AGENCY

DEFINITION OF AGENCY
Contract of agency (2000, 2003 BAR)
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 (NCC, Art. 1868).
NOTE: The essence of agency is representation. For a Contract of Agency to exist, it is essential that the principal
consents that the agent shall act on the former’s behalf and the agent consents so as to act (Rabuya, 2017).
NATURE, FORMS AND KINDS OF AGENCY
Characteristics of a contract of agency
1. Bilateral – If it is for compensation, it gives rise to reciprocal rights and obligations.
2. Unilateral – If gratuitous, it creates obligations for only one of the parties.
3. Nominate – It has its own name.
4. Consensual – It is perfected by mere consent.
5. Principal – It can stand by itself without need of another contract.
6. Preparatory – It is entered into as a means to an end (De Leon, 2010).
7. Generally onerous
8. Representative relation- the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by the principal (Rabuya,
2017).

Classifications of Agency
1. As to manner of creation
a. Express – Agent has been actually authorized by the principal, either orally or in writing (NCC, Art. 1869).
b. Implied– Agency is implied from the acts of the principal, from his silence or lack of action or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority (NCC, Art. 1869).
2. As to character
a. Gratuitous – Agent receives no compensation for his services (Art. 1875).
b. Onerous– Agent receives compensation for his services (NCC, Art. 1875).
3. As to extent of business of the principal
a. General – Agency comprises all the business of the principal (NCC, Art. 1876).
b. Special– Agency comprises one or more specific transactions (NCC, Art. 1876).
4. As to authority conferred
a. Couched in general terms – Agency is created in general terms comprises only acts of administration (NCC, Art.
1877).
b. Couched in specific terms – Agency authorizing only the performance of a specific act or acts (NCC, Art. 1876).
5. As to nature and effects
b. Ostensible or representative – Agent acts in the name and representation of the principal (NCC, Art. 1868).
c. Simple or commission – Agent acts in his own name but for the account of the principal (De Leon, 2010).

Parties to a contract of agency

1. Principal – One whom the agent represents and from whom he derives his authority; he is the person
represented.
2. Agent – One who acts for and represents another; he is the person acting in a representative capacity (De
Leon, 2010).

Essential elements of an agency

1. Consent (express or implied) of the parties to establish the relationship.

NOTE: A person may express his consent:

a. by contract (NCC, Art. 1868), orally or in writing;
b. by conduct (NCC, Art. 1869);
c. by ratification (NCC, Art. 1910); or
d. the consent may arise by presumption or operation of law (De Leon, 2010).
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.
4. The agent acts within the scope of his authority
(De Leon, 2010).
Appointment of an Agent
GR: There are no formal requirements governing the appointment of an agent.
XPN: When the law requires a specific form. i.e. – when sale of land or any interest therein is through an agent,
the authority of the latter must be in writing; otherwise, the sale shall be void (NCC, Art. 1874). (2010 BAR).

Rules on implied acceptance of agency

1. Between 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 (NCC, Art. 1871).
2. Between persons who are absent – The acceptance of the agency cannot be implied from the silence of the
agent except:
a. When the principal transmits his power of attorney to the agent, who receives it without any
objection;
b. When the principal entrusts 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
(NCC, Art. 1872).

NOTE: 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 (NCC, Art. 1870).
Nature of the relationship between principal and agent
It is fiduciary in nature that is based on trust and confidence (De Leon, 2010).
Qualifications of a Principal
1. Natural or juridical person; and
2. He must have capacity to act.

NOTE: If a person is capacitated to act for himself or his own right, he can act through an agent.
Insofar as third persons are concerned, it is enough that the principal is capacitated. But insofar as his
obligations to his principal are concerned, the agent must be able to bind himself.
Kinds of Principal
1. Disclosed principal – At the time of the transaction contracted by the agent, the other party knows that the
agent is acting for a principal and of the principal’s identity.
2. Partially disclosed principal – The other party knows or has reason to know that the agent is or may be acting
for a principal but is unaware of the principal’s identity.
3. Undisclosed principal – The party has no notice of the fact that the agent is acting as such for a principal (De
Leon, 2010).

Joint Principals
Two or more persons appoint an agent for a common transaction or undertaking (NCC, Art. 1915).
Requisites for solidary liability of joint principals
1. There are two or more principals.
2. They have all concurred in the appointment of the same agent.
3. Agent is appointed for a common transaction or undertaking (De Leon, 2010).

Theory of Imputed Knowledge

The importance of the duty to give information of material facts becomes readily apparent when it is borne in
mind that knowledge of the agent is imputed to the principal even though the agent never communicated such
knowledge to the principal (De Leon, 2010).
Exceptions to the theory of imputed knowledge
1. The agent’s interests are adverse to those of the principal.
2. The agent’s duty is not to disclose the information, as where he is informed by way of confidential
information.
3. The person claiming the benefit of the rule colludes with the agent to defraud the principal (De Leon, 2010).

NOTE: The theory of imputed knowledge ascribes the knowledge of the agent to the principal, not the other way
around. The knowledge of the principal cannot be imputed to his agent (Sunace International Management
Services, Inc. v. NLRC, G.R. No. 161757, January 25, 2006).

Kinds of Agents
1. Universal agent – employed to do all acts which the principal may personally do, and which he can lawfully
delegate to another the power of doing.
2. General agent – employed to transact all business of the principal, or all the business of a particular kind or in
a particular place, do all acts connected with a particular trade, business or employment.
3. Special or particular agent – authorized to do act in one or more specific transactions or to do one or more
specific acts or to act upon a particular occasion (De Leon, 2010).
Rule with regard to the execution of the agency
GR: The agent is bound by his acceptance to carry out the agency, in accordance with the instruction of the
principal and is liable for damages which, through his non-performance, the principal may suffer (NCC, Arts.
1884 & 1887).
XPN: If its execution could manifestly result in loss or damage to the principal (NCC, Art. 1888).
Responsibility of two or more agents appointed simultaneously
GR: Jointly liable.
XPN: Solidarity has been expressly stipulated. Each of the agents becomes solidarily liable for:
1. The non-fulfilment of the agency
2. Fault or negligence of his fellow agent
XPNs to the XPN:
1. When one of the other agents acts beyond the scope of his authority – Innocent agent is not liable.
2. When the fault or negligence of his fellow agents acted beyond the scope of their authority – Innocent agent is
not liable (NCC, Art. 1895).

Instances when the agent may incur personal liability

1. Agent expressly bound himself.
2. Agent exceeds his authority
3. Acts of the agent prevent the performance on the part of the principal
4. When a person acts as agent without authority or without a principal.
5. A person who acts as an agent of an incapacitated principal unless the third person was aware of the
incapacity at the time of the making of the contract (De Leon, 2010).

Presumption of contract of agency

GR: Agency is not presumed.
The relation between principal and agent must exist as a fact. Thus, it is held that where the relation of agency is
dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be
proved, with the burden of proof resting upon the person alleging the agency to show, not only the fact of its
existence, but also its nature and extent.
XPNs:
1. Operation of law;
2. To prevent unjust enrichment (De Leon, 2010).

Agency by necessity
Agency cannot be created by necessity. What is created instead is additional authority in an agent appointed
and authorized before the emergency arose. 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 (De
Leon, 2010).
Requisites for the additional authority of agent in cases of necessity
1. Real existence of emergency;
2. Inability of the agent to communicate with the principal;
3. Exercise of additional authority is for the principal’s protection; and
4. Adoption of fairly reasonable means, premises duly considered.

Rule regarding double agency

GR: It is disapproved by law for being against public policy and sound morality.
XPN: Where the agent acted with full knowledge and consent of the principals.
Acts that a principal may delegate to his agent
GR: What a man may do in person, he may do thru another.
XPNs:
1. Personal acts
2. Criminal acts or acts not allowed by law (De Leon, 2014).

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Q: A granted B the exclusive right to sell his brand of Maong pants in Isabela, the price for his
merchandise payable within 60 days from delivery, and promising B a commission of 20% on all sales.
After the delivery of the merchandise to B but before he could sell any of them, B’s store in Isabela was
completely burned without his fault, together with all of A's pants. Must B pay A for the lost pants? Why?
(1999 BAR)
A: The contract between A and B is a sale not an agency to sell because the price is payable by B upon 60 days
from delivery even if B is unable to resell it. If B were an agent, he is not bound to pay the price if he is unable to
resell it. As a buyer, ownership passed to B upon delivery and, under Art. 1504, the thing perishes for the owner.
Hence, B must still pay the price.
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Proving the existence of principal-agent relationship through mere representation
Mere representation of an alleged agent is not sufficient to prove the existence of a principal-agent relationship. The
declarations of the agent alone are generally insufficient to establish the fact or extent of agency. It is a settled rule
that the persons dealing with the assumed agent are bound at their peril, if they would hold the principals liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to establish it (Sps. Yu v. Pan American World Airways, Inc., G.R. No. 123560, March
27, 2000).

Q: A foreign manufacturer of computers and a Philippine distributor entered into a contract whereby
the distributor agreed to order 1,000 units of the manufacturer's computers every month and to resell
them in the Philippines at the manufacturer's suggested prices plus 10%. All unsold units at the end of
the year shall be bought back by the manufacturer at the same price they were ordered. The
manufacturer shall hold the distributor free and harmless from any claim for defects in the units. Is the
agreement one for sale or agency? (2000 BAR)
A: The contract is one of agency not sale. The notion of sale is negated by the following indicia: (1) the price is
fixed by the manufacturer with the 10% mark-up constituting the commission; (2) the manufacturer reacquires
the unsold units at exactly the same price; and (3) warranty for the units was borne by the manufacturer. The
foregoing indicia negate sale because they indicate that ownership over the units was never intended to transfer
to the distributor.
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Agency v. Guardianship

BASIS AGENCY GUARDIANSHIP

As to who they represent
As to the source of authority
As to the appointing
authority
As to being subject to the
person they represent
As to liability
Agent represents a capacitated person. Guardian represents an
incapacitated person.
Agent derives authority from the Guardian derives authority
principal. from the court.
Agent is appointed by the principal and Guardian is appointed by the
can be removed by the latter. court, and stands in loco
parentis.
Agent is subject to directions of the Guardian is not subject to the
principal. directions of the ward, but
must act for the ward’s benefit.
Agent can make the principal Guardian has no power to
personally liable. impose personal liability on the
ward.

Agency v. Judicial Administration

BASIS AGENCY JUDICIAL ADMINISTRATION

As to the source of authority
As to whom they represent
As to the requirement of bond
As to control of the agent/
Administrator
Agent is appointed by the
principal.
Represents the principal.
Agent does not file a bond.
Agent is controlled by the
principal thru the agreement.
Judicial Administrator is
appointed by the court.
Represents not only the court but
also the heirs and creditors of the
estate.
Judicial Administrator files a
bond.
His acts are subject to specific
orders from the court.
Agency v. Lease of Services

BASIS AGENCY LEASE OF SERVICES

As to representation by the Agent represents the principal. Worker or lessor of services does
agent or worker not represent his employer.
As to termination of Relationship can be terminated Generally, relationship can be
relationship at the will of either principal or terminated only at the will of
agent. both.
As to the kind of function he Agent exercises discretionary Employee has ministerial
exercises powers. functions.

Agency v. Trust

BASIS AGENCY TRUST

As to the capacity to hold title
over the property
As to his actions
As to the termination of the
relationship
As to the scope of authority
over property
As to the binding effect of the
contracts entered by them
As to its creation
Agent usually holds no title at all.
Agent usually acts in the name of
the principal.
Agency usually may be
terminated or revoked any time.
Agency may not be connected at
all with property.
Agent has authority to make
contracts which will be binding
on his principal.
Agency is really a contractual
relation.
Trustee may hold legal title to the
property.
Trustee may act in his own name.
Trust usually ends by the
accomplishment of the purposes
for which it was formed.
Trust involves control over
property.
Trustee does not necessarily or
even possess such authority to
bind the trustor or the cestui que
trust.
Trust may be the result of a
contract, it may also be created
by law.

POWERS
Kinds of agency as to extent of powers conferred
An agency may be couched in:
1. General terms – It is one which is created in general terms and is deemed to comprise only acts of
administration (NCC, Art. 1877).
2. Specific terms – It is necessary to perform any act of strict ownership (De Leon, 2010).

Instances when the act of an agent is binding to the principal

1. When the agent acts as such without expressly binding himself or does not exceed the limits of his authority
(NCC, Art. 1897).
2. If principal ratifies the act of the agent which exceeded his authority (NCC, Art. 1898).
3. Circumstances where the principal himself was, or ought to have been aware (NCC, Art. 1899).
4. If such act is within the terms of the power of attorney, as written (NCC, Arts. 1900&1902).
5. Principal has ratified, or has signified his willingness to ratify the agent’s act (NCC, Art 1901).

Effects of the acts of an agent

1. With authority
a. In principal’s name – Valid
b. In his own name – Not binding on the principal; agent and stranger are the only parties, except regarding
things belonging to the principal or when the principal ratifies the contract or derives benefit there from.
2. Without authority
a. In principal’s name – Unenforceable but may be ratified, in which case, may be validated retroactively from the
beginning.
b. In his own name – Valid on the agent, but not on the principal.

Rule as to when the principal is not bound by the act of the agent
1. GR: When the act is without or beyond the scope of his authority in the principal’s name.

XPNs:
a. Where the acts of the principal have contributed to deceive a 3 rd person in good faith.
b. Where the limitation upon the power created by the principal could not have been known by the 3 rd person.
c. Where the principal has placed in the hands of the agent instruments signed by him in blank.
d. Where the principal has ratified the acts of the agent.

2. GR: When the act is within the scope of the agent’s authority but in his own name.

XPN: When the transaction involves things belonging to the principal (NCC, Art. 1883).
NOTE: The limits of the agent’s authority shall not be considered exceeded should it have been performed in a
manner more advantageous to the principal than that specified by him.
RIGHTS OF AGENTS
Instances when the agent may retain in pledge the object of the agency (Legal Pledge)
1. If principal fails to reimburse the agent the necessary sums, including interest, which the latter advanced for
the execution of the agency (NCC, Art. 1912).
2. If principal fails to indemnify the agent for all damages which the execution of the agency may have caused
the latter, without fault or negligence on his part (NCC, Art. 1913).

Rule where two persons deal separately with the agent and the principal
If the two contracts are incompatible with each other, the one of prior date shall be preferred. This is subject
however to the rule on double sale under Art. 1544 of the NCC.
NOTE: Rules of preference in double sale
1. Personal property – possessor in good faith
2. Real property
a. Registrant in good faith
b. Possessor in good faith
c. Person with the oldest title in good faith (NCC, Art. 1544).

If agent acted in good faith, the principal shall be liable for damages to the third person whose contract must be
rejected. If agent is in bad faith, he alone shall be liable (NCC, Art. 1917).
A person acting as an agent cannot escape criminal liability by virtue of the contract of agency
The law on agency has no application in criminal cases. When a person participates in the commission of a
crime, he cannot escape punishment on the ground that he simply acted as an agent of another party (Ong v. CA,
G.R. No. 119858, April 29, 2003).
An agent cannot maintain an action against persons with whom they contracted on behalf of his
principal.
Agents are not a party with respect to that contract between his principal and third persons. As agents, they
only render some service or do something in representation or on behalf of their principals. The
rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter.
The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or non-
performance of the contract by the principal or by the other party thereto does not entitle him to maintain an
action on his own behalf against the other party for its breach.
An agent entitled to receive a commission from his principal upon the performance of a contract which he has
made on his principal's account does not, from this fact alone, have any claim against the other party for breach
of the contract, either in an action on the contract or otherwise.
An agent who is not a promisee cannot maintain an action at law against a purchaser merely because he is
entitled to have his compensation or advances paid out of the purchase price before payment to the principal
(Uy v. CA, G.R. No. 120465, September 9, 1999).
OBLIGATIONS OF AGENT
RESPONSIBILITIES AND OBLIGATIONS OF AN AGENT
Specific obligations of an agent to the principal
1. Carry out the agency (NCC, Art. 1884);
2. Answer for damages which through his non-performance the principal may suffer (Ibid.);
3. Finish the business already begun on the death of the principal (Ibid.);
4. Observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to
him by the owner in case he declines an agency, until an agent is appointed (NCC, Art. 1885);

NOTE: The owner shall as soon as practicable either appoint an agent or take charge of the goods (NCC, Art.
1885).
5. Advance the necessary funds should there be a stipulation to do so except when the principal is insolvent
(NCC, Art. 1886);
6. Act in accordance with the instructions of the principal (NCC, Art. 1887);
7. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal (NCC,
Art. 1888);
8. Answer for damages if there being a conflict between his interests and those of the principal, he should prefer
his own (NCC, Art. 1889);
9. Not to loan to himself if he has been authorized to lend money at interest (NCC, Art. 1890);
10. Render an account of his transactions 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 (NCC, Art. 1891);

NOTE: Every stipulation exempting the agent from the obligation to render an account shall be void [NCC, Art.
1891(2]).
11. Distinguish goods by countermarks and designate the merchandise respectively belonging to each principal,
in the case of a commission agent who handles goods of the same kind and mark, which belong to different
owners (NCC, Art. 1904);
12. Be responsible in certain cases for the acts of the substitute appointed by him (NCC, Art. 1892); (1999 BAR)
13. Pay interest on funds he has applied to his own use (NCC, Art. 1896);
14. Inform the principal, where an authorized sale of credit has been made, of such sale (NCC, Art. 1906);
15. Bear the risk of collection and pay the principal the proceeds of the sale on the same terms agreed upon with
the purchaser, should he receive also on sale, a guarantee commission (NCC, Art. 1907);
16. Indemnify the principal for damages for his failure to collect the credits of his principal at the time that they
become due (NCC, Art. 1908);
17. Be responsible for fraud or negligence (NCC, Art. 1909; De Leon, 2014).

NOTE: The court shall judge with more or less rigor, the fault or negligence of the agent, according to whether
the agency was or was not for compensation.
Instructions
Private directions which the principal may give the agent in regard to the manner of performing his duties as
such agent but of which a third party is ignorant. They are said to be secret if the principal intended them not to
be made known to such party (De Leon, 2010).
Authority v. Principal’s instructions

BASIS AUTHORIT INSTRUCTI

Y ONS
As to the Sum total of Contemplat
scope the powers es only a
committed private rule
to the agent of guidance
 by the to the agent;
principal. independen
t and
distinct in
character.
As to the Relates to Refers to
relationshi the the manner
p to the subject/bus or mode of
agent iness with agent’s
which the action.
agent is
empowered
to deal or
act.
As to third Limitations Without
persons of authority significance
are as against
operative as those with
against neither
those who knowledge
have/charg nor notice
ed with of them.
knowledge
of them.
As to Contemplat Not
purpose ed to be expected to
made be made
known known
to third to those
persons with whom
dealing with the agent
the agent. deals (De
Leon, 2010).
Breach of loyalty of the agent
In case of breach of loyalty, the agent is NOT entitled to commission
The forfeiture of the commission will take place regardless of whether the principal suffers any injury by reason
of such breach of loyalty. It does not even matter if the agency is for a gratuitous one, or that the principal
obtained better results, or that usage and customs allow a receipt of such a bonus.
NOTE: An agent has an absolute duty to make a full disclosure or accounting to his principal of all transactions
and material facts that may have some relevance with the agency (Domingo v. Domingo, G.R. No. L-30573,
October 29, 1971).
When the obligation to account not applicable
1. If the agent acted only as a middleman with the task of merely bringing together the vendor and vendees.
2. If the agent informed the principal of the gift/bonus/profit he received from the purchaser and his principal
did not object thereto.
3. Where a right of lien exists in favor of the agent (De Leon, 2014).
SUMMARY OF RULES : ACTS OF AN
AGENT In behalf of the principal, within
the scope of authority

1. Binds principal;
2. Agent not personally liable

Without or beyond scope of authority

Contract is unenforceable as against the
principal but binds the agent to the third
person.
Binding on the principal when:
1. Ratified or
2. The principal allowed the agent to act
as though he had full powers.

Within the scope of authority but in the

agent’s name

1. Not binding on the principal;

2. Principal has no cause of action against
the 3rd parties and vice versa

When the transaction involves things

belonging to the principal, his remedy is
to sue the agent for damages because of
failure to comply with the agency.
Within the scope of the written power
of attorney but agent has actually
exceeded his authority according to an
understanding between him and the
principal

1. Insofar as 3rd persons are concerned

(not required to inquire further than the
terms of the

written power), agent acted within scope

of his authority;
2. Principal is estopped.

With improper motives

Motive is immaterial; as long as within
the scope of authority, valid.
With misrepresentations by the agent

1. Authorized – principal still liable

2. Beyond the scope of the agent’s
authority

GR: Principal not liable

XPN: Principal takes advantage of a
contract or receives benefits made under
false representation of his agent.
Mismanagement of the business by the
agent

1. Principal still responsible for the acts

contracted by the agent with respect to
3rd persons;
2. Principal, however, may seek recourse
from the agent.

Tort committed by the agent

Principal civilly liable so long as the tort
is committed by the agent while
performing his duties in furtherance of
the principal’s business.
Agent in good faith but prejudices 3rd
parties
Principal is liable for damages.
 EXPRESS v. EXPRESS IMPLIED
IMPLIED AGENCY AGENCY
AGENCY
BASIS
As to One where One which is
definition the agent implied
has been from the
actually acts of the
authorized principal.
by the
principal,
either orally
or in
writing.
As to When it is When it is
authority directly incidental to
conferred by the
words. transaction
or
reasonably
necessary to
accomplish
the purpose
of the
agency, and
therefore,
the principal
is deemed to
have
actually
intended the
agent to
possess.
Scope of the agent’s authority as to
third persons
It includes not only the actual authorization
conferred upon the agent by his principal
but also that which is apparent or impliedly
delegated to him (De Leon, 2010).
Q: When is a third person required to
inquire into the authority of the agent?
A:
1. Where authority is not in writing– Every
person dealing with an assumed agent
must discover upon his peril, if he would
hold the principal liable, not only the fact
of the agency but the nature and extent of
the authority of the agent.
2. Where authority is in writing – 3rd
person is not required to inquire further
than the terms of the written power of
attorney.

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NOTE: A third person with whom the
agent wishes to contract on behalf of the
principal may require the presentation of
the power of attorney or the instructions
as regards the agency (NCC, Art. 1902).
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Q: When may the actual or apparent
authority of the agent bind the
principal?
A: The principal is bound by the acts of
the agent on his behalf, whether or not
the third person dealing with the agent
believes that the agent has actual
authority, so long as the agent has actual
authority, express or implied.
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Doctrine of Apparent Authority
The principal is liable only as to third
persons who have been led reasonably to
believe by the conduct of the principal
that such actual authority exists, although
none has been given (De Leon, 2014).
Apparent authority v. Authority by
estoppel
BASIS Apparent Authority
Authority by
Estoppel
As to the That which Arises when
knowledge is though the
of the not actually principal, by
principal of granted, the his culpable
the principal negligence,
authority knowingly permits his
of the permits the agent to
agent agent to exercise
exercise or powers not
holds him granted to
out as him, even
possessing. though the
principal
may have
no notice or
knowledge
of the
agent’s
conduct.
As to the Founded in Founded on
establishm conscious the
ent of the permission principal’s
authority of acts negligence
beyond the in failing
powers properly to
granted. supervise
the affairs
of the agent.
AGENCY BY ESTOPPEL
It is when one leads another to believe that a certain person is his agent, when as a matter of fact such is not
true, and the latter acts on such misrepresentation, the former cannot disclaim liability, for he has created an
agency by estoppel (Paras, 1969).
Rules regarding estoppel in agency
1. Estoppel of agent –One professing to act as agent for another may be estopped to deny his agency both as
against his asserted principal and the third persons interested in the transaction in which he engaged.
2. Estoppel of principal
a. As to agent – One who knows that another is acting as his agent and fails to repudiate his acts, or accepts the
benefits, will be estopped to deny the agency as against the other.
b. As to sub-agent – To estop the principal from denying his liability to a third person, he must have known or be
charged with knowledge of the fact of the transaction and the terms of the agreement between the agent and
sub-agent.
c. As to third persons – One who knows that another is acting as his agent or permitted another to appear as his
agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the
exercise of reasonable prudence, is estopped to deny the agency.
3. Estoppel of third persons – A third person, having dealt with one as agent may be estopped to deny the agency
as against the principal, agent, or third persons in interest.
4. Estoppel of the government – The government is not estopped by the mistake or error on the part of its agents.

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Q: In an expropriation case between RP and several property owners in Mandaluyong for construction
of the EDSA-Shaw Boulevard Overpass Project, decision was rendered against the RP. The RP through
the OSG received the decision on October 7, 2002 but it was only October 20, 2003 that RP filed a
petition for certiorari. It resorted to an independent civil action because it failed to file within the 15-
day reglementary period. Is the Republic bound and put in estoppel by the gross negligence/mistake of
its agent/former counsel?
A: While the Republic or the government is usually not estopped by the mistake or error on the part of its
officials or agents, the Republic cannot now take refuge in the rule as it does not afford a blanket or absolute
immunity. Our pronouncement in Republic v. CA is instructive: the Solicitor-General may not be excused from its
shortcomings by invoking the doctrine as if it were some magic incantation that could benignly, if arbitrarily,
condone and erase its errors.
The rule on non-estoppel of the government is not designed to perpetrate an injustice. In general, the rules on
appeal are created and enforced to ensure the orderly administration of justice. The judicial machinery would
run aground if late petitions, like the present one, are allowed on the flimsy excuse that the attending lawyer
was grossly lacking in vigilance (Leca Realty Corp. v. Republic, G.R. Nos. 155605 & 160179, September 27, 2006).
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Implied agency v. Agency by estoppel

BASIS IMPLIED AGENCY BY

AGENCY ESTOPPEL
As to Agent is a If caused by
liability true agent, the “agent”,
between with rights he is not
principal and duties considered
and agent of an agent. a true agent,
hence, he
has no
rights as
such.
As to
liability to 1. The 1. If caused
third principal is by the
persons always principal, he
liable; is liable, but
2. The agent only if the
is never 3rd person
personally acted on the
liable. misrepresen
 tation;
2. If caused
by the agent
alone, only
the agent is
liable.

Commission agent
He is one engaged in the purchase and sale of personal property for a principal, which, for this purpose, has to
be placed in his possession and at his disposal.
Broker
He is a middleman or intermediary who in behalf of others and for a commission or fee negotiates
contracts/transactions relating to real or personal property.
NOTE: Distinguished from an agent: An agent is authorized to enter into judicial acts in behalf of the principal
but a true broker is merely an intermediary between the parties and he has no power to enter into a contract in
behalf od any of the paries (Pacific Commercial Co. v. Yatco, 68 Phil. 398, 1939).
Rules
1. Efficient and procuring cause – a principle in the law on agency whereby the broker, to be entitled to
compensation, must be the efficient agent or procuring cause of the sale;
2. Ready-willing-and-able Rule – a principle which states that for a broker to be entitled to commission, he must
provide a person who is ready, willing and able both to accept and live up to the terms offered by his principal
(Albano, 2013).
3. Procuring Cause - Procuring cause is meant to be the proximate cause. The term procuring cause, in
describing a brokers activity, refers to a cause originating a series of events which, without break in their
continuity, result in accomplishment of prime objective of the employment of the broker producing a purchaser
ready, willing and able to buy real estate on the owners terms. A broker will be regarded as the procuring cause
of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting
in a
sale are begun. The broker must be the efficient agent or the procuring cause of the sale. The means employed
by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from his
efforts acting as broker (Medrano, et. al. v. CA, et. al., G.R. No. 150678, February 18, 2005).

Factorage
It is the compensation of a factor or commission agent.
Ordinary commission
It is the compensation for the sale of goods which are placed in the agent’s possession or at his disposal.
Guarantee commission (2004 BAR)
It is the fee which is given in return for the risk that the agent has to bear in the collection of credits.
The purpose of the guarantee commission is to compensate the agent for the risks he will have to bear in the
collection of the credit due the principal (De, Leon, 2014).
Del credere agent
He is the agent who guarantees payment of the customer’s account in consideration of the commission (De
Leon, 2014).
A del credere agent may sue in his name for the purchase price in the event of non-performance by the buyer
(De Leon, 2014).
AGENCY COUCHED IN GENERAL TERMS
It is one which is created in general terms and is deemed to comprise only acts of administration (NCC, Art.
1877).
Acts of administration
Refers to those acts which do not imply the authority to alienate for the exercise of which an express power is
necessary (De Leon, 2014).
NOTE: Payment is an act of administration when it is made in the ordinary course of management (Art. 1878; De
Leon, 2014).
The making of customary gifts for charity, or those made to employees in the business managed by the agent are
considered acts of administration (NCC, Art. 1878; De Leon, 2014).
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Q: P granted to A a special power to mortgage the former’s real estate. By virtue of said power, A secured
a loan from C secured by a mortgage on said real estate. Is P personally liable for said loan?
A: NO. A special power to mortgage property is limited to such authority to mortgage and does not bind the
grantor personally to other obligations contracted by the grantee in the absence of any ratification or other
similar act that
would estop the grantor from questioning or disowning such other obligations contracted by the grantee.
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AGENCY REQUIRING SPECIAL POWER OF ATTORNEY
Special power of attorney (SPA)
It is an instrument in writing by which one person, as principal, appoints another as his agent and confers
upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal with a
primary purpose to evidence agent’s authority to third parties with whom the agent deals (De Leon, 2014).
Intervention of a notary public in the validity of an SPA
GR: A power of attorney is valid although no notary public intervened in its execution (Barretto v. Tuason,
G.R. Nos. L-36811, 36827, 36840, 36872, March 31, 1934).
XPN: When SPA is executed in a foreign country, it must be certified and authenticated (Sec. 24, Rule 132,
Rules of Court).
NOTE: The failure to have the special power of attorney (executed in a foreign country) authenticated is
not merely a technicality – it is a question of jurisdiction. Jurisdiction over the person of the real party-in-
interest was never acquired by the courts (Ibid.).
A special power of attorney is required (1992, 2004 BAR)
1. To create or convey real rights over immovable property.
2. To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration.
3. To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the
things which are under administration.
4. To lease any real property to another person for more than one year.
5. To make such payments as are not usually considered as acts of administration.
6. To obligate principal as guarantor or surety.
7. To bind the principal to render some service without compensation.
8. To bind the principal in a contract of partnership.
9. To ratify obligations contracted before the agency.
10. To accept or repudiate an inheritance.
11. To effect novation which put an end to obligations already in existence at the time the agency was
constituted.
12. To make gifts, except customary ones for charity or those made to employees in the business managed
by the agent.
13. 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.
14. Any other act of strict dominion.
15. To waive an obligation gratuitously (NCC, Art. 1878).

Limitations to a special power of attorney

1. A special power to sell excludes the power to mortgage (NCC, Art. 1879).
2. A special power to mortgage does not include the power to sell (Ibid).
3. A special power to compromise does not authorize submission to arbitration (NCC, Art. 1880).

NOTE: The scope of the agent’s authority is what appears in the written terms of the power of attorney.
While third persons are bound to inquire into the extent or scope of the agent’s authority, they are not
required to go beyond the terms of the written power of attorney. Third persons cannot be adversely
affected by an understanding between the principal and his agent as to the limit of the latter’s authority. In
the same way, third persons need not concern themselves with instruction given by the principal to his
agent outside of the written power of attorney (Siredy Enterprises, Inc. v. CA, G.R. No. 129039, September 27,
2002).
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Q: X was the owner of an unregistered parcel of land in Cabanatuan City. As she was abroad, she
advised her sister Y via overseas call to sell the land and sign a contract of sale on her behalf. Y thus
sold the land to B1 on March 31, 2001 and executed a deed of absolute sale on behalf of X. B1 fully
paid the purchase price. B2, unaware of the sale of the land to B1, signified to Y his interest to buy it
but asked Y for her authority from X. Without informing X that she had sold the land to B1, Y sought
X for a written authority to sell. X e-mailed Y an authority to sell the land. Y thereafter sold the land
on May 1, 2001 to B2 on monthly installment basis for two years, the first installment to be paid at
the end of May 2001. Who between B1 and B2 has a better right over the land? Explain. (2010 BAR)
A: B-2 has a better title. This is not a case of double sale since the first sale was void. The law provides that
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 (NCC, Art. 1874). The property was sold by Y to B1 without any
written authority from the owner X. Hence, the sale to B1 was void.
AGENCY BY OPERATION OF LAW
Instances where an agency is created by operation of law
1. When the agent withdraws from the agency for a valid reason, he must continue to act until the principal
has had a reasonable opportunity to take the necessary steps like the appointment of a new agent to
remedy the situation caused by the withdrawal (NCC, Art. 1929).
2. In case a person declines an agency, he is bound to observe the diligence of good father of the family in
the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an
agent (NCC, Art. 1885).
NOTE: The law reconciles the interests of the agent with those of the principal, and if it permits the withdrawal
of the agent, it is on the condition that no damage results to the principal, and if the agent desires to be relieved
of the obligation of making reparation when he withdraws for a just cause, he must continue to act so that no
injury may be caused to the principal (De Leon, 2010).