THE Law on 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 of agency
1. Principal
2. Preparatory
3. Consensual
4. Onerous
5. Nominate
6. Bilateral
7. Commutative
Parties to a contract of agency, capacity of the parties
1. Principal
2. Agent

How agency relationship is created

1. By appointment
2. By ratification
3. By estoppel
4. By necessity
Kinds of agency
1. According to form
a. Express
1) Oral agreement
2) Written agreement
b. Implied – an agency may be implied from the following:
1) Acts of the principal
2) Silence of the principal
3) Lack of action of the principal
4) Failure of the principal to repudiate the agency

2. According to extent
a. General agency – when it comprises all the business of the principal.
b. Special agency – when it comprises of one or more specific transactions.

3. According to authority conferred

a. Agency couched in general terms (general power of attorney)
b. Agency couched in specific terms – a special power of attorney is required for the performance of the following specific
acts
1) To make such payments as are not usually considered acts of administration.
2) To effect novations
3) To compromise
4) To submit questions to arbitration
5) To renounce the right to appeal from a judgment.
6) To waive objections to the venue of an action.
7) To abandon a prescription already acquired.
8) To waive obligations gratuitously.
9) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a
valuable consideration.
10) To make gifts
11) To loan or borrow money
12) To lease any real property to another person for more than a year.
13) To bind the principal to render some service without any compensation.
14) To bind the principal in a contract of partnership.
15) To obligate the principal as a guarantor or surety.
16) To create or convey real rights over immovable property.
17) To accept or repudiate an inheritance
18) To ratify or recognize obligations contracted before the agency.
19) Any other act of strict dominion.
4. According to its character:
(a) Gratuitous
(b) Compensated or onerous
5. According to its nature and effects:
(a) Ostensible representative – one where the agent acts in the name and representation of the principal; or
(b) Simple or commission – one where the agent acts for the account of the principal but in his own name
Kinds of acceptance of agency by the agent.
1. Express
2. Implied
Announcement of appointment by an agent
1. By special information
2. By public advertisement
Basic principles of agency
1. The agent must act within the scope of his authority.
2. The agent must act in behalf of his principal.
Obligations of an agent

Obligations, in general, of a person who accepts an agency

1. To carry out the agency
2. To be liable for damages which, through his non-performance, the principal may suffer.
3. To finish the business already begun on the death of the principal, should delay entail any danger.
Specific obligations of an agent
1. To advance the necessary funds if there was a stipulation to that effect
2. To act in accordance with the instructions of the principal
3. Not to carry out an agency if its execution would manifestly result in loss or damage to the principal
4. To be liable for damages if there being a conflict between his interest and that of the principal, he should prefer his own
5. Not to borrow the money of the principal without the principal’s consent, if the latter has authorized him to lend the principal’s money
at interest.
6. To render an accounting 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
7. Agent’s liability when he appoints a substitute
Who is a sub—agent?
A sub-agent (or substitute) is a person to whom the agent delegates, as his agent the performance of an act for the principal
which the agent has been empowered to perform.
8. Liability of two or more agents if they have been appointed simultaneously
9. To be liable for interest on the sums he has applied to his own
10. Agent’s liability if he contracts in the name of the principal
General Rule: The agent who acts as such shall not be liable to the party with whom he contracts.
Exceptions: The agent shall be personally liable in the following cases:
a. If he expressly binds himself.
b. Is he exceeds the limits of his authority giving such party sufficient notice of his powers.
Rules if the other party was aware of the agent’s acting beyond the limits of his authority
1) If the agent did not undertake to secure the principal’s ratification, the contract shall be void.
2) If the agent undertook to secure the principal’s ratification of the act and the principal does not ratify the same, the agent
shall be liable.
3) If the principal ratifies the contract, the contract shall be enforceable against the principal.
11. To be responsible not only for fraud, but also for negligence
Commission agent
is one who buys and sells goods or chattels consigned or delivered to him by his principal, for a compensation known as commission.
General rule: The commission agent cannot sell on credit.
Exception: The commission agent can sell on credit only with the express or implied consent of the principal.
Effects if the commission agent sells on credit without principal’s consent
1) The principal may demand payment from him in cash.
2) The commission agent, however, shall be entitled to any interest or benefit, which may result from such sale.
 Del credere commission ( also called guarantee commission) is an additional commission by which the agent (who also gets his
ordinary commission) 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.
Obligations of the principal
1. To comply with all the obligations which the agent may have contracted within the scope of his authority.
2. To be bound for any obligation wherein the agent has exceeded his power if he ratifies such obligation expressly or tacitly.
3. To be solidarily liable with the agent if he allowed the latter to act as though he had full powers when the agent exceeded his
authority.
4. To advance to the agent sums necessary for the execution of the agency should the agent so request.
5. To reimburse the agent the sums advanced by the latter even if the business or undertaking was not successful provided the agent
is free from all fault.
6. To indemnify the agent or all damages which the execution of the agency may have caused the latter, without fault or negligence
on his part
7. Liability when there are two or more principals
Extinguishment of agency
Modes of extinguishment of agency
1. By revocation
2. By 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.
Revocation refers to the act of the principal of terminating the agency at will confidence and representation being the foundation of the
contract.
Kinds of revocation
a. Express
b. Implied
•When agency may not be revoked at will
a. If a bilateral contract depends upon the agency.
b. If the agency is a means of fulfilling an obligation already contracted.
c. If a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is
unjustifiable.
d. If agency is coupled with interest
Withdrawal by the agent
→By the agent giving due notice to the principal of his withdrawal.
Death of the principal
→As a general rule, the death of the principal extinguishes the agency. However, the agency is not extinguished in the following:
a. If the agency has been constituted in the common interest of the principal and the agent.
b. If the agency has been constituted in the interest of a third person who has accepted the situation in his favor.
Death of the agent
1. Effect of death of agent in agency
The death of the agent extinguishes the agency
2. Duty of agent’s heirs
a. Notify the principal of the agent’s death
To adopt in the meantime such measures as the circumstances may demand in the interest of the principal