Professional Documents
Culture Documents
AGENCY
Chapter 1
Nature, Form and Kinds of Agency
ARTICLE 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.
CHARACTERISTICS
Principal Onerous (generally)
Nominate A representative relation (generally)
Bilateral Not inherent/permanent
Preparatory A fiduciary relation based on trust and
Commutative confidence
PARTIES TO A CONTRACT OF AGENCY
1. Principal (mandans, mandante)- he whom the agent represents and from whom the
agent derives authority; the one primarily concerned in the contract.
2. Agent (mandatarius, mandatario)- he who acts or stands for another; usually given full
or partial discretion but sometimes acts under a specific command; sometimes an agent
may have his own agent referred as sub-agent.
A husband, as administrator of conjugal partnership is in that sense an agent who can bind
the conjugal property subject to legal restriction imposed by the law. Hence, should the
husband cause the conveyance of a conjugal real property without the needed consent of
the wife is VOIDABLE. The wife is given ten years within which to bring an action for
annulment. Ratification may of course, be made by the wife.
The distinction between a commercial agency or commission and a civil agency has been
abolished. The Civil Code repealed the Code of Commerce provisions thereon. Hence,
whether the agency be for a civil or commercial purpose, it is now called civil agency
governed by the Civil Code.
DISTINCTIONS
AGENCY GUARDIANSHIP
1) Agent represents a capacitated person. 1) A guardian represents an incapacitated
person.
2) Appointed by the principal and can be 2) Appointed by the court and stands in loco
removed by the latter. parentis.
3) Agent is subject to the directions of the 3) Guardian is not subject to the directions
principal. of the ward. He must only act for the
benefit of the latter.
4) Agent can make the principal personally 4) Guardian has no power to impose
liable. personal liability on the ward.
AGENCY TRUST
1) Agent usually holds no title at all. 1) Trustee may hold legal title to the
property.
2) Usually, agent acts in the name of the 2) The trustee may act in his own name.
principal.
3) Usually, agent may be terminated or 3) The trust is usually ended by the
revoked at any time. accomplishment of the purposes for
which it was formed.
4) Agency may not be connected at all with 4) Trust involves control over property.
property.
5) Agent has authority to make contracts 5) Trustee does not necessarily or even
which will be binding on his principal. possess such authority to bind the
trustor or the cestui que trust.
6) Agency is really a contractual relation. 6) A trust may be the result of the contract
or not; it may be created also by law.
AGENCY TO SELL SALE
1) Ownership of the goods is not 1) Ownership is transferred to the buyer
transferred to the agent. (after delivery).
2) Agent delivers the purchase price. 2) Buyer pays the price.
AGENT BROKER
1) Receives a commission upon the 1) Earns his pay merely by bringing the
successful conclusion of a sale. buyer and the seller together even if no
sale is eventually made.
2) One who is engaged, for others, on a
commission, negotiating contracts
relative to property with custody of
which he has no concern; negotiator
between other parties who never acts in
his own name but in the name of those
who employed him.
ARTICLE 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.
KINDS OF AGENCY
According to Manner of Constitution
a) Express
b) Implied
– It could be implied from the:
Acts of the principal;
Principal’s silence;
Principal’s lack of action;
Principal’s failure to repudiate the agency.
Art. 1871
– In these cases of implied agency, the principal knows that another person
is acting on his behalf without authority.
According to Form
a) Oral
– such form is generally sufficient;
b) Written
– e.g. the law requires that when a sale of a piece of land or any interest
therein through an agent, the authority of the latter shall be in writing,
otherwise, the sale shall be void. (Art. 1874)
ARTICLE 1870
Acceptance by the agent may also be express, or implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances.
ARTICLE 1871
Between persons who are present, the acceptance of the agency may also be implied if the
principal delivers his power of attorney to the agent and the latter receives it without any
objection.
Here the persons are “present”, either physically or conversing with each other through
mobile phone.
ARTICLE 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.
In Art. 1872 (1), just because the offeree did not reply does not mean that the agency has
been accepted. A good instance would be when the offeree writes a letter acknowledging
the receipt of the offer with no objection to the agency.
Another instance of implied acceptance could be when the silent offeree begins to act
under the authority conferred upon him.
ARTICLE 1873
If a person specifically 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.
AGENCY BY ESTOPPEL
– One who clothes another with apparent authority as his agent, and holds him out to
the public as such, cannot be permitted to deny the authority of such person to act
as his agent, to the prejudice of innocent third parties dealing with such person in
good faith, and in the honest belief that he is what he appears to be.
ARTICLE 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.
ARTICLE 1875
Agency is presumed to be for a compensation, unless there is proof to the contrary.
In the absence of stipulation, the agent is entitled to compensation only after he has
completely or substantially completed his obligation as agent.
Compensation may be contingent or dependent upon the realization of profit for the
principal. In case there is a stipulation to this effect.
BROKER
– one who in behalf of others, and for a commission or fee, negotiates contracts relative
to property, the custody of which he has no concern
– he is strictly a middleman and for some purposes the agent of both parties
– one whose occupation is to bring parties together to bargain or to bargain for them in
matters of trade, commerce, or navigation;
– an agent but generally distinguishable from an agent because of the fact that his
authority is of special and limited character in most respects
– as to physical activities, he is an independent contractor
COMPENSATION OF BROKERS
If the broker does not succeed in bringing the mind of the purchaser and the vendor to
an agreement with reference to the terms of the sale, he is not entitled to a
commission.
He is not entitled to a commission even if the sale can later on be effected between the
buyer and seller but through a different broker. The first broker can be called
unsuccessful even if it was he who first interested the purchaser in the sale, negotiated
with him, and even indirectly influenced him to come to terms if the fact remains that
he did not succeed in bringing about the sale.
Even if there is no subsequent broker who intervened, still, if authority of the first
broker had already been withdrawn prior to the sale, such broker is not entitled to any
fee.
He is not entitled to recover his expenses during the negotiations for the sale, such
having been incurred at his own risk, and in consideration of the commission agreed
upon.
There are instances wherein the principal cannot revoke the authority given to a broker,
as when the negotiations through the broker’s efforts have reached such stage that it
would be unfair to deny the commission earned. The principal acts in bad faith if
revocation of authority is made only to evade the payment of the commission.
A broker is entitled to a commission on a sale effected by the owner to the person
produced by the broker after the breaking of the original negotiations, if the breaking up
was a mere machination, and the sale was in fact brought about by what the broker had
done.
If the person introduced by the broker is not able, ready, and willing to buy on the terms
prescribed by the owner, the broker is not entitled to compensation on a sale
subsequently made on those terms by the principal to the same person through another
broker.
ARTICLE 1876
An agency is either general or special.
The former comprises all the business of the principal and the latter, one or more specific
transactions.
GENERAL AGENCY
– it comprises all the business of the principal
SPECIAL AGENCY
– it comprises one or more specific transactions
ARTICLE 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.
A power given to an agent to sell ALL of the properties of the principal is a special power of
attorney, not an agency couched in general terms.
ARTICLE 1878
Special power of attorney are necessary in the following cases:
In general, the execution of a power of attorney does not need the intervention of any
notary public.
The acts referred in this provision require SPA. These acts can be reduced to three, namely:
a) Acts of Strict Dominion or Ownership;
b) Gratuitous Contracts;
c) Contracts where personal trust or confidence is of the essence of the agreement.
Aside from proving the existence of a SPA, it is also necessary for evidence to be presented
regarding the nature and extent of the alleged powers and authority granted to the agent.
SPA is required because the acts enumerated are not mere acts of administration
ARTICLE 1879
A special power to sell excludes the power to mortgage, and a special power to mortgage
does not include the power to sell.
The power to foreclose is not an ordinary agency that contemplates exclusively the
representation of the principal by the agent but is primarily an authority conferred upon the
mortgagee bank for the latter’s own protection. The right of a mortgagee to extrajudicially
foreclose the mortgage after the death of the mortgagor, acting through his attorney-in-
fact, did not depend on the authorization in the deed of mortgage executed by the latter.
The right existed independently of said stipulation and is clearly recognized in Sec.7, Rule 86
of the Rules of Court. (Bicol Savings and Loan Association v. CA)
ARTICLE 1880
A special power to compromise does not authorize submission to arbitration.
RATIO
A principal may authorize his agent to compromise because of absolute confidence in
the latter’s judgment and discretion to protect the former’s rights and obtain from him
the best bargain in the transaction.
If the transaction would be left in the hands of an arbitrator, said arbitrator may not
enjoy the trust of the principal. A fundamental principle of agency shall have been
violated—that an agent must possess the trust and confidence of the principal.
SPECIAL POWER TO SUBMIT TO ARBITRATION
The arbitral award binds the principal, provided that the agent acted within the scope of
his authority.
If the principal had specifically designated who the arbitrators should be, the agent has
no authority to submit the question to other arbitrators.
However, when no designation had been made by the principal and on the contrary the
agent was authorized to submit the controversy to anyone, it was held that the agent
could agree to an arrangement for the appointment of additional arbitrators; moreover,
it would be permissible for the agent to agree that an award could be validly made by
less than the full member of the arbitrators selected. (Security Livestock Ins. Association
v. Brigg)
ARTICLE 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.
An agent may act under the two conditions giver, or under only one of them, or neither. In
which case, four instances may arise:
a) The agent acts with authority and in behalf of the principal
b) The agent acts with authority but in behalf of himself (not the principal)
c) The agent acts without authority but in behalf of a “principal”
d) The “agent” acts without authority and in his own behalf (not the principal)
In letters (c) and (d), “agent” and “principal” are not really such.
EFFECTS
AUTHORITY
– the right of the agent to effect the legal relations of his principal by the performance
effectuated in accordance with the principal’s manifestation of consent.
KINDS OF AUTHORITY
a) Express- authority is clearly defined;
b) Implied- includes necessary acts to accomplish the purpose the purpose; example, if an
agent is authorized to collect a debt, he usually is also impliedly authorized to employ an
attorney as counsel, and to bring suit for the enforcement of the payment;
c) General- agent’s discretion is complete;
d) Special- particular instructions are given;
e) Apparent- the agent or a third person was led by the principal’s conducts or words to
believe that the agent was really authorized, when in fact he was not. As if there really
was authority.
AUTHORITY v. POWER
Authority may be considered the cause, it emanates from a principal and is given to the
agent who thus becomes empowered.
Power is the effect, which may be expressed, implied or incidental.
AUTHORITY v. INSTRUCTIONS
AUTHORITY POWER
1. Principal affects only third persons 1. Concern only the principal and the
because if the act is done outside the agent.
scope of the agent’s authority, the
principal is not bound.
2. Third persons must therefore verify or 2. Third persons do not have to investigate
investigate the authority. or verify the instructions.
This is justified because of the greater benefit that would accrue to the principal.
“Advantageous”, however does not only refer to a financial gain, which may be offset by a
moral or ethical loss.
Example: If the agent was asked to sell on the installment plan an object for P100,000.00 but he
is able to get P100,000.00 cash for the object, he is deemed not to have exceeded his authority.
An agent should not sell things received by him from his principal at a price less than that
fixed by the latter. But there is no prohibition against his selling the goods at a better price,
if said price can be obtained. The conditions of the sale, however, must remain unaltered.
Authorization to sell for cash does not carry with it authorization to sell on credit, even if by
such device a higher price can be obtained.
ARTICLE 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.
Art. 1883 does not apply if the agent was unauthorized or he acts in excess of his authority.