AGENCY

By the contract of Agency, a person binds himself to

render some services or to do something in representation or
on behalf of another, with the consent or authority of the
latter.

Article : 1868 of the New Civil Code

EXCLUSIONS

• Employer- Employee Relationship (Art. 1700)

• Master-Servant

• Employer and Independent Contractor (Art. 1713 )

CHARACTERISTIC OF AGENCY
• Consensual

• Principal

• Nominate

• Unilateral

• Preparatory
ESSENTIAL ELEMENTS

• C- There must be CONSENT express or implied of the parties to establish

Agency

• O- The OBJECT is the execution of a juridical act in relation to third person

• R- Agent acts as a REPRESENTATIVE of the Principal and not for himself

• S - Agent acts within the SCOPE OF HIS AUTHORITY

PARTIES
• Principal

• Agent

• Third Party

CAPACITY OF PARTIES

• As to Principal:
• Any person (Natural or Juridical) capacitated to act in his own right

• As to Agent:
• Does not have to possess full capacity to act in so far as 3rd persons are concerned
but he must not be absolutely incapacitated
• Must be capacitated in so far as his obligation to the Principal
KINDS OF AGENTS

• Universal agent
• one employed to do all acts which the principal may personally do, and which
he can lawfully delegate to another the power of doing

• General agent
• one employed to transact all business of the principal, or all the business of a
particular kind or in a particular place, do all acts connected with a particular
trade, business or employment

• Special or particular agent

• one authorized to do act in one or more specific transactions or to do one or
more specific acts or to act upon a particular occasion.
 PARTNERSHIP AS A CONTRACT
ILLUSTRTIVE CASES
• [G.R. No. 151319. November 22, 2004] MANILA MEMORIAL PARK CEMETERY,
INC., vs. PEDRO L. LINSANGAN.

• 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. Thus, the elements of agency are (i) consent,
express or implied, of the parties to establish the relationship; (ii) the object is
the execution of a juridical act in relation to a third person; (iii) the agent
acts as a representative and not for himself; and (iv) the agent acts within
the scope of his authority.
 [G.R. No. 76931 May 29, 1991] ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES vs. COURT OF APPEALS and AMERICAN AIR-
LINES INCORPORATED.

• The principles and essence of agency, defined by law as a contract

whereby "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 . In an agent-principal relationship, the personality of the
principal is extended through the facility of the agent. In so doing, 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 of the principal, which must not, in any way, be compelled by
law or by any court.
 AGENCY DISTINGUISHED FROM OTHER
CONTRACTS
• Agency versus Partnership

• Control by the principal

• The law of agency provides that an agent must submit to the principal’s right to
control his conduct in regard to the subject of agency, while in partnership, a
partner’s power to bind his co-partner is not subject to the co-partner’s right to
control, unless stipulated.

• Liability of the agent

• A partner acting as agent of the partnership binds not only the members of the firm
but himself as well, while the ordinary agent assumes no personal liability where he
acts within the scope of his authority.

• Sharing of Profits
• In partnership, the profits belong to all parties, while in agency, one takes his profits as
compensation for his services.
Illustrative case :

Sevilla vs. CA G.R. Nos. 41182-3, April 15, 1988

There is neither joint venture between nor partnership TWSI and Sevilla. The relationship
of said parties is one that of a principal and an agent. It is the essence of this contract
that the agent renders services in “representation or on behalf of another”. Sevilla
solicited airline fares but she did so for and on behalf of her principal TWSI.As
compensation, she received 4% of the proceeds in the concept of commissions.
Sevilla pre-assumed her principal’s authority as owner of the business undertaking.
Considering the facts, this case involves a principal-agent relationship rather than a
joint management or partnership. But unlike simple grants of a power of attorney, the
agency that the Court here by declares to be compatible with the intent of the
parties cannot be revoked at will. The reason is that it is an agency coupled with an
interest, the agency having been created for mutual interest of the agent and the
principal. In this case, the agency cannot be revoked at the pleasure of the principal.
This unwarranted revocation of the contract of agency entitles petitioner Sevilla to
damages.
AGENCY VERSUS SALE
• In agency to sell, the agent receives the goods as the goods of the
principal, while in a sale, the buyer receives the goods as owner.

• In an agency to sell, the agent delivers the proceeds of the sale,

while in a sale, the buyer pays the price

• In an agency to sell, the agent can return the object in case he is

unable to sell, while in a sale, the buyer, as a general rule, cannot
return the object sold

• In an agency to sell, the agent, in dealing with the thing received,

is bound to act according to the instructions of the principal, while
in a sale, the buyer can deal with the thing bought as he pleases,
being the owner.
 Illustrative case :
CIR vs. Manila Machinery and
Supply GR No. L-25653
• Manila Machinery transactions which give rise to the income taxed by
CIR indicate the status of an independent dealer. Manila Machinery
shouldered losses resulting from some of its transactions. When no
stocks are available in the Philippines it forwarded the purchased
order to its agent in California who procures the machineries from US
manufacturers and lastly that the US Manufacturers invoiced the
goods to petitioner’s agent in California who prepared the sales
invoice and shipped the goods to the Philippine buyers.
 AGENCY VERSUS LEASE SERVICE
• In agency, the basis is representation, while in lease of service, it is
employment

• In agency, the agent exercises discretionary powers, while the other, the
lessor ordinarily performs only ministerial functions

• In agency, three persons are involved; the principal, the agent and the third
person, while in lease of service, only 2 persons are involved, the lessor and
the lessee.

• Agency relates to commercial transactions while lease of service relates to

manual or mechanical execution
Illustrative Case :

NELSON CO vs. LEPANTO

GR No. L-21601 Dec. 28, 1968
• The management contract was one of contract of lease of services
and not a contract of agency. In both agency and lease of services,
one of the parties binds himself to render some services to the other
party. Agency however is distinguish from lease of work or service in
that: The basis of agency is representation, while in the lease of work
or services, the basis is employment.
 AGENCY VERSUS INDEPENDENT
CONTRACTOR
• In agency an agent acts under the control of the principal while in an
Independent Contractor is authorized to do work according to his own
method .
• In agency an agent of an agent may be controlled by the principal while in
an independent contractor the employees of the latter are not employees
of the employer of the contractor.
• An agent can bind the principal while ordinarily the independent contractor
cannot bind the employer by tort.
• The negligence of an agent is imputable to the principal while the
negligence of the independent contractor is generally not imputable to his
employer.
ILLUSTRATIVE CASE:

SPS BERNABE & SOLEDAD AFRICA at al. vs. CALTEX

et.al GR NO. L-12986 March 31, 1966
• Boquiren is an agent of Caltex hence Caltex cannot escape liability
for the damage caused by the fire. The provisions of the contract
show the extent of control of Caltex over Boquiren. The control was
such that the latter was virtually an employee of the former. Taking
into consideration the fact that the operator owed his position to the
company and the latter could remove him or terminate his services at
will, that the service station belonged to the company and bore its
trade name and the operator sold only the products of the company,
that an employee of the company supervised the operator and
conducted periodic inspections of the company’s gasoline and
service station, that the price of the products sold by the operator was
fixed by the company not the operator and that the receipts signed
by the operator indicates that he is a mere agent, the operator was
an agent of the company not an independent contractor.
AGENCY VERSUS NEGOTIORUM GESTIO
• In both agency and negotiorum gestio, there is representation. The
distinction lies in the fact that in agency, the representation is expressly
conferred, while in negotiorum gestio, the representation is without the
authority of the owner of the business and without his knowledge as
well.

• In agency, the agent acts according to the express will of the

principal, while in the other, the gestor acts according to the
presumed will of the owner

• Agency is a contract while the other is a quasi-contract

Illustrative case :

De la Pena vs. Hidalgo, G.R. No. 5486

• The implied agency is founded on the lack of contradiction or

opposition which constitutes simultaneous agreement on the part of
the p[resumed principal to the execution of the contract, while in the
management of another’s business there is no simultaneous consent,
either express or implied, but a fiction or presumption of consent
because of the benefit received.
AGENCY VERSUS SERVANT
ILLUSTRATIVE CASE:

G.R. No. L-2886, August 22, 1952, GREGORIO ARANETA,

INC., vs. PAZ TUASON DE PATERNO and JOSE VIDAL.

• Jose Araneta was not an agent within the meaning of article 1459. He
was to be nothing more than a go-between or middleman between the
defendant and the purchaser, bringing them together to make the
contract themselves. There was no confidence to be betrayed. Jose
Araneta was not authorize to make a binding contract for the
defendant. He was not to sell and he did not sell the defendant's
property. He was to look for a buyer and the owner herself was to make,
and did make, the sale. He was not to fix the price of the sale because
the price had been already fixed in his commission. He was not to make
the terms of payment because these, too, were clearly specified in his
commission. In fine, Jose Araneta was left no power or discretion
whatsoever, which he could abuse to his advantage and to the owner's
prejudice.
AGENCY VERSUS LOAN

• An agent may be given funds by the principal to take

care of the principal’s business, while a borrower is given
money for the sole purposes of the borrower and he must
generally return it whether or not the his own business is
sucessful.
• ILLUSTRATIVE CASE:
Jai Alai vs. BPI GR No. L-2886 August 22, 1952
BPI acted within legal bounds when it debited the petitioner's account.
Section 23 of the Negotiable Instruments Law , a forged signature in a
negotiable instrument is wholly inoperative and no right to discharge it or
enforce its payment can be acquired through or under the forged signature
except against a party who cannot invoke the forgery, it stands to reason,
upon the facts of record, that the respondent, as a collecting bank which
indorsed the checks to the drawee-banks for clearing, should be liable to the
latter for reimbursement, for, as found by the court a quo and by the
appellate court, the indorsements on the checks had been forged prior to
their delivery to the petitioner. In legal contemplation, therefore, the payments
made by the drawee-banks to the respondent on account of the said checks
were ineffective; and, such being the case, the relationship of creditor and
debtor between the petitioner and the respondent had not been validly
effected, the checks not having been properly and legitimately converted
into cash.
AGENCY VERSUS GUARDIANSHIP
• While the agent derives his authority from his principal, the guardian does not derive
his authority from his ward

• The relation between the principal and the agent is created upon the consent of
the parties while the relation between the guardian and the ward may be created
irrespective of the consent or capacity of the ward.

• Agents are subject to control of their principal, while guardians are not subject to
the direction of his ward

• A legal guardian is substituted by law, while an agent is appointed by the principal

• An agent represents one who has the capacity to contract, while the other
represents one who doesn’t.
RULE 93-95 RULES OF COURT
 AGENCY VERSUS BROKERAGE

• A commission agent is one engaged in the purchase or sale of

personal property of another, which for this purpose, is placed in his
possession at his disposal, while a broker has no relation with the thing
he buys or sells, he is merely an intermediary or negotiator between
the purchaser and the vendor.

• An agent receives a commission upon the successful conclusion of

the sale while a broker earns his pay by merely bringing the buyer and
the seller together even if the sale do not push through.
ILLUSTRATIVE CASE:
PACIFIC COMMERCIAL VS. YATCO
G.R. NO. 45976 , JULY 20, 1939

• Pacific merely acted as a commercial broker as to the sale of the

sugar delivered to the purchaser ex-ship. The broker, unlike the
commission merchant, has no relation with the thing he sells or buys.
He is merely an intermediary between the purchaser and the vendor.
He acquires neither the possession nor the custody of the things sold.
His only office is to bring together the parties to the transaction. These
circumstances are present in connection with the plaintiff's sale of the
sugar which was delivered to the purchaser's ex-ship. The plaintiff
never had possession of the sugar at any time. The circumstance that
the bill of lading was sent to the plaintiff does not alter its character of
being merely a broker, or constitute possession by it of the sugar
shipped
AGENCY VERSUS JUDICIAL ADMINISTRATION

• A judicial administrator is appointed by the court to be its

representative and to represent heirs and creditors of an
estate.

• An agent is only answerable to his principal, and that the

control of the principal emanates from agreements.,
whereas, the acts of the judicial administrator are subject to
specific provisions of the law and orders of the appointing
court.
ILLUSTRATIVE CASE :

SAN DIEGO VS. NOMBRE

G.R. NO. L- 19265, MAY 29, 1964
• While it may be admitted that the duties of a judicial administrator and an
agent are in some respects, identical, the provisions on agency should not
apply to a judicial administrator. A judicial administrator is appointed by the
Court. He is not only the representative of said Court, but also the heirs and
creditors of the estate. A judicial administrator before entering into his duties,
is required to file a bond. These circumstances are not true in case of
agency. The agent is only answerable to his principal. The protection which
the law gives the principal, in limiting the powers and rights of an agent,
stems from the fact that control by the principal can only be thru
agreements, whereas the acts of a judicial administrator are subject to
specific provisions of law and orders of the appointing court.
AGENCY VERSUS SHIP AGENT

• A Ship Agent is “the person entrusted with the provisioning of a vessel or

who represents her in the port in which she happens to be.“(Article 586
of the Code of Commerce)

• A ship agent is liable for the indemnities in favor of third persons which
arise from the conduct of the captain in the care of the goods which
the vessel carried. While an ordinary agent assumes no personal liability
where he acts within the scope of his authority.
 ILLUSTRATIVE CASE:

SWITZERLAND GENERAL INSURANCE CO VS.

RAMIREZ GR NO. L-48264

• The Code of Commerce provides, among others, that the ship agent shall
also be liable for the indemnities in favor of third persons which arise from the
conduct of the captain in the care of the goods which the vessel carried;
but he may exempt himself therefrom by abandoning the vessel with all her
equipment's and the freightage he may have earned during the voyage.
(Article 587). The Citadel Lines is the ship agent for the vessel S/S "St. Lourdes"
at the port of Manila, it is, therefore, liable to the petitioner, solidarily with its
principal, Oyama Shipping Co., Ltd., in an amount representing the value of
the goods lost and or damaged.
KINDS OF AGENCY
AS TO THE MANNER OF CREATION

• Express
• One where the agent has been actually authorized by the
principal either orally or in writing.

• Implied
• Where the acts, or lack of it, of the principal fails to repudiate the
agency, creates the relationship
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 behalf without authority.

• Agency may be oral, unless the law requires a specific form

Illustrative cases :
Equitable Bank vs. Rosita Ku G.R. No. 142950
Conde Vs. CA G.R. No. L-40242
Philippine National Bank vs. CA G.R. No. L- 30831
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 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 objection.

• “present” – face to face or verbal communication

ARTICLE 1872
• Between persons who are absent, the acceptance of
agency cannot be implied from silence.

• Exceptions

• When the principal transmits his power of attorney to the agent,

who receives it without objections.

• When the principal entrusts to him by letter a POA with respect to

the business in which he is habitually engaged as an agent and he
did not reply to the letter.
ARTICLE 1873

• If a person specifically informs another or states by public

advertisement that he has given a POA to a third person,
the latter thereby becomes a duly authorized agent.

• Special information

• Public advertisement
SPECIAL INFORMATION
PUBLIC ADVERTISEMENT
AGENCY BY ESTOPPEL VS. IMPLIED AGENCY
• In implied agency, the agent is a a true agent, with rights and duties of an agent
• In agency by estoppel (caused by the agent), the agent is not a true agent,
hence doesn’t have the rights as such.

• If the estoppel is caused by the principal, he is liable when a 3rd person acted on
the misrepresentation.
• In an implied agency, the principal is always liable

• If the estoppel is caused by the agent, it is only the agent who is liable, never
the alleged principal.
• In an implied agency, the agent is never personally liable
AS TO FORM

ARTICLE 1874

when a sale of a piece of land or any interest

therein is through an agent, the authority of the latter
should be in writing, otherwise, the sale is void.
AS TO CAUSE
Article 1875
Agency is presumed to be for a compensation unless
there is a proof to the contrary.

• Art. 1711. In the absence of an agreement to the contrary, the agency is

presumed to be gratuitous.
Nevertheless, if the agent has for an occupation the
performance of services to which the agency refers, the obligation of
compensating him is presumed.
AS TO EXTENT OF AUTHORITY

• Authority given maybe:

• General
• Comprises all the business of the principal

• Special
• Comprises of specific transactions

ARTICLE 1876