Group 1:

ATOS, RUSSEL
CABUDSAN, CHRISTINE JOY
CHAN, CHELSEA ANDREA
DEADO, MARKO JERICHO

CHAPTER I
Nature, Form and Kinds of Agency

Article 1868
A person binds himself to do something or render some service on behalf of the
other with the authorization of the latter by contract of agency.
● When a person enters into a contract of agency he/she is obligated to do
something or render some service on behalf of the other party.
Article 1869
From the acts of the principal, the agency may be implied or expressed from his
silence or lack of action or failure to repudiate the agency, knowing that the other
person is acting as his presentative without his authority.
Agency may be also oral, unless the law requires a specific form.
● In a contract of agency, the principal’s silence, lack of action or failure to
repudiate the agency with the knowledge that a person is acting on his
behalf implies or expresses agency. Also, unless required by law in
specific from, the agency may be oral.

Article 1870
The agent’s acceptance may also be expressed or implied from his acts or from
his silence or inaction in the situations that carry out the agency.
● In a contract of agency, the agent’s silence or inaction may also be
considered as an implied or express acceptance.
Article 1871
In between parties who are present, if the principal delivers the power of attorney
to the agent and the latter receives it without any objection, the acceptance of agency is
implied.
● In a contract of agency in between parties are present, the acceptance of
agency may be implied when the principal transmits the power of attorney
to the agent without the objection of the latter.

Article 1872
In between parties who are absent, the silence of the agent is not an implied
acceptance except:
1. When the principal delivers his power of attorney to the agent, in a case which
the latter accepts without any objection.
2. In which the principal entrusts his power of attorney by letter or telegram, with
respect to the business that the agent is engaged in and he did not respond to
the letter/telegram.
● In a contract of agency in between parties are absent, the agent’s silence
is not considered as an acceptance. The exceptions are when the
principal delivers the power of attorney to the agent without objection and
when he entrusts his power of attorney through a letter/telegram in which
the agent did not respond.

Article 1873. If a person specially 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. (n)
Ways to effect agency:
1. Special information
2. Public advertisement

How do you rescind an agency?

The same manner as it was constituted. However, agency by special information may
be rescinded by notice in a daily newspaper, provided that it is proven third persons in
question read the revocation.

Article 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. (n)

An authority embodied in writing may it be in a letter shall be sufficient. The absence of

any written form of authority will make the sale void as stated in the article.

Article 1875. Agency is presumed to be for a compensation, unless there is proof

to the contrary. (n)

Need of stipulation:
There is no need for a contract of agency to include a stipulation for compensation since
it is a natural element in a contract. However, a need of stipulation is needed whenever
both parties agree to have a contract of agency without compensation.

Article 1876. An agency is either general or special.

The former comprises all the business of the principal. The latter, one or more
specific transactions. (1712)

Distinctions between a general agent and a special agent:

 1. Scope of authority
General agent - all acts connected with business.
Special agent - specific acts only in accordance with specific instructions.

2. Nature of service authorized

General agent - involves continuity of service.
Specific agent - no continuity of service.

3. Extent to Which Agent May Bind the Principal

General agent - within the scope of his authority although it may be contrary to the
latter’s special.
Special agent - Can not bind his principal in a manner beyond the specific acts he is
authorized to perform.

4. Termination of authority
General agent - does not terminate without notice to the third party.
Special agent - Duty imposed upon the third party to inquire makes the termination,
unless the agency is for the purpose of contracting with such third party.

5. Construction of instructions by the principal

General agent - merely advisory in nature.
Special agent - strictly constructed to limit the agent’s authority.

Article 1877. An agency couched in general terms 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. (n)

A general agent can cover only acts of mere acts of administration, even if:
a. The principal states he/ she holds no power.
 b. The principal considers such acts as appropriate.
c. The agency should authorize a general and unlimited management

Article 1878
Stated in the provision, special powers of attorney are necessary in the
following cases:
(1) To make such payments as are not usually considered as acts of
administration;
● It is said that payment on the day to day basis under the part of business
transactions is only then to be considered as an act of administration.
● However, any other acts that are not part of the ordinary business transaction
should be considered an Act of Strict Dominion which requires a special power of
attorney.

(2) To effect novations which put an end to obligations already in existence at the
time the agency was constituted;
● During the agency, when the agent created an obligation, the former has the
capacity to extinguish the latter by novation and thus constitutes the need to
have a special power of attorney.

(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;
● Based on the listed matters on paragraph three, these are the things that the
agent cannot do on behalf of the principal unless he has a special power of
attorney to do so.
● However, under the ruling of Dungo v. Lopena, an agent that compromises for
the principal without the special power of attorney is unenforceable unless ratified
by the principal.
(4) To waive any obligation gratuitously;
● To condone or remit an obligation is another way to gratuitously extinguish an
obligation. This paragraph provides that an agent cannot gratuitously extinguish
an obligor if the former doesn’t possess a special power of attorney.
● Agent’s implied powers are only up to the extent of condoning or remissioning a
debt but the former needs an express power to gratuitously extinguish the latter.
● The agent may still do so but it will be constituted as an unenforceable contract.

(5) To enter into any contract by which the ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;
● An agent cannot acquire an immovable property even if it is said to be his
consideration for the agency whether or not the immovable property is to be
considered as a gratuitous title.
● The contract that may arise in this circumstance shall be considered as
unenforceable unless a special power of attorney to convey such real property is
in writing according to Jimenez v. Rabot.

(6) To make gifts, except customary ones for charity or those made to employees
in the business managed by the agent;
● An agent must have a special power of attorney for him to be able to give gifts
and donation on behalf of the principal except:
○ Regular gifts for charity
○ Gifts to employees in the business
● Such gifts given by the agent without such power shall be constituted as void
whether or not it affirms with the requisites on Law on Donations.
○ However, if such donation complied with Law on Donations, it shall be
considered as enforceable under Law on Agency.

(7) To loan or borrow money, unless the latter act be urgent and indispensable for
the preservation of the things which are under administration;
 ● Special power of attorney is required when the agent acts to loan a sum of
money on behalf of the principal except:
○ The said loan is urgent and needed for safeguarding the subject matter of
the agency.
● Under the ruling of Rural Bank of Caloocan v. Court of Appeals, the creditor who
lends such money should be the one to execute the special power of attorney for
the benefit of the agent and the principal.

(8) To lease any real property to another person for more than one year;
● The paragraph expressly states that the leasing any real property to any person
for more than a year should have a special power of attorney.
● According to Shopper’s Paradise Realty v. Roque, leasing for more than a year
constitutes an Act of Strict Dominion, thus requires a special power of attorney to
be done by the agent.

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

● Principal binding himself with the agent also requires a special power of attorney.
● The principal having any obligations is then constituted as an Act of Strict
Dominion.

(10) To bind the principal in a contract of partnership;

● Acts of the agent on behalf of the principal regarding the latter’s investment or
contribution to partnerships should be done with a special power of attorney.

(11) To obligate the principal as a guarantor or surety;

● The said paragraph explains that the principal cannot be held as a guarantor to a
third party that was entered to by the agent unless the latter possesses a special
power of attorney.
● It acknowledges Article 2047 stating that the guarantor is then to fulfill the
obligation of the principal debtor, if he fails to do so, which automatically binds
the former solidarily with the principal debtor.
(12) To create or convey real rights over immovable property;
● Real rights are considered to cover mortgages and a like.
● Thus, agents without a special power of attorney, cannot acquire real rights on
behalf of the principal.
● When the agency tends to bind themselves to real right, ruling under Philippine
Sugar Estates Dev. Co. v. Poizat states that the mortgage should be signed by
the principal rather than his agent.
○ If the agent does so, signed the mortgage, he shall be made as the
mortgagor.

(13) To accept or repudiate an inheritance;

● Special power of attorney is also needed when accepting or rejecting an
inheritance for it opposes the interest of the principal.

(14) To ratify or recognize obligations contracted before the agency;

● To ratify is to cleanse a contract.
● Thus, cleansing the defects of a contract should be done with a special power of
attorney of the agent for the said ratification also opposes the interest of the
principal.
● On the other hand, recognizing an obligation should also require a special power
of attorney for the agent acting on behalf of the principal that constitutes an Act
of Strict Dominion.

(15) Any other act of strict dominion. (n)

● Any other acts under strict ownership that are not stated above should be
required of special power of attorney.

**such acts by the agent without the special power of attorney shall be constituted as
unenforceable unless ratified by the principal.
Article 1879
A special power to sell excludes the power to mortgage; and a special power to
mortgage does not include the power to sell.
● This article indicates the exclusivity of special power to sell and special
power to mortgage. The effect of the special power to sell excludes the
power to mortgage and vice versa.

Article 1880
A special power to compromise does not authorize submission to arbitration.
● A special power that has been granted to the arbitrator does not leave the
benefit to the latter. If the said power has been left on the hand of the
arbitrator, the trust of the principal would also not be granted upon him.

Article 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.
● The powers vested upon the special grant that within the scope of the
grantee can act within his limits in order for the agency to live out its
purpose.

Article 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.
● The agent’s power should be focused to give more advantage to the
principal and it will not be considered as exceeded if the powers were fully
exercised.

Article 1883
 If 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.
In such cases 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 provisions of this article shall be understood to be without prejudice to the
actions between the principal and agent.

● The act of the agent within his own legal entity will be limited only to his name.
This provision is understood to be as one with the legal knowledge of the agent.
There is an exception, the things that belong to the principal will be therefore
acted upon himself.