Memorize: 1878, 1919, 1827, 1930

Article 1878. Special powers of attorney are necessary in the following cases:

(1) To make such payments as are not usually considered as acts of administration;

(2) To effect novations which put an end to obligations already in existence at the time the agency was
constituted;

(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;

(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 indispensable 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 in 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.

Article 1919. Agency is extinguished:

(1) By its revocation;

(2) By the 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 for which the agency was constituted.

Article 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is 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.

Article 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.

I. Nature

 Definition –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.
 Purpose; scope; essential elements; basis

In a contract of agency , a person binds himself to render some service or to do something in

representation or on behalf of another with the latter’s consent. Its purpose is to extend the
personality of the principal or the party for whom another acts and from whom he or she derives
the authority to act. The basis of agency is representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the principal.  elements of the contract of
agency: (1) consent, express or implied, of the parties to establish the relationship; (2) the object
is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.

1. Purpose

In accordance with Philippine laws, the purpose of an agency, as defined in the Civil Code of the
Philippines (Title X, Articles 1868 to 1931), is to allow one person, the agent, to act on behalf of
another person, the principal, in order to achieve specific objectives or perform certain tasks. The
key purposes of an agency relationship in the Philippines include:

1.1.Representation: An agency allows the principal to be represented by the agent in various

matters, transactions, or dealings, thereby extending the principal's reach and capacity to
act.

1.2.Delegation of Authority: The principal grants authority to the agent to act on their behalf,
often to perform specific acts or tasks that the principal may not have the time, expertise, or
presence to accomplish themselves.

1.3.Convenience: Agency relationships provide convenience for both the principal and the
agent. The principal can delegate responsibilities, while the agent may earn compensation
for their services.

1.4.Efficiency: Agencies are often established to streamline processes and decision-making.

Agents can make decisions or take actions quickly, benefiting the principal's interests.

1.5.Specialization: Agents may possess specialized skills, knowledge, or expertise that the
principal does not have, making them well-suited to handle particular tasks or transactions
on behalf of the principal.

1.6.Legal Transactions: Agents can enter into legal contracts, agreements, and transactions on
behalf of the principal, ensuring that the principal's interests are protected and their
objectives are met.

1.7.Business and Commercial Purposes: In the context of business and commerce, agency
relationships are common. Businesses may use agents to represent them in negotiations,
sales, procurement, or other commercial activities. Fiduciary Duty: The agent owes a
fiduciary duty to the principal, which means they are obligated to act in the best interests of
the principal and with utmost good faith, loyalty, and diligence.

1.8.Flexibility: Agency relationships can be tailored to meet the specific needs and objectives of
the principal. They can be general or specific, depending on the scope of authority granted.

1.9.Risk Sharing: Agents may assume certain risks on behalf of the principal, such as in
negotiations or contractual arrangements, which can help protect the principal from direct
exposure to those risks.

It's important to note that agency relationships in the Philippines, like in many other jurisdictions,
are subject to legal principles, rules, and regulations that govern the rights, obligations, and
liabilities of both the principal and the agent. Parties entering into agency agreements should be
aware of these legal provisions to ensure that their interests are protected and their agency
relationship complies with the law.

2. Scope

In accordance with Philippine laws, the scope of an agency refers to the extent of the authority
granted by the principal to the agent to act on their behalf. The scope of agency determines what
actions the agent is authorized to take and what matters or tasks they can handle for the
 principal. The scope of agency can be either general or special, and it is defined by the terms of
the agency agreement or the specific instructions given by the principal.

2.1.General Agency (Article 1871): In a general agency, the agent is granted broad authority to
act on behalf of the principal in a wide range of matters. The agent can perform various acts
and make decisions within the ordinary course of the principal's business or affairs. This type
of agency allows the agent to represent the principal in a broad and flexible manner.

2.2.Special Agency (Article 1872): In a special agency, the agent's authority is limited to
specific tasks, transactions, or objectives defined by the principal. The agent's authority is
confined to the specific instructions or purposes for which the agency was created. Special
agency is more restrictive than general agency and is typically used when the principal has a
particular, well-defined need for representation.

It's important to note that the scope of agency can vary widely depending on the terms of the
agency agreement or the instructions provided by the principal. The principal can grant the agent
the authority to enter into contracts, negotiate on their behalf, manage their property, represent
them in legal matters, or perform various other specific tasks.

However, regardless of whether the agency is general or special, the agent must always act
within the bounds of the authority granted by the principal. If the agent exceeds their authority or
acts outside the scope of their agency, they may be personally liable for any resulting damages
or legal consequences, and the principal may not be bound by their actions.

To establish a clear and effective agency relationship, it is essential that the scope of agency is
defined precisely in the agency agreement or instructions, and that both parties understand the
extent of the agent's authority and responsibilities. Additionally, any limitations or restrictions on
the agent's authority should be clearly communicated and documented.

3. Essential Elements

The elements of the contract of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not for himself; and (4) the agent acts within
the scope of his authority.

4. Basis

In accordance with Philippine laws, the basis of agency is primarily found in the Civil Code of the
Philippines, specifically under Title X, "Agency" (Articles 1868 to 1931). The legal basis for
agency in the Philippines is rooted in contract law and is governed by the provisions outlined in
this section of the Civil Code. Here's an overview of the key legal basis for agency in the
Philippines:

4.1.Contractual Relationship (Article 1868): The basis of agency in the Philippines is a

contractual relationship between two parties: the principal and the agent. This contract is
typically formed through mutual consent, where the principal authorizes the agent to act on
their behalf, and the agent agrees to do so. The agency agreement can be express or
implied and may be oral or in writing.

4.2.Representation (Article 1869):** Agency is established to allow one person, the agent, to
represent and act on behalf of another person, the principal. The agent's actions are
considered as if they were performed by the principal, within the scope of the authority
granted.

4.3.Fiduciary Duty (Article 1869):** The agent owes a fiduciary duty to the principal, which
means they are obligated to act in the best interests of the principal and with utmost good
faith, loyalty, and diligence.

4.4.Legal Consequences (Article 1883):** The acts performed by the agent within the scope of
their authority directly bind the principal. Additionally, the principal may be liable for the acts
of the agent, depending on the circumstances and the nature of the agency.

4.5.Termination and Revocation (Articles 1910, 1920):** The agency relationship may be
terminated by various means, including revocation by the principal, withdrawal by the agent,
completion of the agency, or the death, incapacity, or insolvency of either party.
 4.6.Ratification (Article 1898):** If the agent exceeds their authority, the principal may ratify the
act, which will then become binding on the principal.

The agency relationship is essentially a legal framework that allows individuals or entities to
delegate authority and responsibilities to others to act on their behalf. It is governed by the
principles of contract law, agency law, and the specific provisions outlined in the Civil Code of the
Philippines.

It's important for both the principal and the agent to understand their rights and obligations under
Philippine law when entering into an agency relationship, as these legal principles help define
the scope and limits of their authority and responsibilities.

 Cases:

1. Rallos v. Felix Go Chan, G.R. No. L-24332, Jan. 31, 1978

Facts: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of
land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by
Transfer Certificate of Title No. 11116 of the Registry of Cebu. They executed a special
power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell such land for
and in their behalf. After Concepcion died, Simeon Rallos sold the undivided shares of
his sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum
of P10,686.90. New TCTs were issued to the latter. Petitioner Ramon Rallos, administrator of
the Intestate Estate of Concepcion filed a complaint praying (1) that the sale of the undivided
share of the deceased Concepcion Rallos in lot 5983 be unenforceable, and said share be
reconveyed to here state; (2) that the Certificate of ‘title issued in the name of Felix Go Chan
&Sons Realty Corporation be cancelled and another title be issued in the names of
the corporation and the “Intestate estate of Concepcion Rallos” inequal undivided and (3) that
plaintiff be indemnified by way of attorney’s fees and payment of costs of suit.

Issue: Whether or not the sale fell within the exception to the general rule that death
extinguishes the authority of the agent.

Ruling: Yes, the sale is void. The court held that no one may contract in the name of another
without being authorized by the latter, or unless he has by law aright to represent him (Art.
1317 of the Civil Code). Simon’s authority as agent was extinguished upon
Concolacion’s death. The sale did not fall under the exceptions to the general rule that
death ipso jure extinguishes the authority of the agent. Art. 1930 inapplicable since SPA in favor
of Simon Rallos was not coupled with interest and Art. 1931 inapplicable because
Rallos knew of principal Concepcion’s death. For Art 1931 to apply, both requirements must
be present Laws on agency, the terms of which are clear and unmistakable leaving no room for
an interpretation contrary to its tenor, should apply, the law provides that death of the
principal ipso jure extinguishes the authority of the agent to sell rendering the sale to a
third person in good faith unenforceable unless at the agent had no knowledge of the
principal’s death at that time (exception under Art. 1931)

2. Victorias Milling Co., Inc. v. CA, G.R. No. 117356, Jun. 19, 2000

Facts: St. Therese Merchandising regularly bought sugar from Victorias Milling Co., Inc. In the
course of their dealings, Victorias Milling issued several Shipping List/Delivery Receipts (SLDRs)
to St. Therese Merchandising as proof of purchases. Among these was SLDR No. 1214M which
covers 25,000 bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per bag.
The transaction it covered was a direct sale.

On October 25, 1989, St. Therese Merchandising sold to Consolidated Sugar Corp. its rights in
SLDR No. 1214M for P14,750,000.00. Consolidated Sugar Corp. issued checks in payment.
That same day, Consolidated Sugar Corp. wrote Victorias Milling that it had been authorized by
St. Therese Merchandising to withdraw the sugar covered by SLDR No. 1214M.

Consolidated Sugar Corp. surrendered SLDR No. 1214M to Victorias Milling’s NAWACO
warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been released,
Victorias Milling refused to allow further withdrawals of sugar against SLDR No. 1214M because,
according to it, St. Therese Merchandising had already withdrawn all the sugar covered by the
cleared checks.

Issue: Whether or not the contract was one of agency or sale

 Ruling: Sale. Victorias Milling heavily relies upon St. Therese Merchandising’s letter of authority
allowing Consolidated Sugar Corp. to withdraw sugar against SLDR No. 1214M to show that the
latter was St. Therese Merchandising’s agent. The pertinent portion of said letter reads: “This is
to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our
behalf (stress supplied)the refined sugar covered by Shipping List/Delivery Receipt = Refined
Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags.”

Art. 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.

The basis of agency is representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words or actions; and on the part
of the agent, there must be an intention to accept the appointment and act on it, and in the
absence of such intent, there is generally no agency. One factor which most clearly distinguishes
agency from other legal concepts is control; one person - the agent - agrees to act under the
control or direction of another -the principal.

Victorias Milling failed to sufficiently establish the existence of an agency relation between
Consolidated Sugar Corp. and St. Therese Merchandising. The fact alone that it (St. Therese
Merchandising) had authorized withdrawal of sugar by Consolidated Sugar Corp. “for and in our
(St. Therese Merchandising’s) behalf” should not be eyed as pointing to the existence of an
agency relation. Further, Consolidated Sugar Corp. has shown that the 25,000 bags of sugar
covered by the SLDR No. 1214M were sold and transferred by St. Therese Merchandising to it. A
conclusion that there was a valid sale and transfer to Consolidated Sugar Corp. may, therefore,
be made thus capacitating Consolidated Sugar Corp. to sue in its own name, without need of
joining its imputed principal St. Therese Merchandising as co-plaintiff.

Consolidated Sugar Corp. was a buyer of the SLDFR form, and not an agent of STM.
Consolidated Sugar Corp. was not subject to St. Therese Merchandising’s control. That no
agency was meant to be established by the Consolidated Sugar Corp. and STM is clearly shown
by Consolidated Sugar Corp.’s communication to petitioner that SLDR No. 1214M had been
“sold and endorsed” to it. The use of the words “sold and endorsed” means that St. Therese
Merchandising and Consolidated Sugar Corp. intended a contract of sale, and not an agency.

3. Tuazon et. Al. v. Heirs of Bartolome Ramos, G.R. No. 156262, July 14, 2005

Facts: Respondents alleged that on a relevant date, spouses Tuazon purchased from their
predecessor-in-interest cavans of rice. That on the total number of cavans, only a certain portion
has been paid for. In payment thereof, checks have been issued but on presentment, the
checks were dishonored. Respondents alleged that since spouses anticipated the
forthcoming suit against them, they made fictitious sales over their properties. As defense, the
spouses averred that it was the wife of Bartolome who effected the sale and that Maria was
merely her agent in selling the rice. The true buyer of the cavans was Santos. The spouses
further averred that when Ramos got the check from Santos, she took it in good faith and didn't
knew that the same were unfunded.

Issue: Whether or not a contract of agency existed; and Whether or not the spouses are liable
on the check.

Ruling: First, there is no contract of agency.

If it was truly the intention of the parties to have a contract of agency, then when the
spouses sued Santos on a separate civil action, they should have instituted the same on behalf
and for the respondents. They didn't do so. The filing in their own names negate their claim
that they acted as mere agents in selling the rice.

Second, the spouses are liable on the check.

As indorser, Tuazon warranted that upon due presentment, according to their tenor, and
that in case they were dishonored, she would pay the corresponding amount. After the
instrument is dishonored by non-payment, indorsers cease to be merely secondarily
liable. They became principal debtors whose liability becomes identical to that of the
original obligor. The holder of a negotiable instrument need not even proceed against
the maker before suing the indorser. Santos is not an indispensable party to the suit
against the spouses.
 4. Eurotech Industrial Technologies Inc. v. Cuizon and Cuizon, G. R. No. 167552, Apr. 23,
2007

Facts: Eurotech is engaged in the business of importation and distribution of various European
industrial equipment. It has as one of its customers Impact Systems Sales which is a sole
proprietorship owned by Erwin Cuizon.

Eurotech sold to Impact Systems various products allegedly amounting to P91,338.00. Cuizons
sought to buy from Eurotech 1 unit of sludge pump valued at P250,000.00 with Cuizons making
a down payment of P50,000.00. When the sludge pump arrived from the United Kingdom,
Eurotech refused to deliver the same to Cuizons without their having fully settled their
indebtedness to Eurotech. Thus, Edwin Cuizon and Alberto de Jesus, general manager of
Eurotech, executed a Deed of Assignment of receivables in favor of Eurotech.

Cuizons, despite the existence of the Deed of Assignment, proceeded to collect from Toledo
Power Company the amount of P365,135.29. Eurotech made several demands upon Cuizons to
pay their obligations. As a result, Cuizons were able to make partial payments to Eurotech.
Cuizons’ total obligations stood at P295,000.00 excluding interests and attorney’s fees.

Edwin Cuizon alleged that he is not a real party in interest in this case. According to him, he was
acting as mere agent of his principal, which was the Impact Systems, in his transaction with
Eurotech and the latter was very much aware of this fact.

Issue: Whether or not Edwin exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to Eurotech

Ruling: No. Edwin insists that he was a mere agent of Impact Systems which is owned by Erwin
and that his status as such is known even to Eurotech as it is alleged in the Complaint that he is
being sued in his capacity as the sales manager of the said business venture. Likewise, Edwin
points to the Deed of Assignment which clearly states that he was acting as a representative of
Impact Systems in said transaction.

Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers.

In a contract of agency , a person binds himself to render some service or to do something in

representation or on behalf of another with the latter’s consent. Its purpose is to extend the
personality of the principal or the party for whom another acts and from whom he or she derives
the authority to act. The basis of agency is representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the principal.  elements of the contract of
agency: (1) consent, express or implied, of the parties to establish the relationship; (2) the object
is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.

An agent, who acts as such, is not personally liable to the party with whom he contracts. There
are 2instances when an agent becomes personally liable to a third person. The first is when he
expressly binds himself to the obligation and the second is when he exceeds his authority. In the
last instance, the agent can be held liable if he does not give the third party sufficient notice of
his powers. Edwin does not fall within any of the exceptions contained in Art. 1897.

In the absence of an agreement to the contrary, a managing agent may enter into any contracts
thathe deems reasonably necessary or requisite for the protection of the interests of his principal
entrusted to his management.

Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. Eurotech
refused to deliver the 1 unit of sludge pump unless it received, in full, the payment for Impact
Systems’ indebtedness. Impact Systems desperately needed the sludge pump for its business
since after it paid the amount of P50,000.00 as downpayment it still persisted in negotiating with
Eurotech which culminated in the execution of the Deed of Assignment of its receivables from
Toledo Power Company. The significant amount of time spent on the negotiation for the sale of
the sludge pump underscores Impact Systems’ perseverance to get hold of the said equipment.
Edwin’s participation in the Deed of Assignment was “reasonably necessary” or was required in
order for him to protect the business of his principal.

 The parties to the contract; capacity

 1. Principal (Mandante) – One whom the agent represents and from whom he derives his
authority; he is the person represented or the person who consents that another shall act on his
behalf.

The principal may be either a natural person or an artificial one. On the other hand, a voluntary
association of persons which is not a legal entity has no legal existence and cannot sue or be
sued; hence it has no capacity to appoint an agent. The agent is not liable where he was
ignorant of the principal’s incapacity.

2. Agent (Mandatario) – 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.

In the case of the agent, since he assumes no personal liability, he does not have to possess full
capacity to act insofar as third persons are concerned. Even one under legal disability,
whose contracts, therefore, are not binding upon him, may nevertheless act as an agent and
bind his principal.

His capacity is in general the same as in the law of contracts, that is he must be able to bind
himself, but only insofar as his obligations tohis principal are concerned, insofar as third
persons are concerned, however, it is enough that his principal be the one capacitated,
for generally an agent assumes no personal liability. Usually therefore the contract with a
stranger is valid, even if the agent be a minor so longas (principal and agent), the minor-
agent can set up his incapacity, provided he is not in estoppel.

 Cases:

1. Uy and Roxas v. CA, G.R. No. 120465, Sept. 09, 1999

Facts: William Uy and Rodel Roxas herein petitioners are authorized to sell 8 parcels of land by
the owner. William and Rodel then offered to sell the properties to NHA, and by Res. No. 1632,
NHA accepted the offer to the amount of 23.867 million pesos and executed Deeds of Absolute
Sale. However, NHA received a report from Land Geoscience Bureau of the DENR that 3 of the
8 parcels of land are prone to landslides and are not suitable for housing project, thus NHA
cancelled the sale over the 3 parcels of land, and offered 1.255 million as damages to the
owners of the property. Petitioners as agents of the owner, instituted a complaint over the RTC,
RTC awarded the owner the same amount offered by NHA as damages, 1.255 million and held
that the cancellation of NHA is valid. On appeal, CA reversed RTC decision removing the award
for damages.

Issue: Whether or not petitioners have the right as agents to file an action in their own behalf
and receive damages for the cancellation of the sale of the 3 parcels of land.

Ruling: No. As mere authorized agents, they are not real parties to the Contract of Sale.

Art. 1311 of the Civil Code states that Contracts only take effect between the parties, their heirs,
their assigns, and third persons only if there is stipulation in the contract. Herein petitioners are
not parties to the contract of sale between the principal and NHA, but are mere agents to sell the
properties. Thus being an agent, they may only bring an action founded on a contract made for
his principal, as an assignee of such contract. Sec. 372 of the Restatement of the Law on
Agency provides;

Sec 372. Agent as Owner of Contract Right

(1) Unless otherwise agreed, an agent who has acquires an interest in a contract which he
makes on behalf of his principal can, although not a primrose, maintain such action thereon
as might a transferee having similar interest.
However, the petitioners failed show that they are assignees to the said contract. Finally, Art. 372
par (2) provides:
(2) An agent does not have such an interest in a contract as to entitle an action at law upon it
in his own name merely because he is entitled to a portion of the proceed as compensation
for making it or because he is liable for its breach.

Thus, as an agent, who may have advances expenses for the perfection of the sale, and are
entitled of the commission as compensation upon the perfection of the Contract of Sale, does
not have right of action on his own name over the principal and the other parties in case of
breach.
 2. Doles v. Angeles, G.R. No. 149353, Jun. 26, 2006

Facts: Respondent alleged that petitioner was indebted to the former in the concept of a
personal loan amounting to P405,430.00 representing the principal amount and interest; that on
October 5, 1996, by virtue of a "Deed of Absolute Sale",3petitioner, as seller, ceded to
respondent, as buyer, a parcel of land, as well as the improvements thereon, with an area of 42
square meters, in order to satisfy her personal loan with respondent. Petitioner, denied that she
borrowed money from respondent, and averred that from June to September 1995, she referred
her friends to respondent whom she knew to be engaged in the business of lending money in
exchange for personal checks through her capitalist Arsenio Pua. She alleged that her friends,
borrowed money from respondent and issued personal checks in payment of the loan; that the
checks bounced for insufficiency of funds; that despite her efforts to assist respondent to collect
from the borrowers, she could no longer locate them; that she was forced to issue eight checks
amounting to P350,000 to answer for the bounced checks of the borrowers she referred; that
prior to the issuance of the checks she informed respondent that they were not sufficiently
funded but the latter nonetheless deposited the checks and for which reason they were
subsequently dishonored, that she was forced by respondent to execute an "Absolute Deed of
Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution. RTC: Plaintiff Angeles’
admission that the borrowers are the friends of defendant Doles and further admission that the
checks issued by these borrowers in payment of the loan obligation negates the cause or
consideration of the contract of sale executed by and between plaintiff and defendant. CA
Reversed: The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the
amount borrowed from the respondent to her friends. Hence, the Deed of Absolute Sale was
supported by a valid consideration, which is the sum of money petitioner owed respondent
amounting to P405,430.00, representing both principal and interest. Petitioner filed her Motion
for Reconsideration, arguing that respondent categorically admitted in open court that she acted
only as agent or representative of Arsenio Pua, the principal financier and, hence, she had no
legal capacity to sue petitioner. Hence this petition.

Issue: Whether or not the petitioner can be considered as a debtor of the respondent; and
Whether or not an agent who was not authorized by the principal to collect debt in his behalf
could directly collect payment from the debtor.

Ruling: No. Petitioner knew that the financier of respondent is Pua; and respondent knew that
the borrowers are friends of petitioner. This Court has affirmed that, under Article 1868 of the
Civil Code, the basis of agency is representation. In the case at bar, both petitioner and
respondent have undeniably disclosed to each other that they are representing someone else,
and so both of them are estopped to deny the same. And since plaintiff, being an agent, was not
authorized by the principal to collect the debt in his behalf, and respondent was acting only as an
agent with regards to the debtors, the sale of the respondent's property having been predicated
on the loan is void for lack of consideration.

 Contract of Agency; elements

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. (Art. 1868, NCC)

NOTE: The essence of agency is representation. For a Contract of Agency to exist, it is essential
that the principal consents that the agent shall act on the former’s behalf and the agent consents so
as to act. (Rabuya, 2017)

One factor which most clearly distinguishes agency from other legal concepts is control; one person
– the agent – agrees to act under the control or direction of another – the principal. Indeed, the very
word “agency” has come to connote control by the principal. (Amor Trading Corp. v. CA, G.R. No.
158585, 13 Dec. 2005)

Consent of the Parties (Article 1868): Mutual consent is a fundamental element of a contract of
agency. Both the principal and the agent must freely and willingly agree to establish the agency
relationship. This consent forms the basis of the agency contract.

Object of the Agency (Article 1868): The contract of agency must have a specific object or
purpose. This refers to the particular tasks, transactions, or objectives for which the agent is
authorized to act on behalf of the principal. The object must be lawful and possible.
 Authority of the Agent (Article 1868): The principal grants the agent authority to act on their behalf
within the scope defined by the agency contract. The extent of this authority can vary and may be
general or special, depending on the terms of the agreement.

Agent's Act on Behalf of the Principal (Article 1868): The agent's actions are carried out on
behalf of the principal. When the agent acts within the scope of their authority, it is as if the principal
is acting directly through the agent. The agent represents the principal in dealings with third parties.

Principal's Control over the Agent (Article 1870): The principal generally retains the right to
control the agent's actions within the scope of the agency. The principal can provide specific
instructions or limitations on what the agent can and cannot do. This control ensures that the agent's
actions align with the principal's interests.
1. Consent:

1.1. 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. Agency may be oral, unless the law requires a specific form.

1.2. 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.

1.3. 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.

1.4. 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.

1.5. Art. 1898: If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the principal. In this
case, however, the agent is liable if he undertook to secure the principal's ratification.

1.6. Art. 1901: A third person cannot set up the fact that the agent has exceeded his powers, if
the principal has ratified, or has signified his willingness to ratify the agent's acts.

1.7. Art. 1910: The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

1.8. Art. 1317: No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him.

A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it
is revoked by the other contracting party.

1.9. Art. 1403(1): The following contracts are unenforceable, unless they are ratified: (1) Those
entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers.

 Cases:

1. Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R. No. 151379, Nov. 22, 2004

Facts: Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the
Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former
owner of a memorial lot under Contract was no longer interested in acquiring the lot and had
opted to sell his rights subject to reimbursement of the amounts he already paid. The
contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is
made to the former buyer, the contract would be transferred to him. Baluyot informed Atty.
Linsangan that, a new contract covering the subject lot in the name of the latter instead of
old Contract has a listed price of P132,250.00 Atty. Linsangan protested, but Baluyot assured
him that he would still be paying the old price of P95,000.00. For its part, MMPCI alleged that
 second Contract was cancelled conformably with the terms of the contract because of non-
payment of arrearages. MMPCI stated that Baluyot was not an agent but an independent
contractor, and as such was not authorized to represent MMPCI or to use its name except as
to the extent expressly stated in the Agency Manager Agreement.

Issue: Whether or Not, MMPI is liable for the acts of Florencia

Ruling: No. The acts of the agent beyond the scope of his authority do not bind the principal
unless the latter ratifies the same. It also bears emphasis that when the third person knows
that the agent was acting beyond his power or authority, the principal cannot be held liable
for the acts of the agent. If the said third person was aware of such limits of authority, he is to
blame and is not entitled to recover damages from the agent, unless the latter undertook to
secure the principals ratification. Atty. Linsangan failed to show that MMPCI had knowledge
of the arrangement. As far as MMPCI is concerned, the contract price was P132,250.00, as
stated in the Offer to Purchase signed by Atty. Linsangan and MMPCI's authorized officer.
Likewise, this Court does not find favor in the Court of Appeals' findings that "the authority of
defendant Baluyot may not have been expressly conferred upon her; however, the same
may have been derived impliedly by habit or custom which may have been an accepted
practice in their company in a long period of time." A perusal of the records of the case fails
to show any indication that there was such a habit or custom in MMPCI that allows its agents
to enter into agreements for lower prices of its interment spaces, nor to assume a portion of
the purchase price of the interment spaces sold at such lower price. No evidence was ever
presented to this effect.

2. Orient Air Services v. CA, G.R. No. 76931, May 29, 1991

Facts: American Air, an air carrier offering passenger and air cargo transportation, entered
into a General Sales Agency Agreement with Orient Air, authorizing the latter to act as its
exclusive general sales agent for the sale of air passenger transportation. Orient air failed to
remit the net proceeds of sales for several months prompting American Air to undertake the
collection of the proceeds of tickets sold originally by Orient Air and terminating their
agreement. American air instituted suit against Orient Air for the settlement of past
outstanding funds in possession of the latter. Orient Air contended that because of the
unpaid overriding commissions it retained the sales proceeds before remitting the balance to
American Air. American Air contended that the sale must be made by Orient Air and the sale
must be done with the use of American Air’s ticket stocks in order for it to be entitled to the
overriding commission. On the other hand, Orient Air contends that the contractual
stipulation of a 3% overriding commission covers the total revenue of American Air and not
merely that derived from ticketed sales undertaken by Orient Air because it was an exclusive
General Sales Agent. CA held that Orient Air is entitled to commissions and ordered
American Air to reinstate Orient Air as its General Sales Agent.

Issue: Whether or not Orient Air is entitled to commissions; and Whether or not the CA is
correct in ordering reinstatement of Orient Air as agent.

Ruling: 1. Yes. Orient Air was entitled to an overriding commission based on total flown
revenue. American Air’s perception that Orient Air was remiss or in default of its obligations
under the Agreement was, in fact, a situation where the latter acted in accordance with the
Agreement—that of retaining from the sales proceeds its accrued commissions before
remitting the balance to American Air. Since the latter was still obligated to Orient Air by way
of such commissions. Orient Air was clearly justified in retaining and refusing to remit the
sums claimed by American Air. The latter’s termination of the Agreement was, therefore,
without cause and basis, for which it should be held liable to Orient Air.

2. No. CA in effect compels American Air to extend its personality to Orient Air. Such would
be violative of the principles and essence of agency, defined by law as a contract whereby “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. In an agent-
principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, 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 of the principal, which must not, in any way, be compelled by law or by any court.

2. Object (Article 1868): The contract of agency must have a specific object or purpose. This refers
to the particular tasks, transactions, or objectives for which the agent is authorized to act on
behalf of the principal. The object must be lawful and possible.
3. Consideration – Art. 1875: Agency is presumed to be for a compensation, unless there is proof
to the contrary.