PART II
Civil Code. (Arts. 1868-1932).
TITLE X
AGENCY (Arts. 1868-1932)
Chapter 1. NATURE, FORM, AND
KINDS OF AGENCY
Article. 1868. By the contract of
agency a person binds himself to
render some service or to do
something in representation or on
behalf of another, with the consent
or authority of the latter.
Notes:
 The concept of agency
excludes the relationship of
employer and employee (Art.
1700), of master and servant
(Art. 1680), and of employer
and independent contractor
(Art. 1713).
 Agency is a fiduciary
relationship which implies a
power in an agent to contract
with a third person on behalf
of a principal.
 Agency, properly speaking,
relates to commercial or
business transactions.
Agency relationship may also
arise in non-business
situations, as for example, a
person returns an article to a
lender for a borrower-friend.
 Agency is governed by the
CHARACTERISTICS OF A
CONTRACT OF AGENCY
The contract of agency is:
(1)Consensual: it is based on
the agreement of the parties
which is perfected by mere
consent;
(2)Principal: it can stand by
itself without need of another
contract;
(3)Nominate: it has its own
name;
(4)Unilateral: if it is gratuitous
because it creates obligations
for only one of the parties,
i.e. the agent; or Bilateral, if
it is for compensation
because it gives rise to
reciprocal rights and
obligations; and
(5)Preparatory: it is entered
into as a means to an end,
i.e., the creation of other
transactions or contracts.
Nature, basis, and purpose of
agency.
(1)Nature: it is necessary that
the minds of the parties
should meet in making it.
(a) Manifestation of consent. –
Intention of the principal
that the agent shall act for
him and of the agent that
he shall act for the
principal is necessary. It is
 manifested either in words
or conduct between them.
(b)Agent, by legal fiction,
becomes principal. – The
agent, by legal fiction,
becomes the principal
authorized to perform all
acts which the latter
would have him do. Such
a relationship can only be
effected with the consent
or authority of the
principal which cannot in
any way be compelled by
law or by any court.
(c) Presence or absence of
contract of consideration.
– The relationship may be
created by operation of
law (e.g. agency by
estoppel), or a person who
acts for another as
principal may do so
gratuitously.
(2)Basis. – Agency is also a
representative relation.
(a) Personal contract of
representation. – person
Representation constitutes
the basis of agency. It is
generally revocable.
(b) Acts of agents, by legal f
ction, acts of principal. — The
acts of the agent on behalf of
the principal within the scope
of his authority (Art. 1881.)
produce the same legal and
binding effects as if they
were personally done by the
principal. The distinguishing
features of agency are its
representative character and
its derivative authority.
- He who acts through
another acts himself” or
“He who does a thing by
an agent is considered as
doing it himself.”
- Thus, where an agent
purchased property in bad
faith, the principal should
also be deemed a
purchaser in bad faith.
(3) Purpose: to extend the
personality of the principal through
the facility of the agent; to render
some service to do or something.
PARTIES TO THE CONTRACT
The two parties to the contract are
the:
(1) Principal. — one whom the
agent represents and from whom
he derives his authority; he is the
represented. Agency
imports the contemporaneous
existence of a principal, and there
is no agency unless one is acting
for and in behalf of another; and
(2) Agent. — one who acts for and
represents another; he is the
person acting in a representative
capacity. The agent has derivative
authority in carrying out the
principal’s business. He may
employ his own agent in which
case he becomes a principal with behalf, sue on a contract made for
respect to the latter. his principal, as an assignee of
such contract.
Essential Elements of agency

They are as follows: Capacity of the parties

(1) There is consent, express or (1)Principal: A principal must be

implied, of the parties to establish capacitated or have the legal
the relationship; capacity to enter into
(2) The object is the execution of a contract in his own right.
juridical act in relation to third
persons;  It is a general rule that an
3) The agent acts as a agent who assumes to
representative and not for himself; contract in the name of a
and principal without
(4) The agent acts within the scope contractual capacity
of his authority. renders himself liable to
third persons.
 The acts of an agent done
Relationship of third party with for an incompetent
principal and agent principal may be ratified
by the latter after he
(1) Since an agent’s contract is not acquires capacity.
his own but his principal’s, a third  The agent is not liable
party’s liability on such contract is
where he was ignorant of
to the principal and not to the
the principal’s incapacity.
agent, and liability to such third
party is enforceable against the
principal, not the agent.
(2)Agent. – Generally, anyone
can be an agent. His capacity
(2) Where an agency exists, the
is usually immaterial. Since
relationship of the third party with
he assumes no personal
whom the agent has contracted, to
liability, he does not have to
the principal, is the same as that in
possess full capacity to act
a contract in which there is no
for himself insofar as third
agent.
persons are concerned.
G.R: Normally, the agent has
 Some mental capacity
neither rights nor liabilities as
against the third party. He cannot is necessary as an
sue or be sued on the contract. agent, and therefore,
persons who are
Exception: Where an agent is absolutely
constituted as an assignee. In such incapacitated, such as
a case, the agent may, in his own insane persons, cannot
 be agents as they are
completely incapable of
understanding the task
to be performed.
Acts that may be/not be
delegated to agents
Some acts cannot be done through
an agent.
(1)Personal acts. — If personal
performance is required by
law or public policy or the
agreement of the parties, the
doing of the act by a person
on behalf of another does not
constitute performance by
the latter. (e.g. the right to
vote; the making of a will;
statements required to be
made under oath; right to
attend the board meetings by
a member of the board of
directors or trustees of a
corporation; and those acts
which an agent cannot
delegate to a sub-agent
which he has been appointed
to perform in person.)
(2)Criminal acts or acts not
allowed by law. – There can
be no agency in the
perpetration of a crime or an
unlawful act.
Nature of relations between
principal and agent
(1)Relations fduciary in
character. — The relations of
an agent to his principal are
fiduciary in character since
they are based on trust and
confidence (Severino vs.
Severino, 44 Phil. 343
[1923].), on a degree which
varies considerably from
situation to situation.
(2)Agent estopped from
asserting interest adverse to
his principal. — It is an
elementary and very old rule
that in regard to property
forming the subject matter of
the agency, the agent is
estopped from asserting or
acquiring a title adverse to
that of the principal. His
position is analogous to that
of a trustee and he cannot,
consistently with the
principles of good faith, be
allowed to create in himself
an interest in opposition to
that of his principal or cestui
que trust.
(3) Agent must not act as an
adverse party. — In matters
touching the agency, agents
cannot act so as to bind their
principals, where they have an
adverse interest in themselves.
(4) Agent must not act for an
adverse party. — An agent
cannot serve two masters,
unless both consent, or unless
he is a mere middleman or
intermediary (e.g., real estate
broker) with no independent
initiative.
(5)Agent must not use or
disclose secret information.
— Requirements of good faith
 and loyalty demand of the
agent the duty not to use or
divulge confidential
information obtained in the
course of his agency for his
own benefit t to the
principal’s injury and
expense.
(6) Agent must give notice of
material facts. — Principles of
good faith and loyalty to the
principal’s interests also require
that an agent make known to
his principal every and all
material facts, of which the
agent has cognizance, which
concern the transaction and
subject matter of the agency. On
failure to do so, the agent may
be held liable for damages for
any loss suffered or injury
incurred as a result of such
breach.
Knowledge of agent imputed to
principal
G.R: Knowledge of agent is imputed
to the principal
(1)Agents’ duty of notification
(2)Relationship of attorney and
client
(3)Knowledge of the principal. –
The theory of imputed
knowledge ascribes the
knowledge of the agent to
the principal, not the other
way around. The knowledge
of the principal cannot be
imputed to his agent.
Exceptions:
(1)Where the agent’s interests
are adverse to those of the
principal;
(2)Where the agent’s duty is not
to disclose the information as
where he is informed by way
of confidential information;
and
(3)Where the person claiming
the benefit of the rule
colludes with the agent to
defraud the principal.
AGENCY V. LOAN
 The relation between
the parties is one of
lender and borrower or
principal and agent
depends on the terms
of the contract
between them and
their intention.
 One who borrows
money to conduct a
business in which the
lender has no interest
or concern in the
manner of its conduct
is not an agent of the
lender, but the
financing of operations
to be carried on by
another for the mutual
advantage of both,
without any obligation
of such other to return
the money advanced,
makes such other an
agent rather than a
borrower.
 An agent may be given is revocable at the will
funds by the principal of the depositor.
to advance the latter’s
business, while a
borrower is given
money for purposes of AGENCY V. LEASE SERVICE
his own and he must
generally return it (1) In agency, the basis is
whether or not his own representation, while in lease of
business is successful. service (see Art. 1689.), it is
employment;
 Where checks are
deposited with a (2) In agency, the agent exercises
collecting bank, the discretionary powers, while in lease
nature of the of service, the lessor (like a
relationship created at servant) ordinarily performs only
that stage is one of ministerial functions (see Nielson &
agency, that is, the Co., Inc. vs. Lepanto
bank is to collect from Consolidated Mining Co., 26 SCRA
the drawees of the 540 [1968].);
checks the
corresponding (3) In agency, three persons are
proceeds. After the involved: the principal, the agent,
checks are collected and the third person with whom the
and converted into agent has contracted, while in
cash, the creditor and lease of service, only two persons
debtor relationship is are involved: the lessor (master or
created between the employer) and the lessee (servant
depositor and the bank. or employee); and

 Where one deposits (4)Agency relates to commercial

money with a bank or business transactions,
with instructions to while lease of service (like in
apply it in satisfaction the case of master and
of the debt of a third servant) relates more to
person, the matters of mere manual or
conventional debtor mechanical execution, in
and creditor which the servant acts under
relationship between the direction and control of
the bank and the the master.
depositor is created,
coupled with an agency
on the part of the bank AGENCY V. INDEPENDENT
to pay the debt, which CONTRACT
 (1)In agency, the agent is but if the alleged owner or
subject to the control and partner takes his agreed
direction of the principal share of profits, not as owner
whom he represents with but as an agreed measure of
respect to the matters compensation for his services
entrusted to him. In a or the like, the relation is one
contract for a piece of work, of agency.
the independent contractor,
without being subject to the
control of the employer AGENCY V. NEGOTIORUM
except only as to the result of GESTIO
the work, exercises his
employment independently, (1)In both agency and
and not in representation of negotiorum gestio or the
the employer. management of the business
or affairs of an absentee,
there is representation.
AGENCY V. PARTNERSHIP
(2)The distinction lies in the fact
(1)An essential characteristic of that in agency, the
the agency relationship, i.e., representation is expressly
control by the principal, conferred, while in
which is not applicable to the negotiorum gestio, it is not
partnership concept. In only without the authority of
partnership, a partner’s the owner of the business but
power to bind his co-partner is without his knowledge.
is not subject to the co-
partner’s right to control, (3)While the agent acts
unless there is an agreement according to the express will
to that effect. of the principal, the gestor
acts according to the
(2)A partner acting as agent for presumed will of the owner
the partnership binds not by exercising all the diligence
only the firm members but of a good father of a family.
himself as well, while the
ordinary agent assumes no (4)Agency is a contract, while
personal liability where he negotiorum gestio is a quasi-
acts within the scope of his contract.
authority.

(3)As to the sharing of profits, if, AGENCY V. BROKERAGE

when earned, the profits
belong to all the parties as Brokerage: refers to the trade or
common proprietors in occupation of the broker.
agreed proportions, the
relation is one of partnership,
(1)A commission agent (see Art.
1903.) is one engaged in the
purchase or sale for another
of personal property which
for this purpose, is placed in
his possession and at his
disposal. He maintains a
relation not only with his
principal and the purchaser
or vendor, but also with the
property which is the subject
matter of the transaction. On
the other hand, a broker has
no relation with the thing he
buys or sells. He is merely an
intermediary or negotiator
between the purchaser and
the vendor relative to the
property with the custody or
possession of which he has
no concern. His only office is
to bring together the parties
to the transaction never
acting in his own name but in
the name of those who
employed him.
(2)An agent receives a
commission upon the
successful conclusion of a
transaction such as sale. On
the other hand, a broker
earns his pay merely by
bringing the buyer and the
seller together, even if no
sale is eventually made.
(3)Agent is a broader term than
broker, for, while brokers are
agents, their powers are
limited, and when they have
no charge or control of the
property, but act only as go-
betweens in executing a sale,
they cannot be said to be
agents in the larger sense
entitled to receive payment
for the goods delivered,
unless specifically
authorized.
AGENCY V. SALE
(1)In an agency to sell, the
agent receives the goods as
the goods of the principal,
while in sale, the buyer
receives the goods as owner;
(2)In an agency to sell, the
agent delivers the proceeds
of the sale, while in a sale,
the buyer pays the price;
(3)In an agency to sell, the
agent, in dealing with the
thing received, is bound to
act according to the
instructions of his principal,
while in a sale, the buyer can
deal with the thing as he
pleases, being the owner.
 The elementary notion of
sale is the transfer of title to
a thing from one to another,
while the essence of agency
involves the idea of an
appointment of one to act for
another.
 Agency is a relationship
which often results in a sale,
but the sale is a subsequent
step in the transaction.
AGENCY V. BAILMENT
(1)The bailee is possessed of no
power to bind the bailor in
personal liability and he owes
 neither loyalty nor obedience
to the bailor.
(2)A bailee, however, may be
constituted an agent as to
third parties, where, for
example, he is vested with
ostensible authority to sell or
to make binding contracts
with respect to the subject
matter of the bailment.
AGENCY V. GUARDIANSHIP
The distinctions are:
(1) While the agent derives his
authority from his principal, the
guardian, although he acts for and
on behalf of his ward, does not
derive his authority so to act from
the ward (2 C.J.S.
1027.);
(2) The relation of principal and
agent is founded upon consent of
the parties thereto, while that of
guardian and ward may be created
irrespective of the consent or
capacity of the ward;
(3) Agents are subject to the
control of their principals, while
guardians are not subject to the
direction of their wards;
(4) A legal guardian is substituted
by law, while ordinarily an agent is
the appointee of the principal and
his power may at any time be
abrogated or modified by the
principal (see 3 Am.
Jur. 2d 421.); and
(5) While an agent represents one
who has capacity to contract for
himself where he present, a
guardian represents one who has
no such capacity.
AGENCY V. TRUST
(1)In trust, the title and control
of the property under the
trust instrument passes to
the trustee who acts in his
own name, while the agent
represents and acts for his
principal;
(2)While a trust may ordinarily
be terminated only by the
fulfillment of its purpose, an
agency may in general be
revoked at any time;
(3)Agency is formed with the
thought of constant
supervision and control by
principal, whereas a trust is
based on the idea of
discretion in the trustee and
guidance by the settler or
cestui only to a limited extent
and when expressly provided
for;
Notes:
 While trust is not an agency,
it is possible for a trustee to
be an agent also where
extensive direction and
control are kept over the
trustee. (First Wisconsin Trust
Co. v. Wisconsin Dept. of
Taxation)
  Incidentally, a director of a
corporation acts in a Agency may be oral, unless the law
“fiduciary capacity” but the
relationship is not of trust but
agency.
AGENCY V. JUDICIAL
ADMINISTRATION
(1)A judicial administrator is
appointed by the court. He is
not only the representative of
the said court, but also of the
heirs and creditors of the
estate. In agency, such is not
the case;
(2)A judicial administrator,
before entering into his
duties, is required to file a
bond. This is not true in case
of agency;
(3)The protection which the law
gives the principal, in limiting
the powers and rights of an
agent, stems from the fact
that control by the principal
can only be through
agreements; whereas, the
acts of a judicial
administrator are subject to
specific provisions of law and
orders of the appointing
court.
Art. 1869. Agency may be
express, or implied from the acts of
the principal, from his silence or
lack of action, or his failure to
repudiate the agency, knowing that
another person is acting on his
behalf without authority.
requires a specific form.
KINDS OF AGENCY
Agency may be classified as
follows:
(1) As to manner of its creation:
(a) express. — one where the agent
has been actually authorized by
the principal, either orally or in
writing (Art.1869.); or
(b) implied. — one which is implied
from the acts of the principal, from
his silence or lack of action, or his
failure to repudiate the agency
knowing that another person is
acting on his behalf without
authority (Ibid.), or from the acts of
the agent which carry out the
agency, or from his silence or
inaction according to the
circumstances. (Art. 1870.)
An implied agency is an actual
agency as much as an express
agency. The enumeration of cases
of implied agency in Articles 1869
and 1870 is not exclusive.
(2) As to its character:
(a) gratuitous. — one where the
agent receives no compensation
for his services (Art. 1875.); or
(b) compensated or onerous. —
one where the agent receives
compensation for his services.

(3) As to extent of business
covered:
(a) general. — one which comprises
all the business of the principal
(Art. 1876.); or
(b) special. — one which comprises
one or more specific transactions.
(4) As to authority conferred:
(a) couched in general terms. —
one which is created in general
terms and is deemed to comprise
only acts of administration (Art.
1877.); or
(b) couched in specifc terms. —
one authorizing only the
performance of a specific act or
acts. (see Art. 1878.)
(5) As to its nature and effects:
(a) ostensible or representative. —
one where the agent acts in the
name and representation of the
principal (Art. 1868.); or
(b) simple or commission. — one
where the agent acts in his own
name but for the account of the
principal.
FORM OF AGENCY
(1)In general, there are no
formal requirements
governing the appointment
of an agent. The agent’s
authority may be oral or
written. It may be in public or
private writing. An instance
when the law requires a
specific form for the agency
is Article 1874.
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 in writing; otherwise,
the sale shall be void.
(2)Agency may even be implied
from words and conduct of
the parties and the
circumstances of the
particular case. But agency
cannot be inferred from mere
relationship or family ties.
Notes:
 It is not essential that an
agent should be appointed
directly by the principal, but
the appointment may be
made through another, as by
referring an applicant to
another and representing
that he has authority to act,
or the relation may arise out
of an agreement to employ
the agent of another, such
person then becoming the
agent of the first party.
 An agent appointed by the
directors of a corporation to
act for the corporation is an
agent of the corporation and
not of the directors.
PRESUMPTION OF AGENCY

General Rule: Agency is not
presumed. The relation between
principal and agent must exist as a
fact.
It is a rule that whatever
statements or communications
made by the parties (supposed
principal and agent) between
them, if anything thereto appears
contrary to their intention, the
latter will always prevail.
Exceptions: A presumption of
agency may arise, however, in
those few cases where an agency
may arise by operation of law or to
prevent unjust enrichment.
Art. 1870. Acceptance by the
agent may also be express, or
implied from his acts which carry
out the agency, or from his silence
or inaction according to the
circumstances.
Art. 1871. Between persons who
are present, the acceptance of the
agency may also be implied if the
principal delivers his power of
attorney to the agent and the latter
receives it without any objection.
 As regards implied
acceptance by the agent, the
law distinguishes between
cases (1) where persons are
present (Art. 1871) and (2)
where persons are absent
(Art. 1872).
 The agency is impliedly
accepted if the agent
receives a power of attorney
from the principal himself
personally without any
objection, both being
present.
 The presumption of
acceptance may be rebutted
by contrary proof.
POWER OF ATTORNEY
 It is an instrument in writing
by which one person, as
principal, appoints another as
his agent and confers upon
him the authority to perform
certain specified acts or kinds
of acts on behalf of the
principal. The written
authorization itself is the
power of attorney, and this is
clearly indicated by the fact
that it has also been called a
“letter of attorney.”
 Its primary purpose is not to
define the authority of the
agent as between himself
and his principal but to
evidence the authority of the
agent to third parties within
whom the agent deals; and
the person holding a power
of attorney is shown and
designated as an “attorney-
in-fact”, thus distinguishing
such person from an
attorney-at-law.
 A power of attorney must be
strictly construed and strictly
pursued. Under this rule, the
instrument will be held to
grant only those powers
which are specified and
defined, and the agent may
neither go beyond nor
 deviate from the power of
attorney.
 Power of attorneys are
ordinarily subjected to a
strict construction as to
preclude all authority not
expressly given, or
necessarily to be inferred
(Cummins v. Beaumont).
 A special power of attorney
executed in a foreign country
is generally not admissible in
evidence as a public
document in our courts.
(Teotoco v. Metropolitan Bank
and Trust Co.).
 The rule however is not
absolute and should not be
applied to the extent of
destroying the very purpose
of the power. If the language
will permit, a construction
should be adopted which will
carry out, instead of defeat,
the purpose of the
appointment. Even if there
are repugnant clauses in a
power of attorney, they
should be reconciled, if
possible, so as to give effect
to the instrument in keeping
with its general intent or
predominant purpose.
Art. 1872. Between persons who
are absent, the acceptance of the
agency cannot be implied from the
silence of the agent, except:
(1)When the principal transmits
his power of attorney to the
agent, who receives it
without any objection;
(2) When the principal entrusts
to him by letter or telegram a
power of attorney with
respect to the business in
which he is habitually
engaged as an agent, and he
did not reply to the letter or
telegram.