AGENCY

By the contract of Agency, a person binds himself to

render some services or to do something in representation or
on behalf of another, with the consent or authority of the
latter.

Article : 1868 of the New Civil Code

EXCLUSIONS

• Employer- Employee Relationship (Art. 1700)

• Master-Servant (Art. 1689)

• Employer and Independent Contractor (Art. 1713 )

Principal
One whom the agent represents and
from whom he derives authority.

Agent
One who acts and represents another.
KINDS OF AGENTS

• Universal agent
• one employed to do all acts which the principal may personally do, and which
he can lawfully delegate to another the power of doing

• General agent
• one employed to transact all business of the principal, or all the business of a
particular kind or in a particular place, do all acts connected with a particular
trade, business or employment

• Special or particular agent

• one authorized to do act in one or more specific transactions or to do one or
more specific acts or to act upon a particular occasion.
Kinds of Principal
• Disclosed Principal
• At the time of the transaction contracted by the
agent, the other party knows that the agent is acting
for the principal and of the principal’s identity
• Partially disclosed Principal
• The other party knows or has the reason to know
that the agent is or may be acting for a principal
but is unaware of the principal’s identity
• Undisclosed Principal
• The party has no notice of the fact that the
agent is acting in behalf of the principal
Essential Elements of an Agency
• Consent (express or implied) of the parties to
establish the relationship
• By Contract (orally or in writing )
• The Object is the execution of a juridical act in
By Conduct
•relation to third persons
• •TheBy Ratification
agent acts a representive and not for himself
• The agent acts within the scope of his authority
• The consent may arise by
presumption or operation of law
Application

This Photo by Unknown Author is licensed under CC BY-NC-ND

Yes, there was a nominate contract of Agency.

Article 1868 of the NCC provides that by the

contract of agency a person binds himself to render
service or to do something in representation on
behalf of another with consent or authority of the
latter.
Here, Superman bound himself to render service
of buying grocery for Professor X.
CLASSIFICATIONS OF
AGENCY
AS TO THE MANNER OF CREATION
ARTICLE 1869
oral or
written

• Agency may be express or 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 behalf without
authority.

• Agency may be oral, unless the law requires a specific form (1874)
ARTICLE 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 circumstances.
ARTICLE 1871
• Between persons who are present, the acceptance of
the agency may also be implied if the principal delivers his
power of attorney to the agent, and the latter receives it
without objection.
face to face or verbal
communication
ARTICLE 1872
• Between persons who are absent, the acceptance of
agency cannot be implied from silence.

• Exceptions

• When the principal transmits his power of attorney to the agent,

who receives it without objections.

• When the principal entrusts to him by letter a POA with respect to

the business in which he is habitually engaged as an agent and he
did not reply to the letter.
ARTICLE 1873

• If a person specifically informs another or states by public

advertisement that he has given a POA to a third person,
the latter thereby becomes a duly authorized agent.

• Special information

• Public advertisement
SPECIAL INFORMATION
PUBLIC ADVERTISEMENT
AGENCY BY ESTOPPEL VS. IMPLIED AGENCY
• In implied agency, the agent is a a true agent, with rights and duties of an agent
• In agency by estoppel (caused by the agent), the agent is not a true agent,
hence doesn’t have the rights as such.

• If the estoppel is caused by the principal, he is liable when a 3rd person acted on
the misrepresentation.
• In an implied agency, the principal is always liable

• If the estoppel is caused by the agent, it is only the agent who is liable, never
the alleged principal.
• In an implied agency, the agent is not personally liable
 AS TO CHARACTER
GRATUITOUS
One where the agent receives no
compensation for his services

ONEROUS
One where the agent receives compensation
Art. 1875
AS TO EXTENT OF BUSINESS COVERED

• Authority given maybe:

• General
• Comprises all the business of the principal

• Special
• Comprises of specific transactions

ARTICLE 1876
 As to Authority conferred
Couched in general terms
• Deemed to comprise only acts of administration

Couched in specific terms

• One authorizing only the performance of specific
acts
Art. 1877
OBLIGATIONS OF AN AGENT
•Good Faith and loyalty

•Obedience to the Principal’s

Instructions

•Exercise of Reasonable Care

Carry Out the Agency
Art. 1884

Observe Diligence
1885

Advance Necessary Funds

1886

Instructions of the Principal

Art. 1887
Authority is the sum total of the powers given by the Principal to
the agent, while Instructions
Instructions are are private
private guidance
directions the
Principal may give the Agent regarding
Authority relateshow
to thehis subject with
duties will bewhich the Agent is
performed
empowered to deal with, while Instructions refer to the manner of
Agent’s action

Limitation of Authority are operative against those who have

knowledge of t hem, while Instructions is not significant as against
those with neither knowledge nor notice of such instructions
 Liability of the Principal to Third Person

If an act done by the agent is within the scope of

the authority given, it is immaterial that it is directly
contrary to the instructions given by the principal.
The Principal will be liable to the third person unless
the latter knew of the instructions given.
 Blah blah!!
Secret secret!
Secret!! Shhhh..
 The Emergency
Duty to obey reasonable and lawful really exists
Sudden Emergency
instructions
The agent is unable
to communicate
Liability
Ambiguous
for the loss
Instructions
or damage with the principal

The agent’s authority

is exercised for the
Duty to act in Good Faith and with Due principal’s
Insubstantial departure protection
Care

Means are
reasonable under
circumstances
 Non performance Art. 1884

Conflict of Interest Art.1889

Agency resulted to Loss or Damages Art.

1888
If an Agent has been empowered to
borrow money, he may Himself be the
lender at the current interest rate. If
he has been authorized to lend
money, he cannot borrow it without
the consent of the Principal.

Art. 1890
• Money or property as a result of the
performance
Every Agent is bound to render an
Moneyof
•account orhis
property as a result of
transactions and to deliver
non-performance
to the principal what orhe
violation
receivedofby
duty virtue of the agency.
• Gifts in connection with the
agency Art. 1891
• Overprice
• Commissions
• etc
 IF he
• Be was notfor
responsible given the power
the acts to
of the sub-
appoint
agent a substitute
appointed by himself
• If given, the person
Art. 1892appointed is
notoriously incompetent or
insolvent

Art. 1982
 Effects of Substitution
PROHIBITED Agent exceeds the limits of his authority

Acts of the sub-agent is void

Principal not bound by the acts of the sub-

agent

Agent liable to the principal

 Substitution Authorized

The principal may proceed

Sub-agent chosen by the agent against both the agent and
the sub-agent for the
damages he may have
suffered

Absolute exemption of the

Sub-agent chosen by the
agent
Principal
Substitution not Authorized, but not prohibited

Valid substitution if it was beneficial to the

principal

If loss or damage was caused, the agent is

primarily liable to the Principal

Principal has right of action against the

substitute
 Illustrative problem
Rob, asikasuhun mo muna ini
na tindahan ko ha. Bakasyon
muna ako 6 months. Ok boss!
 Padi! Asikasuha daw ining Basta ika padi,
tindahan ni bossing ta ok lang.
mabakasyon man ako. Ang pasalubong ha!
lagay sya sana palan ang
mabaskayon.
IsIS Robin
The Substitution
Liable for the
Valid?
damages caused by the acts of
Green AreLantern?
the acts of GL in the name of Batman Valid??
NO, if Robin wa prohibited by Batman from appointing a
YES, if GL was appointed against the prohibition of Batman or he
substitute
NO, if GL was appointed by Robin against the
was not given authority to appoint or if he was given one, GL was
prohibition of Batmanororinsolvent.
notoriously incompetent Robin acted beyond the scope
YES, if Robin
of his was given the power or not given but no prohibition
authority.
was imposed by Batman
NO, if Robin was given the power to appoint and GL is not
notoriously incompetent or insolvent or GL is designated by
Batman to be a sub-agent.
 If not agreed upon, Presumed
that the responsibility is Joint
If agreed, each of the agents
are Solidarily liable :
for non-fulfillment of the
agency
For the fault or negligence of
fellow agents

Joint and Solidary Obligations of

two or More agents Arts. 1894 -95
The Agent who converted the fund of his
principal to his own use is liable for the
interest as well as the sums he still owing
the Principal after the extinguishment of
the agency.

Art. 1896
 Illustration:

The
A was
Agent
given
whoa written
acts as power
such is of
not
attorney
personally
by Pliable
to sell
to
the
theparty
later’swhom
car for
he150,000.
contracts,
A sold
unless
the he
carexpressly
to B for
binds himself or he exceeds
130,000.the limits of his authority
The
without
Salegiving
is unenforceable
the third party
against
sufficient
P butnotice
A becomes
of the
personally
scope of hisliable
powers.
to B.
However, if B was shown the POA, neither P nor A will
be liable.
Art. 1897
 When authority is not in writing

Every person dealing with an assumed agent is put upon

an inquiry and must discover, if he would hold the
principal liable, not only of the fact of the agency but
the nature and extent of authority of the agent.
If the third person does not make such inquiry, he is
chargeable with the knowledge of the agent’s authority
 When authority is in writing

If the authority is in writing, the third person is not

required to enquire further than the terms of the
written power of attorney.
 COMMISSION AGENT

He is one engaged in the purchase and sale of

personal property for a principal, which, for this
purpose, has to be placed in his possession at
his disposal.
 AGENT VS BROKER

An Agent is authorized to enter into Judicial acts

in behalf of the principal while a broker is merely an
intermediary between the parties and he has no
power to enter into a contract in behalf of any of
the parties.
 OBLIGATIONS OF THE PRINCIPAL
Art. 1910 – The Principal must comply with all the obligations which the agent
may have contracted within the scope of his AUTHORITY.

As for any obligation wherein the agent has exceeded his power, the
principal is not bound, except when he RATIFIES it expressly or impliedly.

Art. 1911 – Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent, if the former ALLOWED the latter to act though
he had full powers.
ART. 1912 – The principal must advance to the agent, should the latter so
request, the sums necessary for the execution of the agency.

Should the agent have advanced them, the principal must REIMBURSE him
therefor, even if the business or undertaking was not successful, provided the
agent is free from all fault.

The reimbursement shall include interest on the sums ADVANCED, from the day
on which the advance was made.
Art. 1913 – The principal must also INDEMNIFY the agent for all the damages
which the executive of the agency may have caused the latter, without fault
or negligence.
G.R. NO. 159489, FEBRUARY 4, 2008 FILIPINAS LIFE ASSURANCE COMPANY (NOW AYALA LIFE
ASSURANCE, INC.) VS. CLEMENTE N. PEDROSO, ETC.

• Facts: Respondent Pedroso is a policyholder of a life insurance issued by petitioner Filipinas Life Assurance
Company (Filipinas Life). Pedroso claims Valle was her insurance agent. On January 1977, Valle told her
that the Filipinas Life Escolta Office was holding a promotional investment program for policyholders.
Enticed, she initially invested and issued a post-dated check dated January 7, 1977 for P10,000.4 In return,
Valle issued Pedroso his personal check for P800 for the 8%5prepaid interest and a Filipinas Life "Agent’s
Receipt" No. 807838.6
• Subsequently, she called the Escolta office, to inquired about the promotional investment. Alcantara
answered and referred her to his manager, Apetrior. The latter confirmed that there was such a
promotion.
• Relying on the representations made by the petitioner’s duly authorized representatives Apetrior and
Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the maturity of
her initial investment. A month after, her investment of P10,000 was returned to her after she made a
written request for its refund. The formal written request, dated February 3, 1977, was written on an inter-
office memorandum form of Filipinas Life prepared by Alcantara.7 To collect the amount, Pedroso
personally went to the Escolta branch where Alcantara gave her the P10,000 in cash. After a second
investment, she made 7 to 8 more investments in varying amounts, totaling P37,000 but at a lower rate of
5%8 prepaid interest a month. Upon maturity of Pedroso’s subsequent investments, Valle would take back
from Pedroso the corresponding yellow-colored agent’s receipt he issued to the latter.
• Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the
investment plan. Palacio made a total investment of P49,5509 but at only 5% prepaid interest. However,
when Pedroso tried to withdraw her investment, Valle did not want to return some P17,000 worth of it.
Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money.
ISSUE: WHETHER OR NOT FILIPINAS LIFE AND ITS CO-DEFENDANTS VALLE, APETRIOR AND
ALACANTARA ARE JOINTLY AND SOLIDARY LIABLE.

HELD: Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle.
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.
The general rule is that the principal is responsible for the acts of its agent done within the
scope of its authority, and should bear the damage caused to third persons.
When the agent exceeds his authority, the agent becomes personally liable for the
damage.
But even when the agent exceeds his authority, the principal is still solidarily liable together
with the agent if the principal allowed the agent to act as though the agent had full
powers.
In other words, the acts of an agent beyond the scope of his authority do not bind the
principal, unless the principal ratifies them, expressly or impliedly.16 Ratification in agency is
the adoption or confirmation by one person of an act performed on his behalf by another
without authority.17
Filipinas Life cannot profess ignorance of Valle’s acts. Even if Valle’s
representations were beyond his authority as a debit/insurance agent, Filipinas
Life thru Alcantara and Apetrior expressly and knowingly ratified Valle’s acts.
It cannot even be denied that Filipinas Life benefited from the investments
deposited by Valle in the account of Filipinas Life. In our considered view,
Filipinas Life had clothed Valle with apparent authority;
Hence, it is now estopped to deny said authority. Innocent third persons should
not be prejudiced if the principal failed to adopt the needed measures to
prevent misrepresentation, much more so if the principal ratified his agent’s
acts beyond the latter’s authority. The act of the agent is considered that of
the principal itself. Qui per alium facit per seipsum facere videtur. "He who
does a thing by an agent is considered as doing it himself."18
 TWO PRINCIPALS SOLIDARY LIABLE
Art. 1916 – If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the
consequences of the agency.

Example: A, B, and C employ agent D to sell land owned by them in common

by the three, with D receiving a commission of P1.5M.

If D is successful, A can collect from ANY of the three the amount of P1500
because of their solidary liability. The solidarity is due to the existence of
common transaction. If A solely pays the P1.5M , he can recover
reimbursement of P500K each from B and C.
 EFFECT IF BOTH AGENT AND
PRINCIPAL TRANSACTED
Art. 1916. – When two persons contract with regard to the same thing, one of them
with the agent and the other with the principal, and the two contracts are
incompatible with each other, that of prior date shall be preferred, without prejudice
to the provisions of Article 1544.

Movable Property – First Possessor in Good Faith

Immovable Property – (1) First Registrant in Good
Faith (2) First Possessor in Good Faith (3) Oldest Title in
Good Faith

a. (Art. 1917) If the agent has acted in good faith, the principal shall be liable in
damages to the third person whose contracts must be rejected. If the agent acted in
bad faith, he alone shall be responsible.
 PRINCIPAL IS NOT LIABLE FOR
EXPENSES INCURRED BY THE AGENT
(ART. 1918)
1. If the agent acted in CONTRAVENTION of the principal’s instructions, unless
the latter should wish to avail himself of the benefits derived from the
contract;
2. When the expenses were due to the FAULT of the agent
3. When the agent incurred them with knowledge that an UNFAVORABLE
RESULT would ensue, if the principal was not aware of.
4. When it was STIPULATED that the expenses would be borne by the agent or
that the latter would be allowed only a certain sum.
 MODES OF EXTINGUISHMENT OF
AGENCY
1. Revocation
2. Accomplishment of the object or purpose
3. Withdrawal of the Agent
4. Expiration of the period for which the agency was constituted
5. Dissolution of the firm or corporation which entrusted or accepted the
agency
6. Death, Insanity, Civil Interdiction or Insolvency of the Principal or Agent
 HOW MAY A CONTRACT OF
AGENCY BE REVOKED?
A contract of agency may be revoked either Expressly or Impliedly.

Implied revocation may be effected –

a. By the act of the principal in appointing another agent for the same
business or transaction
b. By the act of the principal in directly managing the business entrusted to
the agent
c. By the act of the principal in subsequently granting a special power of
attorney as regard the same business to another agent, where he had
previously granted a general power of attorney to one agent.
 WHAT ARE THE EXCEPTIONS TO THE
RULE THAT AGENCY IS REVOCABLE BY
THE PRINCIPAL AT WILL?
1. If bilateral contract depends upon it.
2. If it is the means of fulfilling an obligation already contracted.
3. If a partner is appointed manager of the partnership in the contract of
partnership and his removal from the management is unjustifiable.
4. If it has been constituted in the common interest of the principal and of the
agent or in the interest of a third person who has accepted the stipulation
in his favor.
 SAMPLE
X sold a parcel of land in Legazpi to Y for P100 Million payable in annual
installments for 10 years, but title will remain with X until the purchase price is
fully paid. To enable Y to pay the Price, X gave him a power-of-attorney
authorizing him to subdivide the land, sell the individual lots, and deliver the
proceeds to X, to be applied to the purchase price. 5 years later, X revoked
the power of attorney and took over the sale of the subdivision lot himself. Is
the revocation valid or not? Why?
ANS: The revocation is not valid. The power of attorney given to the buyer (Y) is
irrevocable because it is coupled with an interest: the agency is the means of
fulfilling the obligation of the buyer to pay the price of the land. In other words,
a bilateral contract to buy (Y) and sell (X) the land is dependent on the
agency.

Agency coupled with an interest refers to an agency wherein the agent has
acquired some interest of his own in the execution of the authority granted to
him, IN ADDITION to his mere interest in the contract of employment with the
resulting gains.
INTERNATIONAL EXCHANGE BANK (NOW UNION BANK OF THE
PHILIPPINES) VS. SPOUSES JEROME AND QUINNIE BRIONES,
AND JOHN DOE, G.R. NO. 205657, MARCH 29,2017
Facts: On July 2, 2003, (Spouses Briones) took out a loan of from iBank to purchase a
BMW Z4 Roadster. The Spouses Briones executed a promissory note with chattel
mortgage that required them to take out an insurance policy on the vehicle. The
promissory note also gave iBank, as the Spouses Briones' attomey-in-fact, irrevocable
authority to file an insurance claim in case of loss or damage to the vehicle. The
insurance proceeds were to be made payable to iBank. On November 5, 2003, at
about 10:50 p.m., the mortgaged BMW Z4 Roadster was carnapped by three (3)
armed men.
Jerome Briones (Jerome) immediately reported the incident to the Philippine National
Police Traffic Management Group. The Spouses Briones declared the loss to iBank,
which instructed them to continue paying the next three (3) monthly installments "as a
sign of good faith," a directive they complied with. After the Spouses Briones finished
paying the three (3)-month installment, iBank sent them a letter demanding full
payment of the lost vehicle. 14 On April 30, 2004, the Spouses Briones submitted a
notice of claim with their insurance company, which denied the claim on June 29,
2004 due to the delayed reporting of the lost vehicle. On May 14, 2004, iBank filed a
complaint for replevin and/or sum of money against the Spouses Briones and a person
named John Doe. The Complaint alleged that the Spouses Briones defaulted in
paying the monthly amortizations of the mortgaged vehicle. The Regional Trial Court
dismissed iBank's complaint.
 ISSUE: WHETHER THE AGENCY RELATIONSHIP
WAS REVOKED OR TERMINATEDISSUE:
HELD: Petitioner asserts that the Spouses Briones effectively revoked the agency granted
under the promissory note when they filed a claim with the insurance company. Petitioner
is mistaken.
Revocation as a form of extinguishing an agency under Article 1923 of the Civil Code only
applies in cases of incompatibility, such as when the principal disregards or bypasses the
agent in order to deal with a third person in a way that excludes the agent.
In the case at bar, the mortgaged vehicle was carnapped on November 5, 2003 and the
Spouses Briones immediately informed petitioner about the loss. The Spouses Briones
continued paying the monthly installment for the next three (3) months following the
vehicle's loss to show their good faith.
However, on March 26, 2004, petitioner demanded full payment from Spouses Briones for
the lost vehicle.57 The Spouses Briones were thus constrained to file a claim for loss with the
insurance company on April 30, 2004, precisely because petitioner failed to do so despite
being their agent and being authorized to file a claim under the insurance policy. Not
surprisingly, the insurance company declined the claim for belated filing.
The Spouses Briones' claim for loss cannot be seen as an implied revocation of
the agency or their way of excluding petitioner. They did not disregard or
bypass petitioner when they made an insurance claim; rather, they had no
choice but to personally do it because of their agent's negligence. This is not
the implied termination or revocation of an agency provided for under Article
1924 of the Civil Code.
While a contract of agency is generally revocable at will as it is primarily based
on trust and confidence,59 Article 1927 of the Civil Code provides the
instances when an agency becomes irrevocable:
Article 1927. An agency cannot be revoked if a bilateral contract depends
upon it, or if it is the means of fulfilling an obligation already contracted, or if a
partner is appointed manager of a partnership in the contract of partnership
and his removal from the management is unjustifiable.
• A bilateral contract that depends upon the agency is considered an
agency coupled with an interest, making it an exception to the general rule
of revocability at will. Lim v. Saban, emphasizes that when an agency is
established for both the principal and the agent, an agency coupled with
an interest is created and the principal cannot revoke the agency at will.
• In the promissory note with chattel mortgage, the Spouses Briones authorized
petitioner to claim, collect, and apply the insurance proceeds towards the
full satisfaction of their loan if the mortgaged vehicle were lost or damaged.
Clearly, a bilateral contract existed between the parties, making the agency
irrevocable. Petitioner was also aware of the bilateral contract; thus, it
included the designation of an irrevocable agency in the promissory note
with chattel mortgage that it prepared for the Spouses Briones to sign.
 DEATH
General Rule: Death extinguishes the agency.

a) Protection of Third Party in Good Faith. Anything done by the agent, without
knowledge of the death of the principal or of any other cause which extinguishes
the agency, is valid and shall be fully effective with respect to third persons who
may have contracted with him in good faith.

Example:

The Sale is valid if the agent executed the deed of absolute sale on behalf of the
principal two days after the principal died, an event neither the agent nor the buyer
knew at the time of the sale.