Agency Notes
- Contract depends on its elements and not what the parties
Art. 1317 – No one may contract in the name of another
without being authorized by the latter, or unless he has by law
a right to represent him
A contract entered into in the name of another who has no
authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly
or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party
Art. 1403 (1) – The following are unenforceable contracts
unless ratified:
Those entered into by in the name of another person by one
who has been given no authority or legal representation or has
acted beyond his power
If an agent enters into a contract in behalf of the principal in excess
of his authority
- There is consent but unauthorized consent
- Because there is consent, there is a valid contract however it
is only unenforceable
Art. 1868 – By the contract of agency
 A person binds himself
 To render some service or do something
 In representation or on behalf of another,
 With the consent or authority of the latter
Importance of the Essential Characteristics of Agency
call it
- A missing element would not make a contract of agency
such and will not make it fall under the laws of agency
Elements of a Contract of Agency
 Consent
o There must be actual intentions of the parties to
enter into a contract of agency
o Principal is incapacitated =voidable contract with
third party
o Agent is incapacitated = Agency contract is voidable
o Voidable contracts are valid until annulled
 Object
o The service to be performed by the agent
 Consideration
o An agency is presumed to be for a consideration
Essential Characteristics of a Contract of Agency
A Contract of Agency is Fiduciary and Revocable
- Because the personality of the principal is extended hence
the need for trust and confidence
- Doctrine of Representation
o Actual or legal absence of the principal is converted
to his juridical presence by legal fiction of
representation
- Principal does not need a cause of action to revoke the
contract of agency
- It is revocable due to the fiduciary nature of the contract as it
is for the purpose of representation
Steffi Martina Valle
AGENCY NOTE | CLV
 - Principal may be liable to damages
- Revocability is subject to the exceptions of irrevocable
contracts (Module 1.4 – Extinguishment)
Consensual
- Perfected by mere consent
- Cannot be compelled even by the courts
A Contract of Agency is Preparatory
- It is only a means employed in order to allow one to act as a
representative of another
- Entered into not for one’s own sake
- No commercial significance if no judicial acts are
subsequently entered into
- Validity of the subsequent contract depends on the contract
of agency
- For the preservation of the subsequent contract
Nominate and Principal
- Has its own name and set of laws given by the Civil Code
- Does not depend in another contract to be valid
Progressive
- An ongoing process
- May be argued to go against the mutuality or obligatory
force of contracts
- Because the end goal of the agency contract is the juridical
acts of the agent would do which is to enter into commercial
contracts
o In order to achieve the end goal of a contract of
agency, it is progressive to meet the needs of the
market being a commercial contract
Onerous and Unilateral
- Presumed to be for a consideration
- Principal obligation is only with the agent rendering service
to the principal
- Obligation of the principal only arises upon performance of
the agent’s obligation
- If an agent enters into COA gratuitously but fails to perform
his service, he may be held liable
Personal, Representative and Derivative
- Subject to the control of the principal
- Authority of the agent is from the powers granted by the
principal
- His act is the act of the principal
- Notice to the agent is notice to the principal
- Does not incur liabilities with respect to the contracts he has
entered into for the principal
General Rule: An agent is not liable to the contract he enters into
in behalf and in the name of the Principal
Exception: Except when he binds himself to the contract
- Agent will also be liable if he was a tortfeasor
Art. 1897 – The agent who acts such is not personally liable to
the party he contracts with
 Unless he binds himself
 Or exceeds his authority without giving such party
sufficient notice of his power
Steffi Martina Valle
AGENCY NOTE | CLV
Class Discussion:
- Agent only becomes liable when he binds himself to the
contract
- Agent is also liable if he is a tortfeasor where grounds for his
liability is fraud or negligence
- Agent is only liable when he acts in excess of his authority
when he warrants to the third person that he will obtain the
ratification of the principal General Rule: failure of the principal to object to the representation
of the agent give implied consent
- If agent did not warrant but acts in excess of authority, he
still is not liable Art. 1870 – Acceptance by the agent may also be
o Because an agent is not a party to contract (privity or  Express
relativity of contracts)  Implied from his acts which carries out the agency
o The contract is unenforceable or void as to the  From his silence or inaction according to the
circumstances
principal
 Third persons must practice due diligence in
dealing with agents
Consent of the agent
- Start if the fiduciary relationship
Power of Attorney Contract of Agency
- Once the agent enters into juridical acts in behalf of the
- Normally meant as an - A concept
principal, his acceptance becomes express
instrument
- An agency is not presumed, anyone alleging it must prove it
- Tangible representation
and that a third party dealing with an agent has the
of a contract of agency
responsibility to check the fact of agency and the scope of
** A power of attorney may also refer to the authority granted to the the agent’s power
agent (hence may arise confusion in the use of the terms) o Act is within the agent’s power as with regards to
third persons when it is performed within the written
General Power of Atty Special Power of Atty power given to the agent
- Couched in general - Must say what act or - Declaration of the agent of a contract of agency cannot be
terms specific transaction is taken in face value.
- Acts of administration being dealt with o Due diligence from third parties should be employed
- Declaration of the Principal as to who his agent is may be
taken I n face value
Art. 1869 – Agency may be express or implied
 from the acts of the principal
 from his silence or lack of action Steffi Martina Valle
 or his failure to repudiate the agency knowing that AGENCY NOTE | CLV
another person is acting on his behalf without authority

Doctrine of Apparent Authority or Agency by Estoppel
- Proof of reliance upon the representations made by the
principal
- Proof that such representation solicited the action of the
party
- Based on the Principal’s actions, there is an agency contract
between them
from his client business transactions
- Atty acting as counsel and juridical acts
Art. 1877 – An agency couched in general terms comprises only of
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. 1876 – An agency is either general or special

- General agency comprises all the business of the principal
- Special Agency is established for one or more specific
transactions POWERS OF ATTORNEY

Acts of Administration
Kinds of Agency - Couched in general terms
Universal - Acts the principal himself may purse IN THE ORDINARY
- Covers all acts that the principal may lawfully delegate to his COURSE OF BUSINESS
agent - Conducts usual and necessary in the usual course of business
General - Does not include dispositions or encumbrances
- pertains to the principal’s business of a certain kind or in a - Does not include authority to dispose
certain place
- couched in general terms or made general by the usage or
customs of the business he is authorized to transact
Special
- covers a special or particular act in accordance to specific Art. 1878 – A special power of attorney is necessary in the
transactions following cases:
- Payments not usually considered as acts of administration
- To effect novations which puts an end to obligations
Attorney-at-law Attorney-in-Fact existing at the time the agency was constituted
- cannot settle actions - Contract of agency - To enter into
subject to litigation generally dealt with as o compromise
without the authority with regards to o submit questions to arbitration
o renounce right to appeal from a judgement
o waive objections to the venue of an action
Steffi Martina Valle
o pardon a prescription already acquired
AGENCY NOTE | CLV
- To waive obligations gratuitously
- Entering into any contracts where ownership of an
immovable is transmitted or acquired
 - The grant of a special power of attorney is dependent on the
operative clause of the contract and not the title of the
contract as labeled by the parties
o Even is contract states “GPA” but operating clause
contains “authority to sell” it suffices as an SPA
- Special Power of Attorney need not be in writing and may be
orally given but must be express
o The requirement of express authority refers to the
nature of the authorization and not its form
o If not in writing (and not subject to existing laws
requiring such), authority must be proven and
established by competent and convincing evidence
o 3rd person dealing with an agent must exert due
diligence in checking the fact of agency and the
extent of the power of the agent

Acts of Dominion – enumerated in 1978

- Requires a special power of attorney
- Depends on the nature of the transaction or action
-
Art. 1878 (3) – Special Power of Attorney is necessary
- To enter into
o compromise
o submit questions to arbitration
SPECIAL POWER OT ATTORNEY o renounce right to appeal from a judgement
- Required for acts of strict dominion o waive objections to the venue of an action
- List enumerated in 1878 o pardon a prescription already acquired
o Not exclusive as last paragraph is a catch-all phrase
depending on the nature of the business of the
principal
To Compromise
- Give up terms, hence covers acts of dominion

Steffi Martina Valle

AGENCY NOTE | CLV
 - May not be in writing but be proven by duly established
evidence
To Arbitrate
- To check who is wright or wrong
To compromise does not include that power to submit to arbitration
as the law says so. To arbitrate through the power to compromise
cannot emanate from the doctrine of implied powers as they do not
flow from each other being different from each other.
“Exact payment of sums by legal means” – is enough authority to
grant another the power to sue in one’s behalf
Art. 1878 (1)(7) – Special Power of Attorney is necessary
- To make payments not usually considered acts of
administration
- To Loan or Borrow money (unless urgently and
indispensably needed to preserve things under
administration
To Collect or Receive money in behalf of the Principal
- Authority to collect is not equal to authority to indorse or
encash in behalf of the principal
- Third person taking checks payable to a corporation through
an agent must ascertain the fact and authority of the agency
To Loan or Borrow Money in Behalf of the Principal
- General Rule:
o A Special Power of Attorney is needed for on to
borrow money in behalf of his principal
- Exception:
o Urgent and indispensable need for the preservation
of the things under the administration of the agent
- Power to Loan does not include power to mortgage or
guarantee
Art. 1878 (2) (4) (14) – Special Power of Attorney is necessary
- To effect novations which put an end to obligations
already in existence when agency was constituted
- To waive any obligations gratuitously
- To Ratify and Recognize obligations contracted before
the agency
To effect novations:
- If obligations are entered before, SPA is needed
- If entered subsequent to the establishment of an agency, it
will depend on the nature of the obligation
- Deals with obligations of the principal to third parties
o Principal as the debtor in a contract
o If Principal is the creditor, SPA is needed as it falls
under “To waive obligations gratuitously”
To waive any obligations Gratuitously
- To condone or remit a debt would require a special power of
attorney, absent such would render such condonation or
remission to the principal unenforceable
- If waiver is for a consideration, it is only valid id it is within
the scope of the authority granted to an agent
o By virtue of incidental powers
o BUT WAIVER OF SUCH GRATUITOUSLY
WOULD NEED AN EXPRESS POWER FROM
THE PRINCIPAL
Steffi Martina Valle
AGENCY NOTE | CLV
 - To waive onerously is the same as performance of the
obligation to the principal and if within the scope of
authority, no express authority is needed
- Example: accepting payment of the agent for things bought
by customer in business of principal. Being part of the
general course of business, it is valid.
Art. 1874 – When a sale of a piece of land or any interest therein
is through an agent, the authority of the agent shall be in writing;
otherwise the sale shall be void.
Art. 1878 (5) – A special power of attorney is necessary to enter
into any contract by which ownership over an immovable is
transmitted or acquired either gratuitously or for a valuable
consideration
Sale of Land through an agent
- Covered by Art. 1874
- Authority of an agent must be in writing
o If such authority is not in writing, it is unenforceable
or void as to the principal
NOTE
- An agent is not allowed to buy the property of the principal
even if he is empowered by with the SPA to sell such
property
o It is void according to Art. 1491 (2)
o But the principal may authorize the agent to buy in
which case, the sale is valid
Purchase of land through an agent
- Falls under Art. 1878 (5) which covers “ownership over an
immovable property transmitted or acquired either
gratuitously or a valuable consideration”
- Under Art. 1878, Special Power of Attorney only needs to be
expressed and not in writing
o However, ideally it is best to be in a written
instrument
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
- Both power must be granted to the agent
- Presence of one does not automatically include the other
- If entered in the name of the principal, the principal is not
bound unless ratified
o Unenforceable or void as to the principal
- The power to mortgage does not include power to enter into
other obligations
o Acquiring a debt
o Mortgaging for a past debt of the agent
To bind the Principal in a Mortgage
- Entered in the name of the principal, and signed for /behalf
of the principal
Art. 1878 (12) – A special power of attorney is necessary to create
or convey real rights over immovable property
Art. 1878 (12)
Steffi Martina Valle
AGENCY NOTE | CLV
 - deals with mortgages, easements, usufruct
- deals with real rights
- Special power of attorney is needed
o Must only be expressed and not necessarily in
writing
Art. 1878 (5)
- deals with Contracts of Sale
- covers purchase of land through an agent
o which only needs an express SPA
Art. 1878 (9) – A special power of attorney is necessary to bind
the principal to render some service without compensation
Binding the principal to render service
- SPA is required if without compensation
- Even with compensation, it would still be dependent on the
nature of the service
o Example: talent Managers
Art. 1878 (7) – A special power of attorney is necessary to loan
money, unless the latter act be urgent and indispensable for the
preservation of the things which are under the administration of
the agent
To loan or borrow money
- An act of strict ownership which requires a special power of
attorney
- Exceptions:
o Urgent and indispensable need for the preservation
of the things which are under the administration of
the agent
Agent Empowered to Borrow in behalf of the principal
- Agent in his personal capacity may be the lender at the
current rate of interest
Agent Empowered to Lend in behalf of the principal
- Agent cannot borrow the money of the principal without the
principal’s consent
Art. 1878 (8) – A special power of attorney is necessary to lease
any real property to another person for more than one year
- When personal properties are involved, it may or may not
constitute an act of administration depending on the nature
and circumstances involved
- SPA need not be in writing but the lease contract in order to
be enforceable needs to be in writing pursuant to the
requirements of the Statutes of Frauds
Art. 1878 (15) – A special power of attorney is necessary to effect
any other act of strict dominion
Acts of Strict Dominion
- Those enumerated in 1878
- Acts not part of the enumeration but may be considered as an
act of strict dominion dependent on the circumstances
o Sale of Personal Property
 Generally, an act of strict dominion
Steffi Martina Valle
AGENCY NOTE | CLV

 But if included in the ordinary course of
business of the principal, it may constitute
an act of administration
 Sale or encumbrance of a movable property
may EITHER be an act of strict dominion
or an act of administration depending on the
circumstances
DOCTRINE OF IMPLIED POWERS
- The grant of express or special power of attorney must
necessary include all implied powers or incidental to such
powers even if they amount to acts of ownership or strict
dominion
- Acts must flow from each other
o Unlike power to compromise and power to submit to
arbitration
Art. 1885 – In case a person declines an agency, he is bound to
observe the diligence of a good father of a family in the custody
and the preservation of the thing forwarded to him by the owner
until the owner appoints an agent. The owner shall as soon as
possible appoint an agent to take care of the goods.
- Not rooted on the privity of contract as the agent denied but
from the fact that he accepted the goods of others
- Required to practice the diligence of a good father of the
family even if there is no obligatory force of a contract
between parties
Art. 1884 – The agent is bound by his acceptance of to carry out
the agency and is liable for the damages which through his non-
performance, the principal may incur.
He must also finish the business already began on the death of the
principal, should delay entail any danger

RIGHTS, DUTIES AND OBLIGATIONS OF THE AGENT General Duties of an Agent

Duties Obligation
- All duties are - Juridical necessity to
obligations give, to do or not to doe
- Duty goes beyond the - Not all obligation
realm of obligations would fall into duties
when - Only limited in the four
- Open ended obligation corners of the meeting
of the mind
Duties of Agents
- Liable for the damages obtained by the principal due to his
non-performance
- Requiring the agent to finish the business when contract of
agency is formally terminated due to death
o Obligatory force of the contract requiring the agent
to practice due diligence over the affairs of the
principal is extended even when the contract has
been terminated
 Due to the preparatory characteristics of the
agency contract
- Obedience
o Must act within the authority granted to the agent
o Must act following the instruction of the principal

Steffi Martina Valle

AGENCY NOTE | CLV
 - Due Diligence
o Employing diligence of a good father of a family in
dealing with the affairs for and in behalf of the
principal
- Loyalty
o Put the interest of the principal over the agent’s in
case of conflict of interest
o When a servant serves two masters, if conflict of
interest, one being loyal to one, you become not a
hundred percent loyal to another
Representative, Derivative and Personal
- Action of the agent is action of the principal
- Bad faith of the agent is bad faith of the principal
- Bad faith of the agent, in the performance of his duty
pursuant to the contract of agency binds the principal
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
- states the twin duties of an agent, obedience and diligence
- to act within his scope – Diligence
- to act within his authority - obedience
Art. 1887 – in the execution of the agency, the agent shall act in
accordance to the instruction of the principal. In default, he shall
do all that a good father of the family would do as required by the
nature of the business
Art. 1888 – An agent shall not carry out an agency if its execution
would manifestly result in the loss or damage to the principal
Duty of Obedience
- When agent acts in accordance to the instructions of his
principal, agent cannot he held liable for the damages
suffered by the principal
Breach of Duty of Obedience
- Resulting contract is unenforceable
- Agent may be held liable to the principal for the damages the
principal obtained
Agent Acts in the name of the principal, in excess or without
authority - PRINCIPAL IS NOT LIABLE TO THE THIRD
PARTY, CONTRACT IS VOID AS TO THE PRINCIPAL
- Agent not liable to the third party as the agent is not
privy to the contract
- If the Principal does not ratify the contract, Principal has
no cause of action against the agent because it is void as
to him
- Agent is not liable to the third party based on the
principle of relativity as the agent did not give his
consent
Exception
- Third party may claim liabilities from the agent who
entered to a contract in excess of authority when the
Steffi Martina Valle
AGENCY NOTE | CLV
 agent binds himself to the contract or warrants that will
get the ratification of the principal
Art. 1883 – When an agent acts in his own name, the principal
has no right of action against the persons with whom the agent
has contracted; neither have such persons against the principal
When an agent is one directly bound in favor of the person he
contracted, as if the transaction was of his own, except when the
contract involves things belonging to the principal
This article does not prejudice the actions between the principal
and the agent
- Due to the relativity of contracts
- Principal is not a party in a contract entered into by the agent
under his name
If the agent entered into a contract in his name
- Principal is not a party to that contract
- Principal is not given cause of action
- Agent is only liable to the principal if the object of the
transaction entered by the agent touches on the property
of the principal
- An agent entering a contract in his own name breaches his
fiduciary duties to the principal
o Allowing the principal to obtain damages by virtue
of unrealized profits
Art. 1882 – The limits to an agent’s authority is not considered
exceeded when it was performed in a manner more advantageous
to the principal than specified by him
- Principal would not be able to list all possible scenarios an
agent may face in dealing with his affairs
- The law states acting beyond his power but not against the
instructions of the principal
o Breach of obedience renders the resulting contract
void
Art. 1900 – As to third persons, an act is considered to be
performed within the scope of authority if such act is within the
terms of the power of attorney, as written, even If the agent has
exceeded the limits of his authority according to the
understanding between the principal and the agent
- Third persons relying on the written instruments are not
prejudiced by private agreements by the agent and the
principal
- The agent breaching the private instructions may still be held
liable for damages if incurred by the principal due to breach
of the duty of obedience
o However due to the written instrument, the contract
is binding to the principal with regards to third
persons
Duty of Diligence
- agent observe diligence of a good father of the family in
dealing with the transactions or affairs of the Principal
- Loss itself does not result to breach of due diligence unless
fraud or negligence is employed
Breach of Diligence – agent becomes liable for the damages
incurred by the principal
Steffi Martina Valle
AGENCY NOTE | CLV
 - Who seeks the agent liable has the burden of proving
negligence or fraud by the agent
Principal instructs 1,2,3 and agent knows principal will incur losses –
if he does not follow because of losses, agent is not liable
- May be argued that since the principal was acting pursuant
to the instruction of the principal, he is not to be liable for
the losses the principal suffer
Duty of Diligence v. Duty of Obedience
- Art. 1888 – agent shall not carry out the agency if it its
execution would manifestly results to the loss or damages of
the principal
o In the carrying out the business of the principal,
when the agent knows that its execution would
manifestly results to the loss or damages of the
principal, he is mandated by law not to pursue
o But if the principal has given specific instructions to
the agent despite the risk, the agent shall not be held
liable
Art. 1889 – The agent shall be liable for damages if there being a
conflict between his interest and those of the principal, he should
prefer his own.
Duty of Loyalty
- Always the interest of the principal
- Liable for damages that the principal incurred
o Unrealized profits
- Agent loses his right for compensation and commission
- And all that was given to the agent in his own account
- Agent has duty to deliver
o All accounts received due to the agency
o Agent violates this if he receives gifts by virtue of
the agency and does not account for such with the
principal
- An agent acting in his own name also violates such duty
- Agent cannot purchase principal’s property without consent
from the principal
- When accounting has been rendered and approved, principal
can no longer ask for there to be changes unless due to fraud
or vitiation
- Deliver to the principal what is received by virtue of the
agency
Art. 1884 – The agent is bound by his acceptance of to carry out
the agency and is liable for the damages which through his non-
performance, the principal may incur.
He must also finish the business already began on the death of the
principal, should delay entail any danger
Art. 1909 – An agent is responsible not only for fraud but also for
negligence which shall be judged with more or less rigor by the
courts, according to whether or not the agency was for a
compensation
Agent may become liable to the 3rd parties
1. Agent binds himself
Steffi Martina Valle
AGENCY NOTE | CLV
 2. Acting with fraud or negligence
a. Principal is directly liable to third parties as
committed by the agent by the principle of
representation but 3rd parties may still go after 3rd
parties
b. Agent acts with fraud – voidable, agent is solitarily
liable with principal
i. Agent acts in pursuit of the business of the
Principal (fraud or negligence)
c. Negligence – valid, agent is solitarily liable with
principal
Remedy of Principal
o Principal may go after the agent for breach of due
diligence. Hence, a cause of action for damages
3. When the 3rd party knew that the agent is outside his
authority but says he will ask the principal to ratify the
contract
Art. 1901 – A third party cannot set up the fact that the agent has
exceeded his powers, if the principal has ratified or has signified
his willingness to ratify the agent’s acts
- Defense of unenforceability is only given to the principal
- With regards to the third parties, the contract is valid
3rd parties
- Cannot use the lack of authority of the agent to avoid the
contract
- 3rd party can’t simple decide not to push through with the
contract
- 3rd party can’t hold agent liable in the contract, the agent is
not a party in the contract (parties knowing that they were
entering in a contract with an agent)
Power to Compromise does not include other powers
- Specification as to what it covers and involves
Agent within authority but with fraud to the principal
- Contract is valid and not unenforceable
o Because agent acted within his authority
o Not voidable because consent of the agent is not
vitiated
o Contract is valid
o But breach of diligence gives rise to damages
Art. 1892 – The agent may appoint a sub-agent if the principal
has not prohibited him from doing so; but he shall be responsible
for the acts of the substitute:
- He was not given the power to appoint
- When he was given the power but no person was
designated and he appointed someone notoriously
incompetent or insolvent
All acts of the substitute against the prohibition of the principal is
void
Appointment of Sub-Agent
General Rule: every agent has the right to appoint a sub-agent
- Agent is responsible for the actions of the sub
o No prohibition
o No exact person appointed, but the appointed person
acts negligently or is insolvent
- Agent becomes liable only to the damages caused by the
sub-agent to the principal
- Agent is not liable for sub-agent if it was principal who
appointed the sub-agent
Steffi Martina Valle
AGENCY NOTE | CLV
 - Sub-agent cannot be liable more than what is due the main
agent
Exception: Unless there is a prohibition
- Acts of the sub-agent is void (unenforceable)
Liability of Agent to Principal
- Agent is liable if the principal incurs damages from ratifying
the contract
- Principal has right of action against both the agent and
substitute for acts prejudicial to the principal
Art. 1894 – The responsibility of two or more agents even though
appointed simultaneously is not solidary, if solidarity has not
been expressed
Art. 1895 – If solidarity has been agreed upon, each agent is
responsible for the non-fulfillment of the agency and for the fault
or negligence of his fellow agents, except when the latter has acted
beyond the scope of their authority
1 Special Power of Attorney – 2 agents
- General Rule:
o Only joint joint
o if only one signs a subsequent contract, if within the
power still binds the principal
- Must be expressly stipulated that responsibility is solidary to
require the consent of both agents for it to be valid
- Indicators (I, and, jointly and solidarily)
If solidary agents
- Each agent is responsible for the acts of co-agents
- Exception:
o If the co-agent acted beyond the scope of his
authority
Liability of Agent to third persons
General Rule:
- It is the principal and not the agent who is bound to third
persons
- If acted without or beyond authority
o Void is to the principal
o Agent cannot be held liable as he is not part of the
contract
Exceptions:
Agent may become liable to the 3rd parties
1. Agent binds himself
2. Acting with fraud or negligence
a. Principal is directly liable to third parties as
committed by the agent by the principle of
representation but 3rd parties may still go after 3rd
parties
b. Agent acts with fraud – voidable, agent is solitarily
liable with principal
i. Agent acts in pursuit of the business of the
Principal (fraud or negligence)
c. Negligence – valid, agent is solitarily liable with
principal
Steffi Martina Valle
AGENCY NOTE | CLV
 Remedy of Principal Agent Exceeding Authority
o Principal may go after the agent for breach of due - Every person dealing with an agent is mandated to know the
diligence. Hence, a cause of action for damages extent of the agent’s authority. As if the principal denies, the
3. When the 3rd party knew that the agent is outside his principal wins
authority but says he will ask the principal to ratify the - Liable to the third person
contract o When third party is fully aware and warrants the
ratification
If agent exceeds authority o Fraud and Negligence
- Unenforceable or void to principal
- Principal is not bound by the contract Agent Exceeding Authority and did not indicated his authority
- Agent is not liable to principal as agent is a third party to the - Agent is not liable
contract - Third party is mandated by law to check on the power of the
o But may be gone after for damages agent
o Breach in duty of obedience and diligence
- Agent is not liable to third parties unless agent warrants that Fraud or Negligence
ratification will be obtained - Not an excess of authority
- Agent is not liable because he is not privy to the contract - If agent while pursuing the business of the principal within
the scope of his authority; principal is liable solidarily
Defense if exceeding power or Authority - With SPA– valid and principal may be held liable
- Cannot be used by the 3rd party and only the principal - If there was no authority principal cannot be held liable
- Suing for contract – only Principal
Principal is liable to the deceitful representation of the agent if: - Damages obtained due to the contract – may go after the
- Representation is authorized agent
- Within the implied authority of the agent - Fraud or negligence as cause of action – may go after the
- Agent is apparently authorized by principal to make such agent or both of them
representation
DBP – liability of agent was due to fraud or negligence
If an agent commits a crime in the performance of an agency
- Agent will be held liable for such crime and the fact of Ratification
agency will not excuse him for such - After the act

Implied Agency

Steffi Martina Valle

AGENCY NOTE | CLV
 - Silence
- Lack of attention when the principal knows an agent has
been representing her
Agency to sell is not always a Sale on Consignment
Agent to sell is not always a commission agent
Sale on Consignment
- Goods sold in the name of the agent of things belonging to
the principal and in the possession of the agent
Under both Agency To Sell or Consignment
- No selling on credit without consent
o If sale in credit was allowed by the principal, details
as to the buyer must be transmitted to the principal
or it may be treated as sale on cash basis
Brokerage and Agency
- Both a service contract
Brokerage stops
- Negotiating phase
- Entitled to the commission only by bringing the seller and a
buyer together to negotiate
o Only by giving a bona fide buyer
 Only proven to be bona fide if a sale is
perfected
- No fiduciary duty to the principal
- If he enters a contract in behalf, such contract is only
unenforceable
- Buyer is true bona fide buyer only when:
o if that contract was contracted, perfected and
consummated by the principal
- Ready, willing and able buyers
- Acts on negotiation on the terms that the principal want
- MAIN GOAL IS TO INTRODUCE A BONA FIDE
o ONLY KNOWN THAT HE HAS DONE HIS
JOB UPON PERFECTION EVEN AFTER THE
TERM OF BROKERAGE
Agent
- Entering into a juridical-acts
- When parties perfect a contract
- Goes beyond negotiation
- All contracts of agency are initially brokers
- Perfection is a must
- If no perfection, still no entitlement to commission
- Entitled to commission upon consummation of the contract
- The only thing that the agent that cannot control is the time
Doctrine of Efficient Procuring Cause
- To prevent fraud to be committed by the principal
- For brokerage, mutuality and obligatory force
- Agency; compensation of agent
- Unlike most contracts, the fiduciary characteristic of the
contract makes the contract revocable
- Ability of the principal to revoke the authority of the agent
may be easily a ground for fraud
- Principal may simply wait for the end the brokerage contract
in order for the broker not to earn
- Broker has no capacity to push through with the sale
- In agency, only if there was bad faith on the principal (pre-
termination) as agent may enter into juridical acts
Steffi Martina Valle
AGENCY NOTE | CLV
Manotok; - Accomplishment
- Efficient procuring cause was applied as it was a brokerage
- If it was an agency, no part on the principal to pay as there General Rule:
was a term. Not extending it does not mean bad faith which - Principal may revoke the contract anytime
entitles the agent to a commission. - Upon notice to the agent
- Expressly
Difference between: o By an instrument
- Finder’s fee – put strangers together o Oral instruction to the agent of the revocation
- Service of broker to convert one into a bona fide buyer - Without prejudice to third parties in good faith
- By reason of the preparatory character of a contract of
True Agent earns his commission agency
- Consummation of the sale - Interest of the third-party contractors are protected
o Agent converse to the buyer to push through with
the sale Agent is titled to commission
o If not successful, and seller needs to file suit, agent - Sale or transaction is entered into by the agent
has not fulfilled his service - Upon performance of his service
 According to commercial logic; agent is not
entitled Exception
 According to Ticong case; yes entitled - Revocation cannot only take place if the agency contract is
(unless it is a brokerage) coupled with interest
- Unless there is a stipulation for a finder’s fee o When there is a bilateral contract to be dependent of
the continued existence of the contract of agency
EPC  The bilateral contract is different from the
- Only a broker other contract
- Other matters to consummate is not part of the broker’s job o Means of fulfilling an obligation already contracted
 An obligation can only be complied with
Extinguishment of Agency due to the existence of an agency
- Revocation by the principal o Partner is unjustly removed
- Withdrawal of the agent
- Death, CI, Insolvency, insanity of either The fact of commission does not necessarily mean interest because
- Dossolution of a corporation which is a principal or agent generally agency is onerous
- Expiration - Revocability is due to its fiduciary character

Steffi Martina Valle

AGENCY NOTE | CLV

No such thing as a non-withdrawal agency
- May amount to involuntary servitude
Revocation in bad faith or good faith
- Agent has no way to recover commission for a service not
performed
- Damages if in bad faith
Third party not doing due diligence hence in bad faith
- Cannot hold the principals liable
- Third party cannot raise the invalidity of the contract
- Unenforceable
o Principals; void unless ratified
o 3rd parties
 contract cannot be a source of right
 cannot use the lack of authority as a defense
The creation of a new power of atty either enlarges or decreases the
power of atty must supplant or revoke the prior one when
inconsistent. If the SPA does not revoke the GPA, it is a mere futile
gesture.
- Principle of relativity, only the owner can claim the defense
of the subsequent being unenforceable
o Exception: if it is a contract to defraud creditors,
then it is rescissible contract, and the creditors may
impugn the subsequent contract entered by the agent
in behalf of the principal
o Bilateral contract which depends on it
 Example: contract of sale
 Contract with a lawyer for service is not
bilateral
 A kind of agency to represent someone in
the legal world
o Means of fulfilling an obligation
 Payment of loans with agent-mortgagee
- Upon the death constituted for both agent and principal or a
third party accepted it
- Partnership
Revocation of the principal by directly dealing with the third person
- Only deals with a Special Agency
o Special agency is when specific or particular
transactions are made to be done to the agency
o Directly towards a particular person
- General Agency
o Dealing with anyone who can deals with any
business of the principal
- Only affects specific transactions and third parties notified
Irrevocability of a Contract of Agency
- For the benefit of the agent
- Principal cannot remove power of the agent which normally
he is entitled to such power
Exception:
- Fraud
o Still a cause of action for damages

Irrevocability
- Agency coupled with interest

Steffi Martina Valle

AGENCY NOTE | CLV
Agency with a period - Ig agency was established to especially meet and deal with a
- Still revocable but liable for damages third person, the revocation may be done only if notice was
o Unrealized profit – when he has done his service given to that third person
Agency without a period
- revocable 1927
- Principal revokes or dies, agent can still continue to continue
with the agency
General Rule: principal may revoke and is not a breach
- If the principal revokes in bad faith, revocation still works
but entitles the agent to damages
Irrevocable Agencies:
- If the agency is irrevocable, any revocation is bad faith
- Any attempt to revoke the agency would not work
- Exception as enumerated by law
o No matter how dramatic, if it does not fall under the
enumeration of the law it should not be irrevocable
o If agency for the common interest of both parties or
third persons, Art. 1930 may be the applicable
provision but not the irrevocability
- If under an irrevocable agency, Whatever the principal does,
it is not revocable
o Agent may still exercise the power
o Going to court directly would not really lead to
anything
- In irrevocable agency the issue
o “whether the agent can be deprived of his
power” and not “whether or not he can
recover”

Revocation

Steffi Martina Valle

AGENCY NOTE | CLV