AGENCY “Unless otherwise provided”: There is no law requiring agency

to be in a specific form, but if the AUTHORITY of the agency is

Art 1868 By the contract of agency a person binds himself to not in writing, will the contract entered into by the agent with a
render some service or to do something in representation or third person be valid to the principal?
on behalf of another, with the consent or authority of the latter.
Ex: B verbally authorized A. A entered into a contract for B: What
COMMENTS: is the STATUS OF THE CONTRACT:
- This definition is so broad as to cover representations NOT
contemplated by the Code Commisasion GR: Binding to Principal even if the authority is not writing.
- The purpose/object of the Contract of Agency is execution Exceptions: (Contract may not bind the principal being void)
of a juridical act. (one which creates, modifies and
extinguish alegal relationship) 1. Art 1874: PARCEL OF LAND; NOT IMMOVABLE
- EX OF AGENCY: If a person is authorized to buy and he  The sale would be VOID not the agency
bought then a buyer-seller relationship is created with the
seller and third person Art. 1874. When a sale of a piece of land or any interest
therein is through an agent, the authority of the latter shall be
CHARACTERISTICS: in writing; otherwise, the sale shall be void.
AS A CONTRACT
 Principal Contract 2. Art. 1878: If the agent would enter a contract covered by
o Preparatory Contract- not intended as an end itself; you Art. 1878 without written SPA, the contract entered into
do not enter Contract of Agency for merely the purpose would be UNENFORCEABLE.
of doing so. You enter Contract of Agency for the
purpose ofentering in another Contract Art. 1878. Special powers of attorney are necessary in the
 Consensual Contract following cases:
 Onerous/ gratuitous – there is a disputable presumption (1) To make such payments as are not usually considered as
that the Contract of Agency is for compensation and the acts of administration;
person who claim otherwise has the burden of proof. (2) To effect novations which put an end to obligations already
inexistence at the time the agency was constituted;
AS A RELATION (3) To compromise, to submit questions to arbitration, to
 Fiduciary in character: Based on trust and confidence renounce the right to appeal from a judgment, to waive
 Representative in character: one of the party (Agent) has objections to the venue of an action or to abandon a
the right to represent another (Principal) prescription already acquired;
(4) To waive any obligation gratuitously;
DISTINGUISHED FROM/COMPARED WITH OTHER LEGAL (5) To enter into any contract by which the ownership of an
RELATIONSHIP immovable is transmitted or acquired either gratuitously or for
avaluable consideration;
NEGOTORIUM (6) To make gifts, except customary ones for charity or those
AGENCY GESTIO made to employees in the business managed by the agent;
MANNER OF CREATION (7) To loan or borrow money, unless the latter act be urgent
By contract; created by By operation of law and indispensable for the preservation of the things which are
agreement of the parties under administration;
(8) To lease any real property to another person for more
AGENCY GUARDIANSHIP
Fiduciary relationship; based on trust and confidence than one year;
(9) To bind the principal to render some service without
Both parties must be The ward is not capable
compensation;
capable of giving of giving consent thus,
(10) To bind the principal in a contract of partnership;
consent otherwise, the the guardian represents (11) To obligate the principal as a guarantor or surety;
contract might be the ward because the (12) To create or convey real rights over immovable property;
voidable. law (13) To accept or repudiate an inheritance;
gives him the authority (14) To ratify or recognize obligations contracted before
the agency;
FORM OF CONTRACT: (15) Any other act of strict dominion
Is there a law requiring agency to be in a particular form?
NONE. Art. 1869. Agency may be oral, unless otherwise
provided.
Ex. Agent sold books of principal without SPA.
Is it covered by Art. 1878?
YES. SPA is required because it falls under Art. 1878, par. 15
Par 8, 1878: REAL PROPERTY ang object ng contract; the
principal is the LESSOR; contact of lease shall be in writing
Ex.1 A entered into a lease contract with B for 3 years
without SPA.
What is the status of the contract?
It depends on the OBJECT of the contract. To be covered of
Art. 1878, it must be a REAL PROPERTY for the agent to be
required to execute an SPA.
Ex.2 Object of the contract: land; No spa.
Is it unenforceable to the principal?
This may be binding to the principal if in this contract of lease,
the principal is the LESSEE and not the lessor even if there is
no SPA.
Ex3. Object of contract: land for a lease of more than 3 years
and the principal is the lessor with A & has SPA but the
contract of lease is not in writing.
Is the contract be binding to Principal?
Not necessarily, because it must be in writing. (Art 1803).
When an agent enters into a contract: Art 1878 and 1403
must be complied with otherwise, it shall be UNENFORCEABLE
AS TOTHE PRINCIPAL
(Sps. Miniano B. Dela Cruz v. Anna Marie Concepcion) AMC
bought a parcel of land from Sps. Dela Cruz payable in
installment and claiming that she is already full paid, she
demanded for the execution of the Deed of Sale. However, Sps.
Dela Cruz argues that AMC has not yet fully paid. It was later
discovered that Sps. Dela Cruz sent a letter to AMC that she
can pay/leave payment to Dory “Adoracion Losloso”.
The piece of paper is a sufficient authorization to Dory for
her to receive payment. Thus, Payment to her extinguished
the obligation of AMP by way of payment.
(Sps. Alcantara v. Brigida L. Nido) Brigida, mother of Revelyn
Sebastava, sold a parcel of land to petitioners and according to
the buyers, Brigida is allegedly authorized to sell the land to
them but it was found that Brigida has no written authorization
but only oral. Whether the sale by an agent of a parcel of
land is valid if her authority is not in writing?
No, it is a void sale as covered by Art 1874.
76. X, who was abroad, phoned his brother, Y authorizing him to
sell X’s parcel of land in Pasay. X sent the title to Y by courier
service. Acting for his brother, Y executed a notarized deed of
absolute sale of the land to Z after receiving payment. What is
the status of the sale? Even if the sale is notarized but the
authority of the agent is not in writing (phoned) thus, the sale is
void as provided in Art. 1874.
OBLIGATIONS OF THE AGENT:
Primary obligation: carrying out the agency
Twin-obligation of agent:
a. To act within the scope of his authority
b. To act in representation of the principal
GR: Failure to meet these requirements renders the contract
UNENFORCEABLE.
EXCEPTION: The third person knows that agent is already in
excess or outside of the scope under 1898 making the contract not
only unenforceable but VOID.
TO ACT WITHIN THE SCOPE OF HIS AUTHORITY
Prime Realty Corporation appointed Nestor the exclusive agent in
the sale of lots of its newly developed subdivision. Prime Realty
told Nestor that he could not collect or receive payments
from the buyers. Nestor was able to sell ten lots to Jesus and to
collect the down payments for said lots. He did not turn over the
collections to Prime Realty.
Who shall bear the loss for Nestor’s defalcation, Prime Realty or
Jesus?
Art. 1900, that so far third person is concerned, they only have
to rely on the SPA as written and not required to inquire as to
limitations NOT stated in the SPA. In this case, the principal
verbally told the agent that he cannot collect payment does not
necessarily that the agent does not have authority if otherwise
stated in the SPA. It depends whether in the SPA it is stated
that the agent has authority or not.
If it is stated in the SPA that agent does not have an authority,
then it shall be the buyer (Jesus) who shall bear the lost.
Otherwise, it shall be the principal (Prime Realty).
Art. 1900. So far as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's
authority, if such act is within the terms of the power of
attorney, as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding
between the principal and the agent.
IF THE AGENT ACTED NOT IN REPRESENTATION
CX executed a SPA authorizing DY to secure a loan from any COMMISSION AGENT: If the agent is not able to sell or fails to
bank and to mortgage his property covered by the owner’s sell, can the agent be held liable?
certificate of title. In securing a loan from MBank, DY did not
specify that he was acting for CX in the transaction with GR: If the agent exercised the diligence required, he cannot be
said bank. Is CX liable for the bank loan? Why or why not? held liable.
Justify your answer. DEFENSE IN AGENCY: Exercise of the diligence required.
Yes, because CX authorized DY to obtain the loan.
Agents are not insurers of the success of the business of the
ATTY. URIBE. NO. Since DY did not act in representation of principal. Agency are not guarantors of sale.
CX thus, CX shall not be held liable. The exception is not
applicable in this case since the transaction entered is EXCEPTION:
contract of loan thus, bank has no cause of action against the As an agent, AL was given a guarantee commission in addition
principal. to his regular commission, after he sold 20 units of refrigerators
to a customer, HT Hotel. The customer, however, failed to pay for
As a rule, principal shall not be liable. If the agent acted for the units sold. AL’s principal, DRBI, demanded from AL payment
himself, not in representation of his principal, the principal for the customer’s accountability. AL objected, on the ground
will have no cause of action against the third person neither that his job was only to sell and not to collect payment for units
shall the third person have a cause of action to the principal. bought by the customer. Is AL’s objection valid? Can DRBI collect
EXCEPTION: If the object of the contract entered into from him or not? Reason.
between the agent and third person is a property belonging
to the principal then, they will have cause of action to each No, the objection of AL is not valid and DRBI can collect from him
other, because AL is not an ordinary commission agent but a guaranty
commission agent. Since in addition to his regular commission, he
X appoints Y as his agent to sell his products in Cebu City. receives a guarantee commission. Thus, he not only the
Can Y appoint a sub-agent and if he does, what are the obligation to sell but also to collect the proceeds of the sale
effects of such appointment? and bears the risk of collection. If he fails to collect, he shall be
held liable.
*SUBSTITUTE ≠SUB-AGENT
RIGHT AND OBLIGATIONS OF PRINCIPAL
Art. 1892. The agent may appoint a substitute if the principal Comply with all obligations which the agent has contracted
has not prohibited him from doing so; but he shall be within the scope of its authority and in representation of the
responsible for the acts of the substitute: principal.
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating GR: If the agent acted in excess or outside his authority, the
the person, and the person appointed was notoriously contract shall be unenforceable to the principal
incompetent or insolvent. EXCEPTIONS:
1. Principal has ratified; or
All acts of the substitute appointed against the prohibition of 2. The limitation on the power of the agent could have not been
the principal shall be void. known by the third person (1900 so far as third person of
concerned, they only have to rely to the SPA)
SUBSTITUTE SUB-AGENT
GR: If the agent appointed a If the agent appoints a sub- MODES OF EXTINGUISHMENT
substitute, he will not be agent, he does not
liable. disassociate himself from the Art 1919. Agency is extinguished:
EXCEPTION: Agent shall still agency, he just wants 1) By its revocation;
be liable if he was prohibited someone to help him to 2) the withdrawal of the agent;
from appointing a substitute accomplish the purpose 3) By the death, civil interdiction, insanity or insolvency of the
but still appointed one. All principal or of the agent;
the acts of the substitute is Agent is still liable for the acts 4) By the dissolution of the firm or corporation which
void. of the sub agent.
entrusted or accepted the agency;
Thus, if substitute in bad 5) By the accomplishment of the object or purpose of the
faith/ negligently outside agency;
scope of his authority, agent 6) By the expiration of the period for which the agency was
shall be liable. constituted.

- not an exclusive list, the ordinary modes of extinguishment of
contracts are also applicable in this contract
Mario received from Edgar a pendant with diamonds valued at
P5,000.00 to be sold on commission basis or to be returned on
demand. In the evening of August 31, 1987, while he was
walking home, two men snatched his clutch bag containing the
pendant and ran away. Subsequently, the snatchers were
apprehended and charged. During the pendency of the criminal
case, Edgar brought an action against Mario for the recovery of
the pendant or its value and damages. Mario interposed the
defense of fortuitous event but Edgar contends --
1) That the defense of fortuitous event is untenable because
there was negligence on the part of the defendant; and
2) That if the defense is tenable, there must be a prior
conviction of robbery before it can be availed of. Decide
the case.
As for #2, as ruled in case of Austria v. CA, in order for the
defense of fortuitous to be validly invoked, it is not required
that the perpetrator of the act should be apprehended, much
more to be convicted because such event can be proved by
preponderance of evidence.
As for #1, even assuming if there is fortuitous event, if there is
recurring negligence the person cannot validly invoke the
defense of fortuitous event thus, he shall be liable.
Are there negligence in this case?
UP: Yes, in accord with the case of Austria v. CA.
URIBE: Yes, there was negligence on the part of the defendant
thus the defense of fortuitous event is untenable.
We cannot hold the agent liable for negligence because
robbery took place in 1961 (criminality rate was not yet that
high such that walking with diamonds is not considered as a
negligent act). Had the decision happened in 1971, he shall be
considered liable since the criminality rate at that time was high.
DEATH
Will the death of the agent end the agency?
YES. Because it is expressly provided in Art. 1990 (3) By the
death, civil interdiction, insanity or insolvency of the principal or
of the agent. But also because agency is representative in
character thus, if the agent is dead, who will represent the
principal.
Will the death of the principal end the agency?
As a rule, yes as provided by 1990. But by way of exception
under Art. 1930. If the agency is entered into for the benefit of
a third person who accepted the benefit, despite the death of
the principal the agency shall be in full force and effect.
Art. 1930. The agency shall remain in full force and effect
even after the death of the principal, if it has been
constituted in the common interest of the latter and of the
agent, or in the interest of a third person who has accepted
the stipulation in his favor.
In 1950, in a telephone conversation, A authorized B to sell a
parcel of land consisting of more than 14 hectares. A died in
1954. In 1956, his 4 children sold the land to C. In 1957, B sold
the same land to D. It appears that C did not register the sale
executed by the children. D who was not aware of the previous
sale, registered the sale executed by B, whose authority to sell
was annotated at the back of the Original Certificate of Title.
Assuming that B still had the authority to sell the land – who has
a better right over the said land, C or D?
Under Article 1874, since there was only verbal authorization,
the sale of B to D is void thus, C has better right.
If there was actual SPA in favor of B,
Art 1931: If B knows that A has already died BEFORE sale to
D, then the contract will not the bind the heirs of A thus, C will
have better right
If B has no knowledge:
If B does not have knowledge as to death but D acted in bad
faith (such that D knew of the death of A), thus C shall have the
better right.
If B does not have knowledge as to death and D acted in
good faith, law on double sales shall apply. Under the
circumstances, since D was able to register the land first in good
faith, he shall have better right.
Art. 1931. Anything done by the agent, without knowledge
of the death of the principal or of any other cause 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.
An agent, authorized by a special power of attorney to sell a land
belonging to the principal succeeded in selling the same to a
buyer according to the instructions given the agent. The agent
executed the deed of absolute sale on behalf of his principal two
days after the principal died, an event that neither the agent nor
the buyer knew at the time of the sale. What is the standing of
the sale?
(A) Voidable.
(B) Valid: Art 1931 since agent sold the land without knowledge
of death and third person acted in good faith.
(C) Void.
(D) Unenforceable.
REVOCATION: The principal can revoke the authority of the
agent at will at any time.
What if there is agreement that authority of agent is for one
year, can it be revoked? Can the principal be held liable for
breach of contract?
Yes, it can be revoked but generally, principal cannot be held
liable, in Baretto v. Sta. Marina (The principal can revoke the
authority of the agent even if there was a period agreed
upon as to the authority of the agent because on trust and
confidence.) Thus ,the moment he lost the trust, he can
terminate the agency.
EXCEPTION: Principal can be held liable for breach of
contract under the Abuse of Rights principle.
(Domingo v. Domingo)
In this case, the revocation was done in bad faith since he
only revoked the authority of the agent because the buyer
wants to buy the property in a lower price which he can only
do if he does not need to pay the agent commission.
However, in this case, the agent also acted in bad faith (did
not comply with his fiduciary responsibility) by receiving
money from the buyer without giving it to the principal. The
agent is required to deliver the principal whatever he may
have received pursuant to the agency even if not owing to
the principal, thus all his commission was deemed forfeited.
INSTANCES WHEN THERE CAN BE NO VALID REVOCATION
OF THE AUTHORITY OF THE AGENT
AGENCY COUPLED WITH INTEREST: Art 1927. An agency
cannot be revoked if a bilateral contract depends upon it, or if
itis the means of fulfilling an obligation already contracted, or if
a partner is appointed manager of a partnership in the contract
of partnership and his removal from the management is
unjustifiable.
When is the agency coupled with interest?
1. If a bilateral contract depends upon the agency;
2. If the agency is the means of fulfilling an obligation already
contracted;
3. If a partner is appointed manager of a partnership in a
contract of partnership and his removal from the management
is unjustifiable.
(a) Just cause; (b) by the vote of the partners having controlling
interest.
Richard sold a large parcel of land in Cebu to Leo for P100
million payable in annual installments over a period of ten
years, but title will remain with Richard until the purchase price
is fully paid. To enable Leo to pay the price, Richard gave him a
power-of-attorney authorizing him to subdivide the land, sell
the individual lots, and deliver the proceeds to Richard, to be
applied to the purchase price. Five years later, Richard revoked
the power of attorney and took over the sale of the subdivision
lots himself. Is the revocation valid or not?
Why?
It is NOT VALID REVOCATION because the agency here is one
coupled with interest because the agent, Leo, was constituted as
agent only to secure fulfilment of the buyer’s obligation.
Thus, the principal cannot validly revoke the authority of the
agent until the interest of agent is still existing.
A lawyer was given an authority by means of a SPA by his client
to sell a parcel of land for P3Million. Since the client owed the
lawyer, P1MillioN in attorney’s fees in a prior case he handled,
the client agreed that if the property is sold, the lawyer shall be
entitled to get 5%agent’s fee plus P1M as payment for his unpaid
atty’s fees. The client, however, subsequently, found a buyer of
his own who was willing to buy the property at a much higher
amount.
Can the client unilaterally rescind the authority he gave in
favor of his lawyer?
NO. The agency is one coupled with interest because the agency
was used as a means of fulfilling an obligation which was already
contracted.
(Coleongco v. Claparols)
Coleongco offered to lend money to Claparols subject to
condition that Coleongco shall be appointed as agent as to
certain aspects of the business. Since Claparols needs the
money, he borrowed money and appointed Coleongco but
thereafter, revoked the authority of Coleongco. Thus,
Coleongco filed this case claiming there was no valid
revocation in this case because the agency was one coupled
with interest.

ISSUE: W/N the contract was one coupled with interest?

HELD: YES. Because a bilateral contract depends upon the

agency – he would not be allowed to loan if Coleongco would
not be appointed as agent. However, in this case, the
revocation was proper because there was just cause in
revoking the authority of Coleongco since Claparols was able
to prove that (1) he was not able borrow money from the bank
because Coleongco sent derogatory letter against Claparols
given to banks; (2) one of the employees testified that
Coleongco ordered him to poor acids to the machineries in the
factory.

In a letter left by Coleongco, it was discovered that his motive

was to take over the business of Claparols. Even if the agency is
one coupled with interest, the revocation was valid because
there was just cause to do so.