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Persons prohibited from acquiring property

CHAPTER 1 NATURE, FORM, AND KINDS OF because of their relation with the persons
AGENCY under their charge 1491
(1868 – 1884)
Nature of Relations Between Agent and Principal
1868 – Definition of Agency
1. Fiduciary in Nature (based on trust and
Five Characteristics of Agency: confidence)
1. Consensual 2. Agent estopped from asserting adverse interest
2. Principal to the principal
3. Nominate 3. Agent can’t act for an adverse party (unless he
4. Unilateral acts with the knowledge and consent of both)
5. Preparatory 4. Agent must not use or disclose secret
Five Essential Elements of Agency:
1. Consent Agency Distinguished from the Following
2. Object Contracts:
3. Representative
4. Acted within Authority 1. Loan
5. Competent to be a principal and agent 2. Lease of Service
3. Independent Contact
Agency character in Jurisprudence: 4. Partnership
5. Negotiorum Gestio
1. Personal 6. Brokerage
2. Representative 7. Sale
3. Derivative
1869 – Kinds of Agency
Capacity Requirement:
Kinds of Agency are differentiated from the following
1. Principals – Any person who is capacitated general denominations:
before the eyes of the law (1327; 1329)
2. Agents – No need to possess full capacity, as 1. Creation
long as not totally incapacitated; Must be 2. Character
competent to bind himself 3. Extent of Business Covered
4. Authority Conferred
Two General Acts that can’t be delegated to 5. Nature and Effects
1870 Form of Acceptance of Agent
1. Personal Acts – if personal performance is required
by law or public policy or the agreement of the parties, 1. Express
the doing of the act by a person on behalf of another 2. Implied from his acts which carry out the
does not constitute performance by the latter. agency (subdivided to 1871 and 1872)
3. Silence
Ex: 4. Inaction according to the circumstances
a. Right to vote during an election in a
corporation under section 25 of the Corporation 1871 – Acceptance between present persons
Code (personal delivery of Principal)
b. Making of a will pursuant to Art. 784
c. Statements which are required to be done 1872 – Acceptance when absent (transmittal only of
personally the Principal)
d. A member of the board of directors acting in
proxy capacity B.P. 68 1. When Principal transmits power of attorney and
e. An agent can’t delegate to sub-agent it was received without objection
performance of acts where he was appointed to 2. When Principal entrusts by letter or telegram a
do in person 1892 – 1893 power of attorney to the agent with which he
was habitually engaged in and did not reply to
2. Criminal Acts or Acts Not Allowed by Law – An it
attempt to delegate to another authority to do an act
which, if done by the principal would be illegal, is void. 1873 – Communication or Giving of Notice of
a. Ownership of an alien of a land in the country 1. By way of special information, the person
through a Filipino agent is against the law appointed as agent is considered such with
(Article 12 sec. 3, 7) respect to the person to whom it was given; or
2. If by public advertisement, the agent is
considered as such with regard to any person.
Public advertisement may be made in any form Acts of Administration is a question of fact, because the
(newspaper, radio, posters, billboards) agency relationship sometimes exists for a specific
business, that, even if it were required of the agent to
Agency presumed to exist whether there is actually an produce an SPA, an act may done not as act of strict
agency or not dominion but mere act of administration

Manner of revocation us be done in the same Ex:

manner it was conferred. a. Person employed to sell goods in a retail store
may sell the goods without need of a special
1874 – sale of piece of land without authority in power of attorney because the ‘selling’ is the
writing is void act of administration
b. Attorney-in-fact authorized to pay debts and
unenforceable, not necessarily void – Article 1403 2 (e) employ services of a lawyers to defend the
[need for proof through written, otherwise principal’s interest impliedly authorized to pay
unenforceable] for attorney’s fees for services

1875 – Agency Presumed for Compensation 1878 – SPECIAL POWER OF ATTORNEY

1876- Kind of agency as to extent of business a. Payment (1232)

covered b. Novation
c. Compromise (2028) (arbitration 2042) and the
Three Classifications of Agent: three waivers
d. Waive obligation gratuitously
1. Universal agent – authorized to do all acts that the e. Sale of immovable
principal may personal do, and which he can lawfully f. Make gifts, other than customary ones (or gifts
delegate to another the power of doing, presumed to to employees)
have universal authority g. Loan
h. Lease more than a year
2. General agent – authorized to transact all the i. Gratuitous service
business of his principal in relation to a particular j. Contract of Partnership
trade, business or employment k. Obligation principal as guarantor or surety
l. Create or convey real rights over immovable
3. Special Agent – one authorized to act in one or more property without special power
specific transactions/ particular occasion only m. Accept or repudiate an inheritance
n. Ratify obligations contracted before the agency
Special types of Agent: o. Strict Dominion

1. Attorney at law – represents client in legal 1879 – Vice versa rule on mortgage and sale
matters through agent
2. Auctioneer – business is to sell property for
others 1880 – exclusion of arbitration from power to
3. Broker – one whose business is to act as compromise
intermediary between two parties such as
insurance and real estate brokers 1881 – definition of authority of agent
4. Factor – one whose business is to receive and
sell goods for a commission (entrusted with 1882 – acts beneficial even if beyond instruction
possession) to the principal
5. Cashier in Bank – represents a banking
institution in its financial transactions Authority of the agent – power of the agent to affect
6. Attorney-in-fact – given authority to do a the legal relations of the principal by acts done in
particular act not of legal character. accordance with the principal’s manifestation of
consent to him
1877 – Agency couched in General Terms
Distinguish Authority from Power
Agency couched in general terms may be general
agency or special agency (1876) 1. Authority – Source i.e. Authority from Principal
to sell
Agency couched in general terms grants only acts of 2. Power – Effect i.e. Authority from principal
administration even if the principal would state: gives the agent the power to sell.

1. He withholds no power from the exercise of the Kinds or Types of Authority

2. Agent may execute acts appropriate to carry 1. Actual – Actually granted (express or implied)
out the agency 2. Express – conferred by words (1869)
3. Authorizes a general or unlimited management


3. Implied – incidental to the transaction or 1884 – agent bound by his acceptance to carry out the
reasonable necessary to accomplish the agency and is liable for non performance
purpose of the agency
4. apparent or ostensible – conferred by conduct General Obligations:
or even by silence (another name for authority
by estoppel) [also an implied form] 1. Good faith and loyalty to his trust
5. General – covers all business of the principal 2. Obedience to principal’s instruction
6. Special – particular transaction 3. Exercise of reasonable care
7. By necessity – demanded by virtue of the
existence of an emergency Specific Obligations of the Principal

When may Principal be Bound by Acts of Agent: 1. To carry out the agency according to its terms
1. Standard Requisites: 2. To answer for the damages which through his
a. Agent acts within the scope of authority non performance the principal may suffer 1884
b. He acted on behalf of the principal 3. To finish the business already begun on the
2. Ratification by principal death of the principal, should delay detail any
3. Acts more advantageous to principal danger 1884
4. To observe the diligence of a good father of a
When Principal Bound by Acts of Agent beyond family in the custody and preservation of the
his Powers: goods forwarded to him by the owner in case
he declines an agency, until agent is appointed
1. The acts of the principal contributed to deceive 1885
third persons in good faith 5. To advance the necessary funds should there
2. Limitations upon the power created by him be a stipulation to that effect 1886
could not have been known by the third person 6. To act in accordance with the instructions of
3. Principal placed to the agent instruments the principal 1887
signed by P in blank 7. Not to carry out the agency if its execution
4. Ratified the acts would manifestly result in loss or damage to
the principal (1888)
8. To answer for damages should he prefer in case
of conflict, his own interests to those of the
principal (1889)
1883 – Kinds of Principal (and also agent acting 9. Not to loan to himself without the consent of
as per identity) the principal when he has bee authorized to
lend at interest (1890)
Kinds of Principal: 10. To render an account of his transactions and to
deliver to the principal whatever he may have
1. Disclosed principal – if at the time of the transaction received by virtue of the agency (1891)
contracted by the agent, the other party thereto has 11. Distinguish goods by countermarks and
notice that the agent is acting for a principal and of the designate the merchandise respectively
principal’s identity belonging to each principal, in the case of a
commission agent who handles goods of the
2. Partially disclosed – if the other party has notice that same kind and mark, which belong to different
the agent is or may be acting for a principal but has no owners (1904)
notice of the principal’s identity 12. To be responsible in certain cases for the acts
of the substitute appointed by him (1892)
3. Undisclosed – The other party has no notice of the 13. To pay interest on funds he has applied to his
principal own use (1896)
14. TO inform the principal, where an authorized
AGENCY WITH UNDISCLOSED PRINCIPAL; Effects sale of credit has been made, of such sale
1. Agent directly responsible 15. To bear the risk of collection, should he receive
a. Agent authorized to act on behalf of the also on a sale, a guarantee commission (1907)
principal 16. To indemnify the principal for damages for his
b. Acts in agent’s own name failure to collect the credits of his principal at
the time that they become due (1908)
Thus, the Principal reserves no right of action against 17. To answer for his fraud or negligence (1909)
Agent or Third persons
1885 – obligations of person who declines an
UNLESS, contract involves things belonging to agency
It also creates an obligation on the owner to act as
CHAPTER 2 OBLIGATIONS OF THE AGENT soon as practicable to:
(1884 – 1909) 1. Appoint a new agent; or
2. Taking charge of the goods
1901 – Agent’s lack of authority; when not as
1886 – Stipulation of advancing defense
1902 – presentation of power of attorney
1887 – agent bound by the instruction of the 1903 – Commission agent as to goods received
principal 1904 – obligation of commission agent against
Instructions – private direction which the principal
may give the agent in regard to the manner of 1905 – right of principal where sale on credit was
performing his duties as such agent but of which a without authority
third party is ignorant. They are said to be secret if the
principal intended them not to be made known to such 1. He may require payment in cash, in which
party. case, any interest or benefit from the sale shall
belong to the agent since the principal cannot
Duty of Obedience – it is the fundamental duty of the be allowed to enrich himself at the agent’s
agent to obey all the reasonable and lawful instructions expense; or
given to him by his principal. 2. He may ratify the sale on credit in which case it
will have all the risks and advantages to him
Liability for loss or damage – If the agent exceeds or
violates the instructions, he will be liable. 1906 – authorized sale on credit
1888 – Do not carry out the agency if it shall 1907 – guarantee commission
result to loss or damage to principal
Guarantee commission – (del credere commission) is
1889 – agent’s liability for damages if he prefers one where in consideration of an increased commission
his own interest the factor or commission agent guarantees to the
principal the payment of debts arising through his
1890 – Obligation not to loan agency.
1891 – Duty to Account Its purpose is to compensate the agent for the risks he
will have to bear in the collection of the credit due the
1892 – SUBAGENTS principal
Liability against him if he: 1908 – Obligation of commission agent to collect
1. He was not given the power to appoint one credits of principal
2. When he was given such power, but without
designating the person, and the person 1909 – Liability of agent for fraud and negligence
appointed was notoriously incompetent or
(1910 – 1918)
1893 – An action against the sub agent
1910 – Compliance of the Principal to the
Subagent – is a person to whom the agent delegates as contracted obligations of the agent
his agent, the performance of an act for the principal
which the agent has been empowered to perform Specific Obligations of Principal to Agent
through his representative
1. Comply with all the obligations which the agent
Effects of Substitution may have contracted within the scope of his
authority (1910, 1881) and in the name of the
1. Substitution prohibited principal (1868, 1883)
2. Substitution authorized 2. To advance to the agent, should the latter so
3. Substitution not authorized, but not prohibited request, the sums necessary for the execution
of the agency (1912)
1894 – Agents jointly liable, not solidary 3. To reimburse the agent for all advances made
1895 – condition on solidary liability by him provided the agent is free from fault
1896 – Agent owes interest on the sums he has 4. To indemnify the agent for all the damages
applied to his own use from the day on which he which the execution of the agency ay have
did so caused the latter without fault or negligence on
his part (1913)
Necessity of demand principle 5. To pay the agent the compensation agreed
upon, or if no compensation was specified, the
1897 – Personal liability of the agent reasonable value of the agent’s services (1875,
1898 – agent contracting in the name of the 1306)
1899 – Effect of ignorance of agent Ratification – is the adoption by a person of a prior
1900 – Scope of agent’s authority as to third act which did not bind him, but which was done or
professed to be done on his account thus giving effect good faith if it should be movable property. Should it be
to the acts as if originally authorized by him immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in
VOID ACTS CANNOT BE RATIFIED, IT BEING the Registry of Property. Should there be no inscription,
INOPERATIVE FROM ITS INCEPTION the ownership shall pertain to the person who in good
faith, was the first in the possession; and, in the
Acts that may be ratified: absence thereof, to the person who presents the oldest
title, provided there is good faith.
1. Valid acts
2. Voidable acts 1917 – Liability to third persons of agent or
3. Unrevoked acts of the third party principal

1911 – solidary liability of principal and agent

when agent exceeds authority yet principal 1918 – Principal; when excused from liability
allowed him to act as if he were authorized
1. If the agent acted in contravention of the
This rule establishes the concept of agency by estoppel principal’s instructions, unless the latter should
wish to avail himself of the benefits derived
Distinguish Estoppel from Apparent Authority from the contract;
and Implied Agency 2. When the expenses were due to the fault of the
Apparent Authority – is that which though not actually 3. When the agent incurred them with knowledge
granted, the principal knowingly permits the agent to that an unfavorable result would ensue, if the
exercise or holds him out as possessing principal was not aware thereof;
4. When it was stipulated that the expenses
Authority by Estoppel – arises in those cases where the would be borne by the agent, or that the latter
principal by his culpable negligence permits his agent would be allowed only a certain sum.
to exercise powers not granted to him, even though the
principal may have no notice or knowledge of the
Implied Agency – is an actual and existing agency (1919 – 1932)
relationship distinguished by the manner in which it
was created 1919 – 6 LISTED MODES

1912 – advancing of funds (importan review) Contract of Agency may be extinguished by this list but
it is not exclusive.
1913 – Obligation to indemnify agent
It may, therefore, be generally extinguished by the
1914 – Right of retention following general denominations:

For failing to reimburse based from 1912 and 1913, the 1. Agreement
agent may retain in pledge the object of the agency as 2. Subsequent Acts of the parties
a right over the thing prior to being reimbursed. 3. Operation of Law

1915 – When Principals solidarily liable to agency Rules on Determination of Confidential

Three requisites:
1. There are two or more principals 1. Whether the knowledge or information, the use
2. The principals have all concurred in he of which the complainant seeks to enjoin, is
appointment of the same agent; and confidential;
3. The agent is appointed for a common 2. Whether it be confidential in whole or in part,
transaction or undertaking its use ought to be prevented

1916 Two persons contract separately with agent

and principal
Rules on Destruction of Thing:
Two persons may contract separately with the agent 1. General Rule – absence of the agreement, the
and the principal with regard to the same thing. If the agency terminates;
two contracts are incompatible with each other, the 2. Exceptions –
one of prior date shall be preferred. Subject to the rules a. If substitution is possible;
under 1544: b. Partial loss or destruction of the subject
If the same thing should have been sold to different
vendees, the ownership shall be transferred to the Other causes may exist for the extinguishment of
person who may have first taken possession thereof in the Agency Relationship
Other modes: An agency coupled with an interest is when the agent
receives an estate or interest in the property that is the
1. Extinguishment of the obligation subject of the agency. The agent in this relationship
2. War holds or controls the principal's property and has legal
3. Legal Impossibility rights against interference by outside parties.
4. Termination of the sub-agent’s authority from
the termination of the agent Stated differently, an agency is deemed as one coupled
5. Occurrence of a specified event with an interest where it is established for the mutual
benefit of the principal and of the agent, or for the
interest of the principal and of third persons, and it
1920 – Revocation of the Agency by the Principal cannot be revoked by the principal so long as the
interest of the agent or of a third person subsists. In an
Revocation – is the act of the Principal which is done by agency coupled with an interest, the agents interest
terminating the agency relationship in accordance with must be in the subject matter of the power conferred
his will. and not merely an interest in the exercise of the power
because it entitles him to compensation. When an
agents interest is confined to earning his agreed
Principal’s Revocation of the Agency: compensation, the agency is not one coupled with an
interest, since an agents interest in obtaining his
1. 1920 – Revocation compensation as such agent is an ordinary incident of
2. 1925 – Two Principal Rule the agency relationship (Lim v Saban)

Express Revocation:
1928 - Renunciation
1. 1921 – contracting with specified persons
2. 1922 – Third party with no knowledge of the 1. Without just cause – duty to notify renunciation
revocation and bears damages;
2. With Just cause
Implied Revocation:
1929 – Continuing management after
1. 1923 – New Agent appointed for the same business renunciation
2. 1924 – Direct management (exemption: if interest is
to manage it together with the agent When Agency Persists Despite Death of Principal
3. 1926 – Revocation of GPA by SPA
1. 1930 constitution for: (1) common interest of
1926 – GPA v SPA on special matters the principal and agent; (2) Interest of a third
person who has accepted the stipulation in his
1927 – When is agency irrevocable favor
2. 1931 – Done without knowledge of death of
1. Agency cannot be revoked if a bilateral Principal
contract depends upon it,
2. It is the means of fulfilling an obligation already 1932 – Duty to notify principal by the heirs of the
contracted agent
3. Partner is appointed manager of a partnership

Agency Coupled with an Interest