Agency Reviewer

AGENCY
I. In General: Nature
A. Brief History: Governing Law
1. Spanish Civil Code (civil agency)
2. Spanish Code of Commerce (commercial agency)
3. Civil Code of the Philippines [Art. 227 (1)(2)!
Art. 2270. The following laws and regulations are hereby repealed:
(1) Those parts and provisions of the Civil Code of 1! whi"h are in for"e on the
date when this new Civil Code be"o#es effe"tive:
(2) The provisions of the Code of Co##er"e governing sales$ partnership$ agen"y$
loan$ deposit and guaranty%
A bound hi#self to render so#e servi"e in representation of &. & bound hi#self to A.
The stipulations of the parties will pri#arily govern their agree#ent a""ording to the
prin"iple of autono#y of "ontra"ts' freedo# to "ontra"t. The only e("eption is if the
stipulation is "ontrary laws$ #orals$ "usto#s$ publi" poli"y or publi" order. To what
their agree#ent pertains to will depend upon the intent of the parties. )f the parties
intended for the agree#ent to be a "ontra"t of agen"y$ aside fro# the stipulations of
the parties$ the "ontent of the "ontra"t$ and not the title$ will govern the agree#ent.
A""ording to *e +eon$ "ivil agen"y is governed by the Civil Code while "o##er"ial
agen"y is governed by the Code of Co##er"e. This distin"tion has been abolished
under the new Civil Code. ,owever$ this reasoning is falla"ious be"ause -ust be"ause
the law is abolished doesn.t #ean the distin"tion was also abolished.
The distin"tion is still i#portant be"ause the Co##er"ial Code is not abolished in its
entirety and so#e provisions are still appli"able.
B. Definition [Art. 1868]
Art. 1/. &y the "ontra"t of agen"y a person binds hi#self to render so#e servi"e or
to do so#ething in representation or on behalf of another$ with the "onsent or
authority of the latter.
Criti0ue
1. 1spiritu$ 23 +awyers 4ournal 2!7
2. 4&+ 5eyes 23) +awyers 4ournal 16
Agen"y is a fidu"iary relationship whi"h i#plies a power in an agent to "ontra"t with
a third person on behalf of the prin"ipal.
Agen"y is fro# the +atin word ago (agere) whi"h #eans doer or a"tor.
The prin"ipal7agent relationship "a#e fro# the #aster7servant relationship.
A pro(y in a baptis# is not an agent although he #ay have bound hi#self to do
so#ething in representation of another$ with the "onsent or authority of the latter.
This is the defe"t in the definition of 8agen"y9 in the Civil Code. The definition is so
broad that it in"ludes relationship not "onte#plated by the Code.
1ven though the purpose of the parties is not to #a:e a "ontra"tual relationship
between the prin"ipal and the third person$ there #ay still be a "ontra"t of agen"y
be"ause rights and obligations need not arise fro# a "ontra"t.
,owever$ if the purpose is not to establish rights and obligations between the
prin"ipal and a third person$ it is no longer a "ontra"t of agen"y be"ause the ob-e"t of
a "ontra"t of agen"y is the e(e"ution of a -uridi"al a"t$ one whi"h would either "reate$
#odify or e(tinguish a -uridi"al relationship.
An e(a#ple of a -uridi"al a"t by an agent is when an agent pays. ;ay#ent
e(tinguishes the debtor7"reditor relationship.
5egardless of the intention of the parties$ whether "o##er"ial or not$ the "ontra"t
shall be governed by the provisions of the Civil Code.
Another defe"t in the definition is that the phrase 8with the "onsent or authority of
the latter9 is superfluous be"ause the "onsent is already i#plied fro# the fa"t that it
is a "ontra"t.
C. Purpose
The purpose of agen"y is to e(tend the personality of the prin"ipal through the
fa"ility of the agent.

There is a need to appoint an agent be"ause the prin"ipal "annot personally perfor#
his obligations all at the sa#e ti#e.
1ven though an e#ployee #ay also perfor#$ an agent is still appointed be"ause
agents are not given basi" salary.
)f there is only one obligation$ an agent is appointed be"ause the prin"ipal "annot
personally attend to his obligation.
Agen"y is not only a "ontra"t but also a relationship.
D. Cara!teristi!s
Agen"y as a "ontra"t
1. Consens"al
An agen"y is "onsensual be"ause it is based on the agree#ent of the parties whi"h is
perfe"ted by #ere "onsent.
GING 1
An agen"y is "onsensual be"ause the "ontra"t is perfe"ted by #ere "onsent. )n other
words$ no other a"t is re0uired to perfe"t the "ontra"t.
The "ontra"t is perfe"ted upon the #eeting of the #inds upon the ob-e"t and the
"ause of the "ontra"t.
)t is i#portant to deter#ine when a "ontra"t is perfe"ted be"ause it is fro# that
#o#ent that the parties will be able to de#and fulfill#ent (with e("eptions).
A perfe"ted "ontra"t #ay still be unenfor"eable.
2. Principal
An agen"y is prin"ipal be"ause it "an stand by itself without need of another
"ontra"t.
All preparatory "ontra"ts are prin"ipal "ontra"ts as well.
3. Preparatory
An agen"y is preparatory be"ause it is entered into as a #eans to an end$ i.e.$ the
"reation of other transa"tions or "ontra"ts.
#. $nero"s
A "ontra"t of agen"y is onerous only if there is no stipulation to the "ontrary.
The law presu#es that the agen"y is for "o#pensation. The one$ either the prin"ipal
or the agent$ who alleges otherwise has the burden of proof.
An agent #ay allege that the "ontra"t is gratuitous be"ause if he "o##itted fault or
negligen"e$ he will be -udged with less severity if the "ontra"t was not for
"o#pensation. ,is liability will be #itigated.
Art. 167. <hen it is absolutely i#possible to settle doubts by the rules established
in the pre"eding arti"les$ and the doubts refer to in"idental "ir"u#stan"es of a
gratuitous "ontra"t$ the least trans#ission of rights and interests shall prevail. )f the
"ontra"t is onerous$ the doubt shall be settled in favor of the greatest re"ipro"ity of
interests.
%. &ilateral
An agen"y is unilateral$ if it is gratuitous be"ause it "reates obligations for only one
of the parties$ i.e. the agent% or bilateral$ if it is for "o#pensation be"ause it gives rise
to re"ipro"al rights and obligations.
'. Comm"tative
7. (ominate
An agen"y is no#inate be"ause it has its own na#e.
=in"e the "ontra"t is no#inate$ it shall be pri#arily governed by its Civil Code
provisions.
Agen"y as a relation
1. )id"ciary character
The relations of an agent to his prin"ipal are fidu"iary in "hara"ter sin"e they are
based on trust and "onfiden"e$ on a degree whi"h varies "onsiderably fro# situation
to situation.
The agree#ent to a"t on behalf of the prin"ipal "auses the agent to be fidu"iary$ that
is$ a person having a duty$ "reated by his underta:ing$ to a"t pri#arily for the benefit
of another$ the prin"ipal$ in #atters$ "onne"ted with his underta:ing.
2. *epresentative character
The agent renders so#e servi"e or does so#ething 8in representation or on behalf of
another.9
5epresentation "onstitutes the basis of agen"y. As it is a personal "ontra"t of
representation based on trust and "onfiden"e reposed by the prin"ipal on his agent$
agen"y is generally revo"able.
The a"ts of the agents within the s"ope of their authority$ by legal fi"tion$ are the a"ts
of the prin"ipal.
". #in$s of Agen!y
1. A!tua% Agen!y [Art. 1868]
authority of the latter.
>inds of A"tual Agen"y
a. As to manner of creation [Art. 1+',!
Art. 1/!. Agen"y #ay be e(press$ or i#plied fro# the a"ts of the prin"ipal$ fro# his
silen"e of la": of a"tion$ or his failure to repudiate the agen"y$ :nowing that another
person is a"ting on his behalf without authority.
Agen"y #ay be oral$ unless the law re0uires a spe"ifi" for#.
An e(press agen"y is one where the agent has been a"tually authori?ed by the
prin"ipal$ either orally or in writing.
An i#plied agen"y is one whi"h is i#plied fro# the a"ts of the prin"ipal$ fro# his
silen"e or la": of a"tion$ or his failure to repudiate the agen"y :nowing that another
GING 2
person is a"ting on his behalf without authority$ or fro# the a"ts of the agent whi"h
"arry out the agen"y$ or fro# his silen"e or ina"tion a""ording to the "ir"u#stan"es.
This is not an e("lusive list.
An i#plied agen"y is an a"tual agen"y as #u"h as an e(press agen"y.
5atifi"ation #ay produ"e the effe"t of an e(press or i#plied agen"y. )t results in
agen"y by ratifi"ation.
An agen"y #ay e(ist by operation of law.
General rule: Agen"y is not presu#ed. The relation between prin"ipal and agent
#ust e(ist as a fa"t.
Exception:
1. Agen"y #ay arise by operation of law.
2. Agen"y #ay arise to prevent un-ust enri"h#ent.
-. As to compensation [Art. 1+7%!
Art. 17@. Agen"y is presu#ed to be for a "o#pensation$ unless there is proof to the
"ontrary.
Also "alled as to its "hara"ter.
Aratuitous agen"y is one where the agent re"eives no "o#pensation for his servi"es.
Co#pensated or onerous is one where the agent re"eives "o#pensation for his
servi"es.
"o#pensation.
c. As to e.tent [Art. 1+7'!
Art. 17/. An agen"y is either general or spe"ial.
The for#er "o#prises all the business of the prin"ipal. The latter$ one or #ore
spe"ifi" transa"tions.
As to e(tent of business "overed$ a general agen"y is one whi"h "o#prises all the
business of the prin"ipal while a spe"ial agen"y is one whi"h "o#prises on or #ore
spe"ifi" transa"tions.
A general agen"y #ust not be "onfused with one "ou"hed in general ter#s (Art.
177) whi"h is a spe"ial agen"y when it involves only one or #ore spe"ifi"
transa"tions.
A""ording to the nature and e(tent of their authority agents have been "lassified into
universal$ general and spe"ial. A universal agent is one e#ployed to do all a"ts that
the prin"ipal #ay personally do$ and whi"h he "an lawfully delegate to another the
power of doing. A general agent is one e#ployed to do all a"ts "onne"ted with a
parti"ular trade$ business or e#ploy#ent. A spe"ial agent is one authori?ed to a"t in
one or #ore spe"ifi" transa"tions$ or to do one or #ore spe"ifi" a"ts$ or to a"t upon a
parti"ular o""asion.
d. As to scope of a"thority [Art. 1+77!
Art. 177. An agen"y "ou"hed in general ter#s "o#prises only a"ts of ad#inistration$
even if the prin"ipal should state that he withholds no power or that the agent #ay
e(e"ute su"h a"ts as he #ay "onsider appropriate$ or even though the agen"y should
authori?e a general and unli#ited #anage#ent.

An agen"y "ou"hed in general ter#s is one whi"h is "reated in general ter#s and is
dee#ed to "o#prise only a"ts of ad#inistration.
An agen"y "ou"hed in spe"ifi" ter#s is one authori?ing only the perfor#an"e of a
spe"ifi" a"t or a"ts.
An agen"y "ou"hed in general ter#s #ay be a general agen"y or a spe"ial agen"y.

&. Apparent or 'stensi(%e Agen!y [Art. 18)*]
Art. 176. )f a person spe"ially infor#s another or states by publi" advertise#ent
that he has given a power of attorney to a third person$ the latter thereby be"o#es a
duly authori?ed agent$ in the for#er "ase with respe"t to the person who re"eived the
spe"ial infor#ation$ and in the latter "ase with regard to any person.
The power shall "ontinue to be in full for"e until the noti"e is res"inded in the sa#e
#anner in whi"h it was given.
4&+ 5eyes 1/ +awyers 4ournal 16
As to its nature and effe"ts$ an ostensible or representative agen"y is one where the
agent a"ts in the na#e and representation of the prin"ipal while a si#ple or
"o##ission agen"y is one where the agent a"ts in his own na#e but for the a""ount
of the prin"ipal.
)f there is an apparent agen"y$ there may no longer -e an a"tual agen"y. At the ti#e
the transa"tion was #ade$ the prin"ipal has already revo:ed the agen"y but as far as
the law is "on"erned$ the agen"y is still in full for"e and effe"t and the prin"ipal shall
still be liable if he did not infor# the third person of the revo"ation. This is in order
to avoid fraud.
2 infor#s B that A is his agent and therefore A #ay "ontra"t on behalf of 2. This
does not ne"essarily #ean that an agen"y e(ists between 2 and A. )f A "onsents$
there is an agen"y% if A does not "onsent$ there is no agen"y.
5evo"ation #ade in any #anner is effe"tive where the person dealing with the agent
has a"tual :nowledge thereof. The basis is bad faith. The purpose is so that the
prin"ipal "annot es"ape liability by -ust denying the relationship with the agent.
GING 3
,aving advertised the fa"t that Collantes was his agent and having given spe"ial
noti"e to the plaintiffs of that fa"t$ and having given the# a spe"ial invitation to deal
with su"h agent$ it was the duty of the defendant on the ter#ination of the
relationship of prin"ipal and agent to give due and ti#ely noti"e thereof to the
plaintiffs. Cailing to do so$ he is responsible to the# for whatever goods #ay have
been in good faith and without negligen"e sent to the agent without :nowledge$
a"tual or "onstru"tive$ of the ter#ination of su"h relationship. (5allos vs Bang"o)
The defendant had a perfe"t right to believe$ until otherwise infor#ed$ that the agent
of the plaintiff$ in his pur"hase of aba"D and other effe"ts$ was still representing the
plaintiff in said transa"tions. Autierre?$ the agent$ testified that the aba"D whi"h was
pur"hased by the defendant was pur"hased by hi# as agent of the plaintiff and that
said aba"D was a"tually delivered to the plaintiff. The plaintiff$ it appears$ was
perfe"tly willing to ratify the a"ts of its agent in selling goods to the defendant$ but
see#ed to be unwilling to ratify said agentEs a"ts in pur"hasing goods fro# the
defendant. (Co#pania Aeneral de Taba"os vs *iaba)
*. Agen!y (y "stoppe% [Art. 1+*1]
Art. 1F61. Through estoppel an ad#ission or representation is rendered "on"lusive
upon the person #a:ing it$ and "annot be denied or disproved as against the person
relying thereon.
The prin"ipal "annot deny the e(isten"e of the agen"y after third parties$ relying on
his "ondu"t$ have had dealings with the supposed agent. This #ethod of "reating an
agen"y is :nown as agen"y by estoppel or i#pli"ation.
Art. 1F66. 1stoppel #ay be in pais or by deed.
Art. 1F6F. <hen a person who is not the owner of a thing sells or alienates and
delivers it$ and later the seller or the grantor a"0uires title thereto$ su"h title passes
by operation of law to the buyer or grantee.
1stoppel in pais is an e0uitable estoppel$ as distinguished fro# estoppel by deed or
te"hni"al estoppel. Gnder Arti"le 1F6F$ there is an apparent agen"y or estoppel by
deed.
1ven though there is an a"tual agen"y$ the one alleging it #ay "hoose to prove that
there is an agen"y by estoppel be"ause "ontra"t of agen"y is hard to prove sin"e
agen"y is a personal "ontra"t.
Hne who "lothes another with apparent authority as his agent$ and holds hi# out to
the publi" as su"h$ "an not be per#itted to deny the authority of su"h person to a"t
as his agent$ to the pre-udi"e of inno"ent third parties dealing with su"h person in
good faith and in the honest belief that he is what he appears to be$ for the following
presu#ptions or dedu"tions$ whi"h the law e(pressly dire"ts to be #ade fro#
parti"ular fa"ts$ are dee#ed "on"lusive. (Ia":e vs Ca#ps).
)n agen"y by estoppel$ there may not -e an a"tual agen"y at all.
)f the estoppel is on the ground of negligen"e or fraud on the part of the prin"ipal$
the agen"y is allowed upon the theory that$ when one of two inno"ent persons #ust
suffer loss$ the loss should fall upon hi# whose "ondu"t brought about the situation.
F. Distinguise$ fro,-!o,pare$ wit oter re%ations [.eatures of a
!ontra!t of agen!y]
1. Partnersip [Art. 1)6)]
Art. 17/7. &y the "ontra"t of partnership two or #ore persons bind the#selves to
"ontribute #oney$ property$ or industry to a "o##on fund$ with the intention of
dividing the profits a#ong the#selves.
Two or #ore persons #ay also for# a partnership for the e(er"ise of a profession.
1steban &. &autista$ Treatise on ;hilippine partnership +aw$ pp. @@7@/
;artnership Agen"y
1(tent of Control A partner.s power to bind
his "o7partner is not
sub-e"t to the "o7partner.s
right to "ontrol$ unless
there is an agree#ent to
that effe"t.
An agent #ust sub#it to
the prin"ipal.s right to
"ontrol the agent.s
"ondu"t in regard to the
sub-e"t of the agen"y.
+iability of the agent A partner a"ting as agent
for the partnership binds
not only the fir#
#e#bers but hi#self as
well. ;artners are
solidarily liable in a
subsidiary "apa"ity. The
assets of the partnership
#ust be e(hausted first.
The ordinary agent
assu#es no personal
liability where he a"ts
within the s"ope of his
authority.
=haring of profits The profits belong to all
the parties as "o##on
proprietors in agreed
proportions.
The alleged owner or
partner ta:es his agreed
share of profits$ not as
owner but as an agreed
#easure of "o#pensation
for his servi"es or the li:e.
The agent or partner "an bind the prin"ipal or his "o7partner only by su"h "ontra"ts
as are entered into within the s"ope of his authority.
)n general$ both "on"eptions i#port the idea of a fidu"iary relationship.
1a"h partner is regarded as an agent of his "o7partners when he is a"ting and as
prin"ipal of his "o7partners when they are a"ting.
A partnership is$ in effe"t$ a "ontra"t of #utual agen"y.
The "ontra"t of partnership and the "ontra"t of agen"y are very #u"h si#ilar. )t is
i#portant to distinguish the two in order to ensure that there is no "onfusion.
GING 4
&. Lease of /or0 or 1ervi!e [Art. 16++]
Art. 1/FF. )n the lease of wor: or servi"e$ one of the parties binds hi#self to e(e"ute
a pie"e of wor: or to render to the other so#e servi"e for a pri"e "ertain$ but the
relation of prin"ipal and agent does not e(ist between the#.
+ease of wor: or servi"e Agen"y
&asis is e#ploy#ent &asis is representation
The lessor (li:e a servant) ordinarily
perfor#s only #inisterial fun"tions.
+ease of servi"es "onte#plate only
#aterial (non7-uridi"al) a"ts. (Jielson K
Co. v. +epanto Consolidated Iining Co)
The agent e(er"ises dis"retionary
powers. The agent is destined to e(e"ute
-uridi"al a"ts ("reation$ #odifi"ation or
e(tin"tion of relations with third
parties). (Jielson K Co. v. +epanto
Consolidated Iining Co)
Hnly two persons are involved: the lessor
(#aster or e#ployer) and the lessee
(servant or e#ployee).
Three persons are involved: the
prin"ipal$ the agent$ and the third person
with who# the agent has "ontra"ted.
+ease of servi"e relates #ore to #atters
of #ere #anual or #e"hani"al
e(e"ution$ whi"h the servant a"ts under
the dire"tion and "ontrol of the #aster.
Agen"y relates to "o##er"ial or business
transa"tions.
)n both agen"y and lease of servi"es one of the parties binds hi#self to render so#e
servi"e to the other party. (Jielson K Co. v. +epanto Consolidated Iining Co)
A person #ay be e#ployed to perfor# the duties of both agent and servant (i.e.$
boo::eeper who is also authori?ed to pur"hase offi"e supplies is in this respe"ting as
an agent).
The #anage#ent "ontra"t provides that Jielson would also a"t as pur"hasing agent
of supplies and enter into "ontra"ts regarding the sale of #ineral$ but the "ontra"t
also provides that Jielson "ould not #a:e any pur"hase$ or sell the #inerals$
without the prior approval of +epanto. Therefore$ Jielson "ould not e(e"ute -uridi"al
a"ts whi"h would bind +epanto without first se"uring the approval of +epanto.
Jielson$ then$ was to a"t only as an inter#ediary$ not as an agent. Also$ a stipulation
provides that +epanto "ould not ter#inate the agree#ent at will. (Jielson K Co. v.
+epanto Consolidated Iining Co)
;laintiff was not e#ployed to represent the defendant "orporation in its dealings
with third parties. ,e was a #ere e#ployee hired to perfor# a "ertain spe"ifi" duty
or tas:$ that of a"ting as spe"ial guard and staying at the #ain entran"e of the #ovie
house to stop gate "rashers and to #aintain pea"e and order within the pre#ises.
(*e la Cru? v Jorthern Theatri"al)
*. Contra!t for a Pie!e of /or0 [Art. 1)1*2 1)&3]
Art. 1716. &y the "ontra"t for a pie"e of wor: the "ontra"tor binds hi#self to e(e"ute
a pie"e of wor: for the e#ployer$ in "onsideration of a "ertain pri"e or "o#pensation.
The "ontra"tor #ay either e#ploy only his labor or s:ill$ or also furnish the #aterial.
Art. 172!. Those who put their labor upon or furnish #aterials for a pie"e of wor:
underta:en by the "ontra"tor have an a"tion against the owner up to the a#ount
owing fro# the latter to the "ontra"tor at the ti#e the "lai# is #ade. ,owever$ the
following shall not pre-udi"e the laborers$ e#ployees and furnishers of #aterials:
(1);ay#ents #ade by the owner to the "ontra"tor before they are due%
(2) 5enun"iation by the "ontra"tor of any a#ount due hi# fro# the owner.
This arti"le is sub-e"t to the provisions of spe"ial laws.
Contra"t for a pie"e of wor: Agen"y
)n a "ontra"t for a pie"e of wor:$ the
independent "ontra"tor$ without being
sub-e"t to the "ontrol of the e#ployer
e("ept only as to the result of the wor:$
e(er"ises his e#ploy#ent
independently$ and not in representation
of the e#ployer. (=hell Co#pany v
Cire#en.s )nsuran"e)
)n agen"y$ the agent is sub-e"t to "ontrol
and dire"tion of the prin"ipal who# he
represents with respe"t to the #atters
entrusted to hi#. (=hell Co#pany v
Cire#en.s )nsuran"e)
As a general rule$ the e#ployer is not
liable for the torts or in-ury infli"ted by
the independent "ontra"tor upon third
persons or by the e#ployees of su"h
"ontra"tor. 1#ployer is liable if in-ury is
"aused by his negligen"e or the result of
his interferen"e in the wor: of the
independent "ontra"tor or the wor: is
intrinsi"ally dangerous or a nuisan"e.
)n general$ the a"ts of the agent or
servant within the s"ope of his authority
or e#ploy#ent$ the prin"ipal or
e#ployer is liable.
&oth "ontra"ts involve servi"e.
A "ontra"t for a pie"e of wor: is a :ind of a "ontra"t of lease of servi"e. Hther :inds of
a "ontra"t of lease of servi"e are "ontra"t of e#ploy#ent and "ontra"t of "arriage.
<here one party to a "ontra"t underta:es to a""o#plish a "ertain result a""ording to
his own #ethod and without being sub-e"t to the other party.s "ontrol e("ept as to
the result of the wor:$ the "ontra"t is one for a pie"e of wor: and not agen"y. )n the
absen"e of a statute "reating what is :nown as #e"hani"s. lien$ the owner of a
building is not liable for the value of #aterials pur"hased by an independent
"ontra"tor either as su"h owner or as the assignee of the "ontra"tor. (Cressel v
Iariano Gy Chan"o =ons K Co)
=uppliers #ay re"over fro# the owner of the edifi"e based on Arti"le 172! whi"h
states that those who put their labor upon or furnish #aterials for a pie"e of wor:
underta:en by the "ontra"tor have an a"tion against the owner up to the a#ount
owing fro# the latter to the "ontra"tor at the ti#e the "lai# is #ade.
Gnder the li"ense agree#ent &o0uiren would pay Calte( the purely no#inal su# of
;1.00 for the use of the pre#ises and all the e0uip#ent therein. ,e "ould sell only
Calte( produ"ts. Iaintenan"e of the station and its e0uip#ent was sub-e"t to the
approval$ in other words "ontrol$ of Calte(. &o0uiren "ould not assign or transfer his
rights as li"ensee without the "onsent of Calte(. Ter#ination of the "ontra"t was a
right granted only to Calte( but not to &o0uiren. These provisions of the "ontra"t
GING 5
show the e(tent of the "ontrol of Calte( over &o0uiren. The "ontrol was su"h that the
latter was virtually an e#ployee of the for#er. (Afri"a v Calte( ;hil. )n")
+. 4egotioru, Gestio [Arts &1++5&1+6]
Art. 21FF. <hoever voluntarily ta:es "harge of the agen"y or #anage#ent of the
business or property of another$ without any power fro# the latter$ is obliged to
"ontinue the sa#e until the ter#ination of the affair and its in"idents$ or to re0uire
the person "on"erned to substitute hi#$ if the owner is in a position to do so. This
-uridi"al relation does not arise in either of these instan"es:
(1)<hen the property or business is not negle"ted or abandoned%
(2) )f in fa"t the #anager has been ta"itly authori?ed by the owner.
)n the first "ase$ the provisions of Arti"les 1617$ 1F06$ Jo. 1$ and 1F0F regarding
unauthori?ed "ontra"ts shall govern.
)n the se"ond "ase$ the rules on agen"y in Title 2 of this &oo: shall be appli"able.
Art. 21F@. The offi"ious #anager shall perfor# his duties with all the diligen"e of a
good father of a fa#ily$ and pay the da#ages whi"h through his fault or negligen"e
#ay be suffered by the owner of the property or business under #anage#ent.
The "ourts #ay$ however$ in"rease or #oderate the inde#nity a""ording to the
"ir"u#stan"es of ea"h "ase.
Jegotioru# Aestio Agen"y
Jot only without the authority of the
owner of the business but is without his
:nowledge.
5epresentation is e(pressly "onferred.
A"ts a""ording to the presu#ed will of
the owner by e(er"ising 8all the diligen"e
of a good father of a fa#ily9
A"ts a""ording to the e(press will of the
prin"ipal
Luasi7"ontra"t Contra"t
)n both "ases$ the offi"ious #anager'negotioru# gestor or agent represents the
owner of the business or prin"ipal.
Antonio ,idalgo ad#inistered the property of *e la ;eMa y Ao#i?$ not in the
"hara"ter of business #anager$ but as agent by virtue of an i#plied agen"y vested in
hi# by its owner who was not unaware of the fa"t$ who :new perfe"tly well that the
said Antonio ,idalgo too: "harge of the ad#inistration of that property on a""ount
of the obligatory absen"e of his previous agent for who# it was an i#possibility to
"ontinue in the dis"harge of his duties. (*e la ;ena v ,idalgo)
6. Loans [Art. 13**]
Art. 1!66. &y the "ontra"t of loan$ one of the parties delivers to another$ either
so#ething not "onsu#able so that the latter #ay use the sa#e for a "ertain ti#e and
return it$ in whi"h "ase the "ontra"t is "alled a "o##odatu#% or #oney or other
"onsu#able thing$ upon the "ondition that the sa#e a#ount of the sa#e :ind and
0uality shall be paid$ in whi"h "ase the "ontra"t is si#ply "alled a loan or m"t""m.
Commodat"m is essentially gratuitous.
=i#ple loan #ay be gratuitous or with a stipulation to pay interest.
)n commodat"m the bailor retains the ownership of the thing loaned$ while in
si#ple loan$ ownership passes to the borrower.
The relevan"e of distinguishing loan fro# agen"y is to avoid "onfusion as they have a
lot of si#ilarities.
+oan Agen"y
A borrower is given #oney for purposes
of his own and he #ust generally return
it whether or not his own business is
su""essful.
An agent #ay be given funds by the
prin"ipal to advan"e the latterEs business.
=o#ething is given to the agent or borrower.
<here "he":s are deposited with a "olle"ting ban:$ the nature of the relationship
"reated at that stage is one of agen"y$ that is$ the ban: is to "olle"t fro# the drawees
of the "he":s the "orresponding pro"eeds. After the "he":s are "olle"ted and
"onverted into "ash$ the "reditor and debtor relationship is "reated between the
depositor and the ban:. (4ai Alai Corp v &;))
6. 1a%e [Art. 1+68]
Art. 1F@. &y the "ontra"t of sale one of the "ontra"ting parties obligates hi#self to
transfer the ownership and to deliver a deter#inate thing$ and the other to pay
therefor a pri"e "ertain in #oney or its e0uivalent.
A "ontra"t of sale #ay be absolute or "onditional.
=ale Agen"y to sell
The buyer re"eives the goods as owner.
(>er K Co. v +ingad)
The agent re"eives the goods as the
goods of the prin"ipal. (>er K Co. v
+ingad)
The buyer pays the pri"e. The agent delivers the pro"eeds of the
sale.
The buyer$ as a general rule$ "annot
return the ob-e"t sold.
The agent "an return the ob-e"t in "ase
he is unable to sell the sa#e to a third
person.
The buyer "an deal with the thing as he
pleases$ being the owner.
The agent$ in dealing with the thing
re"eived$ is bound to a"t a""ording to the
instru"tions of his prin"ipal.
The essen"e is the transfer of title to a
thing fro# one to another.
The essen"e involves the idea of an
appoint#ent of one to a"t for another.
There is transfer of possession of goods to the agent or the buyer.
GING 6
A "ontra"t is what the law defines it to be$ and not what it is "alled by the "ontra"ting
parties. (Luiroga v ;arsons ,ardware)
<hatever unforseen events #ight have ta:en pla"e unfavorable to the petitioner$ the
respondent #ight still legally hold the petitioner to the pri"es fi(ed of N1$700 and
N1$/00. This is in"o#patible with the relation of agen"y$ be"ause in agen"y$ the
agent is e(e#pted fro# all liability in the dis"harge of his "o##ission provided he
a"ts in a""ordan"e with the instru"tions re"eived fro# his prin"ipal$ and the
prin"ipal #ust inde#nify the agent for all da#ages whi"h the latter #ay in"ur in
"arrying out the agen"y without fault or i#pruden"e on his part. (Aon?alo ;uyat and
=ons v Ar"o A#use#ent Co)
5espondent did not a"t as agent of 3elas"o% it bought the whis:y fro# A.4. <ilson K
Co. in A#eri"a and then resold it to 3elas"o. Jothing in the "ontra"t to shows that
3elas"o "onstituted and appointed respondent as his agent to buy the li0uor for hi#.
Hn the other hand$ the a"ts of respondent after the e(e"ution of the "ontra"t show
that respondent sold the "ases of whis:y to 3elas"o and gave 3elas"o the
understanding that the li0uor was sold to hi# as indi"ated in the invoi"es. Also$
nothing shows the e(isten"e of privity of "ontra"t between 3elas"o$ as buyer$ and
A.4. <ilson$ as seller. The order for li0uor #ade by respondent fro# A.4. <ilson
#ade no #ention of 3elas"o as the buyer. Also$ supposing an unforeseen event too:
pla"e unfavorable to respondent$ 3elas"o #ight still hold respondent to the pri"e
fi(ed as per "ontra"t. (3elas"o v Gniversal Trading Co.)
<here a foreign "o#pany has an agent here selling its goods and #er"handise$ that
sa#e agent "ould not very well a"t as agent for lo"al buyers$ be"ause the interests of
his foreign prin"ipal and those of the buyer would be in dire"t "onfli"t. ,e "ould not
serve two #asters at the sa#e ti#e. (Car 1aster 1(port K )#port Co. v +i# Te":
=uan)
Appellant is only partly right$ for the reason that the ter#s of the "ontra"t$ while
providing for sale of &ee <a( fro# the plaintiff to Tong and pur"hase of the sa#e by
Tong fro# the plaintiff$ also designates Tong as the sole distributor of the arti"le
within a "ertain territory. &esides$ paragraph F of the "ontra"t entitled O=e"urityO$
provides that Tong was to furnish surety bond to "over all ship#ents #ade by the
plaintiff to hi#. Curther#ore$ appellant #ust have understood the "ontra"t to be
one$ at least partly$ of agen"y be"ause the bond itself says the following: O<,151A=$
the above bounden prin"ipal has been appointed as e.cl"sive agent for ;earl )slands
Co##er"ial Corporation of Ianila$ ;hilippines$ for the 3isayas7Iindanao
;rovin"es% P P P.O (;earl )sland Co##er"ial Corp v +i# Tiang Tong)
The fa"t that appellant re"eived the toba""o to be sold at ;1.60 per :ilo and the
pro"eeds to be given to "o#plainant as soon as it was sold$ strongly negates transfer
of ownership of the goods to the petitioner. The agree#ent "onstituted her as an
agent with the obligation to return the toba""o if the sa#e was not sold. (+i# v
;eople)
<hether viewed as an agen"y to sell or as a "ontra"t of sale$ the liability of Areen
3alley is indubitable. Adopting Areen 3alley.s theory that the "ontra"t is an agen"y
to sell$ it is liable be"ause it sold on "redit without authority fro# its prin"ipal.
(Areen 3alley ;oultry K Allied ;rodu"ts )n". v )AC)
The "ontra"t is "lear that appellant is one of the sellers of the lots in 0uestion. <e
will not allow a variation of the ter#s of the written "ontra"t by parole eviden"e$ for
there is never an allegation in the appellant.s answer that 1(hibit /7Hs#eMa does not
e(press the true intent of the parties or that it is suffering fro# a vi"e or #ista:e or
i#perfe"tion. (&ert Hs#ena K Asso"iates v CA)
). 7rusteesip [Art. 1++8]
Art. 1FF0. A person who establishes a trust is "alled the trustor% one in who#
"onfiden"e is reposed as regards property for the benefit of another person is :nown
as the trustee% and the person for whose benefit the trust has been "reated is referred
to as the benefi"iary.
Trusteeship Agen"y
The title and "ontrol of the property
under the trust instru#ent passes to the
trustee who a"ts in his own na#e.
The agent represents and a"ts for his
prin"ipal.
A trust #ay ordinarily be ter#inated
only by the fulfill#ent of its purpose.
An agen"y #ay in general be revo:ed at
any ti#e.
Trust is based on the idea of dis"retion
in the trustee and guidan"e by the settler
or cest"i only to a li#ited e(tent and
when e(pressly provided for.
Agen"y is for#ed with the thought of
"onstant supervision and "ontrol by
prin"ipal.
<hile trust is not an agen"y$ it is possible for a trustee to be an agent also where
e(tensive dire"tion and "ontrol are :ept over the trustee.
8. Bro0er
&ro:erage Agen"y
A bro:er has no relation with the thing
he buys or sells. ,e is #erely an
inter#ediary or negotiator between the
pur"hases and the vendor relative to the
property with the "ustody or possession
of whi"h he has no "on"ern. ,is only
offi"e is to bring together the parties to
the transa"tion never a"ting in his own
na#e but in the na#e of those who
e#ployed hi#. )n effe"ting a transa"tion$
he a"ts in a "ertain sense as the agent of
both parties. (;a"ifi" Co##er"ial Co. v
Bat"o)
A "o##ission agent is one engaged in
the pur"hase or sale for another of
personal property whi"h for this
purpose$ is pla"ed in his possession and
at his disposal. ,e #aintains a relation
not only with his prin"ipal and the
pur"hases or vendor$ but also with the
property whi"h is the sub-e"t #atter of
the transa"tion.
A bro:er earns his pay #erely by
bringing the buyer and the seller
together$ even if no sale is eventually
#ade.
An agent re"eives "o##ission upon the
su""essful "on"lusion of a transa"tion
su"h as sale.
GING 7
A bro:er is one who is engaged for others on a "o##ission% a negotiator between
other parties$ never a"ting in his own na#e but in the na#e of those who e#ployed
hi#.
3. Guar$iansip
Auardianship Agen"y
The guardian$ although he a"ts for
and on behalf of his ward$ does not
derive his authority so to a"t fro# the
ward.
Agent derives his authority fro# the
prin"ipal.
The relation of guardian and ward
#ay be "reated irrespe"tive of the
"onsent or "apa"ity of the ward.
The relation of prin"ipal and agent is
founded upon "onsent of the parties
thereto.
Auardians are not sub-e"t to the
dire"tion of their wards.
Agents are sub-e"t to the "ontrol of
their prin"ipals.
A legal guardian is substituted by law
and stands in lo"o parentis.
(Cessenden v 4ones)
Hrdinarily$ an agent is the appointee
of the prin"ipal and his power #ay at
any ti#e be abrogated or #odified by
the prin"ipal. (Cessenden v 4ones)
A guardian represents one who has no
legal "apa"ity to "ontra"t for hi#self.
(Cessenden v 4ones)
An agent represents one who has
"apa"ity to "ontra"t for hi#self where
he present. (Cessenden v 4ones)
A #inor is in"apable of appointing an agent or an attorney$ and it "an not be
su""essfully "ontended that the statute "an be "o#plied with by the filing of the
re0uired noti"e by the father$ #other or so#e friend of the "hild as ne(t friend.
<hile the parent of a #inor is its natural guardian he "annot be said to be the agent
or attorney for the "hild. A "hild with a #eritorious "ause of a"tion but in"apable of
initiating any pro"eeding for its enfor"e#ent will not be left to the whi# or #er"y of
so#e self7"onstituted ne(t friend to enfor"e its rights. (I" *onald v =pring 3alley)
18. Bai%,ent
&ail#ent Agen"y
The bailee is possessed of no power to
bind in personal liability.
Agent #ay bind the prin"ipal.
The bailee owes neither loyalty nor
obedien"e to the bailor.
Agent owes loyalty and obedien"e to the
prin"ipal.
Hrdinarily in "ases of bail#ent$ the relation of prin"ipal and agent does not e(ist as
the bailor has no "ontrol over the bailee beyond what is given hi# by "ontra"t$ and is
not responsible to other for his a"ts. A bailee over whose a"tions the bailor has no
"ontrol is not an agent$ even though he a"ts for the benfit of the bailor$ and a bailee
a"ting on behalf of hi#self and whose interests are antagonisti"s to those of his
bailor "annot the the agent of the bailor.
11. 1ip Agent
Considering the pe"uliar relationship of the parties$ Citadel +ines$ )n". "annot be
"onsidered as a 8#ere agent9 under the "ivil law on agen"y as distinguished fro# a
ship agent$ within the "onte(t of the Code of Co##er"e. A ship agent$ a""ording to
Arti"le @/ of the Code of Co##er"e$ is 8the person entrusted with the provisioning
of a vessel$ or /ho represents her in the port in /hich she happens to -e. 9 ;rivate
respondent is the entity that represents the vessel in the port of Ianila and hen"e is
a ship agent within the #eaning and "onte(t of Arti"le @/ of the Code of Co##er"e.
(=wit?erland Aeneral )nsuran"e Co. +td. v 5a#ire?)
II. Essential Elements of a Contract of Agency [Article 1318
Art. 161. There is no "ontra"t unless the following re0uisites "on"ur:
(1) Consent of the "ontra"ting parties%
(2) Hb-e"t "ertain whi"h is the sub-e"t #atter of the "ontra"t%
(3) Cause of the obligation whi"h is established.
The essential ele#ents of agen"y are: (1) there is "onsent$ e(press or i#plied$ of the
parties to establish the relationship% (2) the ob-e"t is the e(e"ution of a -uridi"al a"t
in relation to a third person% (6) the agent a"ts as a representative and not for
hi#self% and (F) the agent a"ts within the s"ope of his authority. (5allos v Celi( Ao
Chan K =ons 5ealty Corp). The last two are not essential. )t #erely goes into the
perfor#an"e$ not enfor"eability of the "ontra"t. Also$ they are obligations of the
agent and obligations presuppose the e(isten"e of a valid "ontra"t. (Gribe)
A. Consent of te !ontra!ting parties
A person #ay e(press his "onsent by "ontra"t (Art. 1/)$ orally or in writing$ by
"ondu"t (Art. 1/!)$ or by ratifi"ation (Art. 1!10)$ or "onsent #ay arise by
presu#ption or operation of law. )n "ertain situations$ the law presu#es that a
person has authority to a"t for another. Cor e(a#ple$ in law$ partners are "onsidered
as agents of the partnership and of ea"h other.
Hnly the "onsent of the prin"ipal and agent are essential. Consent of the third person
is not ne"essary. The third person is not a party to the agen"y but a party to the
"ontra"t entered into by the agent in representation of his prin"ipal. This goes into
the "hara"teristi" of the "ontra"t of agen"y being preparatory.
1. Prin!ipa% [Art. 1863]
silen"e or la": of a"tion$ or his failure to repudiate the agen"y$ :nowing that another
A person who "annot legally enter into "ontra"ts dire"tly should not be per#itted to
do it indire"tly through another.
GING 8
The prin"ipal #ay either be a natural person or an artifi"ial one. Arti"le 1!1!
provides as one of the grounds for the e(tinguish#ent of agen"y 8the dissolution of
the fir# or "orporation whi"h entrusted or a""epted the agen"y.9
Hther na#es: #andante$ e#ployer$ "onstituent$ "hief. ,owever$ 8prin"ipal9 is the
best na#e. ,owever$ when there is a prin"ipal in a -uridi"al relationship$ it #ay not
always be an agen"y. )t #ay be "ontra"t for a pie"e of wor:.
The i#plied agen"y is founded on the la": of "ontradi"tion or opposition$ whi"h
"onstitutes si#ultaneous agree#ent on the part of the presu#ed prin"ipal to the
e(e"ution of the "ontra"t$ while in the #anage#ent of anotherEs business there is no
si#ultaneous "onsent$ either e(press or i#plied$ but a fi"tion or presu#ption of
"onsent be"ause of the benefit re"eived. (*e +a ;ena vs ,idalgo).
a. 0.press
As to #anner of its "reation$ an e(press agen"y is one where the agent has been
a"tually authori?ed by the prin"ipal$ either orally or in writing.
-. 1mplied
An i#plied agen"y is one whi"h is i#plied fro# the a"ts of the prin"ipal$ fro# his
silen"e or la": of a"tion$ or his failure to repudiate the agen"y :nowing that another
person is a"ting on his behalf without authority$ or fro# the a"ts of the agent whi"h
"arry out the agen"y$ or fro# his silen"e or ina"tion a""ording to the "ir"u#stan"es.
This is not an e("lusive list.
)f$ as alleged$ petitioner e(erted no effort to pro"ure the signature of ;io after he had
re"overed fro# his illness$ neither did the Alteras repudiate the deed that their son7
in7law had signed. Thus$ an i#plied agen"y #ust be held to have been "reated fro#
their silen"e or la": of a"tion$ or their failure to repudiate the agen"y. (Conde v CA)
&. Agent
Hther na#es: attorney$ attorney7in7fa"t$ pro(y$ delegate$ and representative.
a. 0.press [Art 1+',2 1+7!
Art. 170. A""eptan"e by the agent #ay also be e(press$ or i#plied fro# his a"ts
whi"h "arry out the agen"y$ or fro# his silen"e or ina"tion a""ording to the
"ir"u#stan"es.
-. 1mplied [Art 1+72 1+72!
Art. 170. A""eptan"e by the agent #ay also be e(press$ or i#plied fro# his a"ts
whi"h "arry out the agen"y$ or fro# his silen"e or ina"tion a""ording to the
"ir"u#stan"es.
Art. 171. &etween persons who are present$ the a""eptan"e by the agen"y #ay also
be i#plied if the prin"ipal delivers his power of attorney to the agent and the latter
re"eives it without any ob-e"tion.
The presu#ption of a""eptan"e #ay be rebutted by "ontrary proof.
A power of attorney is an instru#ent in writing by whi"h one person$ as prin"ipal$
appoints another as his agent and "onfers upon hi# the authority to perfor# "ertain
spe"ified a"ts or :inds of a"ts on behalf of the prin"ipal. )ts pri#ary purpose is not to
define the authority of the agent as between hi#self and his prin"ipal but to eviden"e
the authority of the agent to third parties within who# the agent deals.
Art. 172. &etween persons who are absent$ the a""eptan"e by the agen"y "annot be
i#plied fro# the silen"e of the agent$ e("ept:
(1) <hen the prin"ipal trans#its his power of attorney to the agent$ who re"eives it
without any ob-e"tion%
(2) <hen the prin"ipal entrusts to hi# by letter or telegra# a power of attorney
with respe"t to the business in whi"h he is habitually engaged as an agent$ and
he did not reply to the letter or telegra#.
&etween persons who are absent$ #ere silen"e of the agent does not i#ply
a""eptan"e of the agen"y if the letter or telegra# is not related to the business in
whi"h he is habitually engaged as an agent.
B. '(9e!t: e:e!ution of a 9uri$i!a% a!t
)f the purpose of the agen"y is not to establish rights and obligations between the
prin"ipal and a third person$ it is no longer a "ontra"t of agen"y be"ause the ob-e"t of
a "ontra"t of agen"y is the e(e"ution of a -uridi"al a"t$ one whi"h would either "reate$
#odify or e(tinguish a -uridi"al relationship. An e(a#ple of a -uridi"al a"t by an
agent is when an agent pays. ;ay#ent e(tinguishes the debtor7"reditor relationship.
There are "ertain a"ts that "annot be delegated to agents su"h as personal a"ts and
"ri#inal a"ts.
C. Cause: presu,e$ to (e for !o,pensation
"o#pensation. Jo one has the burden of proving that the "ontra"t is onerous
be"ause the law #a:es this presu#ption.
)f the agen"y is gratuitous$ the "ause is the liberality of the agent. )f the agen"y is
onerous$ the "ause$ as to the prin"ipal$ is the pro#ise of servi"e of the agent. As to
the agent$ the "ause is the pro#ise of the thing.
.or,: 18632 18)+2 18)8
GING 9
There is no law re0uiring a "ontra"t of agen"y to be in a parti"ular for# for the
"ontra"t of agen"y to be valid. ,owever$ there are laws re0uiring the "ontra"t of
agen"y to be in a parti"ular for# for it to be enfor"eable su"h as an agree#ent that
by its ter#s is not to be perfor#ed within a year fro# the #a:ing thereof. The
=tatute of Crauds re0uires the "ontra"t to be in writing$ not ne"essarily in a publi"
do"u#ent.
)f authority of the agent is not in writing and the agent entered into a "ontra"t of sale
with a third person$ the status of the "ontra"t between the agent and the third person
#ay still be valid. As a rule$ the "ontra"t will be valid and binding as to the prin"ipal
(Arti"le 1/). The prin"ipal #ay not be bound by the "ontra"t of sale if the sale is
void.
)f a "ontra"t is a sale of an i##ovable property and the authority of the agent is not
in writing$ as a rule$ the "ontra"t of sale is unenfor"eable be"ause whenever the
ownership of an i##ovable property is trans#itted$ a spe"ial power of attorney is
re0uired (Arti"le 17). ,owever$ if the i##ovable property is a par"el of land$ the
"ontra"t of sale will be void (Arti"le 17F).
The sale of a "ar without an =;A is unenfor"eable be"ause it is an a"t of stri"t
do#inion sin"e it goes into the ownership. Anything sold$ whether #ovable$ involves
a transfer of ownership and is therefore an a"t of stri"t do#inion.
A was orally authori?ed to #anage a restaurant. ,e bought "ertain ite#s$ whi"h he
paid for without =;A. ,e also used the in"o#e of the restaurant to the pay the debt
of the prin"ipal without =;A. The a"ts are not ne"essarily binding upon the prin"ipal.
They are only binding if (1) the ite#s bought were for the restaurant be"ause this is
an a"t of ad#inistration (Art. 17$ par. 1)% and (2) the pay#ent #ade was urgent
and indispensible for the preservation of things whi"h are under ad#inistration (Art.
17$ par. 7). The pay#ent is not binding$ for e(a#ple$ if the debt paid has already
pres"ribed or if there are other #ore onerous debts.
The agent entered into a "ontra"t of lease with a third person for a period of @ years
but his authority was not in writing. The "ontra"t #ay be valid without =;A if the
prin"ipal is the lessee be"ause the property burdened is not the property of the
prin"ipal. &ut -ust be"ause the prin"ipal is the lessor does not #ean that the "ontra"t
will be unenfor"eable. The law only re0uires =;A if the property involves is an
i##ovable property.
)f the agent had =;A for the lease of a par"el of land for @ years and the lessor is the
prin"ipal$ the lease "ontra"t #ay be unenfor"eable as against the prin"ipal if the
"ontra"t of lease itself is not in writing. This is still "overed by the =tature of Crauds.
)t will be unenfor"eable not be"ause the agent does not have =;A but be"ause the
lease itself is not in writing.
General rule: The agent3s a"thority #ay be oral or written. )t #ay be in publi" or
private writing.
Exception:
Art. 17F. <hen a sale of a pie"e 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.
=u"h sale should$ however$ be "onsidered as #erely voidable sin"e the sale "an be
ratified by the prin"ipal su"h as by availing hi#self of the benefits derived fro# the
"ontra"t.
Arti"le 17F spea:s only of an agen"y for 8sale of a pie"e of land or any interest
therein.9 )t #ay be argued$ therefore$ that an agen"y to pur"hase need not be in
writing. =u"h an agen"y$ however$ is "overed by Arti"le 17(@) whi"h provides that$
8A spe"ial power of attorney is ne"essary to enter into any "ontra"t by whi"h the
ownership of an i##ovable is trans#itted or a"0uired.9
Gnder Arti"le 1F06 (Jo.2$ par. QeR) of the Civil Code$ an oral agree#ent for the sale
of real property or of an interest therein is unenfor"eable even if there is no agent.
Art. 17. =pe"ial powers of attorney are ne"essary in the following "ases:
(1) To #a:e su"h pay#ents as are not usually "onsidered as a"ts of ad#inistration%
;ay#ent is the delivery of #oney or the perfor#an"e in any other #anner of an
obligation.
&ut when pay#ent is #ade in the ordinary "ourse of #anage#ent$ it is "onsidered a
#ere a"t of ad#inistration.

(2) To effe"t novations whi"h put an end to obligations already in e(isten"e at the
ti#e the agen"y was "onstituted%
Jovation is the e(tin"tion of an obligation through the "reation of a new one whi"h
substitutes it by "hanging the ob-e"t or prin"ipal "onditions thereof$ substituting a
debtor$ or subrogating another in the right of the "reditor.
(6) To "o#pro#ise$ to sub#it 0uestions to arbitration$ to renoun"e the right to
appeal fro# a -udg#ent$ to waive ob-e"tions to the venue of an a"tion or to
abandon a pres"ription already a"0uired%
A "o#pro#ise #ust be stri"tly "onstrued. The grant of spe"ial power regarding one
of the a"ts #entioned in Jo. 6 is not enough to authori?e others. Co#pro#ise is a
"ontra"t whereby the parties$ by #a:ing re"ipro"al "on"essions$ avoid litigation or
put an end to one already "o##en"ed. Arbitration is where the parties sub#it their
"ontroversies to one or #ore arbitrators for de"ision. These are a"ts of ownership
sin"e they involve the possibility of disposing of the thing or right sub-e"t of the
"o#pro#ise or arbitration.
)f there is no spe"ial power of attorney$ the "o#pro#ise is #erely unenfor"eable.
GING 10
&y pres"ription$ one a"0uires ownership and other real rights through the lapse of
ti#e. )n the sa#e way$ rights and a"tions are lost by pres"ription.
(F) To waive any obligation gratuitously%
This is "ondonation or re#ission. A waiver #ay not be inferred when the ter#s
thereof do not e(pli"itly and "learly prove an intent to abandon the right.
(@) To enter into any "ontra"t by whi"h the ownership of an i##ovable is
trans#itted or a"0uired either gratuitously or for a valuable "onsideration%
(/) To #a:e gifts$ e("ept "usto#ary ones for "harity or those #ade to e#ployees
in the business #anaged by the agent%
Aift or donation is an a"t of liberality whereby a person disposes gratuitously of a
thing or right in favor of another who a""epts it. The #a:ing of "usto#ary gifts for
"harity$ or those #ade to e#ployees in the business #anaged by the agent are
"onsidered a"ts of ad#inistration.
(7) To loan or borrow #oney$ unless the latter a"t be urgent and indispensable for
the preservation of the things whi"h are under ad#inistration%
)n a loan of #oney$ the borrower is bound to pay to the "reditor an e0ual a#ount of
the sa#e :ind and 0uality. The power to lend or borrow #oney is one with #u"h
great possibility of abuse and is not ordinarily in"ident to a general #anagerial
agen"y.
Authority to borrow #oney is rarely inferred unless su"h borrowing is usually
in"ident to the perfor#an"e of a"ts whi"h the agent is authori?ed to perfor# for the
prin"ipal$ or unless it is i#possible for the agent to "o##uni"ate with his prin"ipal
and borrowing is indispensable to the "ontinuan"e of the business or to prevent a
very "onsiderable loss.
This refers only to #oney and not to other fungible things.
() To lease any real property to another person for #ore than one year%
)n the lease of things$ the lessor gives to the lessee the en-oy#ent or use of a thing for
a pri"e "ertain$ and for a period whi"h #ay be definite or indefinite.
An agree#ent for the leasing of real property for a longer period than one year is
unenfor"eable unless #ade in writing. )t follow that even if the agent is espe"ially
authori?ed$ the lease is not enfor"eable against the prin"ipal if it is not in writing.
(!) To bind the prin"ipal to render so#e servi"e without "o#pensation%
)f the servi"e is for "o#pensation$ the power #ay be i#plied.
(10) To bind the prin"ipal in a "ontra"t of partnership%
&y the "ontra"t of partnership$ the partners bind the#selves to "ontribute #oney$
property$ or industry to a "o##on fund with the intention of dividing the profits
a#ong the#selves.
The "ontra"t of partnership thus "reates obligations the fulfill#ent of whi"h re0uires
an a"t of stri"t ownership.
The prin"ipal #ust personally have trust and "onfiden"e in the proposed partners.
(11) To obligate the prin"ipal as a guarantor or surety%
&y the "ontra"t of guaranty$ the guarantor binds hi#self to fulfill the obligation of
the prin"ipal debtor in "ase the latter should fail to do so. )f the person binds hi#self
solidarily$ he is a surety and the "ontra"t is "alled a suretyship.
A "ontra"t of guaranty is unenfor"eable unless it is #ade in writing.
(12) To "reate or "onvey real rights over i##ovable property%
Creating or "onveying real rights$ i.e. #ortgage$ usufru"t$ ease#ent$ et".$ over
i##ovable property is an a"t of stri"t ownership. There is no prin"iple of law by
whi"h a person "an be"o#e liable on a real estate #ortgage whi"h he never e(e"uted
either in person or by attorney7in7fa"t.
(16) To a""ept or repudiate an inheritan"e%
This a"t is one of stri"t do#inion.
(1F) To ratify or re"ogni?e obligations "ontra"ted before the agen"y%
(1@) Any other a"t of stri"t do#inion.
A sale or pur"hase of personal property is an a"t of stri"t do#inion. &ut a sale or
pur"hase #ade in the ordinary "ourse of #anage#ent is #erely an a"t of
ad#inistration and$ therefore$ in"luded in an agen"y "ou"hed in general ter#s.
The fifteen "ases enu#erated are general a"ts of stri"t do#inion or ownership as
distinguished fro# a"ts of ad#inistration. ,en"e$ a spe"ial power of attorney is
ne"essary for their e(e"ution through an agent.
A power of attorney is valid although no notary publi" intervened in its e(e"ution.
The spe"ial power of attorney #ust be in writing$ otherwise$ the "ontra"t entered
into by the agent with a third person will be unenfor"eable.
As a #atter of for#ality$ a power of attorney to "onvey real property ought to appear
in a publi" do"u#ent$ -ust as any other instru#ent intended to trans#it or "onvey an
interest in su"h property ought to appear in a publi" do"u#ent. &ut inas#u"h as it is
an established do"trine that a private do"u#ent is "o#petent to "reate$ trans#it$
#odify$ or e(tinguish a right in real property$ it follows that a power of attorney to
"onvey su"h property$ even though in the for# of a private do"u#ent$ will operate
with effe"t. (4i#enes v 5abot)
GING 11
;;;. <igts an$ '(%igations of te Agent
A. 7o !arry out te agen!y
)n order that the prin"ipal #ay be bound by the a"t of the agent as to third persons
and as to the agent hi#self$ there are two re0uisites: (1) the agent #ust a"t within
the s"ope of his authority% and (2) the agent #ust a"t in behalf of the prin"ipal.
1. 4o act /ithin the scope of his a"thority [Art. 1++1!
Art. 11. The agent #ust a"t within the s"ope of his authority. ,e #ay do su"h a"ts
as #ay be "ondu"ive to the a""o#plish#ent of the purpose of the agen"y.
Art. 12. The li#its of the agent.s authority shall not be "onsidered e("eeded should
it have been perfor#ed in a #anner #ore advantageous to the prin"ipal than that
spe"ified by hi#.
The agent is not dee#ed to have e("eeded the li#its of his authority should he
perfor# the agen"y in a #anner #ore advantageous to the prin"ipal than that
indi"ated by hi# sin"e he is authori?ed to do su"h a"ts as #ay be "ondu"ive to the
a""o#plish#ent of the purpose of the agen"y.
Art. 1F. The agent is bound by his a""eptan"e to "arry out the agen"y and is liable
for the da#ages whi"h$ through his non7perfor#an"e$ the prin"ipal #ay suffer.
,e #ust also finish the business already begun on the death of the prin"ipal$ should
delay entail any danger.
The pri#ary purpose of the agent is to "arry out the agen"y.
General rule: The agent shall no longer "arry out the agen"y upon the death of the
prin"ipal be"ause death is a #ode of e(tinguish#ent of agen"y. This is also based on
the representative "hara"ter of agen"y su"h that the death of one e(tinguishes the
relationship.
Exceptions:
1. =hould delay entail any danger% and
2. )f the agen"y has been "onstituted in the "o##on interest of the prin"ipal and
of the agent$ or in the interest of a third person who has a""epted the
stipulation in his favor.
A third person will :now if an agent a"ts within the s"ope of his authority by
re0uesting for the presentation of the power of attorney. )f there is no power of
attorney or the power of attorney$ as written$ is not suffi"ient to deter#ine if the a"t
is within the s"ope of the agent.s authority$ whether or not the agent a"ted within the
s"ope of his authority #ay still be deter#ined by :nowing the law (i.e.$ the spe"ial
power to sell e("ludes the power to #ortgage).
The agent was authori?ed to sell a spe"ifi" "ar for ;6@0$000. The agent sold the "ar
for ;F@0$000. 1ven if the agent e("eeded the li#its of his authority$ the prin"ipal
#ay still be bound by the "ontra"t be"ause the sale is #ore advantageous to hi#
than that spe"ified by hi#. ,owever$ this is not always the "ase. The prin"ipal told
the agent to sell 1$000 :ilos of #angoes for ;60 per :ilo but the agent sells it for ;6@
per :ilo. This is not ne"essarily advantageous to the prin"ipal sin"e no one will buy
be"ause it is too e(pensive. )n the "ase of the "ar$ the prin"ipal #ay still not want to
re"ogni?e the sale be"ause the prin"ipal #ay have "hanged his #ind for senti#ental
reasons. Also$ the prin"ipal #ay have another prospe"tive buyer offering a higher
pri"e.
*espite the fa"t that there is a =;A$ there #ay still be a 0uestion as to whether the
agent a"ted within the s"ope of his authority. (see "ases)
2. 4o act on -ehalf of his principal [Art. 1+'+!
authority of the latter. (170!a)
5ia-ility of t/o or more agents6
Art. 1!F. The responsibility of two or #ore agents$ even though they have been
appointed si#ultaneously$ is not solidary$ if solidarity has not been e(pressly
stipulated.
Art. 1!@. )f solidarity has been agreed upon$ ea"h of the agents is responsible for the
non7fulfill#ent of agen"y$ and for the fault or negligen"e of his fellows agents$ e("ept
in the latter "ase when the fellow agents a"ted beyond the s"ope of their authority.
)n a -oint obligation$ ea"h debtor is liable only for a proportionate part of the debt. )f
it is solidary$ ea"h debtor is liable for the entire obligation. The presu#ption is that
an obligation is -oint. This follows the general prin"iple respe"ting solidarity. The
inno"ent agent has a right later on to re"over fro# the guilty or negligent agent.
Art. 16. )f an agent a"ts in his own na#e$ the prin"iple has no right of a"tion
against the persons with who# the agent "ontra"ted$ neither have su"h persons
against the prin"ipal.
)n su"h "ase the agent is the one dire"tly bound in favor of the person with who# he
"ontra"ted$ as if the transa"tion were his own$ e("ept when the "ontra"t involves
things belonging to the prin"ipal.
The provisions of this arti"le shall be understood to be without pre-udi"e to the
a"tions between the prin"ipal and agent.
A person is not bound by the a"t of another when (1) the latter a"ts without or
beyond the s"ope of his authority in the for#er.s na#e% and (2) the latter a"ts within
the s"ope of his authority but in his own na#e$ e("ept when the transa"tion involves
things belonging to the prin"ipal.
2 authori?ed B to borrow #oney fro# any ban:. ,e also authori?ed B to #ortgage
GING 12
his par"el of land. B borrowed #oney fro# a spe"ifi" ban: A but he did not dis"lose
his prin"ipal. =in"e the prin"ipal is undis"losed$ the ban: "annot run after 2 if B
defaults. The "ontra"t is between the ban: and the agent. As a general rule$ a third
person will not have a "ause of a"tion against the prin"ipal if the agent a"ts in his
own na#e. The e("eption is not appli"able in this "ase be"ause the ob-e"t of the
"ontra"t does not involve things belonging to the prin"ipal. The loan belongs to the
ban:. 4ust be"ause the prin"ipal gave authority does not #ean he #ay be held liable.
)n order that the prin"ipal #ay be bound by the a"t of the agent as to third persons
and as to the agent hi#self$ there are two re0uisites: (1) the agent #ust a"t within
the s"ope of his authority% and (2) the agent #ust a"t in behalf of the prin"ipal.
<ithout one of these re0uire#ents$ prin"ipal will not be bound as a rule.
General rule: The prin"ipal is not bound by the a"ts of an agent beyond his li#ited
powers. Third persons dealing with an agent do so at their ris: and are bound to
in0uire as to the s"ope of his powers.
Exceptions:
1. where prin"ipal.s a"ts have "ontributed to de"eive a third person in good faith
(Art. 1!11)%
2. where the li#itations upon the power "reated by hi# "ould not have been
:nown by the third person (Art. 1!00)%
1(a#ple: The prin"ipal instru"ted the agent to sell the "ar only to his "lass#ates in
high s"hool. )f the agent sold the "ar to so#eone else$ the prin"ipal #ay still be
bound by the "ontra"t if the =;A did not state that li#itation be"ause the third
person "ould not have :nown about su"h li#itation.
6. where the prin"ipal has pla"ed in the hands of the agent instru#ents signed by
hi# in blan:% and
F. where the prin"ipal has ratified the a"ts of the agent.
General !ule: A third person #ay hold the agent who a"ted beyond the s"ope of
his authority liable for whatever da#age he #ay have "aused to the third person.
Exceptions:
1. A third person "annot set up the fa"t that the agent e("eeded his powers if the
prin"ipal has ratified or has signified his willingness to ratify the agent.s a"ts.
2. )f the third person was aware that the agent was a"ting in e("ess of his
authority$ the "ontra"t is void and the agent "annot be held liable (exception:
if the agent undertoo: to se"ure the prin"ipal.s ratifi"ation and he fails to do so$
the agent is liable).
General !ule: The agent who a"ts as su"h is not personally liable to the person
with who# he "ontra"ts (Art. 1!7).
Exceptions:
1. he e(pressly binds hi#self (Art. 1!7)%
The agent #ay bind hi#self to "onvin"e the third person to enter into the "ontra"t
sin"e the third person nor#ally doesn.t :now the prin"ipal.
2. he e("eeds the li#its of his authority without giving the third person suffi"ient
noti"e of his powers (Art. 1!7)% or
6. the agent is liable not only for fraud$ but also for negligen"e (Art. 1!0!).
*espite the fa"t that the agent a"ted for hi#self$ the law gives the third person a
"ause of a"tion against the prin"ipal if the "ontra"t involves things belonging to the
prin"ipal be"ause there #ight be a possible "ollusion between the prin"ipal and the
agent. Also$ it is usually the prin"ipal who has #oney. The third person #ay not
re"over anything fro# the agent$ whi"h is why the law per#its the third person to
have a "ause of a"tion against the prin"ipal.
B. 7o ren$er an a!!ounting of is transa!tions an$ to $e%iver= [Art.
1831]
Art. 1!1. 1very agent is bound to render an a""ount of his transa"tions and to
deliver to the prin"ipal whatever he #ay have re"eived by virtue of the agen"y$ even
though it #ay not be owing to the prin"ipal.
1very stipulation e(e#pting the agent fro# the obligation to render an a""ount shall
be void.
An agent who ta:es se"ret profit fro# the vendee$ without revealing the sa#e to his
prin"ipal$ is guilty of brea"h of his loyalty to the prin"ipal and forfeits his right to
"olle"t the "o##ission fro# his prin"ipal. The rule is to prevent the possibility of
any wrong$ not to re#edy or repair an a"tual da#age.
The stipulation in paragraph 2 is "ontrary to publi" poli"y as it would en"ourage
fraud. )t is in the nature of a waiver of an a"tion for future fraud whi"h is void.
)f the agent fails to deliver and instead "onverts or appropriates for his own use the
#oney or property belonging to the prin"ipal$ the agent is liable for estafa.
Exceptions to Article 18"1:
1. if the agent or bro:er a"ted only as a #iddle#an with the tas: of #erely
bringing together the vendor and the vendee.
2. )f the agent or bro:er had infor#ed the prin"ipal of the gift or bonus or profit
he re"eived fro# the pur"haser and his prin"ipal did not ob-e"t thereto.
6. <here a right of lien e(ists in favor of the agent.
C. 7o (e responsi(%e for te a!ts of te su(stitute [Art. 183&]
Art. 1!2. The agent #ay appoint a substitute if the prin"ipal has not prohibited hi#
fro# doing so% but he shall be responsible for the a"ts of the substitute:
(1) <hen he was not given the power to appoint one%
(2) <hen he was given su"h power$ but without designating the person$ and the
person appointed was notoriously in"o#petent or insolvent.
All a"ts of the substitute appointed against the prohibition of the prin"ipal shall be
void.
GING 13
Art. 1!6. )n the "ases #entioned in Jos. 1 and 2 of the pre"eding arti"le$ the
prin"ipal #ay further#ore bring an a"tion against the substitute with respe"t to the
obligations whi"h the latter has "ontra"ted under the substitution. (1722a)
2 authori?ed B to sell his produ"ts in Cebu City. Can B appoint a subagentS )f he
does$ what will be the effe"ts of su"h appoint#ent. Arti"le 1!2 is not appli"able to
this proble# be"ause this arti"le deals with substitutes$ not subagents.
A subagent is not the sa#e as a substitute. The substitute ta:es the pla"e of the agent
while a subagent is "ontra"ted by an agent to help hi# in the a""o#plish#ent of the
purpose of the agen"y. <hen an agent appoints a subagent$ he does not disasso"iate
hi#self fro# the agen"y. The agent is responsible for the a"ts of the subagent but is
not responsible for the a"ts of the substitute.
The right of a"tion against the substitute is an e("eption to the general rule that
"ontra"ts are binding only between the "ontra"ting parties$ their assign and heirs.
;rohibited
fro#
appointing
a
substitute
Jot prohibited fro# appointing a substitute
Agent is
liable if he
appoints a
substitute.
All a"ts of
the
substitute
shall be
void.
Jot given the power
to appoint a
substitute.
Aiven the power to appoint a substitute
)f the substitution
has o""asioned
da#age to the
prin"ipal$ the agent
shall be pri#arily
responsible for the
a"ts of the
substitute. &ut the
agent will be liable
if he a"ted in bad
faith.
The prin"ipal
designates the
substitute
;erson to be
appointed was not
designated
The agent #ay still be
liable if he "arried out
the agen"y even though
its e(e"ution would
#anifestly result in loss
or da#age.
Agent will be liable if
the person
appointed is
notoriously
in"o#petent or
insolvent.
Arti"le 1!2 would be relevant if while the property is being #anaged by the
substitute$ losses were in"urred by the prin"ipal.
)irst 7"estion6 <hether or not the agent was given the authority$ "an the prin"ipal
hold the substitute dire"tly liableS
Jot always. The substitute #ay invo:e as a defense that he has no privity of "ontra"t
with the prin"ipal. ,owever$ by e(press provision of the law$ the prin"ipal is given a
right of a"tion against the third person (Art. 1!6).
&utT 4ust be"ause losses were in"urred by the prin"ipal$ the substitute #ay still not
be held liable if he a"ted within the s"ope of his authority$ e(er"ised due diligen"e$
and the reason for the losses was be"ause of a fortuitous event.
Second 7"estion6 Can the prin"ipal dire"tly hold the agent liableS
)t #ust be "onsidered whether the agent is prohibited fro# appointing a substitute
or not. )f the agent is prohibited and he appointed one$ he is liable.
)f the agent is not prohibited fro# appointing a substitute$ there are two s"enarios.
Cirst$ if he was not given the power to appoint a substitute and he appointed one$ he
will be responsible for the a"ts of the substitute. )f he was given power$ it doesn.t
#ean he.s liable. The law states he will be responsible.
&ut$ the agent will be liable if he a"ted in bad faith. ,owever$ it #ust be :ept in #ind
that the agent is not the insurer of the business of the prin"ipal.
=e"ond$ if the agent was given the power to appoint a substitute$ he is still not
ne"essarily liable.
)f prin"ipal designated a person to be appointed as substitute$ the agent #ay still be
liable if he "arried out the agen"y even though its e(e"ution would #anifestly result
in loss or da#age (Art. 17 all provisions should be 0ualified by this provision). A
s"enario where the prin"ipal designated the person but he should not have
appointed this person be"ause it would result in loss or da#age: if person designated
is notoriously in"o#petent or insolvent.
)f the person to be appointed was not designated although he was authori?ed$ he will
only be liable if: person appointed is notoriously in"o#petent or insolvent.
D. <u%es app%i!a(%e to a !o,,ission agent:
Art. 1!06. The "o##ission agent shall be responsible for the goods re"eived by hi#
in the ter#s and "onditions and as des"ribed in the "onsign#ent$ unless upon
re"eiving the# he should #a:e a written state#ent of the da#age and deterioration
suffered by the sa#e.
A fa"tor or "o##ission agent is one whose business is to re"eive and sell goods for a
"o##ission (also "alled fa"torage) and who is entrusted by the prin"ipal with the
possession of goods to be sold$ and usually selling in his own na#e. ,e #ay a"t in
his own na#e or in that of the prin"ipal. An ordinary agent need not have possession
of the goods of his prin"ipal$ while the "o##ission agent #ust be in possession.
Art. 1!0F. The "o##ission agent who handles goods of the sa#e :ind and #ar:$
whi"h belong to different owners$ shall distinguish the# by "ounter#ar:s$ and
designate the #er"handise respe"tively belonging to ea"h prin"ipal.
The purpose is to prevent any possible "onfusion or de"eption.
General rule: The agent #ust hold the property only in the na#e of the prin"ipal.
<here he violates that duty by #ingling the property with his own$ he be"o#es a
debtor of the prin"ipal and liable to hi# for any losses suffered as a result of the
#ingling.
Exceptions:
GING 14
1. &y "usto#$ so#e agents$ su"h as au"tioneers$ nor#ally are per#itted to #ingle
their prin"ipal.s property with their own.
2. =o#e agents$ su"h as "olle"ting ban:s$ are per#itted to #ingle the funds of
their prin"ipal (depositor) with their own and the property of other prin"ipals.
Art. 1!0@. The "o##ission agent "annot$ without the e(press or i#plied "onsent of
the prin"ipal$ sell on "redit. =hould he do so$ the prin"ipal #ay de#and fro# hi#
pay#ent in "ash$ but the "o##ission agent shall be entitled to any interest or
benefit$ whi"h #ay result fro# su"h sale.
)f agent sells on "redit without authority$ the prin"ipal #ay: (1) re0uire the pay#ent
in "ash but any interest or benefit fro# the sale on "redit shall belong to the agent
sin"e the prin"ipal "annot be allowed to enri"h hi#self at the agent.s e(pense% or (2)
ratify the sale on "redit in whi"h "ase it will have all the ris:s and advantages to hi#.
Art. 1!0/. =hould the "o##ission agent$ with authority of the prin"ipal$ sell on
"redit$ he shall so infor# the prin"ipal$ with a state#ent of the na#es of the buyers.
=hould he fail to do so$ the sale shall be dee#ed to have been #ade for "ash insofar
as the prin"ipal is "on"erned.
The purpose is to prevent the agent fro# stating that the sale was on "redit when in
fa"t is was #ade for "ash.
*"les applica-le to a g"arantee commission agent6 8el credere agent
Art. 1!07. =hould the "o##ission agent re"eive on a sale$ in addition to the ordinary
"o##ission$ another "alled a guarantee "o##ission$ he shall bear the ris: of
"olle"tion and shall pay the prin"ipal the pro"eeds of the sale on the sa#e ter#s
agreed upon with the pur"haser.
Auarantee "o##ission (del "redere "o##ission) is one where$ in "onsideration of
an in"reased "o##ission$ the fa"tor or "o##ission agent guarantees to the prin"ipal
the pay#ent of debts arising through his agen"y.
*el "redere agent is the agent who guarantees pay#ent of the "usto#er.s a""ount in
"onsideration of a higher "o##ission.
The prin"ipal #ay sue the buyer in his own na#e notwithstanding the del "redere
"o##ission$ so that the latter a#ounts to no #ore than a guaranty.
The liability of the del "redere agent is a "ontingent pe"uniary liability7 to #a:e good
in the event the buyer fails to pay the su# due. )t does not e(tend to other
obligations of the "ontra"t su"h as da#ages for failure of the buyer to a""ept and pay
for the goods.
The del "redere agent #ay sue in his na#e for the pur"hase pri"e in the event of non7
perfor#an"e by the buyer.
Art. 1!0. The "o##ission agent who does not "olle"t the "redits of his prin"ipal at
the ti#e when they be"o#e due and de#andable shall be liable for da#ages$ unless
he proves that he e(er"ised due diligen"e for that purpose.
<here the agent is not liable$ the prin"ipal.s re#edy is to pro"eed against the debtor.
This arti"le does not apply to a "ase where there is a guarantee "o##ission.
The words Oad#inister$ pur"hase$ sell$O et".$ see# to be used "oordinately. 1a"h has
e0ual for"e with the other. There see#s to be no good reason for saying that ;uno
had authority to ad#inister and not to sell when Oto sellO was as advantageous to
+iMan in the ad#inistration of his affairs as Oto ad#inister.O To hold that the power
was Oto ad#inisterO only when the power Oto sellO was e0ually "onferred would be to
give effe"t to a portion of the "ontra"t only. (+inan v ;uno)
The power is general and authori?es Aabino to sell any :ind of realty ObelongingO
(pertene?"an) to the prin"ipal. The use of the sub-un"tive Opertene?"anO (#ight
belong) and not the indi"ative Opertene"enO (belong)$ #eans that ;o Te"si #eant not
only the property he had at the ti#e of the e(e"ution of the power$ but also su"h as
he #ight afterwards have during the ti#e it was in for"e. (>atigba: v Tai ,ing Co)
The power granted to the agent is so broad that it pra"ti"ally "overs the "elebration
of any "ontra"t and the "on"lusion of any "ovenant or stipulation. <hen the power
of attorney says that the agent "an enter into any "ontra"t "on"erning the land$ or
"an sell the land under any ter# or "ondition and "ovenant he #ay thin: fit$ it
undoubtedly #eans that he "an a"t in the sa#e #anner and with the sa#e breath
and latitude as the prin"ipal "ould "on"erning the property. (A#igo v Teves)
Cigueras had no authority to e(e"ute the "ontra"t of release and novation% and it is
shown that in releasing the sureties$ Cigueras a"ted "ontrary to instru"tions. (3illa v
Aar"ia &os0ue).
Auaranty shall not be presu#ed% it #ust be e(pressed and "annot be e(tended
beyond its spe"ified li#its. &y analogy a power of attorney to e(e"ute a "ontra"t of
guaranty should not be inferred fro# vague or general words$ espe"ially when su"h
words have their origin and e(planation in parti"ular powers of a wholly different
nature (*ir. of ;ubli" <or:s v =ing 4u"o).
There is no provision in the power of attorney authori?ing 4ean to sign anything or
to do anything whi"h would #a:e Aabriela liable as a surety for a pree(isting debt.
<here in an instru#ent powers and duties are spe"ified and defined$ that all of su"h
powers and duties are li#ited and "onfined to those whi"h are spe"ified and defined$
and that all other powers and duties are e("luded. (&;) vs *e Coster).
)t appears to be e(pressly authori?ed by the "lause "onferring the power to Oe(a"t the
pay#entO of su#s of #oney Oby legal #eans.O This #ust #ean the power to e(a"t the
pay#ent of debts due the "on"ern by #eans of the institution of suits for their
re"overy. )t "an not be reasonably supposed that it was the intention of the prin"ipal
to withhold fro# his agent a power so essential to the effi"ient #anage#ent of the
business entrusted to his "ontrol$ as that to sue for the "olle"tion of debts. (Aer#an
K Co. v *onaldson)
Gnless the "ontrary appears$ the authority of an agent #ust be presu#ed to in"lude
all the ne"essary and usual #eans of "arrying his agen"y into effe"t. (Ia":e vs
GING 15
Ca#ps)
&untiong is authori?ed to e#ploy and "ontra"t for the servi"es of lawyers upon su"h
"onditions as he #ay dee# "onvenient$ to ta:e "harge of any a"tions ne"essary or
e(pedient for the interests of his prin"ipal$ and to defend suits brought against her.
This power ne"essarily i#plies the authority to pay for the professional servi"es thus
engaged. (Iuni"ipal Coun"il of )loilo v 1vangelista)
The general rule is that the power to bind a "orporation by "ontra"t lies with its
board of dire"tors or trustees$ but this power #ay either e(pressly or i#pliedly be
delegated to other offi"ers or agents of the "orporation$ and e("ept where the
authority of e#ploying servants and agents is e(pressly vested in the board of
dire"tors or trustees$ an offi"er or agent who has general "ontrol and #anage#ent of
the "orporationEs business$ or a spe"ifi" part thereof$ #ay bind the "orporation by
the e#ploy#ent of su"h agents and e#ployees as are usual and ne"essary in the
"ondu"t of su"h business. (Bu Chu": v >ong +i ;o)
A sales#an with authority to "olle"t #oney belonging to his prin"ipal does not have
the i#plied authority to indorse "he":s re"eived in pay#ent. Any person ta:ing
"he":s #ade payable to a "orporation$ whi"h "an a"t only by agents does so at his
peril$ and #ust abide by the "onse0uen"es if the agent who indorses the sa#e is
without authority. ()nsular *rug v ;hil Jational &an:)
)f the verbal "ontra"t between Aabel#an and Albo was a subagen"y or a
sub#andate$ the defendant is not "ivilly liable for the destru"tion by fire of the fil#
be"ause$ as a #ere sub#andatary or subagent$ it was not obliged to fulfill #ore than
the "ontents of the #andate and to answer for the da#ages "aused to the prin"ipal
by his failure to do so. The fa"t that the fil# was not insured against fire does not
"onstitute fraud or negligen"e on the part of the defendant$ be"ause as a subagent$ it
re"eived no instru"tion to that effe"t fro# its prin"ipal and the insuran"e of the fil#
does not for# a part of the obligation i#posed upon it by law. ()nternational Cil#s
(China) v +yri" Cil#s 1("hange)
,eredia too: the deed to the land in his own na#e by the e(press dire"tion of the
plaintiffs as their agent$ and for their "onvenien"e$ and his a"tion was ratified by
their re0uest for the #e#orandu# setting out the fa"ts and by their "ontinuan"e in
the en-oy#ent of the profits of the transa"tion after the pur"hase and without
#a:ing any effort to have the title transferred in their own na#es. (Jepo#u"eno$ et
al. v ,eredia)
An agent who ta:es a se"ret profit in the nature of a bonus$ gratuity or personal
benefit fro# the vendee$ without revealing the sa#e to his prin"ipal$ the vendor$ is
guilty of a brea"h of his loyalty to the prin"ipal and forfeits his right to "olle"t the
"o##ission fro# his prin"ipal$ even if the prin"ipal does not suffer any in-ury by
reason of su"h brea"h of fidelity$ or that he obtained better results or that the agen"y
is a gratuitous one$ or that usage or "usto# allows it% be"ause the rule is to prevent
the possibility of any wrong$ not to re#edy or repair an a"tual da#age. &y ta:ing
su"h profit fro# the vendee$ the agent assu#es a position wholly in"onsistent with
that of being an agent for his prin"ipal. (*o#ingo v *o#ingo)
The obligation to deliver the funds to the prin"ipal #ust be held to have been
i#posed upon the agent by virtue of the "ontra"t of agen"y. (G= v >iene)
Con"eding that 5eyes was to re"eive 20U$ this$ unless so#e "ontrary and e(press
stipulation was in"luded$ would not entitle hi# in advan"e to 20U of the total to be
"olle"ted$ but only to 20U of the a#ount a"tually "olle"ted. Also$ the right to re"eive
a "o##ission of either 10 or 20U did not #a:e 5eyes a -oint owner with &la":#an
so as to entitle hi# to hold out any su# he "hose. Gnder the oral "ontra"t$ 5eyes was
an agent who was bound to pay to the prin"ipal all that he had re"eived by virtue of
the agen"y. And$ lastly$ sin"e for all pra"ti"al purposes$ the agen"y was ter#inated$
the agent was under the obligation to turn over to the prin"ipal the a#ount "olle"ted$
#inus his "o##ission on that a#ount. (G= v 5eyes)
)n all the transa"tions$ the defendant a"ted in his "apa"ity as attorney7in7fa"t of
Iar"elo$ and there being no eviden"e showing that he "onverted the #oney
entrusted to hi# to his own use$ he is not liable for interest thereon. (*e &or-a v *e
&or-a)
<hile an agent who a"ts for a revealed prin"ipal in the #a:ing of a "ontra"t does not
be"o#e personally bound to the other party$ yet that rule "learly does not "ontrol
this "ase% for even "on"eding that the obligation "reated by the letter was dire"tly
binding only on the prin"ipal$ and that in law the agent #ay stand apart therefro#$
yet it is #anifest that one who has intervened in the #a:ing of a "ontra"t in the
"hara"ter of agent "annot be per#itted to inter"ept and appropriate the thing whi"h
the prin"ipal is bound to deliver$ and thereby #a:e perfor#an"e by the prin"ipal
i#possible. The agent #ust be pre"luded fro# doing any positive a"t that "ould
prevent perfor#an"e on the part of his prin"ipal. (;J& v <el"h$ Cair"hild K Co)
The funda#ental prin"iples whi"h #ust be "onsidered in deter#ining whether an
assu#ed authority e(ists are: (1) that the law indulges in no bare presu#ptions that
an agen"y e(ists: it #ust be proved or presu#ed fro# fa"ts% (2) that the agent "annot
establish his own authority$ either by his representations or by assu#ing to e(er"ise
it% (6) that an authority "annot be established by #ere ru#or or general reputation%
(F) that even a general authority is not an unli#ited one% and (@) that every authority
#ust find its ulti#ate sour"e in so#e a"t or o#ission of the prin"ipal. (,arry >eeler
1le"tri" Co v 5odrigue?)
Gnder the "ir"u#stan"es prevailing at present in Ianila$ with their high )n"iden"e
of "ri#es against persons and property$ that renders travel after nightfall a #atter to
be sedulously avoided without suitable pre"aution and prote"tion$ the "ondu"t of
respondent Abad$ in returning alone to her house in the evening$ "arrying -ewelry of
"onsiderable value$ would be negligent per se9 and would not e(e#pt her fro#
responsibility in the "ase of a robbery. <e are not persuaded$ however$ that the sa#e
rule should obtain ten years previously$ in 1!/1$ when the robbery did ta:e pla"e$ for
at that ti#e "ri#inality had not by far rea"hed the levels attained in the present day.
(Austria vs CA)
;>. <igts an$ '(%igations of te Prin!ipa%
A. 4o comply /ith all the o-ligations /hich the agent may have contracted
/ithin the scope: and in representation of the principal [Art 1,1!
GING 16
Art. 1!10. The prin"ipal #ust "o#ply with all the obligations whi"h the agent #ay
have "ontra"ted within the s"ope of his authority.
As for any obligation wherein the agent has e("eeded his power$ the prin"ipal is not
bound e("ept when he ratifies it e(pressly or ta"itly.
)f the agent a"ted within the s"ope of his authority and in representation of the
prin"ipal$ the general rule is the prin"ipal is bound to the "ontra"t entered into by
the agent. ,owever$ there are e("eptions. Cor e(a#ple$ the prin"ipal will not be
bound if the agent a"ted within the s"ope of his authority as "an be seen fro# the
power of attorney but there have been li#itations i#posed by the prin"ipal not
stated in the power of attorney whi"h the agent did not follow and the third person
was aware of su"h li#itations.
&. 4o advance to the agent the s"ms necessary: [Art 1,12!
Art. 1!12. The prin"ipal #ust advan"e to the agent$ should the latter so re0uest$ the
su#s ne"essary for the e(e"ution of the agen"y.
=hould the agent have advan"ed the#$ the prin"ipal #ust rei#burse hi# therefor$
even if the business or underta:ing was not su""essful$ provided the agent is free
fro# all fault.
The rei#burse#ent shall in"lude interest on the su#s advan"ed$ fro# the day on
whi"h the advan"e was #ade.
General rule: )f it was stipulated that the agent should advan"e the ne"essary su#s
but the agent didn.t$ he will be liable.
Exception: The agent will not be liable if the prin"ipal is insolvent.
C. 4o reim-"rse the agent the s"ms advanced: [Art 1,129 1,1+!
Art. 1!12. The prin"ipal #ust advan"e to the agent$ should the latter so re0uest$ the
su#s ne"essary for the e(e"ution of the agen"y.
=hould the agent have advan"ed the#$ the prin"ipal #ust rei#burse hi# therefor$
even if the business or underta:ing was not su""essful$ provided the agent is free
fro# all fault.
The rei#burse#ent shall in"lude interest on the su#s advan"ed$ fro# the day on
whi"h the advan"e was #ade.
Art. 1!1. The prin"ipal is not liable for the e(penses in"urred by the agent in the
following "ases:
(1) )f the agent a"ted in "ontravention of the prin"ipalEs instru"tions$ unless the
latter should wish to avail hi#self of the benefits derived fro# the "ontra"t%
(2) <hen the e(penses were due to the fault of the agent%
(6) <hen the agent in"urred the# with :nowledge that an unfavorable result
would ensue$ if the prin"ipal was not aware thereof%
(F) <hen it was stipulated that the e(penses would be borne by the agent$ or that
the latter would be allowed only a "ertain su#.
The prin"ipal instru"ted the agent to sell his produ"ts in Cebu but the agent sold it in
Ta"loban. Iay the agent validly de#and for rei#burse#ent as to the e(penses he
in"urred in Ta"lobanS (=ir didn.t answer but ) thin: the answer is generally$ the
prin"ipal is not liable for the e(penses in"urred by the agent in "ontravention of his
instru"tions. ,owever$ he will be liable if he should wish to derive benefit fro# the
"ontra"t.)
5ia-ility /hen there are t/o or more principals6 solidary [Art 1,1%!
Art. 1!1@. )f two or #ore persons have appointed an agent for a "o##on transa"tion
or underta:ing$ they shall be solidarily liable to the agent for all the "onse0uen"es of
the agen"y.
*ights of 4hird Persons in 1ncompati-le contracts /ith agent and principal
The prin"ipal authori?ed the agent to enter into a spe"ifi" "ontra"t over a
deter#inate thing. The agent entered into a "ontra"t over su"h thing with A but the
prin"ipal also entered into a si#ilar "ontra"t with & over the sa#e thing. To
deter#ine who has a better right$ the "ontra"t entered into #ust be identified first. )f
it is a "ontra"t of sale$ 8priority in ti#e$ priority in right9 will not apply. Arti"le 1@FF
is the appli"able rule.
Hne of the third persons #ay suffer da#age. )f su"h person filed an a"tion for
da#ages against both the prin"ipal and the agentV
General rule: only the prin"ipal shall be liable.
Exception: if the agent a"ted in bad faith$ he alone shall be liable.
Ao#e?$ in negotiating for the sale of the land$ a"ted as the agent and representative
of the other plaintiff$ his wife% having a""epted the benefit of the representations of
her agent she "annot$ of "ourse$ es"ape liability for the#. (Aon?ale? K Ao#e? v
,aberer)
Attentive perusal of the "ontra"t is "onvin"ing to the effe"t that the relation between
the parties was not that of prin"ipal and agent in so far as relates to the pur"hase of
"opra by the plaintiff. )t is true that the 3isayan 5efining Co. #ade the plaintiff one
of its instru#ents for the "olle"tion of "opra% but it is "lear that in #a:ing its
pur"hases fro# the produ"ers the plaintiff was buying upon its own a""ount and that
when it turned over the "opra to the 3isayan 5efining Co.$ pursuant to that
agree#ent$ a se"ond sale was effe"ted. (Albalade-o y Cia v ;hil 5efining Co)
#. $o%es of Extinguis&ment of Agency: Art 1"1"
Art. 1!1!. Agen"y is e(tinguished:
(1) &y its revo"ation%
(2) &y the withdrawal of the agent%
(6) &y the death$ "ivil interdi"tion$ insanity or insolven"y of the prin"ipal or of the
GING 17
agent%
(F) &y the dissolution of the fir# or "orporation whi"h entrusted or a""epted the
agen"y%
(@) &y the a""o#plish#ent of the ob-e"t or purpose of the agen"y%
(/) &y the e(piration of the period for whi"h the agen"y was "onstituted.
The list is not e("lusive. There are other #odes of e(tinguishing the agen"y su"h as
novation and loss of the thing whi"h is supposed to be sold by the agent. )n Austria
vs CA$ the agen"y was e(tinguished by the loss of the thing whi"h is the ob-e"t of the
"ontra"t. The agent was not held liable sin"e the pendant was lost due to a fortuitous
event. The perpetrators need not be "onvi"ted for the agen"y to be e(tinguished.
Iere proof as to the happening of the in"ident is enough.
To avail of the e(e#ption granted in the law$ it is not ne"essary that the persons
responsible for the o""urren"e should be found or punished% it would only be
suffi"ient to establish that the unforeseeable event$ the robbery in this "ase$ did ta:e
pla"e without any "on"urrent fault on the debtorEs part$ and this "an be done by
preponderant eviden"e. To re0uire in the present a"tion for re"overy the prior
"onvi"tion of the "ulprits in the "ri#inal "ase$ in order to establish the robbery as a
fa"t$ would be to de#and proof beyond reasonable doubt to prove a fa"t in a "ivil
"ase. (Austria vs CA)
The agen"y is e(tinguished upon the insolven"y of the agent be"ause if the agent
"aused in-ury to the prin"ipal or third person$ the in-ured party "an.t go after the
insolvent agent. This is a prote"tion for the prin"ipal.
Art. 1!20. The prin"ipal #ay revo:e the agen"y at will$ and "o#pel the agent to
return the do"u#ent eviden"ing the agen"y. =u"h revo"ation #ay be e(press or
i#plied.
Art. 1!21. )f the agen"y has been entrusted for the purpose of "ontra"ting with
spe"ified persons$ its revo"ation shall not pre-udi"e the latter if they were not given
noti"e thereof.
Art. 1!22. )f the agent had general powers$ revo"ation of the agen"y does not
pre-udi"e third persons who a"ted in good faith and without :nowledge of the
revo"ation. Joti"e of the revo"ation in a newspaper of general "ir"ulation is a
suffi"ient warning to third persons.
Art. 1!26. The appoint#ent of a new agent for the sa#e business or transa"tion
revo:es the previous agen"y fro# the day on whi"h noti"e thereof was given to the
for#er agent$ without pre-udi"e to the provisions of the two pre"eding arti"les.
Art. 1!2F. The agen"y is revo:ed if the prin"ipal dire"tly #anages the business
entrusted to the agent$ dealing dire"tly with third persons.
The powers of attorney #ade plaintiff the "ontra"torEs agent in the "olle"tion of
whatever a#ounts #ay be due the "ontra"tor fro# the defendant. And sin"e the
"ontra"tor (prin"ipal) de#anded and "olle"ted fro# defendant the #oney the
"olle"tion of whi"h he entrusted to plaintiff$ the agen"y apparently has already been
revo:ed. (Jew Ianila +u#ber Co. )n". v 5epubli")
Art. 1!2@. <hen two or #ore prin"ipals have granted a power of attorney for a
"o##on transa"tion$ any one of the# #ay revo:e the sa#e without the "onsent of
the others.
Art. 1!2/. A general power of attorney is revo:ed by a spe"ial one granted to another
agent$ as regards the spe"ial #atter involved in the latter.
The #a:ing and a""epting of a new power of attorney$ whether it enlarges or
de"reases the power of the agent under a prior power of attorney$ #ust be held to
supplant and revo:e the latter when the two are in"onsistent. )f the new
appoint#ent with li#ited powers does not revo:e the general power of attorney$ the
e(e"ution of the se"ond power of attorney would be a #ere futile gesture. (*e &un"io
K Co. v Hng Auan Aan).
Art. 1!27. An agen"y "annot be revo:ed if a bilateral "ontra"t depends upon it$ or if it
is the #eans of fulfilling an obligation already "ontra"ted$ or if a partner is appointed
#anager of a partnership in the "ontra"t of partnership and his re#oval fro# the
#anage#ent is un-ustifiable.
)f the agent was given the authority to sell a "ertain property and the parties agreed
that the authority should last for one year but after a wee: the prin"ipal revo:ed the
authority of the agent$ will an a"tion for da#ages for brea"h of "ontra"t prosperS )n
&aretto vs =anta Iarina$ the =C ruled that even when there is a period agree upon$
the prin"ipal #ay revo:e the agen"y if the prin"ipal no longer had "onfiden"e in the
agent. This is based on the fidu"iary nature of their relationship. &esides$ by its
nature$ revo"ation should be e(er"ised during the period be"ause if the period
e(pires$ that is another #ode of e(tinguish#ent.
There #ay be da#age without in-ury. Cor e(a#ple$ the da#age is "aused by
fortuitous event. Also$ there is no in-ury when the da#age was "aused by one who
was #erely e(er"ising a right.
The three instan"es in Arti"le 1!27 are when the agen"y is one "oupled with interest.
This arti"le has e("eptions. The agent "an be validly revo:e if there is -ust "ause in
any of the three s"enarios. Cor the "lai# that the agen"y is one "oupled with interest$
a re0uire#ent is it is not suffi"ient that it is an agen"y "oupled with interest. That
interest #ust be stated in the power of attorney. Htherwise$ anyone "ould -ust "lai#
that the agen"y was one "oupled with interest.
The "ontra"t of agen"y "an subsist only so long as the prin"ipal has "onfiden"e in his
agent$ be"ause$ fro# the #o#ent su"h "onfiden"e disappears and although there be
a fi(ed period for the e(er"ise of the offi"e of agent$ the prin"ipal has a perfe"t right
to revo:e the power that he had "onferred upon the agent owing to the "onfiden"e he
had in hi# and whi"h for sound reasons had "eased to e(ist. (&aretto v =anta
Iarina)
A power of attorney "an be #ade irrevo"able by "ontra"t only in the sense that the
prin"ipal #ay not re"all it at his pleasure% but "oupled with interest or not$ the
authority "an be revo:ed for a -ust "ause$ su"h as when the attorney7in7fa"t betrays
the interest of the prin"ipal. The irrevo"ability of the power of attorney #ay not be
GING 18
used to shield the perpetration of a"ts in bad faith$ brea"h of "onfiden"e$ or betrayal
of trust$ by the agent for that would a#ount to holding that a power "oupled with an
interest authori?es the agent to "o##it frauds against the prin"ipal. (Coleong"o v
Claparols)
That the petitioner had "hanged her #ind even if the respondents had found her a
buyer who was willing to "lose the deal$ is a #atter that would not give rise to a legal
"onse0uen"e if the respondents agree to "all off the transa"tion in deferen"e to the
re0uest of the petitioner. &ut the situation varies if one of the parties ta:es
advantage of the benevolen"e of the other and a"ts in a #anner that would pro#ote
his own selfish interest. ;etitioner too: advantage of the servi"es rendered by the
respondents$ but believing that she "ould evade pay#ent of their "o##ission$ she
#ade use of a ruse by indu"ing the# to sign the deed of "an"ellation. ()nfante v
Cunanan)
The power of sale given in a #ortgage is a power "oupled with an interest whi"h
survives the death of the grantor. (;asno v 5avina and 5avina)
A #ere state#ent in the power of attorney that it is "oupled with interest is not
enough. )n what does su"h interest "onsist #ust be stated in the power of attorney.
The fa"t that the prin"ipal #ortgaged the i#prove#ents of the par"el of land is not
su"h interest as "ould render irrevo"able the power of attorney in favor of the agent.
)n fa"t$ no #ention of it is #ade in the power of attorney. (*el 5osario v Abad)
Art. 1!2. The agent #ay withdraw fro# the agen"y by giving due noti"e to the
prin"ipal. )f the latter should suffer any da#age by reason of the withdrawal$ the
agent #ust inde#nify hi# therefor$ unless the agent should base his withdrawal
upon the i#possibility of "ontinuing the perfor#an"e of the agen"y without grave
detri#ent to hi#self.
The fa"t that an agent institutes an a"tion against his prin"ipal for the re"overy of the
balan"e in his favor resulting fro# the li0uidation of the a""ounts between the#
arising fro# the agen"y$ and renders a final a""ount of his operations$ is e0uivalent
to an e(press renun"iation of the agen"y$ and ter#inates the -uridi"al relation
between the#. (3alera v 3elas"o)
Art. 1!2!. The agent$ even if he should withdraw fro# the agen"y for a valid reason$
#ust "ontinue to a"t until the prin"ipal has had reasonable opportunity to ta:e the
ne"essary steps to #eet the situation.
Art. 1!60. The agen"y shall re#ain in full for"e and effe"t even after the death of the
prin"ipal$ if it has been "onstituted in the "o##on interest of the latter and of the
agent$ or in the interest of a third person who has a""epted the stipulation in his
favor.
Art. 1!61. Anything done by the agent$ without :nowledge of the death of the
prin"ipal or of any other "ause whi"h e(tinguishes the agen"y$ is valid and shall be
fully effe"tive with respe"t to third persons who #ay have "ontra"ted with hi# in
good faith.
The a"t of the agent after the death of the prin"ipal #ay still be binding if the agent
a"ted without the :nowledge of the death of the prin"ipal and also$ if the third
person a"ted in good faith.
Arti"le 1!61$ unli:e Arti"le 1!60$ did not #ention that despite the death of the
prin"ipal$ the agen"y shall re#ain in full for"e and effe"t. The only state#ent in
Arti"le 1!61 is despite the fa"t that the "ontra"t was entered into after the death of
the prin"ipal$ that "ontra"t #ay still bind the estate of the prin"ipal. )t did not
#ention that the agen"y was not e(tinguished. *espite the e(tinguish#ent$ the
"ontra"t is still binding be"ause the law so provides$ not be"ause the agen"y is still in
e(isten"e.
Arti"les 1!60 and 1!61 provide the e("eptions to the general rule. Gnder Arti"le 1!61$
an a"t done by the agent after the death of his prin"ipal is valid and effe"tive only
"nder t/o conditions6 (1) that the agent acted /itho"t ;no/ledge of the death of
the principal9 and (2) that the third person /ho contracted /ith the agent himself
acted in good faith. Aood faith here #eans that the third person /as not aware of
the death of the prin"ipal at the ti#e he "ontra"ted with the agent. 4hese t/o
re<"isites m"st conc"r. (5allos v Celi( Ao Chan K =ons 5ealty Corp)
As to the "ontention that the death of the prin"ipal ended the authority of the agent$
and the sale of the par"el of land by the agent to ;anuyas was null and void$ it has
not been shown that the agent :new of his prin"ipalEs de#ise$ and for that reason
arti"le 1!61 is the law appli"able. (&uason and 5eyes v ;anuyas)
1ven granting arg"endo that +uis did die in 1!6/$ plaintiffs presented no proof and
there is no indi"ation in the re"ord$ that the agent +uy >i# Auan was aware of the
death of his prin"ipal at the ti#e he sold the property. The death of the prin"ipal
does not render the a"t of an agent unenfor"eable$ where the latter had no
:nowledge of su"h e(tinguish#ent of the agen"y. (,errera et al v +uy >i# Aua#)
The argu#ent that fore"losure by the &an: under its power of sale is barred upon
death of the debtor$ be"ause agen"y is e(tinguished by the death of the prin"ipal
negle"ts to ta:e into a""ount that the power to fore"lose is not an ordinary agen"y
that "onte#plates e("lusively the representation of the prin"ipal by the agent but is
pri#arily an authority "onferred upon the #ortgagee for the latter.s own prote"tion.
)t is$ in fa"t$ an an"illary stipulation supported by the sa#e ca"sa or "onsideration
for the #ortgage and for#s an essential and inseparable part of that bilateral
agree#ent. (;ere? v ;J&)
Art. 1!62. )f the agent dies$ his heirs #ust notify the prin"ipal thereof$ and in the
#eanti#e adopt su"h #easures as the "ir"u#stan"es #ay de#and in the interest of
the latter.
GING 19

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