LAW ON AGENCY Gen rule: silence does not imply acceptance

REVIEWER
AGENCY
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.
Exceptions:
- When the principal transmits his power of attorney to
the agent who receives it without any objection
- 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

CHARACTERISTICS OF AGENCY WAYS OF GIVING NOTICE OF AGENCY

1. Consensual 1. By special information - the person appointed as
2. Nominate agent is considered such with respect to the person to
3. Preparatory whom it was given.
4. Principal
5. Unilateral (if gratuitous) 2. By public advertisement - the agent is considered
6. Bilateral (if agency is for compensation) such with regard to any person
CLASSIFICATION OF AGENTS
ESSENTIAL ELEMENTS OF AGENCY 1. Universal Agent
1. Consent of the parties to establish the relationship; 2. General Agent
2. Object of the contract is the execution of a juridical 3. Special or Particular Agent
act in relation to third persons;
3. Agent acts as a representative and not for himself; and AGENCY COUCHED IN GENERAL TERMS
4. Agent acts within the scope of his authority. An agency couched in general terms comprises only acts
of administration, even if
PARTIES TO THE CONTRACT OF AGENCY 1. the principal states that he withholds no power; or
1. Principal 2. he states that the agent may execute such acts as he
one whom the agent represents and from whom he may consider appropriate; or
derives his authority (sometimes called the employer) 3. the agency should authorize a general and unlimited
2. Agent management
one who acts for and represent another; he is the person
acting in a representative capacity (sometimes called atty- SPECIAL POWER OF ATTORNEY
in-fact, representative) When SPA is necessary:
1. To make payments
ACTS THAT MAY BE DELEGATED TO AGENTS 2. To effect novations
General Rule: 3. To compromise
What a man may do in person, he may do thru another. 4. To waive an obligations gratuitously
Exceptions: 5. To convey or acquire immovable
1. Personal acts 6. To make gifts
2. Criminal Acts 7. To loan or borrow money
8. To lease realty for more than one year
KINDS OF AGENCY 9. To bind the principal to render service gratuitously
Agency maybe classified into: 10. To bind the principal in a contract of partnership
1. Express or Implied 11. To obligate principal as guarantor or surety
2. Gratuitous or Onerous 12. To create or convey real rights over immovable
3. General or Special property belonging to his principal
4. Couched in general or specific terms 13. To accept or repudiate an inheritance
5. Ostensible/Representative or Simple/Commission 14. To ratify obligations contracted before the agency
15. Any other act of strict dominion
FORMS OF ACCEPTANCE BY AGENT
1. Express KINDS OF AUTHORITY
2. Implied Authority of the Agent maybe
a. Between persons who are present 1. Actual
b. Between persons who are absent 2. Express
3. Implied
4. Apparent or ostensible
5. General
6. Special
7. Authority by necessity
When a Principal IS BOUND by act of Agent:
1. Requisites for Principal to be Bound by Act of Agent:
a. The agent must act in behalf of the principal
b. The agent must act within the scope of his
authority
2. By ratification
3. Performance of agency more advantageous to
principal
When a Principal NOT BOUND by act of agent:
1. The latter acts without or beyond the scope of his
authority in the former’s name
2. The latter acts within the scope of his authority but in
his own name, EXCEPT when the transaction involves
things belonging to the principal
When Principal Bound By Act Of Agent Beyond His
Authority
1. Where the acts of the principal have contributed to
deceive a 3rd person in good faith;
2. Where the limitations upon the power created by the
principal could not have been known by the 3rd
person;
3. Where the principal has placed in the hands of the
agent instruments signed by him in blank;
4. Where the principal has ratified the acts of the agent
KINDS OF PRINCIPAL
1. Disclosed principal
2. Partially disclosed principal
3. Undisclosed principal
Effects Where An Agent Acted In His Own Name
General rule:
The agent is liable directly to the person with whom he
had contracted as if the transaction were his own. The
principal and such person have no right of action against
each other.
Exception:
The principal is bound when the contract involves things
belonging to him. The principal may sue the agent for
breach of contract.
SPECIFIC OBLIGATIONS OF AGENT TO PRINCIPAL
1. Carry out the agency in accordance with its terms
2. Answer for damages which through his non-
performance the principal may suffer
3. Finish the business already begun on the death of the
principal should delay entail any danger (exception to
the rule that death extinguishes agency)
4. Observe the diligence of a good father in the custody
and preservation of the goods forwarded to him by
the owner in case he declines an agency, until an
agent is appointed (Art 1885)
5. Advance necessary funds should there be a stipulation
to that effect. (Art 1886)
6. Act in accordance with the instructions of the
principal, and in default thereof, to do all that a good
father of a family would do. (Art 1887)
7. Not to carry out the agency if it would manifestly
result in loss or damage to the principal. (Art 1888)
8. Answer for damages if there being a conflict between
his & principal’s interests, he prefers his own. (Art
1889)
9. Not to loan to himself without the consent of the
principal if he has been authorized to loan money at
interest. (Art 1890)
10. Render an account of his transactions and deliver to
the principal whatever he may have received by virtue
of the agency (Art 1891)
11. Be responsible in certain cases for the act of the
substitute appointed by him. (Art 1892)
12. Pay interest on funds he has applied to his own use.
(Art 1896)
13. To distinguish goods by countermarks and designate
the merchandise respectively belonging to each
principal. (Art 1904)
14. To inform the principal, where an authorized sale of
credit has been made, of such sale. (Art 1906)
15. To bear the risk of collection, should he receive also
on a sale, a guarantee commission. (Art 1907)
16. To indemnify the principal for damages for his failure
to collect the credits of his principal at the time that
they become due. (Art 1908)
17. To answer for his fraud or negligence. (Art 1909)
Responsibility of 2 or More Agents Appointed
Simultaneously
General Rule: Liable jointly
Exception: Solidarity has been expressly stipulated; each
of the agents becomes solidarily liable:
1. For the non-fulfillment of the agency; or
2. For the fault or negligence of his fellow agent, but
when one of the other agent/s acts beyond the scope
of his authority – innocent agent is NOT liable
EFFECTS OF RATIFICATION
1. With respect to agent - relieves the agent from liability
to the third party for the unauthorized transaction,
and to his principal for acting without authority; may
recover compensation
2. With respect to principal - assumes responsibility for
the unauthorized act, as fully as if the agent had acted
under original authority but not liable for acts outside
the authority approved
3. With respect to 3rd persons - bound by ratification to
the same extent as if the ratified act had been
authorized; cannot raise the question of the agent’s
authority to do the ratified act
Obligations of the Principal
1. Comply with all the obligations which the agent may
have contracted within the scope of his authority (Art
1910)
2. The principal is solidarily liable even if the agent
exceeded his authority if the principal allowed the
agent to act as though he had full powers. (Art 1911)
3. To advance to the agent sums necessary for the
execution of the agency, when agent so requests; (Art
1912)
4. To reimburse all advances including interest made by
the agent provided the agent is free from fault, even if
the business is not successful (Art 1912)
5. To indemnify the agent for all the damages which the
execution of the agency may have caused the latter
without fault or negligence on his part (Art 1913)
6. Pay the agent the compensation agreed upon or the
reasonable value of the latter’s services (Art 1875)
Agent’s Right of Retention
1. To retain the thing which is the object of the agency;
and
2. Until the principal effects the reimbursement and pays
the indemnity
Solidary liability of Principals
Requisites
1. There are 2 or more principals
2. The principals have all concurred in the appointment
of the same agent
3. The agent is appointed for a common transaction or
undertaking
Instances When Principal is not Liable for Expenses
a. If the agent acted in contravention of the principal's
instructions, unless principal derives benefits from the
contract
b. When the expenses were due to the fault of the agent
c. When the agent incurred them with knowledge that
an unfavorable result would ensue, if the principal was
not aware thereof
d. When it was stipulated that the expenses would be
borne by the agent, or that the latter would be
allowed only a certain sum
Modes of Extinguishment of Agency
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.
Revocation of Agency
Rules:
1. May be revoked by the principal at will;
2. Principal can compel the agent to return the
documents evidencing the agency;
3. Revocation maybe implied or express
General rule - Principal may revoked the agency at will.
Exception (Art 1927)
a. When a bilateral contract depends upon the agency
b. When the agency is the means of fulfilling an
obligation already contracted
c. When a partner is appointed as manager of a
partnership in the contract of partnership and his
removal from the management is unjustifiable.
Effect of Revocation in Relation to 3rd Persons
1. Agency to contract with specific persons
- Revocation will not affect the 3 rd person until
notice thereof is given to them.
2. Agency to contract with general public
- Innocent 3rd persons dealing with the agent will
not be affected until they have knowledge of the
revocation.
Implied Revocation
1. Revocation by appointment of New agent
2. Revocation by direct management of business by the
principal
Withdrawal of the Agent
Rules:
1. Agent should give due notice to the principal
2. Agent must indemnify the principal for any damage
suffered by the latter by reason of the withdrawal.
3. Must continue to act as such until the principal has
reasonable opportunity to take the necessary step to
meet the situation.

Death of the Principal

General Rule:
Agency is terminated by the death of the principal.
Exception:
1. If the agency has been constituted in the common
interest of the principal and the agent.
2. If constituted in the interest of a third person who has
accepted the stipulation in his favour.
3. Does not invalidate transactions of an agent, who has
no knowledge of the death of his principal, with third
persons who have dealt with him in good faith.

Death of the Agent

Rules:
1. The agency is extinguished.
2. The heirs of the agent has the duty to inform the
principal of such death.
3. The heirs may temporarily continue the agency.