AGENCY

CIVIL LAW

Agency
TABLE OF CONTENTS
Section Section Section Section Section 1. 2. 3. 4. 5. Nature, Form, and Kinds of Agency Obligations of the Agent Liabilities of the Agent Obligations of the Principal Extinguishment of Agency 197 202 204 205 206

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AGENCY NATURE, FORM, AND KINDS OF AGENCY

Definition and concept 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] Nature, basis and purposes Since agency is a contract, consent, object, and cause. there must

CIVIL LAW
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) Essential elements 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 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). Characteristics 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
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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). Determination of existence of agency 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 agencyThe 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] Agency vs. similar contracts 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 Represents his principal. independent contractor Employed by the employer. Acts under the principals control and instruction. Principal is liable for torts committed by the agent within the scope of his authority. 3. Lease agency Based on representation. Agent exercises discretionary powers.

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Acts according to his own method. Employer not liable for torts committed by the independent contractor.

lease of service Based on employment. Lessor ordinarily performs only ministerial functions.

3 parties: Principal, 2 parties: Lessor and lessee. agent and the 3rd person with whom the agent contracts. Relates to commercial or business transactions. Relates more to matters of mere manual or mechanical execution.

agency Agent is controlled by the principal.

lease of property Lessee is not controlled by the lessor.

Agency may involve Lease of property involves property.. things other than property. Agent can bind the principal. 4. Contract of sale agency to sell Agent receives the goods as the principals goods. sale Buyer receives the goods as owner. Lessee cannot bind the lessor.

Agent delivers the Buyer pays the price. proceeds of the sale. Agent can return the Buyer, as a general object in case he is rule, cannot return the object sold. unable to sell the same to a 3rd person.

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Agent in dealing with the thing received is bound to act according to the instructions of his principal. 5. Guardianship agency guardianship Buyer can deal with the thing as he pleases, being the owner.

CIVIL LAW
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

Agent represents a A guardian capacitated person. 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 Guardian is not the directions of the subject to the principal. directions of the ward but must act for the benefit of the latter Agent can make the Guardian has no principal personally power to impose liable. 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) Kinds 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
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doing. (Mechem, Sec. 58) general special agent agent All acts Specific acts connected in pursuance with the of particular business or instructions employment or with in which he is restrictions engaged. necessarily implied from the act to be done. Involves No continuity continuity of of service. service. May bind his principal by an act within the scope of his authority although it may be contrary to the latters special instructions. Apparent authority does not terminate by the mere revocation of his authority without notice to the 3rd party. Cannot bind his principal in a manner beyond or outside the specific acts which he is authorized to perform. iii.

CIVIL LAW
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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Scope of authority

Nature of service authorized Extent to which agent may bind the principal

Termination of authority

Construction Merely of principals advisory in instructions nature.

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. 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
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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 Though not actually granted, principal knowingly permits or holds out the agent as possessing the necessary powers to act in a certain way. authority by estoppel 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. Agency by Estoppel 1. There is no actual agency; thus without rights & duties as an agent. 2. If caused by the principal, he is responsible. If caused by the agent, he is responsible. Provided, 3rd person in good faith.

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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 Rests on intention. Estoppel Rests on prejudice.

Implied Agency 1. There is actual agency; thus with rights & duties as an agent. 2. Principal alone is liable.

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
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Affects the entire Affects only transaction from the relevant parts of beginning. 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.

CIVIL LAW
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 authority the scope of

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.

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 instructions accordance with

OBLIGATIONS OF THE AGENT

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.

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 Only a private rule powers committed or of guidance to the permitted to the agent agent Relates to the Refers to the subject manner or mode of (biz/transaction) agents action with with which the agent respect to matters is empowered to within the permitted deal or act. scope of action.

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Limits of authority Binding only on the operate vs those principal and agent who have/are charged with knowledge of them. 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 substitutes for

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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 Art. 1896, 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)

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).
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j) To answer fraud/negligence for his commission agent Engaged in the purchase and sale, for a principal, of personal property which has to be placed in his possession and disposal.

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Broker Has no custody or possession of the thing he disposes; merely acts as an intermediary between the sellers and the buyer.

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 Acts for and in behalf of the principal. Need not have possession of the goods of the principal. commission agent Acts in his own name or in that his principal. Must be in possession of the goods of the principal.

Has a relation with Maintains no the principal (buyers relation with the thing which he or sellers) and the purchases or sells. property which is the object of the transaction. [Pacific Commercial v Yatco, 1939]

LIABILITIES OF THE AGENT

When liable, not liable 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 3rd 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 3rd 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. When agent acts within scope of authority Within the scope of authority: for third persons, an act is within the scope of authority if its within the terms of the power
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CIVIL LAW
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 3rd persons (Art. 1902, CC). As a rule, a 3rd 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). Liability of 2 or more agents 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)

OBLIGATIONS OF THE PRINCIPAL

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 agent a. b. persons contract simultaneously with & principal for the same thing: Contract of prior date prevails. If applicable, follow the rule on double sales in Art. 1544, CC. (Art. 1916, CC)

Liability to 3rd 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 damages the agent for

CIVIL LAW
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)

EXTINGUISHMENT OF AGENCY
Quick glance: Ways to extinguish agency Mode 1. By the parties subsequent acts Way of extinguishing 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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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 compensation the agents

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)

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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 3rd persons: (Arts. 1921-1922, CC) Agency to contract with specific persons Wont prejudice 3rd persons until notice is given them. Notice must be personal. Agency to contract with general public Wont prejudice those in good faith & w/o knowledge. Notice may be personal.

b. Expiration period 4. Other modes a. Other modes extinguishment obligations b. Changes in law c. Changes conditions d. War

of of of

in

Modes of extinguishment (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

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 3rd 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 3rd person who accepted the stipulation in his favor (Art. 1930, CC).

CIVIL LAW
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 3rd 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 firm/corporation. 3. By agreement. a. By the accomplishment agencys object/purpose. of the of the

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 instructions 4. Outbreak of war him new

CIVIL LAW

Presumption of continuance of agency: once shown to have existed, agency is presumed to continue, without anything showing termination.

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