AGENCY I.

DEFINITION & NATURE

By 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 (Art. 1868).

A.

Agency Distinguished from other contracts. 1. Independent ContractWhere one party to a contract is authorized to do work according to his own method without being subject to the other partys control, except as to the result of the work, he is an independent contractor. Otherwise, he is an agent (Fressel vs. Mariano) 2. Employment ContractThe main difference between an employee and an agent is that an employee cannot bind the employer while an agent binds his principal provided the agent acts within the scope of his authoriy. Employeremployee relationship is not fiduciary in nature, while the relations between the principal and agent are fiduciary.

B. Characteristics of Agency as Contract. 1. Consensual 2. Bilateral 3. Nominate 4. Principal 5. Preparatory 6. Onerous

II.

PARTIES: PRINCIPAL & AGENT A. Who May Be a Principal? Any person who is legally competent to act for himself may act through an agent. Whatever a person may do personally he may do through another. ExceptionsActs which cannot be performed by an agent are: 1. Voting 2. Executing a will 3. Making of an affidavit 4. Attending a board of directors meetings.

B. Who May Act as Agent It also follows that if a person is legally competent to enter into any contract, he can also enter into a contract for and on behalf of another. It is generally held that the agent need not be absolutely legally capacitated to qualify as an agent, Ordinary intelligence is sufficient qualification. Thus, a minor may be appointed as an agent, for when he acts, provided he keeps himself within the scope of his authority, the act is not considered as his but of his principal. Hence, Art. 1899 provides, that if a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was or ought to have been aware. III. CREATION OF AGENCY A. By Appointment (Express) B. By Implication (Implied) The creation of an agency may be implied from: 1. Acts of the principalif a person knowingly allows another to act as his agent, when in truth and in fact he is not, or by his conduct a third person is led to reasonably believe that he is an agent, that person is liable to such third person who had relied upon the apparent agency. 2. The principals silence or lack of action. 3. The principals failure to repudiate the agency knowing that another person is acting on his behalf without authority (Art. 1869) To perfect the contract of agency, the appointment by the principal must be accepted by the agent. His acceptance can either be express or implied. Express acceptance is done through unequivocal terms like: I agree I accept Acceptance by the agent may be implied from: 1. His acts which carry out the agency 2. His silence or inaction according to the circumstances As regards implied acceptance from the silence of the agent, distinction is made between persons who are present (Art. 1871) and persons who are absent (Art. 1872). Between persons who are present, the acceptance of the agency may be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection.

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 recieves it without any objection; and 2. When the principal entrusts to him by telegram or letter a power of attorney with respect to the business in which he is habitually engaged as agent, and he did not reply to the letter or telegram. After agency is created, there is a need to announce its creation to third persons, who the agent may deal with in general or in particular. 1. By special informationin which case the agent is considered as such only with respect to the person specially informed. 2. By public advertisementin which case the agent is considered as such with respect to any person. IV. KINDS OF AGENCY: GENERAL & SPECIAL Power of AttorneyThe authority given to the agent or the existence of the contract of agency is embodied in a power of attorney. It is always in writing. The agent given the power of attorney is often referred to as attorney-in-fact. A. Agency Couched in General Terms An agency couched in general terms comprises only acts of administration, even if the principal should state that he witholds no power or that the agent may execute such acts as he may consider appropriate or even thoguh the agency should authorize a general and unlimited management. B. Acts that Require Special Power of Attorney Under Article 1878, special power of attorney is required for the following acts: 1. To make such payments as are not usually considered acts of administration. 2. To effect novation which put an end to obligations already in existence at the time the agency was constituted. 3. To compromise, to submit to questions to arbitration, to renounce the right to appeal from a judgement, to waive objections to the venue of an action or to abandon a prescription already acquired. 4. To waive any obligation gratuitously.

5. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. 6. To make gifts, except customary ones for charity or those made to employees in the business managed by the agent. 7. To loan or borrow money, unless the latter act be urgent and indespensable for the preservation of the things which are under administration. 8. To lease any real property to another person for more than one year. 9. To bind the principal to render some service without compensation. 10. To bind the principal to a contract of partnership. 11. To obligate the principal as a guarantor or surety. 12. To create or convey real rights over immovable property. 13. To accept or repudiate an inheritance. 14. To ratify or recognize obligations contracted before the agency. 15. Any other act of strict dominion. Other acts of strict dominion which require special power of attorney are: 16. Act of selling 17. Act of constituting a mortgage 18. The act of entering into compromise 19. The act of entering to arbitration.

Note: A special power to sell excludes the power to mortgage, and a special power to mortgage does not include the power to sell. The act of selling is generally an act of strict dominion, but if the nature of the business entrusted to the agent is buying and selling, selling is considered an act of administration. The better guide to determine whether an act is an act of administration or an act of strict dominion is whether the act is in line with the ordinary business entrusted to the agent. If it is usual, then is an act of administration. If not, act of strict dominion. C. Kinds of Agents 1. General Agentone who is authorized to transact all of his principals business of a particular kind or all of his principals business at a given place. In line with this agency, the agent has the power to perform any act necessary in connectionw ith the particular kind of business entrusted to him. 2. Special Agent---one who is authorized or appointed to do some specific acts, or to transcat certain business affairs. He has limited powers applicable only for specific purpose.

3. Commission Agentone engaged in the purchase or sale for another personal property, which for this purpose, is placed in the possession and at his disposal. 4. Del Credere or Guarantee Commission AgentA guarantee commission agent is one who receives an additional or increased commission in consideration of which he bears the risk of collection and guarantees the payment to his principal the proceeds of the sale on the same terms agreed upon with purchaser.

V.

OPERATION OF AGENCY A. Obligations of Agent to His Principal 1. He is bound by his acceptance to carry out the agency. Thus he is liable for damages which through his non-performance, the principal may suffer. Further, he must also finish the business already began on the death of the principal should delay entail danger (Art. 1884). 2. In the execution of the agency, the agent must act within the scope of his authortiy. He may do such acts as may be conducive to the accomplishment of the purpose of the agency (Art. 1881). Furthermore he must act in the name and in behalf of the principal.

Note: The agent must act within the scope of his authority. Thus, where agent exceeds the scope of the agency the principal is not bound thereby, unless he has ratified said act. But the limits of the agents authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him (Art. 1882). 3. In the execution of the agency, the agent shall act in accordance with the instruction of the principal. 4. If there is conflict between the agents interest and those of his principal, agent shall be liable for damages should he prefer his own. 5. Necessarily the execution of the agency requires some expense. Ordinarily, it is the principal who should advance the funds to the agent for the execution of the agency. But if it is stipulated that the agent shall advance the necessary funds, he shall be bound to do so except when the princiapl is insolvent. 6. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authoritzed to lend money at interest, he cannot borrow without the consent of the principal (Art. 1890).

7. Duty to render accounting. 8. Appointment of a Substitute. In the appointment of a substitute, the agent shall be guided by the following rules: a. If there is no express prohibition to appoint a substitute in the contract of agency, the agent may appoint a substitute whose appointment is valid. b. The agent shall be responsible for the acts of the substitute b.1when he appoints a substitute when he was not given the power to appoint one; b.2when he was given such power, but without designating the persons, and the person appointed was notoriously incompetent or insolvent. c. When there is a prohibition to appoint a substitute and the agent appoints one, all the acts of the substitute shall be null and void. 9. Duty to pay interest, under the following instances: a. When he applied the money of his principal to his own use, said interest to be computed from the day he did so. b. On the sums although unlawfully obtained by the agent, but has not yet been paid to the principal after the extinguishment of the agency, said interest to be computed from the time of default. 10. Responsibility for fraud and neligence.

B.

Responsibility of Two or More Agents If there are two or more agents, the general rule is , that agents responsibility to the principal is joint, although agents may have been simulataneously appointed. They will be solidary if solidarity has been stipulated.

C.

Obligations of the Principal 1. To comply with all the obligations which the agent may have contracted within the scope of his authority. 2. He is not liable for obligations contracted in excess of the agents authority unless he has expressly or impliedly ratified them. 3. To advance the necessary funds advanced by the agent with interest from the day on which the advance was made even if the business is not successful, provided agent is free from fault. 4. To indemnify the agent for all the damages which the execution of the agency may have caused the latter, without fault or negligence on his part.

D. Where Principal and Agent Contracted with Different Persons

Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred without prejudice to the provisions of Article 1554.

VI.

EXTINGUISHMENT OF AGENCY 1. By its revocation 2. By withdrawal of the agent 3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent 4. By the dissolution of the firm or corporation which entrusted or accepted the agency 5. By the accomplishment of the object or purpose of the agency 6. By the expiration of the period which agency was constituted. Implied Revocation 1. When the principal appoints a new agent for the same business or transaction covered by a previous agency. 2. When the principal directly manages the business entrusted to the agent, dealing directly with third persons. 3. When the principal executes a special power of attorney as regards special matter covered by a general power of attorney.