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8/2/2019 Reviewer Agency

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2010-2011 REVIEWER FOR AGENCY

ESP Joven | LPU College of Law, Makati City 1

Characteristics of a Contract of Agency

1. Consensual

2. Principal

3. Nominate

4. Unilateral if gratuitous, bilateral if it is for

compensation5. Preparatory

Essential Elements of Agency

1. There is consent, express or implied, of

the parties to establish the relationship;

2. The object is the execution of a juridical

act in relation to 3rd

persons;

3. The agent acts as representative and

not for himself; and

4. The agent acts within the scope of his

authority

Acts that may not be delegatedto the Agent

1. Personal Actsa. Right to voteb. Making of a willc. Statements which required to be

made under oathd. A member of the Board of Director

cannot act by proxy2. Criminal Acts or acts not allowed by law

a. Alien cannot buy lands from aFilipino Agent

b. Person who prohibited fromacquiring a specific property (i.e. a

judge on a property under litigationin his sala)

No formalities are required for the creation of anagency, except in a sale of a real property orinterest thereon.

Nature of relations betweenprincipal and agent

1. Relations is fiduciary in character.2. Agent is estopped from asserting

interest adverse to his principal.3. Agent must not act as an adverse party4. Agent must not act for an adverse party5. Agent must not use or disclose secret

information

6. Agent must give notice of material facts

Theory of imputed knowledgeExceptions:

1. Where the agents interest are adverseto those of the principal;

2. Where the agents duty is not to disclosethe information as where he is informedby way of confidential information; and

3. Where the person claiming the benefitsof the rule colludes with the agent todefraud the principal.

Agency compared to other contracts.

1. Loan2. Lease of Service3. Independent Contract4. Partnership

5. Negotiorum gestio6. Brokerage7. Sale8. Bailment9. Guardianship10. Trust11. Judicial Administration

Kinds of Agency

As to the Manner of Creation:

1. Express

2. Implied

As to its Character:

1. Gratuitous2. Compensated or onerous

As to extent of business covered:

1. General2. Special

As to authority conferred:

1. Couched in general terms2. Couched in specific terms

As to its nature and effects:

1. Ostensible or representative2. Simple or Commission acts on his

own name but for the account ofprincipal


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The existence of agency is not presumedExcept:

1. Authority of a lawyer to appear for aclient;

Art. 1871. Between persons who are present,

the acceptance of the agency may also beimplied if the principal delivers his power ofattorney to the agent and the latter receives itwithout any objection. (n)

Art. 1872. Between persons who are absent, theacceptance of the agency cannot be impliedfrom the silence of the agent, except:

(1) When the principal transmits hispower of attorney to the agent, whoreceives it without any objection;

(2) When the principal entrusts to him byletter or telegram a power of attorneywith respect to the business in which heis habitually engaged as an agent, andhe did not reply to the letter or telegram.(n)

Power of Attorney is an instrument in writingby which one person, as principal,, appointsanother as his agent and confers upon him theauthority to perform certain specified acts orkinds of acts in behalf of the principal.

Art. 1873. If a person specially informs anotheror states by public advertisement that he hasgiven a power of attorney to a third person, thelatter thereby becomes a duly authorized agent,in the former case with respect to the personwho received the special information, and in thelatter case with regard to any person.

The power shall continue to be in full force untilthe notice is rescinded in the same manner inwhich it was given. (n)

Agency by Estoppel vs. Implied Agency

ImpliedAgency

Agency byEstoppel

Existence There is anactual agency

No Agency, 1assumng to actas agent hasapparent, notreal, authority torepresentanother

Reliance of 3rd

persons

Reliance notnecessary asthere is anagency

3rd

parties canonly invoked ifhe relied ingood faith onthe conduct ofthe principal in

holding agentout asauthorized

Nature ofAuthority

Real agent No rights ofan agent,except whenthe principalsconduct aresuch that theagentreasonablybelieved thatthe principalintended him

to act asagent in thematter

Art. 1874. When a sale of a piece of land or anyinterest therein is through an agent, the authorityof the latter shall be in writing; otherwise, thesale shall be void. (n)

Art. 1875. Agency is presumed to be for acompensation, unless there is proof to thecontrary. (n)

Art. 1876. An agency is either general orspecial.

The former comprises all the business of theprincipal. The latter, one or more specifictransactions. (1712)

Art. 1877. An agency couched in general termscomprises only acts of administration, even if theprincipal should state that he withholds no poweror that the agent may execute such acts as hemay consider appropriate, or even though the

agency should authorize a general and unlimitedmanagement. (n)

Art. 1878. Special powers of attorney arenecessary in the following cases:

(1) To make such payments as are notusually considered as acts ofadministration;


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(2) To effect novations which put an endto obligations already in existence at thetime the agency was constituted;

(3) To compromise, to submit questionsto arbitration, to renounce the right to

appeal from a judgment, to waiveobjections to the venue of an action orto abandon a prescription alreadyacquired;

(4) To waive any obligation gratuitously;

(5) To enter into any contract by whichthe ownership of an immovable istransmitted or acquired eithergratuitously or for a valuableconsideration;

(6) To make gifts, except customaryones for charity or those made toemployees in the business managed bythe agent;

(7) To loan or borrow money, unless thelatter act be urgent and indispensablefor the preservation of the things whichare under administration;

(8) To lease any real property to anotherperson for more than one year;

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

(10) To bind the principal in a contract ofpartnership;

(11) To obligate the principal as aguarantor or surety;

(12) To create or convey real rights overimmovable property;

(13) To accept or repudiate aninheritance;

(14) To ratify or recognize obligationscontracted before the agency;

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

Art. 1879. A special power to sell excludes thepower to mortgage; and a special power tomortgage does not include the power to sell. (n)

Art. 1880. A special power to compromise doesnot authorize submission to arbitration. (1713a)

Art. 1881. The agent must act within the scopeof his authority. He may do such acts as may beconducive to the accomplishment of the purposeof the agency. (1714a)

Art. 1882. The limits of the agent's authorityshall not be considered exceeded should it havebeen performed in a manner moreadvantageous to the principal than that specifiedby him. (1715)

Authority is the power of the agent to affect

the legal relations of the principal by acts donein accordance with the principals manifestationof consent to him.

Authority is the Cause, power is the effect.

Kinds of Authority

1. Actual2. Express3. Implied4. Apparent or ostensible

Requisites to bind the principal from the actsof the agent:

1. The agent must act within the scope ofhis authority; and

2. The agent must act in behalf of theprincipal

Liability for agent who actsbeyond his authority

As to the Principal - he is not bound, except:

1. Where the principals act havecontributed to deceive a third person ingood faith;

2. Where the limitations upon the powercreate by him could not have beenknown by the third person;

3. Where the principal has placed in thehands of the agent instruments signedby him in blank;


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4. Where the principal has ratified the actsof the agent.

As to the Agent he is liable either to thePrincipal or to the 3

rdparty:

1. If the principal is liable to the 3rd

party onthe ground of apparent authority, theagents liability is to the principal;

2. If the principal is not liable to 3rd

personbecause no apparent authority is presnt,the agents liability is to the third party;

3. If the agent personally assumesresponsibility for the particulartransaction, if the principal defaults he,in effect, also becomes obligated as co-principal.

Art. 1883. If an agent acts in his own name, theprincipal has no right of action against thepersons with whom the agent has contracted;neither have such persons against the principal.

In such case the agent is the one directly boundin favor of the person with whom he hascontracted, as if the transaction were his own,except when the contract involves thingsbelonging to the principal.

The provisions of this article shall be understood

to be without prejudice to the actions betweenthe principal and agent. (1717)

Obligations of the Agent

Specific obligation of Agent to Principal

1. To carry out the agency which heaccepted;

2. To answer for damages which throughhis performance the principal maysuffer;

3. To finish the business already begun onthe death of the principal should delayentail any danger;

4. To observe the diligence of a goodfather of the family in the custody andpreservation of the goods forwarded tohim by the owner in case he declined anagency, until an agent is appointed;

5. To advance necessary funds shouldthere be a stipulation to do so;

6. To act in accordance with theinstructions of the principal and indefault thereof, to do all that a goodfather of a family would do;

7. Not to carry out the agency if itsexecution would manifestly result in lossor damage to the principal;

8. To answer for damages if there being aconflict between his interest and thoseof the principal, he should prefer hisown;

9. Not to loan to himself if he has beenauthorized to lend money in interest;

10. To render an account of his transactionand to deliver to the principal whateverhe may have received by virtue of heagency;

11. To distinguish goods by countermarksand designate the merchandiserespectively belonging to each principal,

in the case of a commission agent whohandles goods of the same kind andmark, which belongs to different owners;

12. To be responsible in certain cases forthe acts of the substitute appointed byhim;

13. To pay interest on funds he has appliedto his own use;

14. To inform the principal, where anauthorized sale has been made, of suchsale;

15. To bear risk of collection, should hereceive also on sale, a guarantee

commission;16. To indemnify the principal for damages

for his failure to collect the credits of hisprincipal at the time that they becomedue; and

17. To be responsible for fraud ornegligence

Instruction are private directions whichthe principal may give the agent in regard tothe manner of performing his duties as suchagent but of which a third party is ignorant.


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Authority vs. Instruction

Authority Instruction

Sum of the totalpowers committed orpermitted to the

agent by theprincipal.

Direct the manner oftransacting theauthorized business

and contemplatesonly private rule ofguidance to theagent and areindependent andistinct in character

Relates to subjectwith which the agentis empowered todeal or the kind ofbusiness ortransactions uponwhich he isempowered to act.

Refer to the manneror mode of his actionwith respect tomatters which intheir substance arewithin the scope ofpermitted action.

Limitations ofauthority areoperative as againstthose who have orare charged withknowledge of them.

Instructions limitingthe agents authorityare withoutsignificane asagainst thosedealing with theagent with neitherknowledge nornotice of them.

Is contemplated to

be made known tothe 3

rdpersons

dealing with theagent.

Are not expected to

be made known tothose with whom theagent deals

The Principal will be liable to 3rd

persons even ifthe agent violates the instructions as long as theact is within the apparent scope of the agentsauthority. The only exception is if the 3

rdperson

has knowledge that the agent has exceeded hisauthority or violated his instructions.

3rd

person are tasked to inquire about the

agents authority but not the instructions.

Obligation of the agent to act in accordancewith the principals instructions.

1. Duty to obey reasonable and lawfulinstructions;

2. Liability for loss or damage;3. Duty to act in good faith and with due

care.

Justified departure of principals instruction:

1. In case of emergency where theprincipal cannot be reached.

2. Ambiguous instructions.3. Insubstantial departure that does not

affect the results.

Agent can be the lender to the principal at thecurrent rate of interest.

Methods of broadening and restrictingagents authority:

1. By implication;2. By usage and custom;3. By necessity;4. By certain doctrines (i.e. apparent

authority, liability by estoppel,ratifications, etc.);

5. By rule of ejusdem generis (of the samekind of species).

Guarantee commission (del credere agent) where, in consideration of an increasedcommission, the factor or commission agentguarantees to the principal the payment of debtsarising through his agency.

Obligation of the Principal

1. To comply with all the obligations whichthe agent may have contracted within

the scope of his authority and in thename of the principal;

2. To advance to the agent, should thelatter so request, the sums necessaryfor the execution of agency.

3. To reimburse the agent for alladvances made by him provided theagent is free from fault;

4. To indemnify the agent for all thedamages which the execution of theagency may have caused the latterwithout fault or negligence on his part.

5. To pay the agent the compensation

agreed upon or if no compensation wasspecified, the reasonable value of theagents services.


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Liability of 3rd

persons to principal

1. In contract;2. In tort:

a. Where the third person damages orinjures property or interest of theprincipal in the possession of theagent;

b. Where the 3rd

person colludes withthe agent to injure or defraud theprincipal; and

c. Where the third person induces theagent to violate his contract with theprincipal to betray the trust reposedupon him by the principal.

3. In respect of property received. principal can recover the property in theabsence of law or apparent authority ofthe agent.

Liability of the principal for tort of agent

GL the principal is civilly liable to 3rd

personsfor torts of an agent committed at theprincipals direction or in the course andwithin the scope of the agents employment.

Ratification is the adoption or affirmance by aperson of a prior act which did not bind him, butwhich was done or professed to be done on hisaccount thus giving effect to the acts as iforiginally authorized.

Conditions for ratification:

1. The principal must have the capacityand power to ratify;

2. He must have had the knowledge or hadreason to know of material or essentialfacts about the transaction;

3. He must ratify the acts in its entirety;4. The act must be capable of ratification;

and5. The act must be done in behalf of the

principal.

Ratification can be express or implied

Estoppel is a bar which precludes a personfrom denying or asserting anything contrary tothat which has been established as the truth byhis own deed or representation either express orimplied.

Ratification Estoppel

Rest in intention Rest on prejudice

retroactive Operates uponsomething which hasbeen done but after

the misleading actsand in reliance on it.

Implied Agency there is an actual agency, theprincipal alone is liable.

Agency by estoppels authority of the agent isnot real but apparent. Principal is liable if hecaused the said estoppels. Agent is liable ifestoppels is caused by him.

Nature of agents right of lien

1. Right limited to subject matter of agency2. Right requires possession by agent of

subject matter.3. Right generally only in favor of agent.

Art. 1918. The principal is not liable for theexpenses incurred by the agent in the followingcases:

(1) If the agent acted in contravention of

the principal's instructions, unless thelatter should wish to avail himself of thebenefits derived from the contract;

(2) When the expenses were due to thefault of the agent;

(3) When the agent incurred them withknowledge that an unfavorable resultwould ensue, if the principal was notaware thereof;

(4) When it was stipulated that the

expenses would be borne by the agent,or that the latter would be allowed only acertain sum. (n)


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CHAPTER 4MODES OF EXTINGUISHMENT OF AGENCY

Art. 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 orof the agent;

(4) By the dissolution of the firm orcorporation which entrusted or acceptedthe agency;

(5) By the accomplishment of the objector purpose of the agency;

(6) By the expiration of the period forwhich the agency was constituted.(1732a)

Art. 1920. The principal may revoke the agencyat will, and compel the agent to return thedocument evidencing the agency. Suchrevocation may be express or implied. (1733a)

Art. 1921. If the agency has been entrusted forthe purpose of contracting with specifiedpersons, its revocation shall not prejudice thelatter if they were not given notice thereof.(1734)

Art. 1922. If the agent had general powers,revocation of the agency does not prejudice thirdpersons who acted in good faith and withoutknowledge of the revocation. Notice of therevocation in a newspaper of general circulationis a sufficient warning to third persons. (n)

Art. 1923. The appointment of a new agent forthe same business or transaction revokes theprevious agency from the day on which notice

thereof was given to the former agent, withoutprejudice to the provisions of the two precedingarticles. (1735a)

Art. 1924. The agency is revoked if the principaldirectly manages the business entrusted to theagent, dealing directly with third persons. (n)

Art. 1925. When two or more principals havegranted a power of attorney for a commontransaction, any one of them may revoke thesame without the consent of the others. (n)

Art. 1926. A general power of attorney is

revoked by a special one granted to anotheragent, as regards the special matter involved inthe latter. (n)

Art. 1927. An agency cannot be revoked if abilateral contract depends upon it, or if it is themeans of fulfilling an obligation alreadycontracted, or if a partner is appointed managerof a partnership in the contract of partnershipand his removal from the management isunjustifiable. (n)

Art. 1928. The agent may withdraw from the

agency by giving due notice to the principal. Ifthe latter should suffer any damage by reason ofthe withdrawal, the agent must indemnify himtherefor, unless the agent should base hiswithdrawal upon the impossibility of continuingthe performance of the agency without gravedetriment to himself. (1736a)

Art. 1929. The agent, even if he shouldwithdraw from the agency for a valid reason,must continue to act until the principal has hadreasonable opportunity to take the necessarysteps to meet the situation. (1737a)

Art. 1930. The agency shall remain in full forceand effect even after the death of the principal, ifit has been constituted in the common interest ofthe latter and of the agent, or in the interest of athird person who has accepted the stipulation inhis favor. (n)

Art. 1931. Anything done by the agent, withoutknowledge of the death of the principal or of anyother cause which extinguishes the agency, isvalid and shall be fully effective with respect tothird persons who may have contracted with him

in good faith. (1738)

Art. 1932. If the agent dies, his heirs must notifythe principal thereof, and in the meantime adoptsuch measures as the circumstances maydemand in the interest of the latter. (1739)


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Other modes of extinguishment

1. War2. Legal impossibility3. Termination of agents authority;4. Occurrence of specified avents

When death of the principal does notterminate the agency:

1. Agency has been constituted for thecommon interest if the principal and theagent;

2. If it has been constituted in the interestof a 3

rdperson who has accepted the

stipulation in his favor.

Agency coupled with interest

1. When the agency is created not only for

the interest of the principal but also forthe interest of 3

rdperson;

2. When the agency is created for themutual interest of both the principal andthe agent.

Forms of renunciation of agency:

1. Express2. Implied:

a. Agent abandons the object ofagency and act for himself incommitting a fraud upon his

principal;b. Agent institutes an action against

his principal for the recovery of thebalance in his favor resulting fromthe liquidation of the accountsbetween them arising from theagency, and renders a final accountof his operations.

Mere act of violating the instruction is nottantamount to renunciation.

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