AGENCY

Agency is where a person binds himself to render service or to do

something IN REPRESENTATION of another, with the latter’s
consent or authority.

Nature of Agency

1. Agent acts as representative and not for himself.

2. Agency acts within scope of his authority.

Elements of contract of agency

1. Consent of the principal and agent.

2. Object: execution of a juridical act in relation to third parties.
3. Consideration: either commission or liberality.

Characteristics of agency contract

1. Nominate, principal
2. Consensual
3. Unilateral and generally onerous
4. Preparatory and representative
5. Fiduciary and revocable
(Neither the principal nor the agent can be forced to remain in the
relationship when they choose to have it terminated.)

Consequences of fiduciary relationship

1. Agent estopped from asserting adverse titled over SM of agency

belonging to the principal.
2. Must choose best course of action for the principal, and not one
that favors himself to the detriment of the principal.

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3. Cannot acquire for himself property of the principal entrusted for
disposition.

Express Agency vs. Implied Agency

Express agency – there is ACTUAL ACCEPTANCE.

Implied agency – Implied from:

1. Acts of principal
2. Silence or lack of action
3. His failure to repudiate the agency, knowing that a person is
acting on his behalf without authority.
4. Principal delivers power of attorney to the agent and he accepts it
without objection – if both are in the same place, physically present.
NB: But if not physically present in the same place, as when the
power is delivered through mail, silence is not implied acceptance.
XPNS:
1. Principal transmits power of attorney to the agent who receives it
without objection.
2. Principal entrusts to the agent by letter or telegram a power of
attorney with respect to the business in which the latter is habitually
engagedin, and he did not reply.

Agency by Estoppel

When one led other to believe that he is an agent when in fact he is

not, the person is estopped to deny such fact anymore.

* Even if the agent has exceeded his powers, the principal should be
made liable if he allowed the agent to act as though he had full
powers.

Elements of Agency by Estoppel

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1. Principal manifested a representation of the agent’s authority.
2. Third person in GF relied on the representation.
3. Third person changed his position, to his detriment, relying on the
representation.

* Authority of agent must be in writing.

General Agency vs. Special Agency

General agency – is one that encompasses all of the business of the

principal (Universal Agency) (Agency couched in general terms)
Involves acts of administration only not acts of dominion.

Special agency – is one which will cover only one or more specific
transactions. (Particular agency) (Agency couched in specific terms)

On death of the principal

GR: It terminates the agency.

XPN: The agent must finish the business already began prior to the
principal’s death, should delay entail any danger.

General obligation of the agent who accepts the agency

Legally bound to carry out the terms of the agency.

In case of breach, the principal can sue for damages, but he cannot
compel agent specific performance because it does not apply to
obligations to do.

GR: Agent is not liable for contracts he enters.

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XPN: 1. He exceeds authority. (Principal may ratify, if not
unenforceable as against the principal.)
2. He binds himself to the contract personally.

XPN to the XPN: When the third person was aware that the agent
exceeded his powers, the contract is unenforceable even between the
agent and the third person. (in pari delicto)

When agent is empowered to sell his principal’s property, he

cannot purchase for himself (As provided in Art. 1491)

When an agent is empowered to borrow or lend money, he may

transact with himself

1. If empowered to borrow, he may be the lender at the current

interest, or else, liable for return of difference.

2. If empowered to lend, he may not borrow without the

principal’s consent or else liable for DAMAGES.

When agent acts in his own name

The principal has not right of action against the third persons,
neither do the third persons have right of action against the
principal.

XPNS:

1. When the transaction involves the things of the principal. In this

case, the principal is bound.
2. When the principal ratifies the contract or derives benefit from it.

Remedy of the principal: DAMAGES

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Duty of Loyalty and Art 1891 – When an agent enters into a
contract in his own name on a matter that falls within the scope of
the agency, he is bound to render an account of his transactions and
deliver to the principal what he received by virtue of the agency
even if it may not be owing to the principal.

When agent can appoint a sub-agent

I the principal did not prohibit him from doing so. Effect: Sub-agent
is agent of principal too. Agent is responsible for the acts of the sub-
agent when:

a. He was not given power to appoint one

b. He was allowed, but the one chosen was notoriously
incompetent/insolvent.

* If the principal expressly prohibits the appointment of a sub-agent:

a. All acts of sub-agent are void as to the principal
b. The agent is responsible personally for the contracts entered into
by the sub-agent.

Scope of powers of an agent in general

General powers: Only acts of administration

 Even if the principal provides that the agency may do

whatever he deems appropriate, or even if the agency
authorizes general and unlimited management.

What need SPA (Acts of strict dominion)

1. Making payments not considered as acts of administration.

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2. Effect novation of obligations.
3. Compromise, submit to arbitration, renounce right to appeal,
waive objections, renounce prescription.
4. Waive obligations gratuitously.
5. Transfer of immovable. (whether onerous or gratuitous)
6. Make non-customary gifts.
7. Loan or borrow money. (Unless urgently needed to preserve a
thing under administration)
8. Lease for more than 1 year.
9. Contract for principal to perform service without compensation.
10. Bind principal in partnership contract.
11. Obligate principal as guarantor or surety.
12. Convey or create rights over real property.
13. Accept or repudiate inheritance.
14. Ratify or recognize obligations contracted before agency.
15. Other acts of strict dominion.

Technically SPA need not be in writing, except sale of piece of land

which for validity must be in writing or else, VOID.

Rights and obligations of the principal

1. The principal in not bound by contracts entered into by the agent

without or outside scope of authority, EXCEPT:
a. If he ratified it expressly or tacitly.
b. Principal allowed agent to act as if he had full authority.
c. Principal revoked agency but the third party acted in GF without
such notice o revocation.

2. Principal is liable for torts committed by the agent within the

scope of authority.

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3. Principal must advance sums necessary for the agency if the agent
requests. If the agent paid for it first, the principal must reimburse.

4. Principal NOT liable for expenses of agent if:

a. Outside the scope of authority
b. Incurred due to agent’s fault
c. Agent incurred them with knowledge of unfavorable result, if the
principal was not aware thereof.
d. Express stipulation

5. Must indemnify agent for damages sustained without agent’s

fault.

6. Pay agent for his services.

7. If two or more principals constituted the same agent for a

common undertaking, they are solidarily liable. (as opposed to
constituting two agents by the same persons, the usual rule is joint
liability, not solidary liability as between the agents.)

Irrevocable Agency

GR: An agency is revocable at will

XPNS:

1. A bilateral contract depends upon it.

2. It is the means of fulfilling an obligation already contracted.
3. A partner is appointed managing partner and there is no just
cause.
4. Agency coupled with interest.

Extinguishment of Agency

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1. Revocation – even if it is irrevocable for a definite term or
period, the principal just pays damages to agent for damages caused
if any.

Implied revocation – appointing a new agent for the same business,

or the principal directly manages the business, or by granting a SPA
as regard the same business to another agent, where he previously
granted a GPA to one agent.

2. Withdrawal of agent
3. Death, civil interdiction, insanity, or insolvency of principal or
agent.

When an agency remain in full force notwithstanding death of

the principal

1. constituted in common interest of the principal and agent.

2. There is stipulation pour atrui which has been accepted.

3. Agent did not know the principal was dead and third party was in
GF.

* IF the third party was in BF, void for lack of consent, an essential
element.

4. Dissolution of juridical entity which entrusted or accepted the

agency.

5. Accomplishment of purpose or object of agency.

6. Expiration of period of agency.

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COMPROMISE

It is a contract where parties make reciprocal concessions (amicable

settlement) to put an end to litigation or avoid it altogether.

Matters which cannot be compromised

1. Civil status of person

2. Validity of marriage or legal separation
3. Ground for legal separation
4. Future support
5. Jurisdiction of courts
6. Future legitime

Effect of compromise – it has the effect of res judicata between the

parties. If the one party does not want to comply with the
compromise, the other party may:

1. Enforce the compromise; or

2. Rescind the compromise and insist on his original demand.

LEASE

Lease is a consensual, bilateral, onerous and commutative contract

where one person binds himself to grant temporary use of a thing or
render some service to another, who pays compensation.

Lease of service vs. Lease of things

Lease of Service Lease of Thing

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one party binds himself to one party binds himself to
execute a piece of work or give to another the
render some service for a enjoyment or use of a thing
price certain. for a price certain, whether
for a definite or indefinite
period. (consensual and
onerous. Not a personal
contract therefore death of
party will not auto-extinguish
the contract.

The object is some service The object is a thing

The principal obligation is to The principal obligation of

perform some service. the lessor is to deliver the
thing leased to the lessee.

Remedy is DAMAGES Remedy is SPECIFIC

PERFORMANCE.

Lease of rural and urban lands

* The lessee may not assign the lease without the lessor’s consent.

* The lessee may sublease the property even without the lessor’s
consent. But the lessee must still comply with his responsibility to
perform the contract toward the lessor.

The lessor may hold the sublessee for rent due from the lessee
(Accion Directa) But the sublessee cannot be held liable beyond the
amount due from him under the sublease.

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Nature of sublease agreement

It must comply with the lease agreement as to the manner of use and
preservation of the thing. And so, if the lease agreement provides
that the property must only be residential, the sublease cannot be for
the use of the property as commercial area.

* The warranties applicable to sale like warranty for hidden defects

also apply to lease, even if the lessor was not aware of such defects.

* Persons who are disqualified to enter in a contract of sale are also

disqualified to enter into a contract of lease.

Obligations of the lessor

1. Deliver the thing, which must be fit for the use intended.
2. To make necessary repairs on the thing to keep it fit for such use.
(Unless provided otherwise)
3. Maintain the lessee in peaceful and adequate enjoyment of the
lease during the contract.

Obligations of the lessee

1. Pay the price of lease.

2. Use the thing leased with diligence of GFF, devoting it to use
stipulated (or according to nature of the thing if none is stipulated.)
3. Pay expenses for deed of lease.
4. Return the thing after expiration of lease.
5. Observe the terms provided by the lessor.

Remedy for breach by either party

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1. Rescission with damages
2. Damages alone and allow contract to continue.

When thing leased is lost fortuitously

The lease is terminated. If the thing is reconstructed, there is no

automatic renewal of the lease contract, if there is no BF involved.

When thing lost is partially lost/extinguished

1. Rescission
2. Reduce rent to ½

Tacita Reconduccion (Tacit renewal of a contract of lease) –

Implied New Lease

A new contract of lease is impliedly created or established if at the

end of the lease contract, the lessee continues enjoying the lease for
15 days, with acquiescence of the lessor and no notice to contrary
provided by lessor.

Elements of Implied new lease

1. Lease contract has expired.

2. Lessee continues enjoying the property for period of 15 days or
more after expiration.
3. Continued enjoyment is with acquiescence of the lessor.
4. No notice to contrary provided by the lessor.

Period of the new lease according to the provisions of the law

(Also when period of lease is not fixed)

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Rural land – duration is what is necessary to gather fruits it may
yield for a year.

Urban land – duration is depending on rent paid (yearly if monthly

rent, monthly if weekly rent, etc.)

Grounds to eject a lessee judicially

1. Period has expired.

2. Lack of payment of price
3. Violation of conditions of contract
4. Lessee devotes the thing leased to use other than what was
stipulated or its nature.

Different instances where the purchaser of the thing leased

cannot terminate the lease

1. When the lease is recorded in the ROP

2. There is a stipulation in the contract of sale that the purchaser will
respect the lease.
3. The purchaser actually knows of the existence of the lessee.
4. The sale is fictitious.
5. The sale is pacto de retro.

Rule as to improvements introduced by the lessee on the

property, upon termination of the lease

1. For useful improvements

PREMISE: These are suitable to the purpose of the lease and did
not alter the form/substance of the property. The lessor must pay the
lessee ½ val;ue of improvement. If lessor refuses, the lessee can
remove the thing, even if it causes damage.

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2. For ornamental improvements
Lessee not entitled to reimbursement. But the lessee may remove it
if it does not cause any damage. But the lessor may choose to pay
the value of the thing, which terminates the lessee’s right to remove
the improvement.

* Lessees are not builders or possessors in GF under property law

because they know their right and occupancy of the land is based on
a contract of lease.

Contract for piece of work

One where the contractor binds himself to execute a piece of work

for the employer, in consideration of a certain price or
compensation. The contractor may either employ only his skill/labor
or furnish the material himself.

Loss if the contractor bound himself to purchase the material –

If the loss occurs before the delivery, the contractor bears the loss
XPN: if there is delay in receiving it (mora accipiendi)

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