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Agency

Joseph Giancarlo C. Agdamag

BusLaw2 – K31 & K32
18 January 2018
Nature, Form, and Kinds
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Art. 1868, Civil Code

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.
Definition of Agency
• A relationship which implies a power in an agent
to contract with a third person on behalf of the
principal

• Basis: Representation
– The acts of the agent on behalf of the principal within
the scope of his authority produce the same legal and
binding effects as if the principal personally did them
 Basis is
Representation
Purpose: To extend the
personality of the principal
through the facility of the agent

Distinguishing Features:
1. Representative
character
2. Derivative authority
 Elements of
Agency
1. Consent – express or implied
2. Object – the execution of a
juridical act in relation to third
persons
3. The agent acts as
representative and not for
himself
4. The agent acts within the
scope of his authority
 Characteristics
• Consensual
– Perfected by mere consent
• Nominate
– Has its own name
• Principal
– Does not depend on another contract
for its validity
• Preparatory
– Entered into as a means to an end
Parties
1. Principal
– The person represented (natural or juridical person)
from whom agent derives his authority
– He must be capacitated

2. Agent
– The person acting for another in a representative
capacity
– His actions are binding on the principal
– “attorney-in-fact,” “representative,” “proxy”
Fiduciary Relationship
• Agency is a fiduciary relationship between the
principal and the agent
• Fiduciary
– Based on trust and confidence
– Agent is required to observe utmost good faith and
loyalty towards his principal
– Agent must look after the principal’s interest as if they
were his own
Acts An Agent Cannot Do
1. Personal Acts
– If personal performance is required by law or agreement
– Ex: right to vote, making a will, statement under oath

2. Criminal or illegal acts

– Attempt to delegate another authority to do an act,
which if done by the principal would be illegal, is void
– Ex: alien cannot buy land through a Filipino agent
– Agent who participates in a crime cannot put up a
defense that he was a mere agent
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Art. 1869, Civil Code

Agency must 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.

Agency may be oral, unless the law requires a

specific form.
Classifications of Agency
1. Manner of Creation
– Express – actually authorized, either orally or in writing
– Implied – implied from acts of principal or his silence or
lack of action to repudiate the agency knowing that
another person on his behalf without authority

2. Character
– Gratuitous – agent receives no compensation
– Onerous – with compensation
Classifications of Agency
3. Extent of Business Covered
– General – comprises all of principal’s businesses
– Special – comprises one or more specific transactions

4. Authority Conferred
– Couched in general terms – comprises only acts of
administration
– Couched in specific terms – authorizes only the
performance of specific acts
Classifications of Agency
5. Nature and Effects
– Ostensible/Representative – agent acts in name and
representation of the principal
– Simple/Commission – agent acts in his own name but
for the account of the principal
Form of Agency Contracts
• General Rule
– There are no formal requirements
– Agent’s authority may be oral or written, or in public or
private documents

• Exception
– When the law requires a specific form
– Example: sale of real property by an agent
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Art. 1870, Civil Code

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.
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Art. 1871, Civil Code

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 any
objection.
Acceptance of Agency
• Two persons who are present
– Acceptance is implied if principal gives the agent a
power of attorney

• Power of Attorney
– 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 on his behalf.
– The evidence of the agent’s authority
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Art. 1872, Civil Code

Between persons who are absent, the acceptance of
the agency cannot be implied from the silence of the
agent, except:

1. When the principal transmits his power of

attorney to the agent, who receives it without
any objection;
2. When the principal entrusts to him by letter or
telegram a power of attorney with respect to the
business in which he is habitually engaged as an
agent, and he did not reply to the letter or
telegram.
 Acceptance of
Agency
• Two persons who are absent
– Acceptance cannot be implied
from silence
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Art. 1873, Civil Code

If a person specially informs another or states by

public advertisement that he has given a power of
attorney to a third person, the latter thereby
becomes a duly authorized agent, in the former case
with respect to the person who received the special
information, and in the latter case with regard to any
person.

The power shall continue to be in full force until the

notice is rescinded in the same manner in which it
was given.
Acceptance of Agency
• Two ways of giving notice of agency
– By special information
• Person appointed is considered agent with respect to recipient
– By public advertisement
• Agent is considered as such with regard to any person

• Revocation
– An agency is revoked in the same manner as it was
given
Agency by Estoppel
• There is really no agency at all, but the alleged
agent seemed to have apparent or ostensible,
although no real authority to represent another
• Kinds:
– Estoppel of Agent
– Estoppel of Principal
– Estoppel of Third Persons
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Art. 1874, Civil Code

When a sale of a piece of land or any interest

therein is through an agent, the authority of the
latter shall be in writing; otherwise, the sale
shall be void
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Art. 1875, Civil Code

Agency is presumed to be for a compensation,

unless there is proof to the contrary.
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Art. 1876, Civil Code

An agency is either general or special.

The former comprises all the business of the

principal. The latter, one or more specific
transactions.
Classification of Agents
• Universal Agent
– One employed to do all acts that the principal may
personally do, and which the principal can lawfully
delegate to another the power of doing
• General Agent
– One employed to transact all the business of his
principal, or all 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
 Classification of
Agents
• Special/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.
– Examples: attorney-at-law, broker
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Art. 1877, Civil Code

An agency couched in general terms comprises

only acts of administration, even if the principal
should state that he withholds no power or that
the agent may execute such acts as he may
consider appropriate, or even though the
agency should authorize a general or unlimited
management.
Acts of Administration
1. To sue for collection of debts;
2. To employ workers or servants and employees
needed for the conduct of business;
3. To engage counsel to preserve the ownership and
possession of the principal’s property;
4. To lease real property to another person for 1 year or
less, provided the lease is not registered;
5. To make customary gifts for charity or to employees
in the business managed by the agent;
6. To borrow money if it be urgent and indispensable for
the preservation of the things under administration.
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Art. 1878, Civil Code

Special powers of attorney are necessary in the following cases:
1. To make such payments as are not usually considered as
acts of administration;
2. To effect novations which put an end to obligations already
in existence at the time the agency was constituted;
3. To compromise, to submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired;
4. To waive any obligation gratuitously;
5. To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or
for a valuable consideration;
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Art. 1878, Civil Code

6. To make gifts, except customary ones for charity or
those made to employees in the business managed
by the agent;
7. To loan or borrow money, unless the latter act be
urgent and indispensable for the preservation of the
things which are under administration;
8. To lease any real property to another person for
more than one year;
9. To bind the principal to render some service without
compensation;
10.To bind the principal in a contract of partnership;
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Art. 1878, Civil Code

11.To obligate the principal as a guarantor or
surety;
12.To create or convey real rights over immovable
property;
13.To accept or repudiate an inheritance;
14.To ratify or recognize obligations contracted
before the agency;
15.Any other act of strict dominion.
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Art. 1879, Civil Code

A special power to sell excludes the power to

mortgage; and a special power to mortgage
does not include the power to sell.
Power to Sell
• Included in the a power to sell are:
– Find a purchaser or to sell directly
– Deliver the property
– Make the usual representation and warranty
– Execute the necessary transfer documents
– Fix the terms of the sale
– Receive the price, unless he was authorized only to
solicit orders
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Art. 1880, Civil Code

A special power to compromise does not

authorize submission to arbitration.
Compromise & Arbitration
• Compromise
– A mutual agreement or a settlement of a dispute
between parties by making concessions

• Arbitration
– Settlement of a dispute by a third party (arbitrator),
other than by a court
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Art. 1881, Civil Code

The agent must act within the scope of his

authority. He may do such acts as may be
conducive to the accomplishment of the purpose
of the agency.
Authority of the Agent
• Authority
– The power of the agent to affect the legal relations of the
principal by acts done in accordance with the principal’s
manifestation of consent to him

• Requisites for Principal to be Bound by Agent

1. The agent must act in behalf of the principal
2. The agent must act within the scope of his authority
Agent Acts Beyond Authority
• Principal is not Bound by Agent’s Acts:
1. When the agent acts without authority
2. When the agent acts beyond the scope of his authority
3. When the agent acts within the scope of his authority,
but in his own name
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Art. 1882, Civil Code

The limits of the agent’s authority shall not be

considered exceeded should it have been
performed in a manner more advantageous to
the principal than that specified by him.
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Art. 1883, Civil Code

If an agent acts in his own name, the principal has no
right of action against the persons with whom the agent
contracted; neither have such persons against the
principal.

In such case the agent is the one directly bound in favor

of the person with whom he has contracted, as if the
transaction were his own, except when the contract
involves things belonging to the principal.

The provisions of this article shall be understood to be

without prejudice to the actions between the principal and
agent.
Agent Acting in His Own Name
• General Rule
– If the agent is authorized to act on behalf of the principal
but instead acts in his own name, the agent is the one
directly liable to the person with whom he had contracted
as if the transaction were his own.

• Exception
– If the contract involves something belonging to the
principal
• The principal can file a case for damages against the agent
Next Meeting
• Obligations of the Agent
• Obligations of the Principal
• Modes of Extinguishment of Agency