 AGENCY

 Title X, Chapter 1
 Art. 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.
 IMPORTANCE OF AGENCY: ENABLES MAN TO INCREASE THE RANGE OF HIS
INDIVIDUAL AND CORPORATE ACTIVITY BY ENABLING HIM TO BE
CONSTRUCTIVELY PRESENT IN MANY PLACES AND TO CARRY ON DIVERSE
ACTIVITIES AT THE SAME TIME (Mechem, Outlines of Agency, 3rd ed., p. 5)
 Characteristics of Agency
 Principal
 Nominate
 Bilateral
 Preparatory
 Commutative
 Generally onerous contract

 PARTIES
 Principal – whom the agent represents and from whom he derives authority; one primarily
concerned in the contract
 Agent – he who acts or stands for another.
 Art. 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.

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

 KINDS OF AGENCY ACCORDING TO MANNER OF CONSTITUTION
 A) EXPRESS
 B) IMPLIED – from
 1) acts of the principal
 2) principal’s silence
 3) principal’s lack of action
 4) principal’s failure to repudiate the agency.

NOTE: IN THESE CASE OF IMPLIED AGENCY THE PRINCIPAL KNOWS THAT

ANOTHER PERSON IS ACTING ON HIS BEHALF WITHOUT AUTHORITY
 KINDS OF AGENCY ACCORDING TO FORM
 ORAL
 WRITTEN
 EXAMPLE – Art.1874 “when a sale of land or any interest therein is through an
agent, the authority of the latter shall be in writing”
 Art. 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.
 This Article is self-explanatory.
 Art. 1871. Between the 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.
 “present” – means face to face or conversing with each other through the phone
 Art. 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.
 Art. 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.
 TWO WAYS OF INFORMING OTHER PEOPLE OF THE EXISTENCE OF THE
AGENCY
 (A) SPECIAL INFORMATION
 (B) PUBLIC ADVERTISEMENT

 NOTE: REVOCATION SHALL BE IN THE SAME MANNER AS THE AUTHORITY IS

GIVEN.
 AGENCY BY ESTOPPEL
 If the estoppel is caused by the principal, he is liable but only if the third 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.
 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.
 The principal cannot technically RATIFY. If he does so, there should be no retroactive
effect.
 Art. 1875. Agency is presumed to be for a compensation unless there is proof to the
contrary.
 Agency is presumed to be onerous i.e. use by the agent of the principal’s real estate.
Compensation may be contingent or dependent upon the realization of profit for the
principal.
 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.
 The distinction here depends on the extent of the business covered.
 Art. 1877. An agency couched in general terms comprises only acts of administration, even
if the principal should state he withholds no power or that the agent may execute such acts
 as he may consider appropriate, or even thought the agency should authorize a general and
unlimited management.
 For acts of strict dominion, a special power of attorney is needed.
 EXAMPLES OF ACTS OF ADMINISTRATION
 To sue for the collection of debts
 To employ workers or employees
 To engage counsel to preserve the ownership and possession of the principal’s property
 To lease real property to another person for one year or less, provided the lease is not
registered.
 To make customary gifts for charity or to employees
 To borrow money if it be urgent and indispensable for the preservation of the things under
administration
 Art. 1878. Special power of attorney are necessary in the following cases:

 To make such payments as are not usually considered as acts of administration.

 To effect novations which put an end to obligations already in existence at the time the
agency was constituted;
 To compromise, to submit questions to arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an action or to abandon a prescription
already acquired.
 To waive any obligation gratuitously
 To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration
 To make gifts, except customary ones for charity or those made to employees in the
business managed by the agent
 To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration
 To lease any real property to another person for more than one year.
 To bind the principal to render some service without compensation
 To bind the principal in a contract of partnership
 To obligate the principal as a guarantor or surety
 To create or convey real rights over immovable property
 To accept or repudiate an inheritance
 To ratify or recognize obligations contracted before the agency
 Any other act of strict dominion.
 Art. 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 mortgage does not include the power to execute a second mortgage.
 Art. 1880. A special power to compromise does not authorize submission to arbitration.
 Compromise – agent can settle or put an end to a litigation
 Arbitration – submit the case to an arbitrator for decision.
 Art. 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.
 FUNDAMENTAL PRINCIPLES OF AGENCY
 AGENT MUST ACT WITHIN THE SCOPE OF HIS AUTHORITY
 AGENT MUST ACT IN BEHALF OF HIS PRINCIPAL
  EFFECTS OF AGENT’S ACT
 WITH AUTHORITY
 In principal’s behalf – VALID
 In agent’s behalf – not binding on the principal, binds only agent and 3rd party
 WITHOUT AUTHORITY
 In principal’s behalf – unauthorized and unenforceable
 In agent’s behalf – VALID provided that at the time of delivery, the agent can
transfer legally the ownership of the thing.

 KINDS OF AUTHORITY
 EXPRESS
 IMPLIED
 GENERAL (AGENT’S DISCRETION IS COMPLETE)
 SPECIAL (PARTICULAR INSTRUCTIONS ARE GIVEN)
 APPARENT (AGENT OR 3RD PERSON WAS LED BY THE PRINCIPAL’S CONDUCT
OR WORDS TO BELIEVE THE AGENT IS AUTHORIZED
 DOCTRINE OF AGENCY BY NECESSITY
 STRICTLY SPEAKING, AN AGENCY CAN NEVER BE CREATED BY NECESSITY.
 BY VIRTUE OF THE EXISTENCE OF AN EMERGENCY, THE AUTHORITY OF AN
AGENT IS CORRESPONDINGLY ENLARGED IN ORDER TO COPE WITH THE
EXIGENCIES OR NECESSITIES OF THE MOMENT.
 EXAMPLE: IF A BUS CONDUCTOR IS SERIOUSLY HURT, THE DRIVER IS
AUTHORIZED TO ENGAGE THE SERVICES OF A PHYSICIAN IN THE
COMPANY’S NAME, SO THAT THE CONDUCTOR MAY SURVIVE.
 AUTHORITY DISTINGUISHED
FROM INSTRUCTIONS
 AUTHORITY
 IF ACT IS DONE OUTSIDE THE SCOPE OF AGENT’S AUTHORITY, THE
PRINCIPAL IS NOT BOUND
 THIRD PERSONS MUST VERIFY OR INVESTIGATE THE AUTHORITY
 INSTRUCTIONS
 CONCERN ONLY THE PRINCIPAL AND AGENT
 THIRD PERSONS DO NOT HAVE TO INVESTIGATE OR VERIFY THE
INSTRUCTIONS.
 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.
 SALE AT A LOWER OR HIGHER PRICE
 The 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 selling the goods at a better price, if
said price can be obtained.
 However, the conditions of the same must remain unaltered, hence, authorization to sell for
cash does not carry authorization to sell on credit, even if by such device a higher price can
be obtained.
 Art. 1883. If an agent acts in his own name, the principal has not right of action against the
persons with whom the agent 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 provision of this article shall be understood to be without prejudice to the actions
between the principal and agent.
 AGENCY WITH AN
UNDISCLOSED PRINCIPAL
 ART. 1883 APPLIES TO AN AGENCY WITH AN UNDISCLOSED PRINCIPAL AND
THE AGENT ACTS IN HIS OWN BEHALF
 DOES NOT APPLY IF THE AGENT WAS UNAUTHORIZED OR ACTS IN EXCESS OF
AUTHORITY
 EXAMPLE: AGENT BORROWED MONEY WITHOUT DISCLOSING HE IS
BORROWING IN BEHALF OF A PRINCIPAL. THE LENDER CANNOT COLLECT
FROM THE PRINCIPAL.
 EXCEPTION: AGENT SELL CAR OF THE PRINCIPAL IN HIS OWN NAME. IF
THERE ARE HIDDEN DEFECTS, THE 3RD PARTY CAN SUE THE PRINCIPAL
BECAUSE IT INVOLVES THINGS BELONGING TO THE PRINCIPAL.