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REVIEWER IN AGENCY

Atty. Aliakhbar A. Jumrani

I. What is a Contract of Agency?

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. (Art. 1868,
CC)

1. Elements:
a. The parties’ consent, express or implied, to establish the relationship;
b. The object, which is the execution of a juridical act in relation to a third person;
c. The representation, by which the one who acts as an agent does so, not for
himself, but as a representative;
d. The limitation that the agent acts within the scope of his or her authority. (Tuazon
vs. Ramos, G.R. No. 156262, July 14, 2005)

The declarations of agents alone are generally insufficient to establish the fact or extent
of their authority. The law makes no presumption of agency; proving its existence, nature and
extent is incumbent upon the person alleging it. (Tuazon vs. Ramos, supra)

II. Express and Implied Agency

1. Express Agency

The contract may be oral, unless the law requires a specific form. (Art. 1869, second par,
CC) Ex. Agency to sell real property

2. Implied Agency

a. From the acts of the agent which carry out the agency (Art. 1870, CC)

b. From his silence or inaction according to the circumstances (Ibid)

i. Applicable only between persons who are present

c. If the principal delivers his power of attorney to the agent and the latter receives
it without any objection (Art. 1871, CC)

d. Between persons who are absent:

i. When the principal transmits his power of attorney to the agent, who
receives it without any objection;

ii. 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. 1872, CC)

III. Agency by Estoppel, Ostensible Agency and Doctrine of Apparent Authority

The principal is bound by the acts of his agent with the apparent authority which he knowingly
permits the agent to assume, or which he holds the agent out to the public as possessing. The
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question in every case is whether the principal has by his voluntary act placed the agent in such
a situation that a person of ordinary prudence, conversant with business usages and the nature
of the particular business, is justified in presuming that such agent has authority to perform the
particular act in question. (Professional Services Inc. vs. Agana, G.R. No. 126297, January 31,
2007)

IV. General and Special Agency

A general agency comprises all the business of the principal, while a special agency
comprises one or more specific transactions. (Art. 1876, CC)

A general power covers acts of administration only, while a special power covers acts of
dominion.

The authority to sell a property, which is a special agency, does not include or extend to
the power to administer the property, which is a general agency. (Spouses Aggabao vs. Spouses
Parulan, G.R. No. 165803, September 1, 2010)

V. Agency Couched in General Terms

It comprises only acts of administration, even if the principal should state that he
withholds no power or that the agent may execute such acts as he may consider appropriate, or
even though the agency should authorize a general and unlimited management. (Art. 1877, CC)

Acts of administration, as opposed to acts of ownership, pertain solely to management or

superintendence. They do not necessarily pivot on ownership. (United BF Homeowners vs.
Barangay Chairman of BF Homes, G.R. No. 140092, September 8, 2006)

VI. Agency Requiring Special Power of Attorney (Art. 1878, CC)

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

2. To effect novations which put an end to obligations already in existence at the time the
agency was constituted;

3. 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;

4. To waive any obligation gratuitously;

5. To enter into any contract which the ownership of an immovable is transmitted or

acquired either gratuitously or for a valuable consideration;

6. To make gifts, except customary ones for charity or those made to employees in the
business managed by the agent;

7. To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration;

8. To lease any real property to another person for more than one year;

9. To bind the principal to render some service without compensation;

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10. To bind the principal in a contract of partnership;

11. To obligate the principal as a guarantor or surety;

12. To create or convey real rights over immovable property;

13. To accept or repudiate an inheritance;

14. To ratify or recognize obligations contracted before the agency;

15. Any other act of strict dominion.

The requirement of a special power of attorney refers to the nature of the authorization
and not to its form. If the special authority is not written, then it must be duly established by
evidence. (Gozun vs. Mercado, G.R. No. 167812, December 19, 2006, citing Lim Pin Lao vs. Liano
Tian, 200 Phil 685 [1982])

Note, however, that the authority to sell a piece of land or any interest therein should be
in writing; otherwise, the sale is void. (Art. 1874, CC)

VII. Duty of Third Persons dealing with an Agent

The well-settled rule is that a person dealing with an assumed agent is bound to ascertain
not only the fact of agency but also the nature and extent of the agent’s authority. (Bautista-
Spille vs. NICORP, G.R. No. 214057, October 19, 2015)

• This rule was applied in a purchase of real property from a person who is not the
registered owner. As held by the Supreme Court, he is expected to examine all
factual circumstances necessary for him to determine if there are any flaws in the
title of the transferor, or in his capacity to transfer the land.

• Under Art. 1902, CC, a third person with whom the agent wishes to contract on
behalf of the principal may require the presentation of the power of attorney, or
the instructions as regards the agency.

VIII. Agency by Operation of Law or Without Agreement

1. When a person declines the agency and no new agent has been appointed

Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a
good father of family in the custody and preservation of the goods forwarded to him by the
owner until the latter should appoint an agent. The owner shall as soon as practicable either
appoint an agent or take charge of the goods.

2. Immediately after the agent withdraws from the agency

Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must
continue to act until the principal has had reasonable opportunity to take the necessary steps to
meet the situation.

3. In case of extinguishment of the agency, without the knowledge of the agent

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Art. 1931. Anything done by the agent, without knowledge of the death of the principal
or of any other causes which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good faith.

4. In case of death of the agent

Art. 1932. If the agent dies, his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the interest of the latter.

IX. Rights and Obligations of the Agent

1. Powers of an Agent

a) Those expressly conferred, and

b) Powers incidental to the express powers conferred.

It is a fundamental principle in the law of agency that every delegation of authority, whether
general or special, carries with it, unless the contrary be expressed, implied authority to do all of
those acts, naturally and ordinarily done in such cases, which are reasonably necessary and
proper to be done in order to carry into effect the main authority conferred. (Citibank, N.A. vs.
Chua, G.R. No. 102300, March 17, 1993)

2. Rights

a) Right to be compensated (Art. 1875, CC)

b) Right to appoint a substitute (Art. 1892, CC)

c) Right to be reimbursed the sums advanced by him for the execution of the agency (Art.
1912, CC)

3. Obligations

a) To carry out the agency and finish the business (Art. 1884, CC)

b) To act in accordance with the instructions of the principal (Art. 1887, CC)

c) To advance the necessary funds if such is stipulated (Art. 1886, CC)

d) To render an account of his transactions and to deliver whatever he may have received
by virtue of the agency (Art. 1891, CC)

e) To pay damages to the principal for his non-performance and for engaging in conflict of
interest (Art. 1884, 1889, CC)

f) To answer for his fraud and negligence (Art. 1909, CC)

X. Rights and Obligations of the Principal

1. Rights
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a) Right of control over the agent. (Art. 1887, 1888, CC)

b) To be paid damages if, there being conflict between the interests of the principal and
those of the agent, the agent should prefer his own (Art. 1889, CC), or if the agent is
guilty of fraud or negligence. (Art. 1909, CC)

c) Right to an accounting by the agent of his transactions and to the delivery of whatever
the agent may have received by virtue of the agency. (Art. 1891, CC)

2. Obligations

a) To pay the agent his compensation, unless the contrary was agreed upon. (Art. 1875,
CC)

b) To comply with the obligations which the agent may have contracted within the scope
of his authority, or those which the agent has done outside the scope of his authority
but which the principal has ratified, or when the principal allowed the agent to act as
though he had full powers. (Art. 1910, 1911, CC)

c) Doctrine of Imputed Knowledge

⚫ The principal is chargeable with and bound by the knowledge of or notice to his
agent received while the agent was acting as such. (Cosmic Lumber Corp. vs.
114311, November 29, 1996)

d) To advance to, or reimburse, the agent, the sums necessary for the execution of the
agency, or the damages which the execution of the agency has caused the agent,
without fault or negligence on his part. (Art. 1912, 1913, CC)

⚫ But, the principal is not liable for the expenses incurred by the agent in the
following cases:

1. If the agent acted in contravention of the principal's instructions, unless the

latter should wish to avail himself of the benefits derived from the contract;

2. When the expenses were due to the fault of the agent;

3. When the agent incurred them with knowledge that an unfavorable result
would ensue, if the principal was not aware thereof;

4. When it was stipulated that the expenses would be borne by the agent, or that
the latter would be allowed only a certain sum. (Art. 1918, CC)

XI. Irrevocable Agency (Art. 1927, CC)

1. If a bilateral contract depends upon it

2. If it is the means of fulfilling an obligation already contracted; and

3. If a partner is appointed manager of a partnership in the contract of partnership and his

removal from management is unjustifiable.

XII. Agency Coupled with Interest

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An agency is deemed as one coupled 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 cannot be revoked by the principal so long as the interest of the agent or of a
third person subsists. In an agency coupled with an interest, the agent's interest must be in the
subject matter of the power conferred and not merely an interest in the exercise of the power
because it entitles him to compensation. When an agent's interest is confined to earning his
agreed compensation, the agency is not one coupled with an interest, since an agent's interest
in obtaining his compensation as such agent is an ordinary incident of the agency relationship.
(Lim vs. Saban, G.R. No. 163720, December 16, 2004)

XIII. Modes of Extinguishment (Art. 1919, CC)

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; and

6. By the expiration of the period for which the agency was constituted.

By reason of the very nature of the relationship between principal and agent, agency is
extinguished by the death of the principal or of the agent and any act of an agent after the death
of his principal is void ab initio, except as explicitly provided for in the New Civil Code: (1) when
the agency is coupled with an interest (Art. 1930); and (2) when the agent performed an act for
the principal without knowledge of the principal's death and the third person who contracted
with him acted in good faith. (Art. 1931). (Rallos vs. Felix Go Chan, L-24332, January 31, 1978)