AGENCY MIDTERMS REVIEWER1
Agreement, American airlines authorized Orient Air
I. INTRODUCTION
A. How is agency defined
Art. 1868. By the contract of agency a person
binds himself to render some service or to do
something in representation or on behalf of
another, with the consent or authority of the
latter.
RALLOS V. FELIS GO CHAN
Quick Facts: Sisters authorized their brother to SELL
their undivided shares in a parcel of land. One of the
sisters DIED. Subsequently the brother sold the
parcel of land. Administrator went to court and
prayed that the sale be declared unenforceable.
Ratio:
- There’s a relationship of Agency when 1
party called the principal (mandante)
authorized another called the agent
(mandatario) for and in his behalf with
transactions to third persons.
- The essential elements of agency
(CORA):
1. Consent, express or implied
2. Object is the execution of a juridical
act in favor of third persons
3. Agent acts as a Representative
4. Agent acts within the scope of his
Authority.
- Agency is basically 1, personal 2.
representative, and 3. derivative in nature.
The authority of the agent to act emanates
from the powers granted to him by his
principal; his act is the act of the principal if
done within the scope of authority
- “Qui facit per alium facit per se”,
meaning, “He who acts through another
acts for himself”. By the very nature of
the relationship between the agent and
the principal, agency is extinguished by
death of the principal or the agent.
De Leon:
Characteristics of a contract of agency
1. Consensual
2. Principal
3. Nominate
4. Unilateral (if gratitious); bilateral (if for
compensation)
5. Preparatory
1. Consent
Art. 1868. By the contract of agency a person
binds himself to render some service or to do
something in representation or on behalf of
another, with the consent or authority of the
latter.
ORIENT AIR SERVICES V CA
1
Under Professor Dio. By Annie, Eds, Jam, Anj F, Kae, Lou,
Chi, Pat (Batch 2012). Compiled by Eds.
Quick Facts: By virtue of a General Sales Agency
Services as its exclusive general agent within the
Philippines. Orient Air failed to promptly remit net
proceeds of sales. As a result American Air
terminated the agreement. RTC and CA ordered
reinstatement of Orient as a general sales agent of
American Air in the Philippines.
Ratio
The PURPOSE of agency is to EXTEND the
personality of the principal through the facility of the
agent. The agent by legal fiction becomes the
principal authorized to perform all acts which the
latter would have him do. Such a relationship can
only be effected “with the CONSENT or
AUTHORITY” of the principal which CANNOT, in
any way, be COMPELLED by any law or any
court
UY V CA
Quick Facts: Uy and Roxas were agents to sell 8
parcels land. The property was offered to NHA. NHA
Board approved the acquisition but thereafter
cancelled the acquisition of 3 parcels of land. Agents
filed a case against NHA to recover their unearned
income. CA ruled that as agents they were not real
parties in interest, hence it is indispensable that the
lot owners be included as party plaintiffs.
Ratio:
Agents do something or render some service in
representation or on behalf of the principal. The
rendering of service does not make them
parties to a contract. A contract may be
violated only by the parties thereto as against
each other.
Art. 1869. Agency may be express, or implied
from the acts of the principal, from his silence
or lack of action, or his failure to repudiate the
agency, knowing that another person is acting
on his behalf without authority.
Agency may be oral, unless the law requires a
specific form. (1710a)
MACKE V CAMPS
Quick Facts: Macke and Chandler sold to one
Ricardo Flores, managing agent of Washington Café,
various goods which were only partially paid pending
the return of his principal (Camps). Principal refused
to pay on the ground that Flores was not his agent.
a
Written contract shows that defendant was sub
lessee of a property with Flores as managing agent of
the café
Ratio:
Authority to buy such reasonable quantities of
supplies as might from time to time be necessary in
carrying on the business may be fairly
presumed that such agent is clothed with a
general authority, especially in view of the fact
that the principal appears to have left the agent in
charge during more or less prolonged periods of
absence.
PRUDENTIAL BANK V CA
Quick Facts: Aurora Cruz invested 200k in CB bills
with Prudential. Upon maturity, she renewed the
investment and was requested to sign a Withdrawal
Slip, allegedly a new requirement of the bank. After
some time, she sought to withdraw her 200k but she
was informed that the investment appeared to have
been withdrawn. It appears that the bank’s employee
Quimbo perpetuated the fraud and caused the
withdrawal of the amount. Bank ignored repeated
follow-ups of Cruz. She then filed a complaint for
breach of contract. TC = for plaintiff, CA affirmed.
Ratio:
A bank is liable for the wrongful acts of its officers
done in the interest of the bank or in the course of
dealings of the officers in their representative
capacity but not for acts outside the scope of their
authority. The bank is still liable to innocent third
persons where the representation is made in
the course of business by an agent acting
within the general scope of his authority even
though the agent is secretly abusing his/her
authority and attempting to perpetuate fraud
upon his principal or some other person for his
ultimate benefit.
LINTONJUA V ETERNIT
Quick Facts: 90% of EC’s stocks were owned by
ESAC, with Glanville as President and Delsaux as
Regional Director. ESAC in 1986 instructed Adams,
member of ESAC Board of Directors, to dispose the 8
parcels of land without written authority from EC.
Adams engaged the services of Lauro Marquez as
broker, who in turn offered it to Litonjua. EC
cancelled the sale of 8 parcels of land to Litonjua
siblings due to the end of political instability. Litonjua
filed a complaint for specific performance and
damages against EC. TC = EC, CA affirmed.
Ratio:
Agency by estoppel (Requisites):
1. Principal manifested a representation of the
agent’s authority / knowingly allowed agent
to assume such authority
2. Third person in Good Faith relied upon such
representation
3. 3rd person has changed its position to its
detriment.
Art. 1870. Acceptance by the agent may also be
express, or implied from his acts which carry
out the agency, or from his silence or inaction
according to the circumstances. (n)
Art. 1871. Between persons who are present,
the acceptance of the agency may also be
implied if the principal delivers his power of
attorney to the agent and the latter receives it
without any objection. (n)
*Principal personally delivers POA.
Art. 1872. Between persons who are absent,
the acceptance of the agency cannot be
implied from the silence of the agent, except:
(1) When the principal transmits his
power of attorney to the agent, who
receives it without any objection;
(2) When the principal entrusts to him
by letter or telegram a power of
attorney with respect to the business in
which he is habitually engaged as an
agent, and he did not reply to the letter
or telegram. (n)
*Principal only transmits POA
Art. 1898. If the agent contracts in the name of
the principal, exceeding the scope of his
authority, and the principal does not ratify the
contract, it shall be void if the party with whom
the agent contracted is aware of the limits of
the powers granted by the principal. In this
case, however, the agent is liable if he
undertook to secure the principal's ratification.
(n)
Art. 1901. A third person cannot set up the fact
that the agent has exceeded his powers, if the
principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
* only the principal can ratify
* A principal can ratify a transaction by receiving the
benefits thereof, in accord with the principle that the
principal may not accept the benefits of a transaction
and repudiate its burdens.
Cf. Macke v Camps
Art. 1910. The principal must comply with all
the obligations which the agent may have
contracted within the scope of his authority.
* The duties and liabilities of the principal are
primarily based upon the contract and the
validity of the contract between them.
Art. 1317. No one may contract in the name of
another without being authorized by the latter,
or unless he has by law a right to represent
him.
A contract entered into in the name of another
by one who has no authority or legal
representation, or who has acted beyond his
powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person
on whose behalf it has been executed, before it
is revoked by the other contracting party.
(1259a)
Art. 1403. The following contracts are
unenforceable, unless they are ratified:
(1) Those entered into in the name of
another person by one who has been
given no authority or legal
representation, or who has acted
beyond his powers;
2. Object
3. Consideration
Art. 1875. Agency is presumed to be for a
compensation, unless there is proof to the
contrary. (n)
B. Who are the parties to the contract of
agency
(1) Principal- person represented
 (2) Agent- who acts for and represent another
(3) Third party- the party to whom the business
is transacted
C. Must the parties be capacitated
Principal - must be capacitated.
- capacity of the agent depends on
the capacity of the principal
Agent - does not have to possess full
capacity in so far as third persons are concerned
but in so far as his obligation to his
principal is concerned, the agent must be
competent to bind himself.
II. WHAT IS THE FORM OF THE CONTRACT OF
AGENCY
Art. 1869. Agency may be express, or implied
from the acts of the principal, from his silence
or lack of action, or his failure to repudiate the
agency, knowing that another person is acting
on his behalf without authority.
Agency may be oral, unless the law requires a
specific form. (1710a)
Art. 1874. When a sale of a piece of land or any
interest therein is through an agent, the
authority of the latter shall be in writing;
otherwise, the sale shall be void. (n)
ANGELES V PNR
Quick Facts: Principal authorized through a letter
explicitly stating that the agent was his lawful
representative to withdraw PNR’s
scrap/unserviceable rails. Agent already paid PNR,
but was unable to withdraw the scrap
matls/unserviceable rails.
Ratio:
Power of Attorney – in the absence of statute,
no form or method of execution is required. A
letter is sufficient to constitute a power of attorney
JIMENEZ V RABOT
Quick Facts: Principal wrote to his sister requesting
that the latter sell any of his parcels of land located
in Pangasinan
Ratio:
Power of attorney to convey such property,
eventhough in the form of a private document
will operate with effect. The written authorization
need not contain the particular description of
the property which the agent is permitted to
sell.
CITY LITE REALTY CORPORATION V CA
Quick Facts: Broker was the one who negotiated
and agreed to sell the property.
Ratio:
A written authority to find a buyer is different
from a written authority to sell.
COSMIC LUMBER V CA
Quick Facts: Principal authorized agent to enter into
a compromise agreement. In the compromise
agreement, agent agreed to sell the property to the
3rd party
Ratio: The authority granted is explicit and
exclusionary. The power to enter into a compromise
agreement does not include the power to sell.
SAN JUAN STRUCTURAL STEEL V CA
Quick Facts: A corporate treasurer by herself
without any authorization from the board of directors
sold a parcel of land owned by the corporation.
Ratio
The general principles of agency govern the
relations between a corporation and its officers
subject to:
1. articles of incorporation
2. by laws
3. relevant provisions of law
4. board resolution
5. powers that may be implied or
incidental to the power intentionally
conferred upon the officer, powers
added by custom and usage
DE LOS REYES V CA
Quick Facts: A verbal agreement between principal
and agent involving a sale of land registered in the
name of principal’s deceased father.
Ratio: A void contract under 1874 can be
ratified.
AF REALTY V DIESELMAN
Quick Facts: A member of the board of directors
authorized a broker to sell a parcel of land owned by
the company.
Ratio: A void contract CANNOT be ratified by
clear mandate in 1409 (7) of the civil code.
III. WHO HAS THE OBLIGATION TO DETERMINE
EXISTENCE AND SCOPE OF AGENCY?
KEELER ELECTRIC CO. V. RODRIGUEZ
- Keeler sold to Rodriquez an electric plant, to be
shipped from Manila to Iloilo. Rodriquez paid to
Montelibano, who claimed to be Keeler’s agent. SC:
Montelibano not Keeler’s agent.
- Mechem on Agency Sec. 743: Fundamental
principles:
1. The law indulges no bare presumptions that
an agency exists. It must be proved/presumed from
facts.
2. The A cannot establish his own authority
either by his representations or his assuming to
exercise it.
3. An authority cannot be established by mere
rumor or generational reputation.
4. Every general authority is not an unlimited
one.
 5. Every authority must find its ultimate sources
in some act/omission from the P.
- Persons dealing with an assumed agency, are
bound at their peril, if they would hold the P to
ascertain not only the fact of the agency but the
nature and extent of the authority and in case
either is controverted, the burden of proof is upon
them to establish it.
- Against the A, the TP has the oblig’n to determine
existence and scope of agency. It is entirely within
TP’s power to satisfy himself that the A has the
authority he assumed to exercise, or to decline to
enter into relations with him. TP must also act with
ordinary prudence and reasonable diligence, if he
knows or has good reason to believe that the A is
exceeding his authority, he can’t claim protection.
- Notes:
1.Every authority’s ultimate source is P’s
act/omission
2.TP dealing with assumed A are bound to:
a.Verify fact of agency
b.Verify nature and extent
c. In case any is controverted by P, A must prove
agency
YU ENG CHO V. PAN AMERICAN
- Tokyo-SanFrancisco wasn’t confirmed yet plaintiffs
pushed through with the flight. Business
agreement didn’t push through. Damages sought
from PanAm, TWSI, and Tagunicar was a
broker/independent travel agent who represented
herself as agent of TWSI.
- Against the A, the TP has oblig’n to determine the
existence and scope of agency, and is bound at his
peril, having the burden to ascertain not only the
fact of agency, but also the nature and extent of
the authority granted.
- To prove fact of agency, it should not be from
admission of agent but must be traced from
act/omission from principal
IV. HOW IS AGENCY DISTINGUISHED FROM
OTHER CONTRACTS/RELATIONSHIPS?
A. Master-servant
Art. 1689. Household service shall always be
reasonably compensated. Any stipulation that
household service is without compensation
shall be void. Such compensation shall be in
addition to the house helper's lodging, food,
and medical attendance.
Art. 1690. The head of the family shall furnish,
free of charge, to the house helper, suitable
and sanitary quarters as well as adequate food
and medical attendance.
Art. 1691. If the house helper is under the age
of eighteen years, the head of the family shall
give an opportunity to the house helper for at
least elementary education. The cost of such
education shall be a part of the house helper's
compensation, unless there is a stipulation to
the contrary.
Art. 1692. No contract for household service
shall last for more than two years. However,
such contract may be renewed from year to
year.
Art. 1693. The house helper's clothes shall be
subject to stipulation. However, any contract
for household service shall be void if thereby
the house helper cannot afford to acquire
suitable clothing.
Art. 1694. The head of the family shall treat
the house helper in a just and humane manner.
In no case shall physical violence be used upon
the house helper.
Art. 1695. House helper shall not be required
to work more than ten hours a day. Every
house helper shall be allowed four days'
vacation each month, with pay.
Art. 1696. In case of death of the house helper,
the head of the family shall bear the funeral
expenses if the house helper has no relatives
in the place where the head of the family lives,
with sufficient means therefor.
Art. 1697. If the period for household service is
fixed neither the head of the family nor the
house helper may terminate the contract
before the expiration of the term, except for a
just cause. If the house helper is unjustly
dismissed, he shall be paid the compensation
already earned plus that for fifteen days by
way of indemnity. If the house helper leaves
without justifiable reason, he shall forfeit any
salary due him and unpaid, for not exceeding
fifteen days.
Art. 1698. If the duration of the household
service is not determined either by stipulation
or by the nature of the service, the head of the
family or the house helper may give notice to
put an end to the service relation, according to
the following rules:
(1) If the compensation is paid by the day,
notice may be given on any day that the
service shall end at the close of the following
day;
(2) If the compensation is paid by the week,
notice may be given, at the latest on the first
business day of the week, that the service shall
be terminated at the end of the seventh day
from the beginning of the week;
(3) If the compensation is paid by the month,
notice may be given, at the latest, on the fifth
day of the month, that the service shall cease
at the end of the month.
Art. 1699. Upon the extinguishment of the
service relation, the house helper may demand
from the head of the family a written
statement on the nature and duration of the
service and the efficiency and conduct of the
house helper.
B. Employee-employee
Art. 1700. The relations between capital and
labor are not merely contractual. They are so
impressed with public interest that labor
contracts must yield to the common good.
Therefore, such contracts are subject to the
special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and
similar subjects. –
Notes: diff. from agency: representation

C. Lease of service
Art. 1644. In the lease of work or service, one
of the parties binds himself to execute a piece
of work or to render to the other some service
for a price certain, but the relation of principal
and agent does not exist between them.
– Notes: diff. from agency: representation, fiduciary
rel’p
D. Independent contractor
Art. 1713. By the contract for a piece of work
the contractor binds himself to execute a piece
of work for the employer, in consideration of a
certain price or compensation. The contractor
may either employ only his labor or skill, or
also furnish the material.
– Notes: diff. from agency: limited control
E. Trust
Art. 1440. A person who establishes a trust is
called the trustor; one in whom confidence is
reposed as regards property for the benefit of
another person is known as the trustee; and
the person for whose benefit the trust has
been created is referred to as the beneficiary.
- Notes:
- incident fiduciary rel’p; no representation; a
property rel’p; control; objective: preservation of
thing
- diff. from agency: also has control (P can terminate
anytime); but objective: juridical act
F. Sale
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional.
- Notes: diff. from agency: representation; A never
acquires ownership
G. Partnership
Art. 1767. By the contract of partnership two or
more persons bind themselves to contribute
money, property, or industry to a common
fund, with the intention of dividing the profits
among themselves.
Two or more persons may also form a
partnership for the exercise of a profession.
- Notes:
- mutual agency; distribution of profits
- diff. from agency: no sharing of losses, no
contribution to a common fund
H. Negotiorum gestio/quasi-contract
Art. 2144. Whoever voluntarily takes charge of
the agency or management of the business or
property of another, without any power from
the latter, is obliged to continue the same until
the termination of the affair and its incidents,
or to require the person concerned to
substitute him, if the owner is in a position to
do so. This juridical relation does not arise in
either of these instances:
(1) When the property or business is not
neglected or abandoned;
(2) If in fact the manager has been tacitly
authorized by the owner.
In the first case, the provisions of Articles
1317, 1403, No. 1, and 1404 regarding
unauthorized contracts shall govern.
In the second case, the rules on agency in Title
X of this Book shall be applicable. (1888a)
Art. 2145. The officious manager shall perform
his duties with all the diligence of a good
father of a family, and pay the damages which
through his fault or negligence may be
suffered by the owner of the property or
business under management.
The courts may, however, increase or moderate
the indemnity according to the circumstances
of each case.
- Notes:
- quasi-contract due to acts executed by manager ;
officious: acting out of desire to help another;
agent for a limited value; objective:
preserve/administer business/property; implied
agency
- diff. from agency: also has representation; but
consent is needed; objective:
representation/execution of juridical act
I. Judicial administrator
- Notes:
- court-appointed, bond required, relationship
- diff. from agency: also has representation; but no
bond
J. Broker
- Notes:
- brings parties together; may be agent; can
represent both parties if authorized by both; no
relation to the thing; compensation: commission
upon consummation of contract
- 2 test (City Lite):
1.Must be the efficient procuring cause
2.Should have obtained a ready, able, willing
buyer
SEVILLA V. CA
- Plaintiff was “branch manager” of TWC, but was
really its agent and not its employee nor partner
- Tests for determination of er-ee rel’p:
1. Right of control test: where the person for
whom the services are performed reserves the
right to control not only the end to be achieved
but means to be used in reaching such end
2. Existing economic conditions prevailing
between parties
- It was an agency with plaintiff as agent, who
solicited fares in behalf of TWC, and received
commission. And since there was mutual interest of
both A and P, the agency here cannot be revoked
at will by the P. A entitled to damages.

SHELL V. FIREMEN’S INSURANCE CO.
- Car fell from hydraulic lifter at carwash; plaintiff
sued Shell for sum of money on negligence. Shell
claimed the person responsible was an
independent contractor, hence, Shell not liable.
Person was really an agent. Since he was found
negligent, Shell found liable.
- As the act of the A or his employees acting within
the scope of his authority is the act of the P, breach
of the undertaking by A is one for which P is
responsible.
DELA CRUZ V. NORTHERN THEATRICAL
ENTERPRISES
- Guard sues employer for recovery of expenses
incurred in his homicide cases. SC denied, because
he wasn’t hired to represent defendant in its
dealings with third persons; he was an employee
hired to perform specific duty.
NIELSON & CO. V. LEPANTO CONSOLIDATED
- Mining operations suspended during the Japanese
occupation and resumed a little later after the war,
mgt contract unilaterally terminated by Lepanto
Agency Lease of services
One of the parties binds himself to render some
service to the other party
Based on representation Based on employment
Agent is destined to
execute juridical acts Contemplates only
(creation, modification, material (non-juridical)
or extinction of relations acts
with third parties)
- The management contract is a lease of service and
not a contract of agency. Neilson’s principal
undertaking or operating the mine and mill wasn’t
executing juridical acts for Lepanto, to create,
modify, or extinguish business relations between
Lepanto and third persons. Neilson was not an
agent as interpreted in the law of agency, but an
only an agent only in the sense of performing
material acts for an employer, for compensation.
- Neilson’s incidental capacity as purchasing agent
of supplies and enter into contracts regarding the
sale of mineral, but Neilson couldn’t make any
purchase or sell minerals without prior approval of
Lepanto; hence, these are not considered juridical
acts either, but just acting only as an intermediary.
QUIROGA V. PARSONS HARDWARE
- Parsons agreed with Quiroga for exclusive sale of
Quiroga beds. Quiroga claims Parsons was his
agent.
- SC: it was a sale, not an agency, because Quiroga
supplies the beds, and Parsons pays their price; if
he were an A, he’d have to deliver price to Quiroga
for the beds sold, and return unsold beds, which
isn’t the case here. The words ‘commission on
sales’ simply means discount on the price. The
word ‘agency’ only meant Parsons was the only
one who could sell Quiroga beds in Visayas.
GONZALO PUYAT & SONS V. ARCO AMUSEMENT
CO.
- Discounted price of sound equipment not
disclosed; Arco seeks reimbursement. SC denied.
- Whatever unforeseen events might’ve taken place
unfavorable to Arco, Gonzalo, vendor’s agent,
might still legally hold Arco for the fixed price. This
is incompatible to the claimed agency, because in
agency, A is exempted from all liability in discharge
of his commission provided that A acts within scope
of authority and P must indemnify A for all
damages which A may incur in carrying out the
agency without A’s fault. Besides, it is out of the
ordinary for one to be the A of both the vendor and
the vendee.
LIM V. PEOPLE
- Tobacco, estafa, receipt letter
- Since Lim was a businesswoman and took efforts
collecting tobacco leaves from Ayroso’s house,
more likely acting as A. There was no transfer of
ownership and the agreement clearly considered
Lim as an A with obligation to return any unsold
tobacco.
PACIFIC COMMERCIAL V. YATCO
- Sugar, commission merchant, broker, tax, ex-ship
- Commission merchant: engaged in purchase/sale
for another of personal property, which, for this
purpose, is placed in his possession and at his
disposal. Relationship not only with P, but also to
property.
- Broker: no relation to the thing; merely
intermediary; doesn’t acquire possession over the
property.
KER V. LINGAD
- Rubber products distributor, commercial
broker
- National Internal Revenue Code: commercial
broker: sell merchandise for other persons or
bring buyers and sellers together; includes
commission merchants.
- Essence of sale: transfer of title for a price
paid; transferee is in the position of an owner,
not merely an agent who accounts for the
proceeds of a resale.
- Essence of agency to sell: delivery to an
agent, not as his property, but as the property of
the principal, who remains the owner and has the
right to control sales, fix price and terms,
demand and receive the proceeds less the A’s
commission upon the sales.
HAHN V. CA
- BMW distributor found by SC as agent of BMW
- Agent: receives commission upon successful
conclusion of a sale; P exercises control over A (as
BMW has over Hahn).
- Broker: earns merely by bringing buyer and seller
together, even if no sale is eventually made.
V. SOME CLASSES OF AGENTS

A. Attorneys-at-law
B. Auctioneers
C. Brokers
D. Factors; commission merchants

Mechem, A Treatise on the Law of Agency


Art. 1903. The commission agent shall be
responsible for the goods received by him in the
terms and conditions and as described in the
consignment, unless upon receiving them he should
make a written statement of the damage and
deterioration suffered by the same. (n)
Art. 1904. The commission agent who handles
goods of the same kind and mark, which belong to
different owners, shall distinguish them by
countermarks, and designate the merchandise
respectively belonging to each principal. (n)
Art. 1905. The commission agent cannot, without
the express or implied consent of the principal, sell
on credit. Should he do so, the principal may demand
from him payment in cash, but the commission agent
shall be entitled to any interest or benefit, which may
result from such sale. (n)
Art. 1906. Should the commission agent, with
authority of the principal, sell on credit, he shall so
inform the principal, with a statement of the names
of the buyers. Should he fail to do so, the sale shall
be deemed to have been made for cash insofar as
the principal is concerned. (n)
Art. 1907. Should the commission agent receive on
a sale, in addition to the ordinary commission,
another called a guarantee commission, he shall bear
the risk of collection and shall pay the principal the
proceeds of the sale on the same terms agreed upon
with the purchaser. (n)
Art. 1908. The commission agent who does not
collect the credits of his principal at the time when
they become due and demandable shall be liable for
damages, unless he proves that he exercised due
diligence for that purpose. (n)
VI. WHAT ARE THE CLASSIFICATION OF AGENCY
CONTRACTS?
A. Express agency; implied agency
B. Agency by estoppel; no consent
Art. 1900. So far as third persons are concerned, an
act is deemed to have been performed within the
scope of the agent's authority, if such act is within
the terms of the power of attorney, as written, even if
the agent has in fact exceeded the limits of his
authority according to an understanding between the
principal and the agent. (n)
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the
agent if the former allowed the latter to act as
though he had full powers. (n)
Art. 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they were
not given notice thereof. (1734)
Art. 1922. If the agent had general powers,
revocation of the agency does not prejudice third
persons who acted in good faith and without
knowledge of the revocation. Notice of the revocation
in a newspaper of general circulation is a sufficient
warning to third persons. (n)
C. Agency by operation of law
Art. 1869. Agency may be express, or implied from
the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf
without authority.
Agency may be oral, unless the law requires a
specific form. (1710a)
Art. 1884. The agent is bound by his acceptance to
carry out the agency, and is liable for the damages
which, through his non-performance, the principal
may suffer.
He must also finish the business already begun on
the death of the principal, should delay entail any
danger. (1718)
Art. 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has
been constituted in the common interest of the latter
and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor. (n)
Art. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third
persons who may have contracted with him in good
faith. (1738)
D. Universal, general and special
Art. 1876. An agency is either general or special.
The former comprises all the business of the
principal. The latter, one or more specific
transactions. (1712)
E. Durable agency

Art. 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has
been constituted in the common interest of the latter
and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor. (n)
SIASAT VS. IAC
(sale of flags to DepEd)
Kinds of Agents
1. Universal agent – one who is authorized to do
all acts for his principal which can lawfully be
delegated to an agent
2. General agent – one authorized to do all acts
pertaining to a business of a certain kind or at a
particular place, or all acts pertaining to a
business of a particular class or series
3. Special agent – one authorized to do some
particular act or act upon some particular
occasion. He acts usually in accordance with
specific instructions
DOMINION INSURANCE CORPORATION VS. CA
[special vs. general agency]
A perusal of the Special Power of Attorney would
show that Dominion and Guevarra intended
to enter into a principal-agent relationship
and, despite the use of the word “special”,
the contents reveal that what was really
constituted was a general agency.
o Arts. 1876 and 1877 state that a general
agency is one which comprises all the
business of the principal but, couched in
general terms, it is limited only to acts of
administration.
o A general power permits the power to
do all acts for which the law does not
require a special power, such as those acts
enumerated in the Special Power of Attorney.
However, the payment of claims is not an act of
administration and Art. 1878 includes such
payment in its enumeration of instances
when a special power of attorney is
required, besides the abovementioned
document.
F. Couched in general terms; couched in
specific terms
Art. 1877. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power or
that the agent may execute such acts as he may
consider appropriate, or even though the agency
should authorize a general and unlimited
management. (n)
Art. 1878. Special powers of attorney are necessary
in the following cases:
(1) To make such payments as are not usually
considered as acts of administration;
(2) To effect novations which put an end to
obligations already in existence at the time the
agency was constituted;
(3) To compromise, to submit questions to
arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an
action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership
of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity
or those made to employees in the business
managed by the agent;
(7) To loan or borrow money, unless the latter act be
urgent and indispensable for the preservation of the
things which are under administration;
(8) To lease any real property to another person for
more than one year;
(9) To bind the principal to render some service
without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or
surety;
(12) To create or convey real rights over immovable
property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted
before the agency;
(15) Any other act of strict dominion. (n)
Art. 1879. A special power to sell excludes the
power to mortgage; and a special power to mortgage
does not include the power to sell. (n)
Art. 1880. A special power to compromise does not
authorize submission to arbitration. (1713a)
1. Mortgage
PNB VS. STA. MARIA
[6 brothers and sisters executed PA in favor of
Maximo Sta. Maria; power to mortgage does not
include power to loan]
Disinclination of courts to enlarge an
authority granted beyond the powers expressly given
and those incidentally flowing therefrom as being
usual or reasonably necessary and proper for the
performance of such express powers.
The authority granted by defendants-
appellants (except Valeriana) unto their brother,
Maximo, was merely to mortgage the property jointly
owned by them, not to contract for any loans in their
names and behalf. Maximo alone, with Valeriana who
authorized him to borrow money, must answer for
them; other defendants-appellants' only liability is
that the real estate authorized by them to be
mortgaged would be subject to foreclosure and sale
to respond for the obligations contracted by Maximo.
But they cannot be held personally liable.
BPI VS. DE COSTER
[wife was in Paris when husband mortgaged her
property]
It is very apparent from the face of the
instrument that the whole purpose and intent of the
power of attorney was to empower and authorize the
husband to look after and protect the interest of his
wife. There is no provision authorizing him to
sign anything or to do anything which would
make his wife liable as a surety of a pre-
existing debt. It is fundamental rule of
construction that in an instrument that defines
and specifies powers and duties, such would be
limited and confined to those which are
specified and defined and that all other powers
and duties are excluded. Hence, it follows that
since the husband was not authorized then the note
in question is void for want of power to execute it.
The mortgage is also void. The
mortgaged property is owned by Gabriela and
since the note is void as to her, then it follows
that the mortgage is also void for want of
power to execute it.
2. Loan / borrow
HODGES VS. SALAS
[applied proceeds of mortgage to personal debt]
The provision cannot be interpreted as also
authorizing Yulo to dispose of the money as he
pleases, particularly when it does not appear
that such was the intention of the principals.
And in applying part of the funds to pay his
personal obligations, he exceeded his authority.
The agent was obliged to turn over the
money to the principals or, at least, place it at their
disposal
3. Sell
STRONG V GUTIERREZ REPIDE
[agent Jones, capital stocks, sale, general agent]
Jones did not have the authority to sell
in behalf of Mrs Strong. Strong was a general
agent, which according to Art. 1713 (Old Civil Code):
“An agency stated in general terms only includes
acts of administration. In order to compromise,
alienate mortgage, or to execute any other act
of strict ownership an express mandate is
required.”
There are only three instances whereby the
principal is held bound by the third party’s
assumption of the authority of the agent:
(1) Where his acts have contributed to deceive a
third person in good faith;
(2) Where the limitations upon the power
created by him could not have been known by a
third person; and
(3) Where he has placed in the hands of the
agent instruments signed in blank.
KATIGBAK VS. TAI CHING CO
(letters indicating acknowledgment of agency)
While it is true that a power of attorney not
recorded in the registry of deeds is ineffective in
order that an agent may validly perform acts in the
name of the principal, it does, however, bind the
principal to acknowledge acts performed by his
attorney-in-fact regarding said property. The
record contains many indications that Tecsi was
aware of the sale (letters complaining of the
demands of Gabino to send him rents of the land,
promises to send, remittance) and these were a tacit
acknowledgement that he occupied the land no
longer as an owner but only as a lessee.
4. Lease
VDA. DE CHUA VS. IAC
[general agent executed lease contract for 5years]
Where the lease contract entered into by an agent is
for more than one year, the agent must be armed
with a special power of attorney.
5. Compromise
DUNGO VS. LOPENA
[attorney entered into compromise agreement]
The client, on becoming aware of the
compromise and the judgment thereon, fails to
repudiate promptly the action of his attorney, he will
not afterwards be heard to contest its validity.
It is neither accurate nor correct to conclude
that the absence of an SOA where one is required by
law renders the contract void. It is merely
unenforceable (1403[1] CC).
VICENTE VS. GERALDEZ
[placer lease contract, cement, mining, VP of
company refused to sign compromise agreement]
1. Special powers of attorney are necessary to
compromise and to renounce the right to appeal
from a judgment. Attorneys cannot compromise
their client’s litigation. It is not disputed that the
lawyers of Hi Cement had not submitted to the
Court any written authority from their client to
enter into a compromise.
2. Juridical persons may compromise only in the
form and with the requisites which may be
necessary to alienate their property. As a general
rule an officer or agent of the corporation has no
power to compromise or settle a claim by or
against the corporation, except to the extent that
such power is given to him either expressly or by
reasonable implication from the circumstances.
3. To ratify the unauthorized contract of an
agent and make it binding on the corporation, it
must be shown that the governing body or officer
authorized to ratify had full and complete
knowledge of all the material facts connected
with the transaction to which it relates.
Ratification must be by the officer or governing
body having authority to make such contract,
and must be with full knowledge.
6. Other acts of strict dominion
INSULAR DRUG VS. NATIONAL BANK
[former salesman had anomalous transactions,
committed suicide]
Foerster had implied authority to indorse all
checks made out in the name of the Insular Drug Co.,
Inc., has even less force. Not only did the bank
permit Foerster to indorse checks and then place
them to his personal account, but it went farther and
permitted Foerster's wife and clerk to indorse the
checks. The right of an agent to indorse commercial
paper is a very responsible power and will not be
lightly inferred. A salesman with authority to collect
money belonging to his principal does not have the
implied authority to indorse checks received in
payment. Any person taking checks made payable to
a corporation, which can act only by agent does so at
his peril, and must same by the consequences if the
agent who indorses the same is without authority.
VII. WHAT ARE THE OBLIGATIONS AND
LIABILITIES OF AGENTS TO THEIR PRINCIPALS?
A. Act within scope of authority
Art. 1879. A special power to sell excludes the
power to mortgage; and a special power to
mortgage does not include the power to sell.
(n)
Notes:
• Reason for 1879
o Power to sell – payment of price
o Power to mortgage – purpose as
collateral
Art. 1880. A special power to compromise does
not authorize submission to arbitration.
(1713a)
Notes:
• Compromise – avoid litigation by making
reciprocal/mutual concessions
• Why power to arbitrate & power to
compromise different? Because power to
compromise requires another SPA
• Can General Agent appoint Principal as agent
of another? YES, but only if for a
compensation – 1878 (9) SPA needed of w/o
compensation
Art. 1881. The agent must act within the scope
of his authority. He may do such acts as may
be conducive to the accomplishment of the
purpose of the agency. (1714a)
Notes:
• 1st sentence – states duty & limitation
• 2nd sentence – qualifies limitation =
conducive to the accomplishment of the
purpose of the agency
Art. 1882. The limits of the agent's authority
shall not be considered exceeded should it
have been performed in a manner more
advantageous to the principal than that
specified by him. (1715)
Notes:
• Discusses manner of performance of the
agent
• If more advantageous
• Principal controlling actions of agent
• Ex. P instructs A to sell in MM only; but A can
“offer” to sell anywhere outside MM like in
internet (e-bay)
• Instructions – words said/written by P to A to
guide latter simultaneous w/ or after delivery
of written PoA; can refer to oral instructions
• Are instructions part of PoA?
o Yes if general agency
o No between A & P; scope of authority
includes written in PoA instructions
Art. 1887. In the execution of the agency, the
agent shall act in accordance with the
instructions of the principal.
In default thereof, he shall do all that a good
father of a family would do, as required by the
nature of the business. (1719)
B. Carry out the agency
Art. 1884. The agent is bound by his
acceptance to carry out the agency, and is
liable for the damages which, through his non-
performance, the principal may suffer.
He must also finish the business already begun
on the death of the principal, should delay
entail any danger. (1718)
Notes:
• Acceptance – agent signifies consent to
agency; bound by his acceptance
• Agent – not required to perform acts 8
hrs/day
Art. 1928. The agent may withdraw from the
agency by giving due notice to the principal. If
the latter should suffer any damage by reason
of the withdrawal, the agent must indemnify
him therefor, unless the agent should base his
withdrawal upon the impossibility of continuing
the performance of the agency without grave
detriment to himself. (1736a)
Notes:
• To withdraw – with due notice to P
• Withdrawal – by terms of the contract
• Repudiation – breach of contract
Art. 1929. The agent, even if he should
withdraw from the agency for a valid reason,
must continue to act until the principal has had
reasonable opportunity to take the necessary
steps to meet the situation. (1737a)
Notes:
• Reasonable time & manner – depends on
circumstances
• Sufficient time – ex. To return things to P
C. Not to carry out the agency
Art. 1888. An agent shall not carry out an
agency if its execution would manifestly result
in loss or damage to the principal. (n)
D. Loyalty
Art. 1889. The agent shall be liable for
damages if, there being a conflict between his
interests and those of the principal, he should
prefer his own. (n)
Notes:
• Damages if conflict of interest
Art. 1890. If the agent has been empowered to
borrow money, he may himself be the lender at
the current rate of interest. If he has been
authorized to lend money at interest, he
cannot borrow it without the consent of the
principal. (n)
Art. 1491. The following persons cannot
acquire by purchase, even at a public or
judicial auction, either in person or through the
mediation of another:
(1) The guardian, the property of the person or
persons who may be under his guardianship;
(2) Agents, the property whose administration
or sale may have been entrusted to them,
unless the consent of the principal has been
given;
Notes:
• Agent – relative limitation only
o Valid if w/ consent
(3) Executors and administrators, the property
of the estate under administration;
(4) Public officers and employees, the property
of the State or of any subdivision thereof, or of
any government-owned or controlled
corporation, or institution, the administration
of which has been intrusted to them; this
provision shall apply to judges and government
experts who, in any manner whatsoever, take
part in the sale;
(5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and other
officers and employees connected with the
administration of justice, the property and
rights in litigation or levied upon an execution
before the court within whose jurisdiction or
territory they exercise their respective
functions; this prohibition includes the act of
acquiring by assignment and shall apply to
lawyers, with respect to the property and
rights which may be the object of any litigation
in which they may take part by virtue of their
profession.
Notes:
• Lawyers – relative prohibition; only w/
respect to the property under litigation
• Generally, agent has interest in property of P
= compensation
• Principal has interest on subject = interest
(6) Any others specially disqualified by law. (1459a)
AUSTRIA V CA
Pendant w/ diamonds worth 4.5K; consignment of
goods for sale; on her way home 2 men snatched her
purse w/ pendant inside; Maria didn’t pay – robbery
extinguished her obligation. SC: prior conviction not
necessary; fortuitous event = focus on “events” not
on agents
PNB V MANILA SURETY
P279K delivered by PNB to ATACO, guaranteed by
Manila Surety under trust receipt up to P50K. ATACO
assigned rt. to collect from BPW(public works); Bank
ceased to collect. SC: bank negligent in stopping
collection, exonerated surety. Irrevocable agency by
stipulation of the parties. Principal can’t revoke
agency
E. Diligence
Art. 1885. In case a person declines an agency,
he is bound to observe the diligence of a good
father of a family in the custody and
preservation of the goods forwarded to him by
the owner until the latter should appoint an
agent or take charge of the goods. (n)
Art. 1887. In the execution of the agency, the
agent shall act in accordance with the
instructions of the principal.
In default thereof, he shall do all that a good
father of a family would do, as required by the
nature of the business. (1719)
Art. 1909. The agent is responsible not only for
fraud, but also for negligence, which shall be
judged with more or less rigor by the courts,
according to whether the agency was or was
not for a compensation. (1726)
Notes:
• Agent liable for fraud & negligence; to
whom? PRINCIPAL
F. Account/deliver
Art. 1891. Every agent is bound to render an
account of his transactions and to deliver to
the principal whatever he may have received
by virtue of the agency, even though it may not
be owing to the principal.
Every stipulation exempting the agent from the
obligation to render an account shall be void. (1720a)
Notes:
• Render an account of his transactions &
deliver
o Even though it may not be owing to
the P
• Agent may contract w/ other persons but the
moment he receives something not from the
P, he must turn it over for the P
DOMINGO V DOMINGO
Exclusive agency to sell; 1K earnest money and 1k
gift/propina to Oscar; Highest loyalty required=
utmost good faith; absolute obligation to make full
disclosure = 1891.
Sir: no duty when 1) broker & 2) plus
disclosed & no obligation
G. Solidary liability
Art. 1894. The responsibility of two or more
agents, even though they have been appointed
simultaneously, is not solidary, if solidarity has
not been expressly stipulated. (1723)
Art. 1895. If solidarity has been agreed upon,
each of the agents is responsible for the non-
fulfillment of agency, and for the fault or
negligence of his fellow agents, except in the
latter case when the fellow agents acted
beyond the scope of their authority. (n)
Notes:
• Joint agency (and) - 2 or more agency acting
together
• Solidary agency (and/or) – there are 2 or
more agents & they’re required to act
independently
SEVERINO V SEVERINO
Fabiola wants to be recognized as sole heir of
Melecio & take land from Guillermo; SC: defendant is
agent of Melecio; def is estopped from
owning/asserting adverse title to the subject of
agency. Encargado = administrator – to preserve
property;
H. Pay interest
Art. 1896. The agent owes interest on the sums he
has applied to his own use from the day on which he
did so, and on those which he still owes after the
extinguishment of the agency. (1724a)
I. Fraud; negligence
Art. 1909. The agent is responsible not only for
fraud, but also for negligence, which shall be
judged with more or less rigor by the courts,
according to whether the agency was or was
not for a compensation. (1726)
J. Specific obligations of commission
agents
Art. 1903. The commission agent shall be
responsible for the goods received by him in
the terms and conditions and as described in
the consignment, unless upon receiving them
he should make a written statement of the
damage and deterioration suffered by the
same. (n)
Art. 1904. The commission agent who handles
goods of the same kind and mark, which
belong to different owners, shall distinguish
them by countermarks, and designate the
merchandise respectively belonging to each
principal. (n)
Art. 1905. The commission agent cannot,
without the express or implied consent of the
principal, sell on credit. Should he do so, the
principal may demand from him payment in
cash, but the commission agent shall be
entitled to any interest or benefit, which may
result from such sale. (n)
Art. 1906. Should the commission agent, with
authority of the principal, sell on credit, he
shall so inform the principal, with a statement
of the names of the buyers. Should he fail to do
so, the sale shall be deemed to have been
made for cash insofar as the principal is
concerned. (n)
Art. 1907. Should the commission agent
receive on a sale, in addition to the ordinary
commission, another called a guarantee
commission, he shall bear the risk of collection
and shall pay the principal the proceeds of the
sale on the same terms agreed upon with the
purchaser. (n)
Art. 1908. The commission agent who does not
collect the credits of his principal at the time
when they become due and demandable shall
be liable for damages, unless he proves that he
exercised due diligence for that purpose. (n)
GREEN VALLEY POULTRY V IAC
Sale v Agency; non-exclusive distributor; nature is
one of agency; looked like a sale because of 1)
discounts & 2) payment due 60 days
MUNICIPAL COUNCIL OF ILOILO V EVANGELISTA
Claim of MC as alleged assignee of rights of Atty.
Soriano by virtue of a judgment as payment of
professional services rendered by him to widow and
co-heirs
VIII. RESPONSIBILITY FOR ACTS OF
SUBSTITUTES
Art. 1892. The agent may appoint a substitute
if the principal has not prohibited him from
doing so; but he shall be responsible for the
acts of the substitute:
(1) When he was not given the power to
appoint one;
(2) When he was given such power, but without
designating the person, and the person
appointed was notoriously incompetent or
insolvent.
All acts of the substitute appointed against the
prohibition of the principal shall be void.
(1721)
Notes:
• Substitute agent – appointed by original
agent to do same things originally
mandated/tasked by the Principal on behalf
of the P
• Sub-agent – agent appointed by original
agent to do same thing but on behalf of the
agent
• Can Agent appoint his own agent? YES you
are a principal for your own self
• G.R.: Agent may appoint sub
• Problem w/ substitution:
o No recourse against agent; better not
to designate a substitute agent
o Purpose to give flexibility to agent; to
be continuous agency
Art. 1893. In the cases mentioned in Nos. 1 and
2 of the preceding article, the principal may
furthermore bring an action against the
substitute with respect to the obligations
which the latter has contracted under the
substitution. (1722a)
Notes:
• Joint liability
DEL ROSARIO V LA BADENIA
Extensive selling campaign; Aragon as Gen Agent in
Albay; Aragon hired spouses Del Rosario as manager
of central agency in Legaspi; according to Aragon’s
book =it was sps account; Spouses were agents;
broad power of Aragon; no eveidence that they acted
beyond limit
INTERNATIONAL FILMS V LYRIC FILM
IFC leased “Monte Carlo madness” film; verbal
agreement re: sub-agency and keeping the film in
vault; new agent Joseph agreed to sub-agency; vault
burned down; SC: defendant not obliged to fulfill
more than what’s mandated; no mandate to insure
against fire
IX. WHAT ARE THE OBLIGATIONS AND
LIABILITIES OF AGENTS TO 3RD PARTIES?
A. Agent acting within scope of authority
Art. 1883. If an agent acts in his own name, the
principal has no right of action against the
persons with whom the agent has contracted;
neither have such persons against the
principal.
In such case the agent is the one directly
bound in favor of the person with whom he has
contracted, as if the transaction were his own,
except when the contract involves things
belonging to the principal.
The provisions of this article shall be
understood to be without prejudice to the
actions between the principal and agent.
(1717)
Art. 1897. The agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself or
exceeds the limits of his authority without
giving such party sufficient notice of his
powers. (1725)
Art. 1899. If a duly authorized agent acts in
accordance with the orders of the principal, the
latter cannot set up the ignorance of the agent
as to circumstances whereof he himself was, or
ought to have been, aware. (n)
A. Agent acting outside of authority –
1897, 1898, 1911
Art. 1897. The agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself or
exceeds the limits of his authority without
giving such party sufficient notice of his
powers. (1725)
Art. 1898. If the agent contracts in the name of
the principal, exceeding the scope of his
authority, and the principal does not ratify the
contract, it shall be void if the party with whom
the agent contracted is aware of the limits of
the powers granted by the principal. In this
case, however, the agent is liable if he
undertook to secure the principal's ratification.
(n)
Art. 1911. Even when the agent has exceeded
his authority, the principal is solidarily liable
with the agent if the former allowed the latter
to act as though he had full powers. (n)
1. With notice to third parties
Art. 1901. A third person cannot set up the fact
that the agent has exceeded his powers, if the
principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
2. Without notice to third parties
PHILIPPINE NATIONAL BANK VS. AGUDELO
When an agent negotiates a loan in his personal
capacity and executes a promissory note under his
own signature without express authority from his
principal, giving as security therefore real estate
belonging to the latter, also in his own name and not
in the name and representation of the said principal,
the obligation so contracted by him is personal and
does not bind the principal.
PHIL PRODUCTS CO. V PRIMATERIA SOCIETE
ANONYME POUR LE COMMERCE EXTERIUR:
PRIMATERA (PHIL). INC.
With regard to Art 1897 of the CC which provides
“that the agent who acts as such is not personally
liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his
authority without giving such party sufficient notice
of his powers”, the court held that there is no proof
that the agents exceeded the limits of their
authority. In fact, the principal (Primateria
Zurich) who should have raised the point,
never raised it. It did not deny liability on the
ground of excess of authority. In addition, the
article does not hold that in cases of excess of
authority, both the agent and its principal are
liable. Since, a judgement was already given
against the Primateria Zurich for the whole
amount, and PPC did not appeal from such
judgment then Art 1897 would not apply.
NATIONAL POWER CORP. VS. NATIONAL
MERCHANDISING CORP.
- NPC was unaware of the limitations on the powers
granted by the New York firm to Namerco.
- The New York corporation in its letter said: We
hereby certify that National Merchandising
Corporation . . . are our exclusive representatives in
the Philippines.
- Namerco never disclosed to the NPC the cabled or
written instructions of its principal.
NATIONAL BANK V. WELCH, FAIRCHILD & CO.
[Benito Juarez ship]
True, an agent who acts for a revealed principal in
the making of a contract does not become
personally bound to the other party in the sense
that an action can ordinarily be maintained upon
such contract directly against agent. Yet that rule
doesn’t apply here. One who has intervened in the
making of a contract in the character of agent can’t
be permitted to intercept and appropriate the thing
which is the principal is bound to deliver, and
thereby make performance by the principal
impossible. The agent must be precluded from
doing any positive act that could prevent
performance on the part of his principal. This much
is what ordinary good faith requires.
TUASON VS. OROZCO
- A debt thus incurred by the agent is
binding directly upon the principal,
provided the former acted, as in the
present case, within the scope of his
authority.
- The fact that the agent has also bound
himself to pay the debt does not relieve
from liability the principal for whose
benefit the debt was incurred. The
individual liability of the agent
constitutes a further security and does
not affect the liability of the principal.
CERVANTES vs. CA
- Plaintiff knew that a written request to the
legal counsel was necessary for extension, he
cannot use what the PAL agents did to his
advantage
- Citing Art. 1898 of the Civil Code, the acts of
an agent beyond the scope of his authority
do not bind the principal, unless the latter
ratifies the same expressly or impliedly
- When the third person knows that the
agent was acting beyond the scope of
his power or authority, the principal
cannot be held liable for the acts of the
agent
B. Agent acting in his own name; exception
– 1883
Art. 1883. If an agent acts in his own name, the
principal has no right of action against the
persons with whom the agent has contracted;
neither have such persons against the
principal.
In such case the agent is the one directly
bound in favor of the person with whom he has
contracted, as if the transaction were his own,
except when the contract involves things
belonging to the principal.
The provisions of this article shall be
understood to be without prejudice to the
actions between the principal and agent.
(1717)
SMITH, BELL & CO. v SOTELO MATTI
Manila Oil doesn’t seem to have taken part in the
contracts. Mr Vicente Sotelo signed the contracts in
his individual capacity and under his own name. If Mr
Vicente Sotelo was agent, he is still liable since he
entered the contract under his own name, and did
not represent that he was under commission to
represent Manila Oil (Art. 1717 of the Old Civil Code,
Art. 1883 in the NCC). The Code of Commerce holds
Mr Vicente Sotelo since he transacted the business
under his own name, and therefore directly liable.
Intervenor has no right of action, so the Court in its
disposition only directed the acceptance and
payment of the ordered goods under Mr Vicente
Sotelo’s name, without prejudice to actions he could
invoke against his principal.
RURAL BANK OF BOMBON VS. CA
SY-JUCO v SY-JUCO
• The effects of agency must be sought: Art 1717
(when an agent acts in his own name, principal
has no right of action against person with whom
agent has contracted EXCEPT cases involving
things belonging to the principal
• Effects of this rule:
 Agent is bound to the principal although he
does not assume the character of such agent
and appears acting in his own name.
 Agent’s apparent representation yields to the
principal’s true representation and that, in
reality and in effect, the contract must be
considered as entered into between the
principal and the third person and
consequently, if the obligations belong to the
former [principal], to him alone must also
belong the rights arising from the contract.
NFA VS. IAC
GOLD STAR MINING CO., INC. v MARTA LIM-
JIMENA
• Pursuant to Article 1883 Jimena may sue
Gold Star because Lincallo, in transferring the
mining claims to Gold Star (without disclosing
that Jimena was a co-owner although Gold
Star had knowledge of this fact as shown by
the proofs) acted as Jimena's agent with
respect to Jimena's share of the claims
X. WHAT ARE THE OBLIGATIONS AND
LIABILITIES OF PRINCIPALS TO AGENTS?
A. Advance/reimburse – 1912, 1914, 1918
Art. 1912. The principal must advance to the
agent, should the latter so request, the sums
necessary for the execution of the agency.
Should the agent have advanced them, the
principal must reimburse him therefor, even if
the business or undertaking was not
successful, provided the agent is free from all
fault.
The reimbursement shall include interest on
the sums advanced, from the day on which the
advance was made. (1728)
Art. 1914. The agent may retain in pledge the
things which are the object of the agency until
the principal effects the reimbursement and
pays the indemnity set forth in the two
preceding articles. (1730)
Art. 1918. The principal is not liable for the
expenses incurred by the agent in the
following cases:
(1) If the agent acted in contravention of the
principal's instructions, unless the latter
should wish to avail himself of the benefits
derived from the contract;
(2) When the expenses were due to the fault of
the agent;
(3) When the agent incurred them with
knowledge that an unfavorable result would
ensue, if the principal was not aware thereof;
(4) When it was stipulated that the expenses
would be borne by the agent, or that the latter
would be allowed only a certain sum. (n)
B. Indemnify – 1913 (Dela Cruz v. No.
Theatrical)
Art. 1913. The principal must also indemnify
the agent for all the damages which the
execution of the agency may have caused the
latter, without fault or negligence on his part.
(1729)
C. Solidary liability – 1915
Art. 1915. If two or more persons have
appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to
the agent for all the consequences of the
agency. (1731)
D. Compensation – 1875
Art. 1875. Agency is presumed to be for a
compensation, unless there is proof to the
contrary. (n)
E. Agent’s lien – 1914
Art. 1914. The agent may retain in pledge the
things which are the object of the agency until
the principal effects the reimbursement and
pays the indemnity set forth in the two
preceding articles. (1730)
MACONDRAY vs. SELLER
(Real estate broker, arbitrary 5pm deadline)
There is no valid revocation because at the time fixed
by the manager for the deadline and termination of
negotiations, the broker had already earned his
commissions agreed upon, and could be deprived
thereof by the arbitrary action of the principal.
DANON vs. BRIM & CO.
(Factory; 5% commission if sale is consummated or if
the broker finds a purchaser ready, able and willing
to buy)
Broker has not yet performed all acts under the
contract to recover commission because what he has
accomplished is merely to find a person who might
have bought the factory. The company was willing to
go into negotiations, but was not yet ready to buy- no
negotiations yet, and no board resolution to
authorize the purchase
ROCHA vs. PRATS
(Sale did not transpire due to disagreement on
proviso on the need for banking security)
The duty assumed by the broker is to bring the minds
of the buyer and seller to an agreement for a sale,
and the price and the terms on which it is to be
made. Until all that is done, right to commission does
not accrue.
INLAND REALTY vs. CA
(Agent referred Stanford Microsystems as buyer,
initial price too low; sale was eventually
consummated with Stanford about 1 year 5 months
after cessation of agency)
Agent not entitled to commission because it was not
the efficient procuring cause in bringing about the
sale. There was no participation in the critical events
leading to the sale – negotiations, finalization of
terms and conditions, drafting of the deed,
processing of documents, etc.
INFANTE vs. CUNANAN
(Principal terminated agency after referral of a buyer,
allegedly because of change of mind, but
subsequently transacted directly with the proposed
buyer)
Agents entitled to commission; the principal took
advantage of the services of the agents, and in bad
faith, terminated the agency to avoid payment of
commission.
PRATS vs. CA
(Initial negotiations by principal with SSS, subsequent
grant of exclusive agency; after termination, sale is
eventually consummated between principal and SSS)
An agent who is not the efficient procuring cause in
bringing about the sale as his exclusive authority has
expired is not entitled to compensation. Exception, as
a matter of equity, may be compensated for the
diligent steps taken to bring the parties together.
UNILAND RESOURCES vs. DBP
(Agent without authority, but introduced potential
buyers nonetheless; allegation of implied agency)
Implied agency does not apply because it has been
clear that only accredited brokers may look for a
buyer. Relationship of agency is founded on mutual
consent. Applied Prats Case to award compensation
for efforts.
XI. WHAT ARE THE OBLIGATIONS OF
PRINCIPALS TO THIRD PARTIES?
A. Agent acting within the scope of his
authority
Art. 1883. If an agent acts in his own name, the
principal has no right of action against the
persons with whom the agent has contracted;
neither have such persons against the
principal.
In such case the agent is the one directly
bound in favor of the person with whom he has
contracted, as if the transaction were his own,
except when the contract involves things
belonging to the principal.
The provisions of this article shall be
understood to be without prejudice to the
actions between the principal and agent.
(1717)
Art. 1910. The principal must comply with all
the obligations which the agent may have
contracted within the scope of his authority.
Art. 1917. In the case referred to in the
preceding article, if the agent has acted in
good faith, the principal shall be liable in
damages to the third person whose contract
must be rejected. If the agent acted in bad
faith, he alone shall be responsible. (n)
B. Agent acting outside scope of his authority
Art. 1900. So far as third persons are
concerned, an act is deemed to have been
performed within the scope of the agent's
authority, if such act is within the terms of the
power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority
according to an understanding between the
principal and the agent. (n)
Art. 1911. Even when the agent has exceeded
his authority, the principal is solidarily liable
with the agent if the former allowed the latter
to act as though he had full powers. (n)
Art. 1916. When two persons contract with
regard to the same thing, one of them with the
agent and the other with the principal, and the
two contracts are incompatible with each
other, that of prior date shall be preferred,
without prejudice to the provisions of Article
1544. (n)
GONZALES vs. HABERES
(Misrepresentation in the deed of sale; vendor
spouses) There is no merit in the contention of the
husband that misrepresentations of his wife cannot
be charged against him, because in negotiating for
the sale, he acted as agent and representative of his
wife.
XI. What are the obligations of principals to
third parties
Gonzales vs. Haberes
Sale of land in Nueva Ecija where the entire area of
which was occupied by adverse claimants and the
title disputed. The plaintiff brought the action to
recover the unpaid sum for the land. Defendant’s
defense is that plaintiff through false representation
led him to believe that the plaintiff is in possession of
the land.
Ratio: Where the sale of land is effected on the
strength of misrepresentations of the agent of the
vendor, the latter cannot accept the benefit of such
representations and at the same time deny the
responsibility for them.
XII. DUTY OF THIRD PARTIES DEALING WITH
AGENT
Art. 1902. A third person with whom the agent
wishes to contract on behalf of the principal
may require the presentation of the power of
attorney, or the instructions as regards the
agency. Private or secret orders and
instructions of the principal do not prejudice
third persons who have relied upon the power
of attorney or instructions shown them. (n)
XIII. HOW IS AGENCY EXTINGUISHED?
A. Revocation; agency coupled with interest
Art. 1873. If a person specially informs another
or states by public advertisement that he has
given a power of attorney to a third person,
the latter thereby becomes a duly authorized
agent, in the former case with respect to the
person who received the special information,
and in the latter case with regard to any
person.
The power shall continue to be in full force
until the notice is rescinded in the same
manner in which it was given. (n)
Art. 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation
which entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose
of the agency;
(6) By the expiration of the period for which the
agency was constituted. (1732a)
Art. 1920. The principal may revoke the agency at
will, and compel the agent to return the document
evidencing the agency. Such revocation may be
express or implied. (1733a)
Art. 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they were
not given notice thereof. (1734)
Art. 1922. If the agent had general powers,
revocation of the agency does not prejudice third
persons who acted in good faith and without
knowledge of the revocation. Notice of the
revocation in a newspaper of general circulation is a
sufficient warning to third persons. (n)
Art. 1923. The appointment of a new agent for the
same business or transaction revokes the previous
agency from the day on which notice thereof was
given to the former agent, without prejudice to the
provisions of the two preceding articles. (1735a)
Art. 1924. The agency is revoked if the principal
directly manages the business entrusted to the
agent, dealing directly with third persons. (n)
Art. 1925. When two or more principals have
granted a power of attorney for a common
transaction, any one of them may revoke the same
without the consent of the others. (n)
Art. 1926. A general power of attorney is revoked by
a special one granted to another agent, as regards
the special matter involved in the latter. (n)
Art. 1927. An agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of
fulfilling an obligation already contracted, or if a
partner is appointed manager of a partnership in
the contract of partnership and his removal from
the management is unjustifiable. (n)
BARRETTO VS. STA. MARIA
Sta. Maria, a resident of Spain and owner of La
Insular Cigar & Cigarettes factory. Barretto is the
agent for the company in the Philippines. He
transacted with a Uy Yuan who bought company
products but later on became insolvent. Barretto
wrote a letter to Sta. Maria allegedly containing his
resignation. Sta. Maria did not replied only after 11
months and accepted Barretto’s resignation and
replaced him with another agent.
Ratio: When the time during which the agent may
hold his position is indefinite or undetermined when
no period has been fixed in his commission and so
long as the confidence reposed in him by the
principal exists. But as soon as this confidence
disappears the principal has a right to revoke the
power he conferred upon the agent especially when
the latter has resigned his position for good reason.
Sta. Maria did not immediately reply because he was
being cautious.
Even though a period is stipulated during which the
agent or employee is to hold his position in the
service of the owner or head of a mercantile
establishment, yet the latter may, for any of the
special reasons specified in the Art 300 of the Code
of Commerce, dismissed such agent or employee
even before the termination of such period.
DIOLOSA VS. CA
Broker’s authority was revoked because principal
intend to reserve the lots for the benefit of her
grandchildren. NOTE: the case talked about the
RESCISSION of the contract of agency
Ratio: The authority to sell is not extinguished until
all the lots have been disposed of, as stated in the
contract of agency. Since the agreement is a valid
contract, it can only be rescinded on the grounds
specified in Art 1381 to 1382 of the CC. (in short,
those transactions with lesions or there is economic
disadvantage+ other contracts declared by law to be
rescissible).
NEW MANILA LUMBER COMPANY VS. RP
Two schools
Section 1 of Public Act No. 3688 Section one of Public
Act No. 3688, entitled "An Act for the protection of
persons furnishing material and labor for the
construction of public works", states that a person
entering into a contract with the Republic must first
execute a penal bond, “with good and sufficient
sureties, with the additional obligation that such
contractor or his or its sub-contractors shall promptly
make payments to all persons supplying him or them
with labor and materials in the prosecution of the
work provided for in such contract; and any person,
company or corporation who has furnished labor or
materials in the construction or repair of any public
building or public work, and payment for which has
not been made, shall have the right to intervene and
be made a party to any action instituted by the
Government…”
In the case at bar, it is not disputed that defendant
Republic has already instituted a suit against the
contractor for the forfeiture of the latter's bond
posted to secure the faithful performance of
stipulations in the construction contract with regards
to one of the two school buildings. The contractor has
a similar bond with respect to the other school
building. Pursuant to Act 3688, plaintiff's legal
remedy is, not to bring suit against the Government,
there being no privity of contract between them, but
to intervene in the civil case above-mentioned as an
unpaid supplier of materials to the contractor, or file
an action in the name of the Republic against said
contractor on the latter's other bond.
At any rate, under the facts alleged in the complaint,
the powers of attorney in question made plaintiff the
contractor's agent in the collection of whatever
amounts may be due the contractor from the
defendant. And since it is also alleged that, after the
execution of the powers of attorney, the contractor
(principal) demanded and collected from defendant
the money the collection of which he entrusted to
plaintiff, the agency apparently has already been
revoked. (Articles 1920 and 1924 CC) The point is
made by plaintiff that the powers of attorney
executed by the contractor in its favor are
irrevocable and are coupled with interest. But even
supposing that they are, still their alleged
irrevocability cannot affect defendant who is not a
party thereto. They are obligatory only on the
principal who executed the agency.
Plaintiff also cites Article 1729 of the new Civil Code,
which states that “Those who put their labor upon or
furnish materials for a piece of work undertaken by
the contractor have an action against the owner up
to the amount owing from the latter to the contractor
at the time the claim is made. . . .” This article,
however, as expressly provided in its last paragraph,
"is subject to the provisions of special law." The
special law governing in the present case, as already
seen, is Act No. 3688.
There is another reason for upholding the order of
dismissal complained of. Plaintiff's action being a
claim for sum of money arising from an alleged
implied contract between it and the Republic of the
Philippines, the same should have been lodged with
the Auditor General. The state cannot be sued
without its consent.
DY BUNCIO VS. ONG GUAN
Rice mill and camarin
The POA given to the agent was not a general POA
but a limited one that did not include the power to
alienate the properties in question.
− The claim of Tong, et. al that the validity of the
sale should be upheld because there is a
previous POA given in 1920 which is a general
power of attorney is untenable. The court held
that the making and accepting of a new POA
(whether it enlarges or decreases the power of
the agent) must be held to supplant and revoke
the latter when the two are inconsistent.
Reasoning: If the new appointment with limited
powers does not revoke the gen. POA, the
execution of the second POA would be a mere
futile gesture.
− The deed of sale in favor of Teng did not divest
Ong Guan Can of his title therefore, his
properties are subject to attachment and
execution.
GARCIA VS. DE MANZANO
Father and son; half interest in the boat
A second POA revokes the first one only after notice
is given to the first agent
RALLOS VS. YANGCO
Tobacco leaf; severance of the agency without notice
to the third person transacting with the agent
• Since Yangco advertised the fact the
Collantes was his agent, gave special notice
to Rallos of this fact, and gave a special
invitation to Rallos to deal with Collantes as
an agent, it was Yangco’s duty on the
termination of the agency to give due and
timely notice to Rallos.
• Failing to do so, Yangco is responsible to
Rallos for whatever goods may have been in
good faith and without negligence sent to the
agent without knowledge, actual or
constructive, of the termination of such
relationship.
a. The Power of Attorney executed by
Tiburcio does not create an agency
coupled with an interest nor does it
clothe the agency with an
irrevocable character
- The rule is that a mere
statement in the PoA that it is
coupled with an interest is not
enough. In what does such interest
consist must be stated in the PoA
- IN THIS CASE, the fact that
Tiburcio mortgaged the
improvements on the land in favor of
Primitivo, does not constitute an
interest that could render irrevocable
the PoA executed by Primitivo. In
fact, the mortgage has nothing to do
with the PoA as it can be foreclosed
by Primitivo UPON DEFAULT of
Tiburcio
- AS SUCH, the agency was
terminated upon the death of Tiburcio
in 1945. CONSEQUENTLY, Primitivo
could no longer validly convey the
land
b. ASSUMING ARGUENDO that the
irrevocable PoA was valid, the act of
Primitivo would subject the land to an
encumbrance, which is prohibited by law
(see footnote 1)
-Note that the homestead was issued in
1936 while the PoA was executed in 1937
-It was contended by Primitivo that (1)
the PoA was to be availed of by the agent
after the lapse of the prohibition period of
five years, and that (2) in fact he sold the
land in 1947
-HOWEVER, this argument cannot be
sustained since nothing to that effect is
found in the PoA
COMPANIA GENERAL DE TOBACOS V. DIABA
The agent sold some goods to third party and bought
some goods as well. Principal ratifies the sale by the
agent but does not want to recognize the obligation
of the agent.
-The principal is liable to the transactions conducted
by the agent because he failed to notify the agent of
the termination of the agency.
DEL ROSARIO VS. ABAD
Within the prohibited period of 5 years, the
homesteader mortaged the improvements of the
homestead . At the same time, he executed an
irrevocable SPOA coupled with interest in favor of the
mortagagee authorizing him to sell the land. After
the lapse of the prohibitive period, the mortgagor
died leaving his debts unpaid. Mortagagee used the
SPOA to sell the land.
-A mere statement in the POA that it is coupled with
interest is not enough. What the interest consists of
must be shown.
CALEONGCO VS. CLAPAROLS
Sabotage of the nail factory
The financing agreement itself already contained
clauses for the protection of appellant's interest, and
did not call for the execution of any power of
attorney in favor of Coleongco. But granting
appellant's view, it must not be forgotten that a
power of attorney can be made irrevocable by
contract only in the sense that the principal may not
recall it at his pleasure; but coupled with interest or
not, the authority certainly can be revoked for a just
cause, such as when the attorney- in-fact betrays the
interest of the principal, as happened in this case. It
is not open to serious doubt that the irrevocability of
the power of attorney may not be used to shield the
perpetration of acts in bad faith, breach of
confidence, or betrayal of trust, by the agent, for that
would amount to holding that a power, coupled with
an interest authorizes the agent to commit frauds
against the principal.
Our new Civil Code, in Article 1172, expressly
provides the contrary in prescribing that
responsibility arising from fraud is demandable in all
obligations, and that any waiver of action for future
fraud is void. It is also on this principle that the Civil
Code, in its Article 1800, declares that the powers of
a partner, appointed as manager, in the articles of
copartnership are irrevocable without just or lawful
cause; and an agent with power coupled with an
interest cannot stand on better ground than such a
partner in so far as irrevocability of the power is
concerned.
B. Withdrawal
Art. 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation
which entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose
of the agency;
(6) By the expiration of the period for which the
agency was constituted. (1732a)
Art. 1928. The agent may withdraw from the agency
by giving due notice to the principal. If the latter
should suffer any damage by reason of the
withdrawal, the agent must indemnify him therefor,
unless the agent should base his withdrawal upon
the impossibility of continuing the performance of
the agency without grave detriment to himself.
(1736a)
Art. 1929. The agent, even if he should withdraw
from the agency for a valid reason, must continue to
act until the principal has had reasonable
opportunity to take the necessary steps to meet the
situation. (1737a)
VALERA VS. VELASCO
- The filing of the complaint by an agent against the
principal for the collection of a balance in his favor
resulting from a liquidation of the agency accounts
between them, and his rendering of a final account of
his operations, are equivalent to an express
renunciation of the agency and terminate the
juridical relation between them. Filing of the
complaint by agent against the principal is equivalent
to an express renunciation as if the agent explicitly
said “I renounce the agency”
C. Death; agency coupled with an interest
1919. Supra
Art. 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has
been constituted in the common interest of the
latter and of the agent, or in the interest of a third
person who has accepted the stipulation in his favor.
(n)
Art. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third
persons who may have contracted with him in good
faith. (1738)
Art. 1932. If the agent dies, his heirs must notify the
principal thereof, and in the meantime adopt such
measures as the circumstances may demand in the
interest of the latter. (1739)
PASNO VS. RAVINA
-The power of sale given in a mortgage is a power
coupled with an interest which survives the death of
the granteor
RAMON VS. CAOIBES
The first document is only a power of attorney.
Caoibes as an agent had the obligation to deliver the
amount collected by virtue of the said power to the
principal, or, after her death, to the adminstratrix of
her estate, Consolacion.
A1711 CC – the contract of agency is
presumed to be gratuitous, unless the agent is a
professional agent. There is no such proof that
respondent is such.
A1732 – agency is terminated, among other
causes, by the death of the principal or of the agent.
When Caoibes made use of the power of attorney, his
principal was already dead.
Re donation: The donation made was of personal
property and in writing thus the acceptance must
also be made in writing (A632 old CC).
HERRERA VS. LUY KIM GUAN
-There was no proof of the death of the prinicipal
-Assuming that the principal died, Natividad
presented no proof and there is no indication in the
record that the agent, Luy, was aware of the death of
his principal.
-The death of the principal does not render the act of
an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency.
Rallos vs. Felix Go Chan (supra)
D. Dissolution of the firm/corporation – likened
to the death of a natural person
E. Accomplishment of the object or purpose
F. Expiration of the period
G. Civil interdiction, insanity, insolvency
TOLENTINO
Art 1868
ELEMENTS OF AGENCY
1. Consent – express or implied
2. Object – execution of a juridical act in relation to a
third person
 3. Agent – (1) acts as a representative AND (2) not for
himself
4. Agent – acts within scope of his authority
AGENCY v LEASE OF SERVICES
Key distinction: idea of representation in agency
AGENT LESSOR OF SERVICES
Executes juridical act on Performs a material act for
behalf of another the benefit of another
AGENCY v INDEPENDENT CONTRACTOR
Shell Company of the Philippines v Firemen’s Insurance
• The operator is an agent of the company and not
an independent contractor. Consequently, his
negligence as such agent is imputable to his
principal and the latter is answerable to third
persons.
• Evidence presented:
1. Operator of gasoline and service station owed
his position to the company and the latter
could remove him or terminate his services at
will
2. Service station belonged to the company and
bore its tradename
3. Operator sold only the products of the
company
4. Equipment used by the operator belonged to
the company and were just loaned to the
operator and the company took charge of their
repair and maintenance
5. Employee of the company supervised the
operator and conducted periodic inspection
oaf the company’s gasoline and service station
6. Price of the products sold by the operator was
fixed by the company and not by the operator
7. Receipts signed by the operator indicated he
was a mere agent
IMPERSONATION
• No agency if Juan pretends to be Pedro and enters
into a contract with Jose, who thinks he is
contracting actually with Pedro, there is no agency.
The elements of representation is absent.
• Juan is not acting in “another’s name” but “under
another name.”
ACTS SUSCEPTIBLE OF AGENCY
• General rule: admissible in all contracts or acts
• Exception:
o Marriage contract
o Making of wills and testaments
o Presence of accused during the trial of a
criminal case
CREATION OF AGENCY
• Testimony of person who drafted the contract does
not determine its nature.
• A contract must be considered, not as the parties
stipulated it, but as they performed it.
CAPACITY OF PARTIES
• Both parties must have the capacity to give
consent.
• PRINCIPAL’S CAPACITY  If any special capacity
is required for the act entrusted to the agent, it is
the principal and not the agent who must have
such special capacity. Why? Because it is he who
will receive the benefits and incur the obligations
or losses arising therefrom.
• AGENT’S CAPACITY  No particular capacity is
required, so long as he has sufficient intelligence
and freedom of will. But with respect to his
obligations and responsibilities towards the
principal, he must have the capacity to bind
himself.
• Incapacitated agent:
o may set up his incapacity against principal
o such agent would be liable to the principal
only in cases of illicit acts and unjust
enrichment.
o cannot invoke capacity to refuse delivery
of things received for the principal.
Reason: zit’s considered a fraudulent act
which the law does not sanction.
RELATION OF PRINCIPAL AND AGENT
• Relation of an agent to his principal  fiduciary
• In regard to property forming the subject-matter of
agency  agent is estopped from acquiring or
asserting a title adverse to that of principal
(Severino v Severino)
• Agent cannot represent both himself and his
principal in a transaction involving the shifting to
another person of the agent’s liability for a debt to
the principal (Aboitiz v de Silva)
• When a person undertakes to act as agent for
another  Reciprocal relations are created. Even if
the owner of business/property has not given his
consent thereto, by virtue of a quasi-contract.
BINDING EFFECT
• Agent is the representative of his principal. ERGO:
o Agent acts in bad faith, the principal is
also deemed in bad faith
o Notice to agent is also notice to principal
Art 1869
IMPLIED AGENCY
• Created from the:
o silence or lack of action
o failure to repudiate the representation
• E.g. when a person takes charge of the
administration of property without express
authorization and without a power of attorney
executed by the owner, but with the knowledge of
the latter and performed for nine years the duties
of his office without opposition or absolute
prohibition on the owner’s part.
• Compared with “officious management” (or
management of another’s business)
IMPLIED AGENCY OFFICIOUS MANAGEMENT
Comes from a contract Derived only from a “quasi-
contract”
Founded on the lack of No simultaneous consent,
contradiction or opposition, either express or implied, but
which constitutes a fiction or presumption of
simultaneous agreement on consent because of the
the part of the presumed benefit received
principal to the execution of
the contract
Art 1870, Art 1871
PRESUMPTION
• Only prima facie and may be defeated by proof to
the contrary
Art 1872
ACCEPTANCE
• This is not compulsory, but if the agent wants to
refuse it, he must act immediately so that his
silence may not be interpreted as an acceptance,
and so that he may not incur any responsibilities.
RECEIPT WITHOUT OBJECTION
• Par 1: mere fact of non-refusal does not mean
acceptance.
• Pothier says: Retention of POA is not as clear a
proof of acceptance as when it is delivered
personally.
 • Par 2: acceptance is implied from “failure to reply
to the letter or telegram”, ERGO, more than mere
failure is required for cases falling outside of Par 2
Art 1873, Art 1874
LETTER SUFFICIENT AUTHORITY
• Where the owner of certain parcels of land left
them in the care of his sister as his agent, and
later, while absent, wrote to sell one parcel of land
which she did, it has been held that the letter
containing the authority to sell was sufficient
(Jimenez v Rabot)
Art 1875
RIGHT TO COMPENSATION
• When an agent employed to sell/lease property has
complied with the terms of his contract by
furnishing a purchaser or lessee ready, able and
willing to buy or lease the property, he is entitled
to commission.
• A broker, not having quite succeeded in bringing
the minds of buyer and seller to an agreement in
regard to the terms of the sale, is not entitled to
commission (Rocha v Prats), nor if his exclusive
authority to such has expired (Prats v CA)
• When does a broker earn his commission?
o It is not sufficient that he only find a buyer
but also one who will actually buy the
property on the terms and conditions
imposed by the owner.  The efficient-
and-procuring-cause principle is
synonymous with the ready-willing-and-
able rule and these words provide off
hand the test in determining whether the
agent was the procuring cause of the sale.
o When the principal had broken
negotiations with the buyer for the
purpose of later making a direct contract
with the latter
Art 1876, Art 1877
ACTS OF ADMINISTRATION
• General power permits the agent to do all acts for
which the law does not require a special power.
• Examples of mere acts of administration
o Commence suits to collect debts owing to
the principal
o Appoint servant or employees of a firm
Art 1878
SPECIAL POWERS
• PoA should expressly mention the act for which it is
drawn (Strong v Rapide)
• Such special power can be included in a general
power of attorney
o by giving authority for all acts of a
particular character
o by specifying therein the act or
transaction for which a special power is
needed
Art 1879
POWER TO SELL
• Must be understood as for cash and not on credit,
unless the latter is expressly authorized.
POWER TO RAISE MONEY
• If a power to raise a sum of money for which
purpose the agent is authorized to sell a particular
real property, or to avail himself of any other
means, the agent is considered as empowered to
mortgage the property.
• A special power to mortgage does not include the
power to contract loans for the principal (PNB v
Sta. Maria)
Art 1880, Art 1881
LIMITATION ON AUTHORITY
• Power and duties of an agent are confined and
limited to those which are specified and defined
in his power of attorney, which limitation is a
notice to and is binding upon, the person dealing
with such an agent (BPI v de Coster)
• Agent alone cannot enlarge or extend his
authority, by his own acts or statements, nor can
be alone remove the limitations or waive
conditions imposed by the principal; to charge the
principal in such case, the principal’ consent or
concurrence must be shown (Keeler Electirc v
Rodriguez)
• Illustrations:
o BPI v de Coster – Authority given by wife
does not carry with it or imply that
husband has a legal right to sign her
name to a promissory note which would
make her liable for the payment of a pre-
existing debt of the husband or that of his
firm, for which she was not previously
liable, or to mortgage her property to
secure such debt.
o Hodges v Salas – PoA of special character
to borrow any amount of money does not
authorize agent to use the money as he
pleased. In applying the money borrowed
to pay his personal obligations, he
exceeds his authority. It should be
understood that the agent is obliged to
turn over the money to the principals or at
least, place it at their disposal.
o NAPOCOR v NAMERCO – Principal said
that agent should not sign contract unless
it wished to assume sole responsibility for
the shipment, exceeds the limits of its
authority in subsequently signing the
contract.
o Keeler v Rodriguez – Where an agent has
no authority to collect payments for his
principal, and a debtor pays him, relying
upon his representations as to his
authority to make such collections and
receipt for the money, such debtor pays
at his own risk, and such payment is not a
valid defense as against the principal.
EFFECT OF UNAUTHORIZED ACTS
• When agent, entering into contract on behalf of his
principal, exceeds his authority
 Contract not void, but only voidable at the
instance of the party who has been improperly
represented
Only the principal is prejudiced and only he can
impugn the agent’s act
 Agent becomes personally liable for damages. In
order to avoid liability: He must disclose the limits
of his authority (NAPOCOR v NAMERCO)
• When an attorney-in-fact is not authorized under
his PoA to sell the business or establishment of his
principal, the sale and conveyance thereof in favor
of 3rd person is unenforceable and the latter
acquires no title thereto.
Art 1882
SCOPE OF ARTICLE
• Condition of agency can be improved but not made
worse
 • Refers to an “advantage which can be obtained
without modifying the conditions, the form or the
object of the agency”
• Not exceeding authority if: agent acts in a more
advantageous manner such that if principal were
the one acting, he would have followed the more
advantageous course
Art 1883
SCOPE OF ARTICLE
• Applicable only to cases where it is material to the
3rd person to know with whom he is contracting.
Otherwise (when immaterial e.g. driver of an
ordinary vehicle for hire), it is inapplicable.
PERSONAL LIABILITY OF AGENT
• When does agent incur personal liability?
1. When an agent transacts business in his own
name, it shall not be necessary for him to
state the name of his principal and he shall be
directly liable as if the business were for his
own account, to the persons with whom he
transacts the same, said persons not having
any right of action against the principal, nor
the latter against them.
2. When agent acts beyond the scope of his
authority, and for acts in violation of the terms
of the written authority.
LIABILITY OF THE PRINCIPAL
• If the things involved are those belonging to the
principal, it shall be deemed that the contract is
made on behalf of the principal (Syjuco v Syjuco).
• The principal may sue the person with whom the
agent dealt with his own name, when the
transaction involves things belonging to the
principal (Gold Star Mining v Lim-Jimenez)
JUDGMENT AGAINST THE AGENT
• A judgment, for or against an agent, in no way
binds the real party in interest.
CHAPTER 2
OBLIGATIONS OF THE AGENT
Art. 1884-1887
 Interpretation of Instructions – should be done in
accordance with the principal’s presumed will and the
usages of trade. In case of doubt, it is allowed tp deposit
in a bank the money realized from the agency. In an
agency to sell, the price indicated must be construed as
the minimum while in an agency to buy, the maximum.
 Effect of Instructions – They shall form part of the
agency; they constitute the means or the orders carrying
out the power granted. If an agent departs from the
instructions, it means that he has exceeded the authority
conferred upon him. However, the instructions are only
binding to the principal and the agent, not to third
persons.
 Responsibility of Agent – An agent cannot be held
responsible for the failure of the principal to accomplish
the object of the agency if he carried out the instructions
of the principal and (1) does not appear to exceed his
authority; or (2) acted with negligence, deceit or fraud.
Art. 1888
 Result in Loss – necessary that the transaction is
undoubtedly prejudicial to anyone. It is insufficient that
there is only possible loss or damage. An agent will
become liable to the principal for the damages the latter
may suffer if it is proven that he knows of considerable
defects at the time he was carrying out the agency. He
should have suspended action first and waited for further
actions from the principal.
Art. 1889
 Applies to All Agents – without distinction between
gratuitous or renumerated agency. It is best for the agent
to renounce the agency if he wishes to prefer his own
interests when a conflict arises, provided the renunciation
is not fo the purpose of personally profiting from the
transaction.
Art. 1890, Art. 1891
 Delivery of What is Received – If the agent is
authorized to sell a parcel of land at a certain price and
he sells it for a higher amount, the principal can demand
the entire price paid. Same goes when an agent is
authorized to lend money with interest to a person and he
lends it with interest, the principal can demand the
interest.
 This does not apply to overpayment made by mistake. If a
debtor pays to the agent more than what is owing to the
principal by mistake, agent may keep the mistake but he
is the one directly liable to the payor if the latter decides
to sue to collect the overpayment.
 Obligation to Account – The duty of the agent to
account does not only involve the money and property
which may have come into his hands during and by virtue
of the agency but also those which comes into the
agent’s hands as the result of his agency (Asiatic
Petroleum vs. Quey Sim Poo)
 The obligation of an agent to account and the right of the
principal to an accounting are transmissible through their
respective heirs.
 An order requiring an agency to render a detailed account
of the business of the agency to the principal is simply a
consequence of the rescission of a contract of agency,
since every agent must give an account of his
transactions.
 Lawyers are bound to promptly account for money or
property received by them on behalf of their clients and
failure to do so constitutes professional misconduct.
Art. 1892
 Use of Employees – If the agent is authorized to sell a
parcel of land at a certain price and he sells it for a higher
amount, the principal can demand the entire price paid.
Same goes when an agent is authorized to lend money
with interest to a person and he lends it with interest, the
principal can demand the interest.
Art. 1893, 1894
 Joint Agency – there are several agents that act
collectively. They are considered as a single unit
regardless of whether they act together or separately. All
must act towards the same end to bind the principal.
Moreover, the knowledge of a fact by one of them is
considered as knowledge of all.
 Liability is Personal – Each agent is liable only for his
own acts or omissions if there is no solidarity. If the
agents are charged with a joint undertaking, so that one
cannot act without the others, and the agency is not
performed due to the omission of the agent, then he
alone bears the entire responsibility for the injury caused.
If each one can act separately, then he is liable for his
own omission.
Art. 1895
 Solidary Agency – one in which, there being several
agents for the same purpose, each acts independently of
the others, and can bind the principal without the
intervention of the others. When a person appoints two
agents independently, the consent of one will not be
required to validate the acts of the other, unless that
appears positively to have been the principal’s intention.
 The present article really governs a joint agency where
the agents act collectively as a unit in relation to third
persons, but where it is stipulated that they shall be
solidarily liable to the principal.
 Fault or Negligence – includes fraud or dolo.
 Acts Beyond Powers – an act of one agent beyond the
scope of the agency does not concern the other agents as
they have no power to prevent it, and they should not be
held liable for it. This is not the same case if the liability
pertains to the non-performance of the agency itself.
Art. 1896, 1897
 Liability of the Agent – An agent cannot be held
personally liable on the contract if he acts in the name of
the principal within the scope of the agency.
Art. 1898
 Excess of Authority – The agent is liable depending on
whether or not the third person knows the limits of the
agent’s power. If he knows such limits, he is to blame and
he is not entitled to recover damages from the agent,
unless the latter undertook to secure the principal’s
ratification.
 Ratification – The acts of an agent beyond the scope of
his authority does not bind the principal unless he ratifies
it expressly or impliedly. If the principal benefits from an
act done by the agent, it means that he tacitly ratified
such act.
 Only the principal can ratify; the agent cannot ratify his
own unauthorized acts. And the principal must have
knowledge of the acts he is to ratify.
Art. 1899-1909
 Breach of Trust – An agent may not, without the
permission of the principal, directly or indirectly buy for
himself what he was commissioned to sell, or sell what he
has been commissioned to buy. The prohibition ceases
upon the agency’s termination.
Chapter 3
OBLIGATIONS OF THE PRINCIPAL
1910
Liability for agent’s illicit acts
The fault of the agent is attributable to the principal (culpa
contractual) when the agent is in the performance of an
obligation of the principal. But where the fault/crime
committed by agent is not in the performance of an
obligation of the principal, the general rule is that the
principal is not bound by the illicit act of the agent.
Exceptions:
1. Principal’s own negligence - when the act
committed by the agent because of the defective
instructions from the principal, or due to the lack of
necessary vigilance/supervision on his part
2. Agent secures a contract through fraud, or makes
a fraudulent alienation, or executes a simulated
contract
3. Crime consists of an act which is within the powers
of the agent, but becomes criminal only because of
the manner in which the agent has performed it
1911
Basis of liability – principal’s failure to adopt the
necessary measures to prevent third persons from being
deceived by the apparent authority of the agent
1913
Reasonable compensation for professional services
rendered by third persons in the execution of agency
1914
Applies even when the appointments were made by the
principals in separate acts. The solidarity arises from the
common interest of the principals, and not from the act
constituting the agency.
Chapter 4
MODES OF EXTINGUISHMENT OF AGENCY
1919
Death of principal
- Even if the agency is for a definite period and the
period has not yet expired
- 1930 and 1931 are exceptions to the general rule
provided in this article on the revocation by death
1920
Power to revoke
- Constitutes an exception to the general rules of
contract
- Basis: Representation and confidence being the
bases of the contract, it is the will of the person
represented that may put an end to the
representation. If it were not so, the representation
would be converted into a true alienation of the
personality.
- Rule on damages: Principal is not liable for
damages for having made use of this power to
revoke the agency. Exception: When this was
done in abuse of right, in bad faith and as a means
to avoid paying compensation to the agent.
Stipulation on irrevocability
- Agency is essentially revocable. Permanent
revocability is an essential characteristic of
agency.
- Parties may validly stipulate that agency shall be
irrevocable for a certain period, so long as the
agreement is according to the purpose of the
agency and not contrary to morals.
- Forms of agreement:
o Waiver – renunciation of the right to
revoke
o (Sir says there is another ground, but this
is what Tolentino said) A mere obligation
of the principal not to revoke
1921
It is the duty of the principal to give due and timely notice
to third persons to whom he has given special invitation to
deal with his agent and failure to do so renders him liable to
them for whatever goods may have been in good faith and
without negligence sent to the agent without knowledge of
the termination of the agency. If the third person have
knowledge of the revocation, this is equivalent to
notification.
1922
Refers to the agency in which the person with whom the
agent is to contract, is not specified
1923
Incompatibility of powers
- A new agency revokes an existing one only when:
o The two are incompatible with each other,
or
o When the principal makes known to the
first agent that his powers have ceased by
the appointment of a new agent
- Where there is no incompatibility, the new agency
may only mean a division of the agency and the
two agencies can coexist
Notice to first agent
- Without notice to first agent, it must be considered
that the latter acted under a valid POA which had
not been legally revoked on the date of transaction
Exclusive agency
- Where agency is for a compensation and the
compensation depends upon the success of the
transaction, it is usual to stipulate that the agency
shall be exclusive. In this case the principal is
deprived of the right to appoint a new agent for the
same transaction, either jointly or by revocation.
- This stipulation is limited with respect to the
transaction or with respect to time; otherwise it will
be contrary to the revocability of the agency
1924
Direct intervention by the principal
- Will revoke only when such intervention is
incompatible with the agency
- Under Argentine Code even where there is
incompatibility, the agency will subsist if the
principal expressly manifests that he has no
intention of revoking the agency
1926
Subsequent general power – law does not provide for the
reverse situation but under Argentine Code the special
power is not revoked by a subsequent general power given
to another agent unless the latter also refers to the act
authorized under the special power

1927
Stipulation of irrevocability
- An irrevocable agency cannot be perpetual. It must
be limited to a particular transaction or to a
determinate period, because public order is against
indefinite/irrevocable obligations
- Effect of irrevocable agency:
o Does not insure an indemnity to
agent/third persons prejudiced by
revocation;
o Except when otherwise stipulated, it
extends the agency even against the will
of the principal, in the sense that acts of
the agent will bind the principal
notwithstanding the untimely revocation

1928
Relationship may also be terminated in case of an
impossibility of continuing the agency without serious injury
to himself.

1931
Revocation by an act of principal vis. Revocation by
operation of law (example: death of principal)

END