From Atty. Deanabeth C.

Gonzales, Professor Rizal Technological University, CBET

Sept. 13, 2020

For everyone who will get hold of a copy or portions of this material:

This is posted online in the light of the pandemic covid-virus which adversely affect not just the
Philippines but the entire world. It is a privilege for me to teach part-time in a state university for more
than a decade now. I teach subjects in the College of Business and Entrepreneurial Technology
(CBET), subjects which are all part of the Board Exam for CPAs. Being a CPA-Lawyer, I know for a
fact that having a book is a must in studying any law subject. However, teaching in a school where
many students cannot afford to buy a book, my former students in the past years can attest to the fact
that I went out of my way to pay for books in advance and allow some students to pay me in
installments over the entire semester just for them to have a book. Nevertheless, some students still
cannot afford to buy a book, and attended classes by just walking to school. Being a product of the
Public School System in the Philippines, up to college in PUP Sta. Mesa for Accountancy, I fully
understand the money issue in buying books for many students.

With Social Distancing rules and hygienic issues during this pandemic, students are not encouraged
to make use of the university physical library and the online library is not yet that fully operational.
Hence, I decided to post portions of some books online to help those students who cannot afford to
buy a book, specially now that unemployment in the country has risen at all-time high.

Portions of the book were copied by former CBET students from the book Law on Sales, Agency and
Bailments by Hector De Leon (definitely not the latest edition) and from other books/sources (i.e., Law
on Sales, Agency, Pledges and Mortgages by Carlos Suarez, Alexander Suarez, 2008 ed., etc.) when
they were asked to report in class. I wasn’t too happy to see reports which were mostly copied from
the books but I got the softcopies of their reports sent to my email. In the end, I found myself having a
softcopy of many portions of the books on Law of Sales. There is no copyright infringement here
because it is for educational purposes and only portions of the book will be posted to help students
who cannot afford to buy a book in this pandemic times.

Note that the postings will not cover the entire assignment given for each session or particular day.
Rather, the postings will explain only some portions of the assignment for the day based on the books
previously used by the former CBET students. There is no new Civil Code to date so that the contents
of the books still apply. I will not prescribe any book on Sales for this semester in view of the financial
difficulty for most families. Students can buy (but NO available new stock of books in Rex Bookstore
per my online search as of September 10, 2020 nor in National Bookstores) or borrow any edition of
the book on sales by any author. Each student must download the proper civil code provisions from
the internet, make use of whatever postings available in the group/class messenger that can be
helpful for your classmates or do own research. The postings are for personal use of the student only
and not for mass production.

With no intent to have financial gain, but only to help students from the less privilege sector of our
society during this pandemic times, I hope many will benefit from this posting.

It may seem to be a cliché that “The Youth is the Hope of the Fatherland,” spoken by Dr. Jose Rizal.
Yet, in times like this, we need to give hope and to assist all students who will face more challenging
times ahead.

More power to all Filipinos and to all educators who in this pandemic times make extra efforts to
educate all learners.

May God who made heaven and earth continue to bless us all through Jesus Christ, by whose
blood shed on the cross save us all. Maraming salamat po.
LAW ON SALES – Notes19
Ref. book: Law on Sales, by Hector De Leon.

AGENCY
Art. 1868. By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of
the latter.
Concept of contract of agency.
Article 1868 defines the contract of agency. The definition, which is very broad enough to
include all situations in which one person is employed to render service for another, excludes,
however, from its concept the relationship of employer and employee (Art. 1700), of master and
servant (Art. 1680), and of employer and independent contractor (Art. 1713).
Agency is a relationship which implies a power in an agent to contract with a third person
on behalf of a principal. It is this power to affect the principal’s contractual relations with third
persons that differentiates the agent from the employee, the servant, and the independent
contractor.
EXAMPLES:
P, owner of a land, wants to construct a building on it. He may do any of the ff:
(1) He may hire C, a building contractor, to construct the building with the materials and
labor to be furnished by C; or
(2) He himself may construct the building, buying the necessary materials and employing
W, etc. (workers) who shall construct the building under his direction and supervision;
or
(3) He may secure the services of A to supervise and to act for him in all matters
connected with the construction work.
“Agency” is sometimes used in a sense other than to denote the relationship of principal
and agent.
(1) Thus, it may be used to denote the place at which the business is transacted. When
used in the sense of place of business, the relationship of principal and agent is not
necessarily implied.
(2) Likewise, the term may be used in the sense of instrumentality by which a thing is
done.
(3) It is also used to refer to the exclusive right of a person to sell a product of another in a
specific territory.
Characteristic of a contract of agency.
(1) Consensual because it is perfected by mere consent
(2) Principal because it can stand alone without the need of another contract;
(3) Nominate because it has its own name;
(4) Unilateral if it is gratuitous because it creates obligations for only one of the parties,
i.e., the agent; or bilateral if it is for compensation because it gives rise reciprocal
rights and obligations; and
(5) Preparatory because it is entered into as a means to an end, i.e., the creation of other
contracts.
Essential elements of agency.
(1) There is consent, express or implied, of the parties to establish the relationship;
(2) The object is the execution of a juridical act in relation to this persons,
(3) The agent acts as a representative and not for himself; and
(4) The agent acts within the scope of his authority,
In addition, the parties must be competent under the law to act as principal and agent.

Nature, basis, and purpose of agency.

The word “agency” when used in its broadest meaning is both a contract and a
representative relation.
(1) Since agency is a contract, the following requisites must concur: (a) consent of the
contracting parties; (b) object which is the subject matter of the contract; and (c) cause
which is established. (Art. 1318.) Article 1868 defines agency from the viewpoint of a
contract.

(2) Agency is also a representative relation. The agent renders some service or does
something “in representation or on behalf of another.” (Art. 1868) Representation
constitutes the basis of agency.

(3) The purpose of agency is to extend the personality of the principal through the acts of
the agent. It enables the activity of man which is naturally limited in its exercise by his
physiological conditions to be extended, permitting him to perform or carry on many
different activities through another, when his physical presence is impossible or
inadvisable, at the same time in different places. (see 11Manresa 434)

Parties to the contract.

The two (2) parties to the contract are the:
(1) Principal. – one whom the agent represents and from whom he derives his
authority; he is the person represented; and
(2) Agent. – One who acts for and represents another; he is the person acting in a
representative capacity. The agent may be performing his tasks as attorney,
proxy, delegate, or representative.
Agency implies the contemporaneous existence of both the principal and agent and there
is no agency unless one is acting for and in behalf of another with the latter’s express or implied
consent or authorization. The principal or agent may be either a natural person or a judicial entity.
Capacity of the parties.
(1) Any person who is capacitated under the law (see Art. 11327, 1329) to act in his own right
may be a principal.
(2) In this case of the agent, since he assumes no personal liability, he does not have to
process full capacity to act insofar as third persons are concerned. But persons who are
absolutely incapacitated, such as insane persons, cannot be agents. Insofar as his
obligations to his principal are concerned, the agent must be competent to bind himself.
Acts that may/may not be delegated to agents.
 (1) In general. – The general rule is that what a man may do in person, he may do through
another. Thus,
(2) Exemption. – Some acts, however, cannot be done through an agent.
(a) Personal acts. - if personal performance is required by law or public policy or the
agreement of the parties, the doing of the act by a person on behalf of another does
not constitute performance by the latter.
1.) The right to vote during election cannot be delegated because voting is considered
a purely personal act under the law. A member of the board of directors of a
corporation cannot validly act by proxy because his right to attend the board
meetings is personal to him. (Sec. 25, last par., Corporation Code.)
2.) The making of a will is a strictly personal act; it cannot be accomplished through
the instrumentality of an agent or an attorney. (Art. 784.)
3.) Obviously, statements which are required to be made under oath should be made
personally.
4.) Under the Corporation Code, a member of the board of directors or trustless of a
corporation cannot validly act by proxy because his right to attend board meetings
is personal to him. (see Sec. 25, last par., B.P. Blg. 68.)
5.) An agent cannot delegate to a sub-agent the performance of acts which he has
been appointed to perform in person. (see Art. 1892-1893.)

(b) Criminal acts or acts not allowed by law. – An attempt to delegate to another
authority to do an act which, if done by the principal would be illegal, is void. (2 C.J.
1039.)
Nature of relations between principal and agent.
(1) Relations fiduciary in character. – The relations of an agent to his principal are
fiduciary in character since they are based on trust and confidence, on a degree which
varies considerably from situation to situation.
(2) Agent estopped from asserting interest adverse to his principal . – In regard to property
forming the subject matter of the agency, the agent is estopped form asserting or
acquiring a title adverse to that principal. His position is analogous to that of a trustee
and he cannot, consistently with the principles of good faith, be allowed to create in
himself an interest in opposition to that of his principal.
(3) Agent must not act for an adverse party.- An agent cannot serve two (2) masters,
unless both (e.g., real estate broker) with no independent initiative.
(4) Agent must not use or disclose secret information. –Requirements of good faith and
loyalty demand of the agent the duty not to use divulge confidential information
obtained in the course of his agency for his own benefit to the principal’s injury and
expense.
Agency distinguished from similar contracts.
(1) Loan. – An agent may be given funds by the principal to advance the latter’s business,
while a borrower is given money for purposes of his own and he must generally return it
whether or not his own business is successful. A lot, however, depends on the intent of
the parties. (2 C.J. 1030.)
(2) Lease of service. –In agency, the basis is representation, while in lease of service (Arts.
1644, 1689.) it is employment. In agency, the agent exercises discretionary powers, while
in lease of service, the lessor (like a servant) ordinarily performs only ministerial functions.
(3) Independent contact. –Where one party to a contract undertakes to accomplish a certain
result (as the construction of a house) according to his own methods and without being
 subject to the other party’s control except as to the result of the work, the contract is one
for a piece of work (Art.1713.) and not agency. (Fressel vs. Mariano Uy Chaco Sons &
Co., 34 Phil. 122.)
In the agency, the agent is subject to control and direction of the principal whom he
presents. In a contract for a piece of work, the independent contractor exercises his
employment independently, and not in representation of the employer.
(4) Partnership. –While an agent acts only for his principal, a partner acts not only for his co-
partners and the partnership but also as principal of himself. (Arts. 1767, 1803.)
(5) Negotiorium gestio. –In both agency and negotiorium gestio or the management of the
business or affairs of an absentee (Art. 2144.), there is representation. The distinction lies
in the fact that in the first, the presentation is expressly conferred, while in the second, it is
not only without the authority of the owner of the business but is without his knowledge.
While the agent acts according to the express will of the principal, the gestor acts
according to the presumed will of the owner by exercising ‘all the diligence of a good
father of a family.’ (Art. 2145.)
Agency is a contract, while negotiorum gestio is a quasi-contract. Hence, their juridicial
relations are different.
(6) Brokerage. – A commission agent is one engaged in the purchase or sale for another of
personal property which, for this purpose is placed in his possession and at his disposal. A
broker has no relation with the thing he buys or sells. He is merely an intermediary between
the purchaser and the vendor.

(7) Sale. –An agency to sell is different from sale. (Art. 1458, Civil Code.) For the distinctions
between the two and example, see Article 1466, Sales. (par. 1.)
Art. 1869. Agency may be express, or implied from the acts of the principals, 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.
Agency may be oral, unless the law requires a specific form.
Kinds of agency. Agency may be classified as follows
(1) As to manner of its creation:
(a) Express. – One where the agent has been actually authorized by the principal either
orally or in writing (Art. 1869.); or
(b) Implied. - One which 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 (Ibid.) or from the acts of the agent which carry out the
agency, or from his silence or inaction according to the circumstances. (Art. 1870)
The enumeration of cases of implied agency in Articles 1869 and 1870 is not exclusive.
An implied agency is an actual agency as much as an express agency.
(2) As to its character:
(a) Gratuitous. –One where the agent receives no compensation for his services. (Lbid.)
(b) Compensated or Onerous. – One where the agent receives compensation for his
services. (lbid.)
(3) As to extent of business cobered:
(a) General. –One which comprises all the business of the principal (Art. 1876.); or
 (b) Special. –One which comprises one or more specific transactions. (Ibid)

(4) As authority conferred:

(a) Couched in general terms. –One which is created in general terms and is deemed to
comprise only acts of administration (Art. 1877.); or

(b) Couched in specific terms. –One authorizing only the performance of a specific act or
acts. (see Art. 1878.)

(5) As to its nature and effects:

(a) Ostensible or Representative. –One where the agent acts in the name and
representation of the principal; or
(b) Simple or Commission. –One where the agent acts for the account of the principal but
in his own name. (see Art. 1882.)

Form of agency.
In general, there are no formal requirements governing the appointment of an agent. The
agent’s authority may be oral or written. An instance when the law requires a specific form for the
agency is Article 1874.
Art. 1870. Acceptance by the agent may also be express, or implied from his acts
which carry out the agency, or from his silence or inaction according to the
circumstances.
Form of acceptance by agent.
Since agency is a contract, there must be consent by both parties. An agency is either
express or implied, and this is true on the part of the principal (Art. 1869.) as well as on
that of the agent. (Art. 1870.)