AGENCY

CONTRACT OF AGENCY A contract whereby a person (agent) binds himself to render some service or to do something in representation or on behalf of another (principal), with the consent or authority of the latter. (Article 1868)

The parties to the contract are: 1. Principal- one whom the agent represents and from whom he derives authority; he is the person represented. 2. Agent- one who acts for and represents another; he is the person acting in a representative capacity.

AGENCY
1. Principle of representation is applied. 2. Extinguished at will of the principal. 3. Agent exercise discretionary 1.

LEASE OF SERVICES
Principle of employment is

applied. 2. Concurrence of parties is

necessary. 3. Employee exercise ministerial functions only.

power to attain an end for which he was appointed. 4. Preparatory Contract

4. Principal Contract

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AGENCY TO SELL
1. Agent receives the goods as the goods of the principal. 2. Agent delivers the proceeds of the sale 3. Agent can return the object in case he is unable to sell the same 4. Bound to act according to the instructions of his principal.

SALE
1. The buyer receives goods as owner 2. Buyer pays the price.

3. the buyer, as a rule, cannot return the object sold 4. The buyer can deal with the thing as he please being the owner.

PURPOSE OF AGENCY The purpose of agency is to extend the personality of the principal through the facility of the agent. It enables the activity of man which is naturally limited in its exercise by the impositions of his physiological conditions to be legally extended by permitting him to be constructively present in many different places and to perform diverse juridical acts and carry on many different activities through another when physical presence is impossible or inadvisable at the same time. (11 Manresa 434)

ELEMENTS OF AGENCY A. Consent Any person or entity having juridical capacity and capacity to act and not otherwise disqualified, may enter into an agency. But as regards the party with whom the agent acts or contracts, the legal capacity of

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the principal rather than the agent, is of the greater import.

B. Object the services to be undertaken by the agent may cover all acts pertaining to a business of the principal (general agency) or one or more specific transactions (special agency) the extent of the agents authority to act, whether it be a general or a special agency, depends on how the agency is couched.

C. Cause May be onerous or gratuitous but presumed for compensation NOTE: The agent may not be deprived of his right to compensation by an unjustified revocation of the agency

KINDS OF AGENCY 1. as to manner of creation a) express- one where the agent has been actually authorized by the principal, either orally or in writing; b) implied- one which is implied from the
i. acts of the principal- from his silence or lack of action, or his failure to

repudiate the agency knowing that another person is acting on his behalf without authority. ii. Acts of the agent- when he carries out the agency, or from his silence or

inaction according to the circumstances.

2.

as to its character

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a) b)

gratuitous- one where the agent receives no compensation for his services. compensated or onerous- one where the agent receives compensation for his services.

3.

as to extent of business covered a) b) general- one which comprises all the business of the principal; special- one which comprises one or more specific transactions.

4.

as to authority conferred a) couched in general terms- one which is created in general terms and is deemed to comprise only acts of administration; b) couched in specific terms- one authorizing only the performance of a specific act or acts.

5.

as to its nature and effects a) ostensible or representative- one where the agent acts in the name and in representation of the principal. b) simple or commission- one where the agent acts in his own name but for the account of the principal.

ACTS WHICH MAY BE DELEGATED TO AN AGENT GENERAL RULE: What a man may do in person, he may do thru another. EXCEPTIONS: 1. Personal acts- if personal performance is required the doing of an act by a person on behalf of another does not constitute performance by the latter.

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a) b) c) d)

Voting during an election; Making a will; Making statements which are required to be done under oath; A member of the board of directors or trustees in a corporation cannot validly

act as such by proxy e) An agent cannot delegate to a sub-agent the performance of acts which he has

been appointed to perform in person. 2. Criminal Acts or Acts not allowed by law- There can be no agency in the perpetration of a crime or unlawful act. Examples: a) b) An alien principal using an agent to acquire lands; Persons who, because of their position and relation with the persons under their

charge or property under control, are prohibited from acquiring said property and cannot do so through an agent.

FORM OF AGENCY 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 his behalf without authority. (Article 1869)

NOTE: In an implied agency, the principal is still bound by the acts of the agent just as in case of express agency GENERAL RULE: There are no formal requirements governing the appointment of an agent. The agents authority may be oral or written. It may be in a public or private EXCEPTION: When the law requires a specific form Example: Sale of a piece of land or any interest therein through an agent: writing.

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NOTES:

authority to sell must be in writing; otherwise the sale is VOID (Art.1874) the sale itself should be in writing in order to be enforceable. The authority of an agent to execute a contract of sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. (Dizon et al. vs. CA et al., GR 124741,January 28, 2003) FORM OF ACCEPTANCE BY AGENT Acceptance by the agent may also be express or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances

Kinds of Implied Acceptance 1. Where persons are present Acceptance may be implied if: a. b. 2. principal delivers his power of attorney to the agent and agent receives it without any objection Where persons are absent GENERAL RULE: Acceptance cannot be implied from silence of the agent EXCEPTION: 1. principal transmits his power of attorney to the agent, who receives it without any objection; 2. principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he ishabitually engaged as an agent, and he did not reply to the letter or telegram

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IMPLIED ACCEPTANCE
1. De Jure Agent 2. Binds the principal for acts within the scope of his authority.

AGENCY BY ESTOPPEL
1. Not really an agent 2. Only the purported

agent is liable.

RULE ON AGENCY BY ESTOPPEL One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person in good faith, and in the honest belief that he is what he appears to be. (Cuison vs. CA, GR.88531, October 26, 1993) CLASSES AND KINDS OF AGENTS 1. 2. Universal Agent- one employed to do all acts that the principal may personally do, and which he can lawfully delegate to another the power of doing. General Agent- one employed to transact all the business of the principal, or all the business of a particular kind or in a particular place, or in other words to do all acts, connected with a particular trade, business or employment. 3. Special or Particular Agent- one authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion.

General Agent

Special Agent

1. Scope of Authority

Usually

authorized with

to the

do

all

acts or

Authorized to do only acts in pursuance instructions of or particular with

connected

business

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employment in which he is engaged.

restrictions

necessarily

implied from the acts to be done

2. Continuity

Conducts

series

of

transactions

Usually

involves or a

single of

involving a continuity of service.

transaction transactions continuity

series

not

involving

3. Extent by which agent may bind principal Binds his principal by an act within the scope of his authority although it may be contrary to his special instructions Cannot bind his principal in a manner beyond or outside the specific acts to which he is on

authorized

perform

behalf of the principal 4. Termination of Authority Apparent authority does not terminate by the mere revocation of his authority without notice to the third party Mere revocation is effective to terminate the authority as to third persons because the

third person has a duty to inquire 5. Construction of Instructions of Principal Statement of principal with respect to the agents authority would ordinarily regarded as advisory only Authority of agent must be strictly pursued

SPECIAL POWER OF ATTORNEY (SPA)

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An instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. NOTE: It need not be notarized; except where it is executed in a foreign country, must be certified in accordance with the Rules of Court. INSTANCES WHERE SPA IS NECESSARY (ART 1878) (PECWEM- LLB- BOCARO) 1. 2. 3. To make such payments as are not usually considered as acts of administration; To effect novation which put an end to obligations already in existence at time the agency was constituted; 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. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. To waive any obligation gratuitously; To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or foe a valuable consideration; To make gifts, except customary ones for charity or those made to employees in the business managed by the agents; To loan or borrow money, unless the latters act be urgent and indispensable for the preservation of the things which are under administration; To lease any real property to another person for more than one year; To bind the principal to render some service without compensation; To bind the principal in a contract of partnership; To obligate the principal as guarantor or surety; To create or convey real rights over immovable property; To accept or repudiate an inheritance; To ratify or recognize obligations contracted before the agency; Any other act of strict dominion.

NOTE: a third person with whom the agent wishes to contract on behalf of the principal agency; except private or secret orders.

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may require the presentation of the power of attorney or the instructions as regards the

NOTE: The scope of the agents authority is what appears in the written terms of the power of attorney. While third persons are bound to inquire into the extent or scope of the agents authority, they are not required to go beyond the terms of the written power of attorney. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latters authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent outside the written power of attorney. (Siredy Enterprises, Inc. vs. CA, et al. GR 129039, September 27, 2002) NOTES:

SPA to sell does not include the power to mortgage; and vice versa. SPA to mortgage includes the power to allow the extrajudicial foreclosure of the
mortgaged property.

SPA to compromise does not authorize submission to arbitration SPA for an agent to institute any action in court to eject all persons in the principals
lots so that the principal could take material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this is protective of the rights and interests of the principal in the property, does not grant any power to the agent to sell the subject property nor a portion thereof. (Cosmic Lumber Corp vs. CA 265 SCRA 168) EFFECT OF LACK OF SPA WHERE ONE IS REQUIRED: UNENFORCEABLE When principal bound by act of agent 1. 2. Agent must act within the scope of his authority Agent must act in behalf of the principal

NOTE: The limits of the agents authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. When a person NOT bound by act of another 1. 2. Latter acts without or beyond the scope of his authority in the formers name; and Latter acts within the scope of his authority but in his own name (UNDISCLOSED PRINCIPAL), except when the transaction involves a thing belonging to the principal. In such case, the contract is deemed as entered between the principal and the third person.

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EFFECTS OF AGENTS ACTS 1. a. With Authority in principals name valid; principal is bound; agent not personally

liable unless he bound himself (Article 1897) b. in his own name Apply Article 1883; generally not binding on the principal; agent and stranger are the only parties, except regarding things belonging to the principal or when the principal ratifies the contract or derives benefit therefrom. 2. a. b. Without Authority in principals name unauthorized and unenforceable but may be ratified, in which case, may be validated retroactively from the beginning (Article 1407) in his own name valid, whether or not the subject matter belongs to the principal, provided that at the time of delivery, 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 OCCASIONS WHEN PRINCIPAL IS BOUND BY THE ACTS OF THE AGENT BEYOND THE LATTERS POWERS General Rule: The principal is not bound by the acts of the agent beyond his limited powers. Exceptions: 1. 2. 3. 4. Where the principals acts have contributed to deceive the third person in good faith; Where the limitations upon the power created by him could not have been known by Where the principal has placed in the hands of the agent instruments signed by him in Where the principal has ratified the acts of the agent.

the third person; blank (Strong vs. Gutierrez Repide 6 PHIL 680 [1906])

Doctrine of Agency by Necessity correspondingly enlarged in order to cope with the exigencies or the necessities of the moment Requisites: 1. Real existence of an emergency

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By virtue of the existence of an emergency, the authority of an agent is

2. 3. 4.

Inability of the agent to communicate with the principal Exercise of the additional authority for the principals own protection Adoption of fairly reasonable means, premises duly considered

NOTE: Agency can never be created by necessity; what is created is additional authority in an agent appointed and authorized before the emergency arose. GENERAL OBLIGATIONS OF AGENT TO PRINCIPAL: 1. 2. 3. To act with utmost good faith and loyalty for furtherance of principals interests To obey all lawful orders and instructions of principal within the scope of the agancy To exercise reasonable care, skill and diligence

SPECIFIC OBLIGATIONS OF AGENT TO PRINCIPAL 1. 2. 3. 4. To carry out the agency which he has accepted To answer for damages which through his performance the principal may suffer To finish the business already begun on the death of the principal should delay entail any danger To observe diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed 5. 6. 7. 8. 9. 10. 11. To advance the necessary funds should there be a stipulation to do so To act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do Not to carry out the agency if its execution would manifestly result in loss or damage to the principal To answer for damages if there being a conflict between his interest and those of the principal, he should prefer his own Not to loan to himself if he has been authorized to lend money at interest To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency To distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same kind and mark, which belong to different owners 12. 13. 14. To be responsible in certain cases for the acts of the substitute appointed by him To pay interest on funds he has applied to his own use To inform the principal, where an authorized sale of credit has been made, of such sale

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15. 16. 17.

To bear the risk of collection, should he receive also on sale, a guarantee commission To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become due To be responsible for fraud or negligence

NOTE: A stipulation exempting the agent from the obligation to render an account shall be VOID. GENERAL RULE: Knowledge of agent is knowledge of principal. EXCEPTIONS 1. 2. 3. Agents interests are adverse to those of the principal Agents duty is not to disclose the information (confidential information) Where the person claiming the benefit of the rule colludes with the agent to defraud the principal

SUB-AGENT A 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. NOTE: The agent may appoint a substitute (sub-agent) except when he has been prohibited by the principal. (ART 1892) Instances when agent shall be responsible for the acts of the substitute: 1. 2. 3. when he was not given the power to appoint; or when he was given such power but without designating the person, and the person appointed was notoriously incompetent or insolvent. in these two cases the principal may further bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution.

JOINT AGENTS Agents appointed by one or more principals under such circumstances as to induce the inference that it was the principals intent that all should act in conjunction in consummating the transaction for which they were appointed.

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NOTE: All acts of the substitute appointed against the prohibition of the principal shall be VOID.

 If solidarity has been agreed upon, each agent is responsible for the:
a. b. non-fulfillment of the agency

Their responsibility is JOINT; except if solidarity has been expressly stipulated.

fault or negligence of his fellow agents; except when the fellow agents acted beyond the scope of their authority.

NOTE: innocent agent has a right later on to recover from the guilty or negligent agent (ART 1217(2)) Instances when agent may incur personal liability: 1. When the agent expressly binds himself NOTE: The individual liability of the agent can be considered a further security in favor of the creditor and does not affect or preclude the liability of the principal; both are liable 2. 3. 4. 5. When agent exceeds his authority When agent by his acts prevents performance on the part of the principal When a person acts as an agent without authority or without a principal A person who acts as an agent of an incapacitated principal unless the third party was aware of the incapacity at the time of the making of the contract

FACTOR/COMMISSION AGENT - one engaged in the purchase and sale for a principal of personal property, which for this purpose, has to be placed in his possession and at his disposal. If the commission agent received goods consigned to him, he is responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal. A commission agent can sell on credit only with the express or implied consent of the principal. If such sale is made without authority, the principal is given two alternatives:

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i.

He may require payment in cash, in which case any interest or benefit from the

sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agents expense; ii. He may ratify the sale on credit in which case it will have all the risks and

advantages to him.

If the commission agent is authorized to sell on credit, he shall inform the principal with a statement of the names of the buyers. With such statement, the sale shall be deemed to be for cash as far as the principal is concerned. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves the exercise of due diligence for that purpose.

BROKER A middleman or intermediary who, in behalf of others and for a commission or fee, negotiates contracts/transactions relating to real or personal property.

Factorage Compensation of a factor or commission agent.

Ordinary Commission Compensation for the sale of goods which are placed in his possession or at his disposal.

Guaranty Commission (Del credere) Fee that is given in return for the risk, which the agent has to bear in the collection of credits.

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An agent with a del credere commission is liable to the principal if the buyer fails to pay or is incapable of paying. GENERAL OBLIGATIONS OF PRINCIPAL TO AGENT Duties and liabilities of the principal are primarily based upon the contract and the validity of the contract between them SPECIFIC OBLIGATIONS OF PRINCIPAL TO AGENT (CARIP) 1. 2. 3. To comply with all the obligations which the agent may have contracted within the scope of his authority and in the name of the principal To advance to the agent, should the latter so request, the sums necessary for the execution of the agency To reimburse the agent for what the latter has advanced (plus interest), even if the business was not successful,provided the agent was free from fault 4. To indemnify the agent for all the damages, which the execution of the agency may have caused the latter without fault or negligence on his part NOTE: The agent may retain in pledge the things which are the object of the agency until the principal effects this reimbursement and pays the indemnity. 5. To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agents services

LIABILITY OF PRINCIPAL FOR TORT OF AGENT RULE: The principal is civilly liable to third persons for torts of an agent committed at the principals direction or in the course and within the scope of the agents authority. Reason for liability: The rule is based upon the principle that he who does an act through another does it himself. CONDITIONS FOR RATIFICATION 1. 2. 3. 4. 5. principal must have capacity and power to ratify principal must have had knowledge of material facts principal must ratify the acts in its entirety act must be capable of ratification act must be done in behalf of the principal

ESTOPPEL BY PRINCIPAL Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.

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JOINT PRINCIPALS

Liability: solidarily liable to the agent for all the consequences of the agency. Requisites of solidary liability:
1. 2. 3. There are two or more principals

Two or more persons who appoint an agent for a common transaction or undertaking.

The principals have all concurred in the appointment of the same agent; and The agent is appointed for a common transaction or undertaking

NOTE: Any one of them may revoke the agency RULES ON DOUBLE SALE BY PRINCIPAL AND AGENT 1 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 Article 1544(double sale). 2 If the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent is in bad faith, he alone shall be responsible. Instances when principal is not liable for the expenses incurred by the agent: 1. 2. 3. 4. if the agent acted in contravention of the principals instructions, unless the latter should wish to avail himself of the benefits derived from the contract; when the expenses were due to the fault of the agent; when the agent incurred them with knowledge that an unfavorable result would ensure, if the principal was not aware thereof; 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 (EDWARD) 1. 2. 3. Expiration of the period Death, civil interdiction, insanity or insolvency of the principal or of the agent Withdrawal of the agent

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 agent may withdraw by giving notice to the principal, but must indemnify the principal for damages that he may suffer by reason of such withdrawal. 4. 5. 6. Accomplishment of the object or the purpose of the agency Revocation Dissolution of the firm or corporation, which entrusted or accepted the agency.

Instances when death of principal does not terminate agency 1. 2. If the agency has been constituted in the common interest of the principal and the agent If it has been constituted in the interest of a third person who has accepted the stipulation in his favor

Revocation of Agency by Principal GENERAL RULE: Agency is revocable at will of the principal, regardless of the term of the agreement. EXCEPTIONS: 1. 2. 3. If a bilateral contract depends upon it; If it is the means of fulfilling an obligation already contracted; If a partner is appointed manager of a partnership and his termination is unjustifiable; and 4. If it is created not only for the interest of the principal but also for the interest of third persons, who have accepted the stipulation in their favor

Agency coupled with an interest 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. The agency becomes merely a part of another obligation or agreement, or an incidental element thereof so it cannot be unilaterally revoked. NOTE: However, in Coleongco vs. Claparals (10 SCRA 577), the SC made a sweeping revoked for a just cause. Implied Revocation may be effected: statement that coupled with an interest or not, the authority (agency) can certainly be

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1. 2. 3.

By the act of the principal in appointing another agent for the same business or transaction; By the act of the principal in directly managing the business entrusted to the agent; or By the act the principal in subsequently granting a special power of attorney as regards the same business to another agent, where he had previously granted a general power of attorney to one agent.

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