I.

Definition of Agency

A. AS A TYPE OF CONTRACT

Art 1868. By a 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.

A.1. ELEMENTS (STATUTORY): a) A person binds himself to render some service or to do something
b) In representation or on behalf of another c) With the consent or authority of the latter

A.2. ELEMENTS (JURISPRUDENTIAL) a) There is consent, express or implied of the parties to establish
the relationship b) The object is the execution of a juridical act in relation to a third person c) The
agent acts as a representative and not for himself d) The agent acts within the scope of his authority

C. EFFECTS OF AGENCY

1. Integration (merger) of the personality of the principal and the agent

2. Extension (reproduction) of the personality of the principal through the agent

Effects of Agency

1.) Integration or merger of the personality of the principal and agent

2.) Extension or reproduction of the personality of the principal to the agent
3.) Consequences:

Merger – The agent, by legal fiction becomes the principal, authorized to perform acts which the
principal could have done

Agent is not a real party in interest. He cannot sue in behalf of the contract. Unless he has been
authorized to that effect.

IMPUTED KNOWLEDGE Knowledge of facts acquired or possessed by an officer or agent of a

corporation in the course of his employment, and in relation to matters within the scope of his
authority, is notice to the corporation, whether he communicates such knowledge or not.

knowledge of the agent to the principal, not the other way around. [Sunace International v.
NLRC,

The general rule is that the principal is chargeable with and bound by the knowledge of or notice
to his agent, received while the latter was acting as such. The well-established exception is
where the conduct and dealings of the agent are such as to raise a clear presumption that he
will not communicate to the principal the facts in controversy.
 Bad faith of the Agent is Bad faith of the Principal

II. Kinds of Agency

A. GENERAL AGENCY

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.

To be a General Agent, it is sufficient that the listed authorized transactions apparently cover all
that is required to run the business of the principal. It is not necessary that the power granted
actually says “all the business of the principal.”

B. SPECIAL AGENCY

The Agent only handles specific aspects of the business.

C. AGENCY COUCHED IN GENERAL TERMS This refers to a type of authority granted to the
agent, not to the scope. If the power granted refers to acts of administration, then the
agency is properly called an agency couched in general terms.

d. AGENCY REQUIRING SPECIAL POWER OF ATTORNEY Article 1878.

A SPOA may be oral or written, but if it is oral, it must be duly established by evidence.

D.2. Effect of Absence of Specific Authority D.2.A. In General If an agent performs a transaction under
Art 1878 without specific authority therefor, the transaction is unenforceable. However, the agent can
still seek the principal’s ratification.

D.2.B Sale Of Land Or Any Interest Therein 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. Requirements: The authorization must be (a) Written, and (b) Specific

E. AGENCY BY OPERATION OF LAW

General Rule: Normally, an agency is established only if there is mutual intent on the part of the
principal and agent to establish the agency. [Victorias Milling v. CA, G.R. No. 117356 (2000)] Exceptions:
An agency may be established by operation of law, however, in the following cases:
(1) In a partnership, every partner is an agent of the partnership for the purpose of its business [Art.
1818];

(2) Agency by estoppel (both statutory and jurisprudential), where the principal’s actions would
reasonably lead a third person to conclude that an agency exists;

(3) In case of certain necessity or emergency, an agency by necessity may

EXPRESS OR IMPLIED AGENCY:

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.

B.1. ACTS OF THE PRINCIPAL The act of the principal which constitutes consent may be in the form of
silence, lack of action, or failure to repudiate the agency knowing that another person is acting on his
behalf without authority. [See Art 1869]

Requisites: (a) The alleged principal should be aware of the acts of the alleged agent

(b) The alleged principal has had reasonable opportunity under the circumstances to repudiate the acts
of the alleged agent

(c) A third party has transacted with the alleged agent without being made aware of the alleged agent’s
lack of authority

(d) There were no facts or circumstances which may raise any suspicion on the part of the third person
that the agent was not authorized

V. Powers A. RIGHTS OF AGENTS

A.1. COMPENSATION The principal must prove that the agency is not for a fee if he contests it. But in
itself, compensation is not an element of an agency contract.

Appointment of substitute

(1) When Allowed: when the principal does not prohibit it. Presumption: the agent is authorized to
appoint a substitute (2) Responsibility for Acts of the Substitute General Rule: If the Agent
validly appoints a substitute,
(2) the Principal is liable for the Substitute’s acts Exception: [Art. 1892] (a) If the agent appoints a
substitute although he was not given the power to appoint one (b) If the agent was given the
power to appoint a substitute, and the principal did not designate the person he can appoint,
but he appoints someone who is notoriously incompetent or insolvent (proven by history or
record of failures in similar business ventures in the past). (3) Validity of the Substitute’s acts If
the principal prohibits the agent from appointing a substitute, then all the acts of the substitute
are void. The acts will be valid if:
 B. OBLIGATIONS OF AGENTS B.1. ACT WITHIN SCOPE OF AUTHORITY

Advantageous Acts 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.

VII. Modes of Extinguishment

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.

General Rule: The principal may revoke the agency at will. Exception: Agency cannot be revoked if it is
coupled with an interest, such that: (1) A bilateral contract depends upon it; (2) It is the means of
fulfilling an obligation already contracted; or (3) A partner is appointed manager of a partnership in the
contract of partnership and his removal from the management is unjustifiable. The principal can revoke
the agency even if the period fixed in the contract has not yet expired. [CMS Logging v. CA, G.R. No.
L41420 (1992)]