Art. 1878. Special powers of attorney are necessary in the (3) Nature, not form of authorization.
ation. — Article 1878 refers to
following cases:
(1) To make such payments as are not usually considered as
acts of administration;
(2) To effect novations which put an end to obligations
already in existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or
for a valuable consideration;
(6) To make gifts, except customary ones for charity or those
made to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent
and indispensable for the preservation of the things which
are under administration;
(8) To lease any real property to another person for more
than one year;
(9) To bind the principal to render some service without
compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable
property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the
agency;
(15) Any other act of strict dominion. (n)
When special powers are necessary
(1) Acts of strict dominion. — In the fifteen cases enumerated
are general acts of strict dominion or ownership as
distinguished from acts of administration.
(2) Construction of powers of attorney. —Powers of attorney
are generally construed strictly and courts will not infer or
presume broad powers from deeds which do not sufficiently
include property or subject under which the agent is to deal.
The act done must be legally identical with that authorized to
be done. However, the rule is not absolute and should not be
applied to the extent of destroying the very purpose of the
power. Authority in the cases enumerated in Article 1878
must be couched in clear and unmistakable language. In
other cases, the authority need not be with special power,
but may arise by implication if it is reasonably necessary to
the exercise of other powers which are bestowed.
the nature of the authorization, not its form.
(a) A power of attorney is valid although no notary public
intervened in its Article 1878 does not state that the special
authority be in writing. The same must be duly established by
evidence other than the self-serving assertion of the party
claiming that such authority was verbally given him. A
notarized power of attorney, however, carries the evidentiary
weight conferred upon it with respect to its due execution.
(b) The special power of attorney can be included in a general
power of attorney (hence, there is no need to execute a
separate and special power) when it specifies therein the act
or transaction for which the special power is required. The
requirement of a special power of attorney is met if there is a
clear mandate from the principal specifically authorizing the
performance of act.
To make payment
If the payment is usually considered an act of administration,
no special power of attorney is needed. However, some acts
of administration carry with them the exercise of acts of
dominion, e.g. the sale by an administrator of fertile land or
the products of the land. (Paras, citing Manresa)
Payment is the delivery of money or the performance in any
other manner of an obligation. (Art. 1232.) It is an act of
ownership because it involves the conveyance of ownership
of money or property. But when payment is made in the
ordinary course of management, it is considered a mere act
of administration. It is included in an agency couched in
general terms and hence, no special power of attorney is
needed.
To effect novation
Novation is the extinction of an obligation through the
creation of a new one which substitutes it by changing the
object or principal conditions thereof, substituting a debtor,
or subrogating another in the right of the creditor. Note that
the obligations must already be in existence at the time the
agency was constituted.
To compromise, etc.
A compromise must, be strictly construed. The grant of
special power regarding one of the acts mentioned in No. 3 of
Article 1878 is not enough to authorize the others. A
judgment based on a compromise entered into by an
attorney without specific authority from the client is null and
void. Such judgment may be impugned and its execution
restrained in any proceeding by the party against whom it is
sought to be enforced.
(1) Compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one
already commenced. Arbitration is where the parties submit
their controversies to one or more arbitrators for decision.
These are acts of ownership since they involve the possibility
of disposing of the thing or right subject of the compromise
or arbitration. Confession of judgment stands on the same
footing as compromise of causes; so a counsel may not
confess judgment except with the knowledge and at the
instance of the client. But although the law expressly requires
a special power of attorney in order that one may
compromise an interest of another, it is neither accurate nor
correct to conclude that its absence renders the compromise
agreement void. In such a case, the compromise is merely
unenforceable. This results from its nature as a contract. It
must be governed by the rules and the law on contracts.
(2) A special power of attorney is also necessary with respect
to the authority of the agent to waive the right to appeal
from a judgment; objections to the venue of an action; and a
prescription already acquired. By prescription, one acquires
ownership and other real rights through the lapse of time. In
the same way, rights and actions are lost by prescription.
To waive an obligation gratuitously
This is condonation or remission. The agent cannot waive a
right belonging to the principal without valuable
consideration or even for a nominal consideration. He cannot
bind the principal who is the obligee unless especially
authorized to do so.
A waiver may not be inferred when the terms thereof do not
explicitly and clearly prove an intent to abandon the right.
To convey or acquire immovable
No. (5) applies whether the contract is gratuitous or onerous.
It refers only to immovables. Nos. (5) and (12) refer to sales
made by an agent for a principal and not to sales made by the
owner personally to another, whether that other be acting
personally or through a representative.
A buyer has every reason to rely on a person’s authority to
sell a particular property owned by a corporation on the basis
of a notarized board resolution. The notarial
acknowledgment in a document is a prima facie evidence of
the fact of its due execution.
To make gifts
Gift or donation is an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of another
who accepts it. An agent without special power from the
principal cannot make gifts. But the making of customary gifts
for charity, or those made to employees in the business
managed by the agent, are considered acts of administration.
To loan or borrow money
In a loan of money, the borrower “is bound to pay to the
creditor an equal amount of the same kind and quality.” The
power to lend or borrow money is one with much great
possibility of abuse and is not ordinarily incident to a general
managerial agency.
(1) The power to borrow any amount of money which the
agent deems necessary cannot be interpreted as also
authorizing him to use the money as he pleases.
(2) The exception in No. (7) refers to “borrow” and not to
“loan.” The agent, however, may be empowered to borrow
money. But the authority to borrow money for the principal is
not to be implied from the special power of attorney to
mortgage real estate.
(3) Authority to borrow money is rarely inferred unless such
borrowing is usually incident to the performance of acts
which the agent is authorized to perform for the principal, or
unless it is impossible for the agent to communicate with his
principal and borrowing is indispensable to the continuance
of the business or to prevent a very considerable loss.
Note that No. 7 refers only to money and not to other
fungible things.
To lease realty for more than one year
In the lease of things, the lessor gives to the lessee the
enjoyment or use of a thing for a price certain, and for a
period which may be definite or indefinite.
(1) An unrecorded lease of real estate is not binding upon
third persons. By implication, the lease of realty to another
person for one year or less is an act of mere administration
provided the lease is not registered.
(2) The requirement of special power of attorney extends to
renewal or extension of lease of real property to another.
(3) An agreement for the leasing of real property for a longer
period than one year is unenforceable unless made in writing.
It follows that even if the agent is especially authorized, the
lease is not enforceable against the principal if it is not in
writing.
No. 8 does not refer to lease of real property from another
person and to lease of personal property.
To bind the principal to render service gratuitously
The agent may, by contract, bind himself to render service
without compensation. However, to bind the principal to that
effect, a special power is necessary.
If the service is for compensation, the power may be implied.
To bind the principal in a contract of partnership
By the contract of partnership, the partners bind themselves
to contribute money, property, or industry to a common fund
with the intention of dividing the profits among themselves.
The contract of partnership thus creates obligations the
fulfillment of which requires an act of strict ownership.
The principal must personally have trust and confidence in
the proposed partners.
To obligate principal as guarantor or surety
By the contract of guaranty, the guarantor binds himself to
fulfill the obligation of the principal debtor in case the latter
should fail to do so. If the person binds himself solidarily, he is
a surety and the contract is called a suretyship.
A power of attorney to loan money does not authorize the
agent to make the principal liable as a surety for the payment
of the debt of a third person.
A contract of guaranty is unenforceable unless it is made in
writing.
To create or convey real rights over immovable property
An agent cannot create or convey real rights like mortgage,
usufruct, easement, etc., over immovable property belonging
to his principal without special power. That is an act of strict
ownership. There is no principle of law by which a person can
become liable on a real estate mortgage which he never
executed either in person or by attorney-in-fact.
To accept or repudiate an inheritance
Any person having the free disposal of his property may
accept or repudiate an inheritance.40 (Art. 1044) This act is
one of strict dominion; hence, the necessity of a special
authority.
To ratify obligations contracted before the agency
An agent cannot effect novation of obligations existing at the
time of the constitution of the agency unless he be specially
authorized to do so. On the same principle, he cannot ratify
or recognize obligations contracted before the agency
without special power from the principal.
Any other act of strict dominion
Generally, a sale or purchase of personal property is an act of
strict dominion. Hence, a special power is necessary in order
that the act shall be binding on the principal.
Art. 1879. A special power to sell excludes the power to
mortgage; and a special power to mortgage does not include
the power to sell. (n)
Scope of authority to sell/to mortgage
The power to sell ​carries with it​ the:
(a) power to find a purchaser or to sell directly;
(b) power to deliver the property;
(c) power to make the usual representation and warranty;
(d) power to execute the necessary transfer documents (like
the execution of the contract itself of sale);
(e) power to fix the terms of the sale, including the time,
place, mode of delivery, price of the goods, and the mode of
payment unless there be set conditions stipulated by the
principal;
(f) power to sell only for cash, since the absence of special
authority does not authorize the agent authority to sell on
credit;
(g) power to receive the price, unless he was authorized only
to solicit orders.
The power to sell does ​not carry with it​ the:
(a) power to barter or to exchange;
(b) power to mortgage or pledge.
The power to mortgage ​does not include​ the:
(a) power to sell;
(b) power to execute a second mortgage;
(c) power to mortgage for the agent's personal benefit or for
the benefit of any third person, unless contrary has been
clearly indicated. (Paras)
An authority to sell the principal’s property does not carry
with it or imply the authority to mortgage. And vice versa, the
power to sell is not to be implied from the special power to
mortgage, much less can it be construed to include an
authority to represent the principal in any litigation.
In the absence of special authority, the sale or mortgage will
be unenforceable against the principal as the agent “has
acted beyond his powers.”
(2) The sale proscribed by a special power to mortgage under
Article 1879 is a voluntary and independent contract, and not
an auction sale resulting from extrajudicial foreclosure of a
real estate mortgage, which is precipitated by the default of
the mortgagor. Absent such default, no foreclosure can take
place. It matters not that the authority to extrajudicial
foreclosure was granted by an attorney-in-fact and not by the
mortgagor personally. The stipulation in that regard, although
ancillary, forms an essential part of the mortgage contract
and is inseparable therefrom. No creditor will agree to enter
into a mortgage contract without that stipulation intended
for his protection.
(3) The power of attorney to sell any kind of realty belonging
and “might belong” to the principal covers not only the
property belonging to him at the time of the execution of the
power, but also such as he might afterwards have during the
time it is in force.
(4) A mere authority to a real estate agent “to sell” property
at a certain price and for a certain commission does not carry
with it the implied power to make a contract of sale at such
price in behalf of the principal but as merely authorizing the
agent to find a purchaser and submit his offer to the principal
for acceptance.
Contract giving agent exclusive authority to sell
The appointment of a person as exclusive agent to sell
specified property is not equivalent to giving the agent an
exclusive power of sale. In the former case, the principal may
endeavor to sell through his own efforts; in the latter, he may
not so compete with the agent. But if the principal appoints a
person as exclusive agent to sell the principal’s products in a
specified territory, the principal may not compete with the
agent in that territory, either personally or by other agents,
or appoint another selling agent to sell his products.
An exclusive agency will not be created by implication where
the words of the contract do not naturally import such a
meaning. An agency contract, to have the effect of giving the
agent an exclusive territory which the principal may not
invade to make sales, must sufficiently designate the territory
within which the agent is to have exclusive rights.
Contract giving agent exclusive authority of sale
It is often desirable for the protection of the agent that he
should be the exclusive agent and should be protected
against the chance of other agents reaping the benefit of his
labor in securing purchasers — hence, arise contracts for
exclusive agencies. The idea, however, that the owner shall
be excluded from the right to sell his own property under
such a contract is so inconsistent with the notion of
ownership and the ​jus disponendi​ thereto appertaining that
clear and unequivocal language must be employed to negate
such right.
The reason is that, as is usual in such contracts, the broker
does not bind himself to do anything. He has incurred no
obligation to act, and the owner cannot even censure him for
his inactivity. The words “exclusive sale” may well mean
exclusive agency to sell — the idea being the owner shall
employ no other agent and that the broker shall have the
only grant of power to sell that the owner will execute.
Hence, the words may be construed to be an inhibition upon
the owner to grant to any one else the power to sell, rather
than an inhibition upon his right to sell.
Power to revoke and right to revoke broker’s authority
distinguished
The principal always has the power to revoke but not having
the right to do so in those cases wherein he has agreed not to
exercise his power during a certain period. If in the latter
case, he does exercise his power, he must respond in
damages.
Art. 1880. A special power to compromise does not
authorize submission to arbitration. (1713a)
Conversely, a special power to submit to arbitration does not
authorize the power to compromise (Paras)
Scope of special power to compromise/to submit to
arbitration
(1) The authority of the agent to compromise or make
settlements of claims or accounts for the principal includes by
implication the power to do whatever things are usual and
necessary which the principal himself can do to effectuate
such compromise or settlement. But he is not thereby
authorized to submit to arbitration because while the
principal may have confidence in the agent’s judgment, the
arbitrator designated may not possess the trust of the
principal.
(2) It would seem that the authority to submit to arbitration
does not include the power to compromise. The principal
may not have trust in the agent’s judgment in making a
settlement.
Art. 1881. The agent must act within the scope of his
authority. He may do such acts as may be conducive to the
accomplishment of the purpose of the agency. (1714a)
Art. 1882. 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. (1715)
If the agent acted:
(1) ​With authority
(a) In principal's behalf - Valid (principal is bound; agent not
personally liable unless he bound himself)
(b) In agent's behalf - Apply Art. 1883 (generally not binding
on principal; agent and stranger are the only parties, except
regarding things belonging to the principal
(2) ​Without authority
(a) In "principal's" behalf - Unauthorized and unenforceable
(Art. 1403, par. 1) but may be ratified, in which case it may be
validated from the very beginning
(b) In "agent's" behalf - Valid, whether or not the subject
matter belongs to the principal, provided that at the time
delivery is to be made, the "agent" can transfer legally the
ownership of the thing. Otherwise, he will be held liable for
breach of warranty against eviction. Article 1883 does not
apply.
Authority of an agent defined
Authority is the power of the agent to affect the legal
relations of the principal by acts done in accordance with the
principal’s manifestation of consent to him. The authority of
the agent is the very essence — the sine qua non — of the
principal and relationship. This authority, unless it is
otherwise agreed, includes only authority to act for the
benefit of the principal, and the source of the authority is
always the principal and never the agent.
Authority distinguished from power
(1) As to existence — While “authority” and “power” are
often used synonymously, the former may be considered the
source or cause, while the latter, the effect. Thus, an agent
granted authority by the principal has thereby the “power” to
act for him.
The power of the agent is also the limitation upon his ability
to bind the principal, for it is well-settled that an agent binds
his principal only as to acts within his actual or apparent
authority.
(2) As to scope. — Generally speaking, the extent of the
agent’s authority depends upon the purpose of the agency.
As between an agent and a principal, an act is within the
authority of the agent if it is not a violation of his duty to the
principal, and it is within his power if he has the legal ability
to bind the principal to a third person although the act
constitutes a violation of his duty to the principal. In fine, an
agent with authority to do an act has also the power to bind
the principal, but the latter may exist without the former.
Kinds of authority
The authority of the agent may be:
(1) ​Actual​. — when it is actually granted, and it may be
express or implied. It is the authority that the agent does, in
fact, have. It results from what the principal indicates to the
agent;
(2) ​Express​. — when it is directly conferred by words (Art.
1869);
(3) ​Implied​. — when it is incidental to the transaction or
reasonably necessary to accomplish the main purpose of the
agency (Art. 1881), and, therefore, the principal is deemed to
have actually intended the agent to possess although the
principal has said nothing about the particular aspect of the
agent’s authority;
(4) ​Apparent or ostensible​. — when it is conferred by words,
conduct or even by silence of the principal (see Art. 1869.)
which causes a third person reasonably to believe that a
particular person, who may or may not be the principal’s
agent, has actual authority to act for the principal. This
specific type of authority is another name for authority by
estoppel or a species of the doctrine of estoppel. It is also an
implied authority but only in the sense that it is not expressly
conferred.
Apparent authority relied on by a third party to be possessed
by an agent may be created by the principal intentionally or
by negligence. It is something of a contradiction because it
implies absence of actual authority. The apparent authority of
an agent can only arise by the acts or conduct of the principal
giving rise to an appearance of authority and making the
principal responsible for certain agent’s action that were not
really authorized at all. Note that for apparent authority, an
agent has authority if it appeared reasonable from the
viewpoint of the third party, while in the case of implied
authority, the concern is in what appeared responsible to the
agent. Apparent authority is the term used where no express
or implied authority is present.
Both actual and apparent authority are embraced in the
agent’s “power”;
(5) ​General​. — when it refers to all the business of the
principal (Art. 1876);
(6) ​Special​. — when it is limited only to one or more specific
transactions; and
(7) ​Authority by necessity or by operation of law​. — when it is
demanded by necessity or by virtue of the existence of an
emergency. The agency terminates when the emergency has
passed.
When principal bound by act of agent
(1) ​Requisites​. — In order that the principal may be bound by
the act of the agent as to third persons and as to the agent
himself, there are two requisites:
(a) The agent must act within the scope of his authority; and
(b) The agent must act in behalf of the principal.
(2) ​Authority possessed by agent​ — The principal is bound by
either actual or apparent authority of the agent.
(a) So long as the agent has actual authority, express or
implied, 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.
(b) Under the doctrine of apparent authority (estoppel), 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.
The principal may or may not be liable to the apparent agent.
(3) ​Authority ratified by another (principal)​ — On occasion, a
person, who is in fact not an agent, may make a contract on
behalf of another, or he is an agent but he has exceeded his
powers. If the principal subsequently approves or affirms the
contract, an agency relationship is created by ratification, and
neither the principal nor the third person can set up the fact
that the agent had no authority or exceeded his powers.
When a person not bound by act of another
A person, therefore, is not bound by the act of another in the
following instances:
(1) The latter acts without or beyond the scope of his
authority in the former’s name; and
(2) The latter acts within the scope of his authority but in his
own name, except when the transaction involves things
belonging to the principal. (Art. 1883, par. 2.)
One who acts in his own behalf without authority from
another, or in the name of a non-existent principal, naturally
binds himself alone. He cannot be considered an agent for
any purpose, since there must be a principal in order to have
an agent.
Unauthorized acts in the name of another unenforceable
An agent acting for a principal ordinarily incurs no personal
liability if he acts in a proper fashion. If the “agent” acts
without authority or in excess or beyond the scope of his
authority, there is no representation.
Such act is unauthorized and, therefore, unenforceable,
whether or not the party with whom the agent contracted
was aware of the limits of the agent’s power, unless the
“principal” ratifies the transaction before it is revoked by the
other contracting party (Arts. 1317, 1403[1]) or is in estoppel
to deny the agent’s authority.
Where acts in excess of authority more advantageous to
principal
The agent is not deemed to have exceeded the limits of his
authority should he perform the agency in a manner more
advantageous to the principal than that indicated by him (Art.
1882) since he is authorized to do such acts as may be
conducive to the accomplishment of the purpose of the
agency. (Art. 1881.) This rule is of evident equity.
Liability of principal/agent for acts of agent beyond his
authority or power
(1) ​Principal​. — As a general rule, the principal is not bound
by the acts of an agent beyond his limited powers. In other
words, third persons dealing with an agent do so at their risk
and are bound to inquire as to the scope of his powers.
There are, however, four qualifications whereby the principal
is held liable:
(a) Where his (principal’s) acts have contributed to deceive a
third person in good faith;
(b) Where the limitations upon the power created by him
could not have been known by the third person;
(c) Where the principal has placed in the hands of the agent
instruments signed by him in blank; and
(d) Where the principal has ratified the acts of the agent.
(2) ​Agent​. — The agent who exceeds his authority is
personally liable either to the principal or to the third party,
in the absence of ratification by the principal.
(a) If the principal is liable to the third party on the ground of
apparent authority, the agent’s liability is to the principal.
(b) If the principal is not liable to the third person because the
facts are such no apparent authority is present, then the
agent’s liability is to the third party.
(c) If the agent personally assumes responsibility for the
particular transaction, if the principal defaults he, in effect,
also becomes obligated as a co-principal.
Action must be brought by and against principal
(1) An action is not properly instituted when brought in the
name of an attorney-in-fact and not in the name of the
principal, the real party-in-interest, and in such case the
complaint must be dismissed not upon the merits, but on the
ground that is has been improperly instituted.
(2) When the principal is bound by the act of the agent, the
action must be brought against the principal, not against the
agent. The bringing of the action against the agent cannot
have
any legal effect except that of notifying the agent of the
claim. Beyond such notification, the filing of the action can
serve no other purpose. There is no law giving any effect to
such action upon the principal.
Art. 1403. The following contracts are unenforceable, unless
they are ratified:
(1) Those entered into in the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers
Contracts without or in excess of authority
Contracts entered into in the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers are unenforceable
No one may contract in the name of another without being
authorized by the latter or unless he has a right to represent
him. If he is duly authorized, he must act within the scope of
his powers.
A contract entered into in the name of another by one who
has no authority or legal representation or who has acted
beyond his powers, is unenforceable.
However, such contract may be ratified, expressly or
impliedly, by the person in whose behalf it has been
executed, before it is revoked by the other contracting party.
Ratification is the act of validating any kind of defective
contract.
Art. 745. The donee must accept the donation personally, or
through an authorized person with a special power for the
purpose, or with a general and sufficient power; otherwise,
the donation shall be void. (630)
The formalities for acceptance, if any, must also be present,
otherwise the donation is void.
Art. 745 speaks of two kinds of authorized persons:
(a) one with a special power;
(b) one with a general and sufficient power.
On general principles, an ordinary agent or administrator
cannot accept in behalf of the principal, both in simple and
onerous donations; in first (simple donation) because the
principal may not want to accept the donor's generosity, in
the second (onerous donation) because the principal may not
want to be bound.
If the agent or administrator accepts an onerous donation on
behalf of the principal, such onerous donation entered into is
an unauthorized or unenforceable contract.
While Art. 745 speaks only of the acceptance, it would seem
that it is also applicable to the giving on the part of the donor.
The authorization should be in a public instrument
conformably with Art. 1358. An SPA is needed when an
inheritance is to be accepted.