of his daughter Llamas, it is
clear that she isnt prohibited from appointing
a substitute. By authorizing Lim to sell the
subject properties, Llamas merely acted
within the limits of the authority given by her
father, but she will have to be "responsible for
the acts of the sub-agent," among which is
precisely the sale of the subject properties in
favor of respondent. (Escueta v. Lim, 2007)
i) To pay interest
2 cases under !"#$ %&'(, CC:
a. Sums belonging to the principal applied to
agents own use: agent liable for interest as
compensation/indemnity from the day on
which he did so, without prejudice to criminal
liability (Art. 315, RPC)
b. Agent owes sums even after the end of the
agency: agent liable for interest from the date
the agency is extinguished.
Agent is bound to deliver the money hence,
demand unnecessary. (Art. 1891, CC)
!"#"$ $%&
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%'()!*
j) To answer for his
fraud/negligence
Liability: that the agency is or isnt gratuitous
will be considered by the court in fixing the
liability of the agent (Art. 1909, CC)
k) Factor/Commission agents
Factor/commission agent: one whose business
is to receive & sell goods for a commission,
and is entrusted by the principal with its
possession (Mechem on Agency)
Obligations of a commission agent:
a. Responsibility for goods received as
described in the consignment - to avoid
liability, make a written statement of the
damage and deterioration of the goods
upon receiving them (Art. 1903, CC)
b. If handling goods of same kind and
mark with different owners - distinguish
them by countermarks and designate the
goods owned by each principal (Art.
1904, CC)
c. Sale on credit - only if with principals
express or implied consent (Art. 1905,
CC). If without authority, principal with
2 alternatives:
1. require payment in cash - any
interest/benefit from the sale shall
go to the agent
2. ratify the sale
- if authorized, shall be deemed to have
been made on a cash basis if agent fails
to inform the principal of such sale and
of the names of the buyers (Art. 1906,
CC)
d. If agent receives a guarantee
commission - agent bears the risk of
collection (Art. 1907, CC). The
guarantee commission is paid to the
agent in addition to the ordinary
commission agreed upon.
e. To collect the principals credits when
they are due & demandable - agent is
liable for damages if he fails to do so,
unless he can show that the credit is
uncollectible despite the exercise of due
diligence (Art. 1908, CC). This
exception doesnt apply if theres a
guarantee commission.
ordinary agent commission agent
Acts for and in
behalf of the
principal.
Acts in his own
name or in that his
principal.
Need not have
possession of the
goods of the
principal.
Must be in
possession of the
goods of the
principal.
commission agent Broker
Engaged in the
purchase and sale,
for a principal, of
personal property
which has to be
placed in his
possession and
disposal.
Has no custody or
possession of the
thing he disposes;
merely acts as an
intermediary
between the sellers
and the buyer.
Has a relation with
the principal (buyers
or sellers) and the
property which is
the object of the
transaction.
Maintains no
relation with the
thing which he
purchases or sells.
[Pacific Commercial v Yatco, 1939]
$"%1"$"0"(4 23 0V( %'()0
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Gen. rule: an agent who acts as such isnt
personally liable to the party with whom he
contracts (Art. 1897, CC)
Exceptions:
1. The agent acts in his own name (Art.
1883, CC): he is directly bound in favor of
the person with whom he contracted.
Exception: if the contract involves
things owned by the principal. (Art.
1883, CC)
2. The agent expressly binds himself
(Art. 1897, CC): he obligates himself
personally and by his own act.
3. The agent exceeds his authority
without giving the other party sufficient
notice of his powers (Art. 1897, CC): the
contract is unenforceable against the
principal; for depriving the third party of
any remedy against the principal, the
agent is liable. (NPC v. Natl Merchandising
Corp.)
4. The agent exceeded the scope of his
authority and undertook to secure
principals ratification (Art. 1898, CC).
That the agent has also bound himself to pay
the debt doesnt relieve the principal, for
whose benefit the debt was incurred, from
liability. The agents individual liability
constitutes a further security in the creditors
favor and doesnt affect/preclude the
principals liability. [Tuason v Orozco, 1906]
Art. 1897 presents 2 instances when an agent
becomes personally liable to a third person:
when he expressly binds himself to the
obligation, and when he exceeds his authority.
In the last instance, the agent can be held
liable if he does not give the third party
sufficient notice of his powers. In case of
!"#"$ $%&
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excess of authority, the law doesnt say that a
third person can recover from both the
principal and the agent. (Eurotech Industrial
Technologies Inc. v. Cuizon, 2007)
Though the entrustee is a corporation, the law
specifically makes the officers/employees
responsible for the offense, without prejudice
to the civil liabilities of such corporation
and/or board of directors. Such
officers/employees are vested with the
authority and responsibility to devise means
necessary to ensure compliance with the law
and, if they fail to do so, are held criminally
accountable. The principle applies to those
corporate agents who themselves commit the
crime and to those, who, by virtue of their
managerial positions or other similar relation
to the corporation, could be deemed
responsible for its commission, if by virtue of
their relationship to the corporation, they had
the power to prevent the act. (Ching v. Sec.
of Justice, 2006)
Where agency exists, the third party's liability
on a contract is to the principal and not to the
agent. However, where an agent is
constituted as an assignee, the agent may, in
his own behalf, sue on a contract made for his
principal. (Angeles v. PNR, 2006)
Effect where 3
rd
person aware of limits of
power: if agent exceeded the scope of his
authority and the principal didnt ratify the
contract, the contract is unenforceable against
the principal, and void between the agent and
the third person. (Art. 1898, CC)
1. Agent promised to secure the
principals ratification and failed -
agent is liable. (Art. 1898, CC)
2. Contract ratified - principal is liable.
Effect of agents ignorance: if the agent acted
in accordance with the principals orders, the
latter cant use the agents ignorance as to
circumstances where he himself was/ought to
have been aware. (Art. 1899, CC) The
principal is liable.
When 3
rd
person cant use as a defense the
agents lack of authority:
1. The principal has ratified the contract;
or
2. Principal signified his willingness to
ratify. (Art. 1901, CC)
Ratification: if the agent exceeds his
authority, the principal isnt bound unless he
ratifies it. (Art. 1910, CC) Without
ratification, the agent is liable.
&H,- :+,-5 :.5A W65H6- A.7M, 7B :;5H7<65/
Within the scope of authority: for third
persons, an act is within the scope of
authority if its within the terms of the power
of attorney as written, even if the agent in
fact exceeded the limits of authority based on
an understanding between him and the
principal (Art. 1900, CC).
Presentation of power of attorney or
instructions: may be required by 3
rd
persons
(Art. 1902, CC). As a rule, a 3
rd
person deals
with an agent at his peril. But he cant be
bound by private/secret orders and
instructions of the principal (Art. 1902, CC).
$6:F6G65/ 7B E 7< >7<, :+,-5A
Gen. rule: joint liability
Except: if solidarity is expressly stipulated,
solidary liability (Art. 1894, CC) for:
1. non-fulfillment of the agency; or
2. fault/negligence of fellow agents.
Exception to exception: when some agents
acted beyond the scope of their authority,
innocent agents arent liable. (Art. 1895,
CC)
21$"'%0"2)4 23 0V( LR")!"L%$
1. To comply with the obligations
contracted by the agent
Principal is bound: he must comply with all
the obligations arising from the agents
authorized acts. If the agent acted beyond his
authority, the principal is bound if he ratifies
the contract (Art. 1910, CC).
Principal is estopped: though the agent
exceeded his authority, the principal is liable if
he allowed the former to act as if he had full
powers (Art. 1911, CC).
If 2 persons contract simultaneously with
agent & principal for the same thing:
a. Contract of prior date prevails.
b. If applicable, follow the rule on double
sales in Art. 1544, CC. (Art. 1916,
CC)
Liability to 3
rd
persons, if agent & principal
contracted separately:
a. Agent in good faith - principal is liable
for damages.
b. Agent in bad faith - agent is liable.
(Art. 1917, CC)
2. To advance the necessary
sums and reimburse the agent
Obligation to advance funds: the principal
must advance to the agent, upon his request,
the sums necessary for the execution of the
agency. (Art. 1912, CC)
Obligation to reimburse: if the agent
advanced the sums necessary, these must be
reimbursed by the principal with interest from
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the day the advance was made, even if the
business wasnt successful (Art. 1912, CC).
Exceptions to the obligation of advancement/
reimbursement:
a. If the agent acted in contravention
of the principal's instructions, unless
principal derives benefits.
b. When the expenses were due to the
fault of the agent.
c. When the agent incurred them
knowing that an unfavorable result
would ensure, if the principal was
unaware thereof.
d. When it was stipulated that the
expenses would be borne by the agent,
or that the latter would be allowed only
a certain sum. (Art. 1918, CC)
Agents right to retain object of agency in
pledge: if the principal fails to reimburse the
agent (Art. 1914, CC). But agent isnt
entitled to the excess in case the thing was
sold to satisfy his claim, and the proceeds are
more than his claim (Arts. 2115, 2121, CC).
Also he must possess the thing lawfully in his
capacity as agent (2 C.J. 457).
When principals solidarily liable for the
agencys consequences:
a. There are 2/more principals;
b. They all concurred in the
appointment of the same agent;
and
c. The agent is appointed for a
common
transaction/undertaking. (Art.
1915, CC)
3. To indemnify the agent for
damages
Obligation to indemnify agent: for damages
which the execution of the agency has caused
the agent, so long as the agent isnt at fault
(Art. 1913, CC). This is based on fairness.
Note: Arts. 1914-1915 are applicable here.
4. To pay the agent's
compensation
Presumed for compensation: the principal
must pay the compensation -
a. agreed upon, or
b. the reasonable value of the services.
When agent is entitled to compensation: only
after he has completed/substantially
completed his obligation.
Agent cant be deprived of agreed commission
by the principal by dealing directly with the
buyer. The principals act is unfair as would
amount to bad faith. (Infante v. Cunanan)
It would be in the height of injustice to permit
the principal to terminate the contract to the
brokers prejudice when he had already
reaped the benefits of the brokers efforts.
(Lim v. Saban)
In case of double agency:
a. If both principals have knowledge of
the double employment, the agent can
recover from both of the principals.
b. If both principals have no knowledge of
the double employment, the agent
cant recover from either.
c. If the 2nd employer has knowledge of
the 1st employment, both he and the
agent are guilty, and an executory
contract entered into in fraud of the
1st employer is unenforceable.
Brokers: One who negotiates contracts
relative to property in behalf of others and for
a fee.
Since a brokerage relationship is essentially a
contract of agency, principles of contract law
apply. Since the principals of the broker are
generally undisclosed, the broker is personally
liable. Hence, petitioner had to advance the
payments for respondents trades. Brokers
have a right to be reimbursed for sums
advanced by them. (Abacus Securities Corp.
v. Ampil, 2006)
If a broker isnt efficient in procuring cause in
bringing about the sale, he isnt entitled to
compensation. (Prats v. CA)
(X0")'Q"4VS()0 23 %'()!*
Y;6.Z +G:-.,[ &:/A 57 ,O56-+;6AH :+,-./
Mode Way of
extinguishing
1. By the parties
subsequent acts
a. Principals
revocation
b. Agents withdrawal
2. By operation of law a. By the
principals/agents
- death
- civil interdiction
- insanity, or
- insolvency
b. By the
firms/corporations
dissolution
3. By agreement a. Accomplishment of
object/purpose
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b. Expiration of
period
4. Other modes a. Other modes of
extinguishment of
obligations
b. Changes in law
c. Changes in
conditions
d. War
S7?,A 7B ,O56-+;6AH>,-5 (Art. 1919, CC)
1. By the subsequent acts of the parties
either by mutual consent or unilaterally.
a. By the principals revocation.
Revocation: termination by the
subsequent acts of the principal. May be
express or implied. If the agents
authority is in writing, the principal may
compel him to return this document
(Art. 1920, CC).
Gen. rule: principal may revoke the
agency at will (Art. 1920,CC).
Except (BIW): 1. the revocation is done
in bad faith (Danon v. Brimo);
2. the agency is coupled with an
interest, such as when -
a. a bilateral contract depends
on it;
b. its the means of fulfilling an
obligation already contracted;
c. a partner is appointed
manager of a partnership and
is removed unjustifiably. (Art.
1927, CC)
3. the principal waived his right
to revoke (New Manila Lumber
Co. v. Rep.)
Agency coupled with an interest cant be
terminated by the sole will of the
principal since third persons are
involved, though its revocable after the
interest ceases. The interest of the agent
must be in the subject matter of the
power conferred, and not merely in the
exercise of the power as it entitles him
to compensation. (Del Rosario v. Abad)
An agency coupled with interest may be
revoked when the agent acts to defraud
the principal. The irrevocability of the
power of attorney may not be used to
shield the perpetration of acts in bad
faith, breach of confidence, or betrayal
of trust. [Coleongco v Claparols, 1964]
Irrevocability of the contract cannot
affect 3rd persons and is obligatory only
on the principal who executed the
agency. [New Manila Lumber v Republic,
1960]
Principals liability for damages despite
revocation of agency:
1. Agency with a fixed period: principal
liable due to wrongful discharge of
agent before end of the period.
2. No period fixed: principal liable if
the agent can prove the former acted
in bad faith.
Effect of revocation wrt 3
rd
persons:
(Arts. 1921-1922, CC)
Agency to contract
with specific
persons
Agency to contract
with general
public
Wont prejudice
3
rd
persons until
notice is given
them.
Wont prejudice
those in good faith
& w/o knowledge.
Notice must be
personal.
Notice may be
personal.
The principal has a duty to give actual
notice of the revocation of the agency to
third parties. [La Compania General de
Tobacos v Diaba, 1911]
As to the agent: Express notice is always
necessary. Revocation without notice to
the agent will not render invalid an act
done in pursuance of the authority.
As to 3rd persons: Express notice is
necessary. Insofar as 3rd parties acting
in good faith and without knowledge of
revocation, acts of the agent are deemed
valid.
As to former customers: Actual
notice must be given to them
because they always assume the
continuance of the agency
relationship.
As to other persons: Notice by
publication is enough.
Revocation by appointment of a new
agent: effective when notice is given to
the former agent (Art. 1923, CC). The
2 agencies must be incompatible. This is
an implied revocation.
Revocation by direct management by
principal: when the principal deals
directly with 3
rd
persons (Art. 1924,
CC). This is an implied revocation.
!"#"$ $%&
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Revocation if with 2/more principals: one
of the principals may revoke the power
of attorney without the others consent
(Art. 1925, CC).
Partial revocation of gen. power: a gen.
power is revoked by a special one wrt
the special matter involved in the latter
(Art. 1926, CC).
b. By the agents withdrawal.
The agent may withdraw at will, subject
to the contractual obligations to the
principal (fixed period of agency,
purposes not accomplished).
Right to withdraw: based on the
prohibition against involuntary servitude
(Art. III, Sec. 18, 1987
Constitution).
1. without just cause: agent with duty
to give due notice to the principal
and to indemnify the latter, should
he suffer damages due to the
withdrawal (Art. 1928, CC)
2. with just cause: if due to
impossibility of continuing with the
agency without grave detriment to
himself (Art. 1928, CC), or due to
a fortuitous event (Art. 1174,
CC), the agent cant be held liable.
Obligation to continue to act: agent must
continue to act until the principal has
had reasonable opportunity to take the
necessary steps to remedy the situation
caused by the withdrawal (1929, CC).
Implied renunciation:
1. agent conducts himself in a way
incompatible with his duties.
2. agent abandons the object of agency
and acts for himself in committing a
fraud upon the principal.
3. files a complaint against the principal
and adopts an antagonistic attitude
towards him (Valera v. Velasco).
2. By operation of law.
a. By the principals/agents death,
civil interdiction, insanity or
insolvency.
As theres an integration of the
principals personality into the agents,
its impossible for agency to continue
once the death of either is established.
(Rallos v. Felix Go Chan & Sons)
Except: 1. the agency is constituted in
the common interest of the principal and
agent, or in the interest of a 3
rd
person
who accepted the stipulation in his favor
(Art. 1930, CC).
2. wrt acts done by the agent who didnt
know of the principals death (Art.
1931, CC)
3. wrt business already begun when the
principal died, if delay would cause
danger (Art. 1884, CC).
An act done by the agent after the
principals death is valid and effective
only if the agent and the 3
rd
person knew
of the death. The knowledge of the 2
must concur; otherwise the agents act
void and unenforceable. (Rallos v. Go
Chan & Sons)
Agents death: his heirs are obligated to
notify the principal and to adopt such
measures as the circumstances may
demand for the principals interest (Art.
1932, CC). But they cannot continue
the agency.
Exceptions:
a. agency by operation of law
b. agency coupled with an interest in the
subject matter of the agency
b. By the dissolution of the
firm/corporation.
3. By agreement.
a. By the accomplishment of the
agencys object/purpose.
b. By the expiration of the period of
the agency.
Other Modes
The modes enumerated in Art. 1919 are
those peculiar to agency. The list isnt
exclusive.
Other modes:
1. Modes of extinguishment of obligations
(Art. 1291, CC)
2. Changes in law affecting the subject
matter/transaction involved in the
agency (2 Am. Jur. 75)
3. Changes in conditions not anticipated
by the parties (2 Am. Jur. 61)
Except: a. the original circumstances
are restored within a reasonable period
of time
b. agent has reasonable doubts
as to whether the principal
would want him to act, his
authority wont be terminated if
he acts reasonably
c. the principal and agent are in
close daily contact, and the
agent knows that the principal
is aware of the change and
!"#"$ $%&
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doesnt give him new
instructions
4. Outbreak of war
Presumption of continuance of agency: once
shown to have existed, agency is presumed to
continue, without anything showing
termination.