AGENCY REVIEWER PROF.

SANCHEZ

THE LAW ON AGENCY ART. 1870. Acceptance by the agent may also be express,
or implied from his acts which carry out the agency, or from
I. INTRODUCTION his silence or inaction according to the circumstances. (n)
A. HOW IS AGENCY DEFINED

ARTICLE 1868. By the contract of agency a person binds

himself to render some service or to do something in ART. 1871. Between persons who are present, the
representation or on behalf of another, with the consent or acceptance of the agency may also be implied if the
authority of the latter. (1709a) principal delivers his power of attorney to the agent and the
latter receives it without any objection. (n)
The denition, which is very broad enough to
include all situations in which one person is ART. 1872. Between persons who are absent, the
employed to render service for another, acceptance of the agency cannot be implied from the
silence of the agent, except: (1) When the principal
excludes, however, from its concept the
transmits his power of attorney to the agent, who receives
relationship of employer and employee (Art.*
it without any objection; (2) When the principal entrusts to
1700.), of master and servant (Art. 1680.), and him by letter or telegram a power of attorney with respect
of employer and independent contractor. (Art. to the business in which he is habitually engaged as an
1713.) agent, and he did not reply to the letter or telegram. (n)
Agency is a duciary relationship which
implies a power in an agent to contract with a
third person on behalf of a principal. ART. 1901. A third person cannot set up the fact that the
agent has exceeded his powers, if the principal has ratied,
PURPOSE: extension of the principals
or has signied his willingness to ratify the agents acts. (n)
personality
Its both a contract and a relationship
CHARACTERISTICS ART. 1910. The principal must comply with all the
Its consensual, for it is perfected by obligations which the agent may have contracted within the
mere consent; scope of his authority. As for any obligation wherein the
agent has exceeded his power, the principal is not bound
Its principal, for it can stand by itself;
except when he raties it expressly or tacitly. (1727)
Its nominate;
It can either be unilateral (if its
gratuitous) or bilateral (if its for ART. 1898. If the agent contracts in the name of the
compensation); and principal, exceeding the scope of his authority, and the
Its preparatory because it is entered principal does not ratify the contract, it shall be void if the
into as a means to an end party with whom the agent contracted is aware of the limits
ELEMENTS of the powers granted by the principal. In this case
however, the agent is liable if he undertook to secure the
CONSENT (express/implied)
principals ratification.
Manifestation of Consent:
The principal must intend ART. 1317. No one may contract in the name of another
that the agent shall act for without being authorized by the latter, or unless he has by
him, the agent must intend law a right to represent him.
to accept the authority and A contract entered into the name of another by one who
act on it, and such intention has no authority or legal representation, or who has acted
of the parties must nd beyond powers, shall be unenforceable, unless it is ratified,
expression either in words expressly or impliedly, by the person on whose behalf it has
been executed before it is revoked by the other contracting
or conduct between them.
party. (1259a)

ART. 1869. Agency may be express, or implied from the acts ART. 1403. The following contracts are unenforceable,
of the principal, from his silence or lack of action, or his unless they are ratified:
failure to repudiate the agency, knowing that another (1) Those entered into in the name of another
person is acting on his behalf without authority. Agency person by one who has been given no authority
may be oral, unless the law requires a specic form. (1710a) or legal representation, or who has acted beyond
his powers;

D2019 | PAGE 1
AGENCY REVIEWER PROF. SANCHEZ

GENERAL RULE: AS STATED BY ART. 1317, no one may POWER OF ATTORNEY: is an instrument in writing by which
contract in the name of another without being authorized one person, as principal, appoints another as his agent and
by the latter, or unless, he has by law a right to represent confers upon him the authority to perform certain
him or else, such contract entered into shall be specied acts or kinds of acts on behalf of the principal.
unenforceable (NCC 1317, 1403 (1)). The written authorization itself is the power of attorney,
and this is clearly indicated by the fact that it has also been
THIS RULE APPLIES TO AGENCY (See NCC 1868; called a letter of attorney.
emphasis should be placed on the phrase, with PURPOSE: to evidence the authority of the agent
the consent or authority of the latter) to third parties within whom the agent deals
CONSENT, HOWEVER, MAYBE EXPRESS or
IMPLIED OBJECT: execution of the juridical act
EXPRESS CONSENT: may be made orally or in
writing (principal verbally confers or expressly
CONSIDERATION
stipulates in writing authorization upon another
who accepts it, by stating his or her conformity, ART. 1875. Agency is presumed to be for a compensation,
verbally, or in writing) unless there is proof to the contrary. (n)
IMPLIED CONSENT
one which is implied from the acts of The agent does not have to prove that the
the principal, from his silence or lack agency is for compensation.
of action, or his failure to repudiate The prima facie presumption that the agency is
the agency knowing that another for a compensation may be contradicted by
person is acting on his behalf without contrary evidence.
authority (1869); OR
from the acts of the agent which
carry out the agency, or from his B. WHO ARE THE PARTIES TO THE CONTRACT OF AGENCY
silence or inaction according to the PRINCIPAL: one whom the agent represents and
circumstances. (Art. 1870.)
from whom he derives his authority (2 C.J.S.
o As regards implied
1024.); he is the person represented. Agency
acceptance by the agent,
the law distinguishes
imports the contemporaneous existence of a
between cases (1) where principal, and there is no agency unless one is
persons are present (Art. acting for and in behalf of another (2-A Words
1871.) and (2) where and Phrases 436.)
persons are absent. (Art. AGENT: one who acts for and represents another;
1872.) he is the person acting in a representative
o The agency is impliedly capacity. The agent has derivative authority in
accepted if the agent
carrying out the principals business. He may
receives a power of
employ his own agent in which case he becomes a
attorney from the principal
himself personally without principal with respect to the latter. (see Art.
any objection, both being 1892.) If an act done by one person in behalf of
present. The presumption another is, in its essential nature, one of
of acceptance may be agency, the former is agent of the latter
rebutted by contrary proof. notwithstanding that he is not so called. (2-A
An implied agency is an actual agency Words and Phrases 436.)
as much as an express agency
Ratication may produce the effect of an express
C. MUST THE PARTIES BE CAPACITATED
or implied agency. It results in agency by
DE LEONS VIEW: It is only the principal who
ratication. (see Arts. 1901, 1910, par. 2.)
For ratification to be valid, the needs to be capacitated
following requisites must concur: A principal must be capacitated (see Arts.
o The act performed by the 1327, 1329.4) or have the legal capacity to
agent must be legal enter into contract in his own right. The logic
o The principal must ratify is simple. A person who cannot legally enter
such act voluntarily into contracts directly should not be
o And the ratification cannot permitted to do it indirectly through another
be divisible
Generally, anyone can be an agent. His
capacity is usually immaterial. In the case of

D2019 | PAGE 2
AGENCY REVIEWER PROF. SANCHEZ

the agent, since he assumes no personal

liability, he does not have to possess full
capacity to act for himself insofar as third II. WHAT IS THE FORM OF THE CONTRACT OF AGENCY
persons are concerned. An agent derives his The usual method an agency is created is by
authority from the principal, and a contract contract which may be oral, written, or implied.
made by the agent is legally viewed as a There are some provisions of law which require
contract of the principal. certain formalities for particular contracts. The
VILLANUEVAS VIEW (the one who recited in class, rst is when the form is required for the validity
espoused this view) of the contract; the second, when it is required to
Both the principal and the agent should be make the contract effective against third persons
capacitated because an agency is a contract. such as those mentioned in Articles 1357 and
1358 of the Civil Code; and the third, when it is
CASE DOCTRINES required for the purpose of proving the existence
of a contract such as those provided in the
RALLOS V. FELIX GO CHAN Statute of Frauds in Article 1403
In general, there are no formal requirements
ELEMENTS OF AN AGENCY:
governing the appointment of an agent. The
There is consent, express or implied, of the
parties to establish the relationship; agents authority may be oral or written. It may
The object is the execution of a juridical act be in public or private writing. An instance when
in relation to third persons; the law requires a specic form for the agency is
The agent acts as a representative and not Article 1874.
for himself; and ART. 1874. When a sale of a piece of land or any
The agent acts within the scope of his interest therein is through an agent, the authority of
authority the latter shall be in writing; otherwise, the sale shall
be void. (n)
ORIENT AIR SERVICES V. CA
Agency may even be implied from words and
In an agent-principal relationship, the conduct of the parties and the circumstances of
personality of the principal is extended through the the particular case. (Arts. 1869-1872.)
facility of the agent. In so doing, the agent, by legal
fiction, becomes the principal, authorized to CASE DOCTRINES
perform all acts which the latter would have him
do. Such a relationship can only be effected with ANGELES V. PNR
the consent of the principal, which must not, in any
way, be compelled by law or by any court. Where agency exists, the third party's (in this
case, PNR's) liability on a contract is to the
LITONJUA, JR. V. ETERNIT CORP. principal and not to the agent and the relationship
of the third party to the principal is the same as
The property of a corporation, however, is not that in a contract in which there is no agent.
the property of the stockholders or members, and Normally, the agent has neither rights nor liabilities
as such, may not be sold without express authority as against the third party. He cannot thus sue or be
from the board of directors. Physical acts, like the sued on the contract. Since a contract may be
offering of the properties of the corporation for violated only by the parties thereto as against each
sale, or the acceptance of a counter-offer of other, the real party-in-interest, either as plaintiff
prospective buyers of such properties and the or defendant in an action upon that contract must,
execution of the deed of sale covering such generally, be a contracting party.
property, can be performed by the corporation
only by officers or agents duly authorized for the Article 1374 of the Civil Code provides that
purpose by corporate by-laws or by specific acts of the various stipulations of a contract shall be read
the board of directors. Absent such valid and interpreted together, attributing to the
delegation/authorization, the rule is that the doubtful ones that sense which may result from all
declarations of an individual director relating to of them taken jointly. In fine, the real intention of
the affairs of the corporation, but not in the course the parties is primarily to be determined from the
of, or connected with, the performance of language used and gathered from the whole
authorized duties of such director, are not binding instrument.
on the corporation.

D2019 | PAGE 3
AGENCY REVIEWER PROF. SANCHEZ

III. WHO HAS THE OBLIGATION TO DETERMINE THE

JIMENEZ V. RABOT
EXISTENCE AND THE SCOPE OF THE AGENCY
As a matter of formality, a power of attorney THE THIRD PERSON
to convey real property ought to appear in a public
ART. 1902. A third person with whom the agent wishes to
document, just as any other instrument intended to
contract on behalf of the principal may require the
transmit or convey an interest in such property
presentation of the power of attorney, or the instructions
ought to appear in a public document
as regards the agency. Private or secret orders and
Art. 1713 (now 1874) of the Civil Code requires instructions of the principal do not prejudice third persons
that the authority to alienate land shall be who have relied upon the power of attorney or instructions
contained in an express mandate shown them. (n)

Subsection 5 of section 335 of Code of Civil AS A RULE, a third person deals with an agent at his peril.
Procedure say that the authority of the agent must Hence, he is bound to inquire as to the extent of the
be in writing and subscribed by the party to be agents authority, and this is especially true where the act
charged. of the agent is of an unusual nature. Ignorance of the
agents authority is no excuse. So, it is his duty to require
AF REALTY V. DISELMAN FREIGHT the agent to produce his power of attorney to ascertain
the scope of his authority. He may also ask for the
Since a corporation, such as the private instructions of the principal. (Art. 1887.)
respondent, can act only through its officers and
While the third person is chargeable with knowledge of
agents, all acts within the powers of said
the terms of the power of attorney as written and the
corporation may be performed by agents of its
instructions disclosed to him, he is not bound and cannot
selection; and, except so far as limitations or
be affected by the private or secret orders and
restrictions may be imposed by special charter, by-
instructions of the principal in the same way that he
law, or statutory provisions, the same general
cannot be prejudiced by any understanding between the
principles of law which govern the relation of agency
principal and the agent (Art. 1900). Such secret orders or
for a natural person govern the officer or agent of a
instructions cannot be invoked as against third parties if
corporation, of whatever status or rank, in respect to
the agent has apparent authority.
his power to act for the corporation; and agents
when once appointed, or members acting in their
stead, are subject to the same rules, liabilities, and CASE DOCTRINES
incapacities as are agents of individuals and private
persons. KEELER ELECTRIC CO. V. RODRIGUEZ

He must act with ordinary prudence and

COSMIC LUMBER CORP. V. CA
reasonable diligence to ascertain whether the agent is
acting and dealing with him within the scope of his
When the sale of a piece of land or any
powers. Obviously, if he knows or has good reason to
interest thereon is through an agent, the authority
believe that the agent is exceeding his authority, he
of the latter shall be in writing; otherwise, the sale
cannot claim protection. So, if the character assumed by
should be void. Thus, the authority of an agent to
the agent is of such a suspicious or unreasonable nature,
execute a contract for the sale of real estate must
or if the authority which he seeks is of such an unusual or
be conferred in writing and must give him specific
improbable character, as would sufce to put an
authority, either to conduct the general business of
ordinarily prudent man upon his guard, the party dealing
the principal or to execute a binding contract
with him may not shut his eyes to the real state of the case
containing terms and conditions which are in the
but should withal refuse to deal with the agent at all, or
contract he did execute
should ascertain from the principal the true condition of
For the principal to confer the right upon an affairs.
agent to sell real estate, a power of attorney must
so express the powers of the agent in clear and
unmistakable language.

D2019 | PAGE 4
AGENCY REVIEWER PROF. SANCHEZ

IV. HOW IS AGENCY DISTINGUISHED FROM OTHER

CONTRACTS/RELATIONSHIPS
AGENCY

ARTICLE 1868. By the contract of agency a person binds Article 1698. If the duration of the household service is not
himself to render some service or to do something in determined either by stipulation or by the nature of the
representation or on behalf of another, with the consent or service, the head of the family or the house helper may give
authority of the latter. (1709a) notice to put an end to the service relation, according to
the following rules:

(1) If the compensation is paid by the day, notice may be

MASTER-SERVANT
given on any day that the service shall end at the close of
the following day;
Article 1689. Household service shall always be reasonably
compensated. Any stipulation that household service is (2) If the compensation is paid by the week, notice may be
without compensation shall be void. Such compensation given, at the latest on the first business day of the week,
shall be in addition to the house helper's lodging, food, and that the service shall be terminated at the end of the
medical attendance. seventh day from the beginning of the week;
Article 1690. The head of the family shall furnish, free of (3) If the compensation is paid by the month, notice may be
charge, to the house helper, suitable and sanitary quarters given, at the latest, on the fifth day of the month that the
as well as adequate food and medical attendance. service shall cease at the end of the month.
Article 1691. If the house helper is under the age of Article 1699. Upon the extinguishment of the service
eighteen years, the head of the family shall give an relation, the house helper may demand from the head of
opportunity to the house helper for at least elementary the family a written statement on the nature and duration
education. The cost of such education shall be a part of the of the service and the efficiency and conduct of the house
house helper's compensation, unless there is a stipulation helper.
to the contrary.

Article 1692. No contract for household service shall last for

more than two years. However, such contract may be EMPLOYER-EMPLOYEE
renewed from year to year. Article 1700. The relations between capital and labor are
Article 1693. The house helper's clothes shall be subject to not merely contractual. They are so impressed with public
stipulation. However, any contract for household service interest that labor contracts must yield to the common
shall be void if thereby the house helper cannot afford to good. Therefore, such contracts are subject to the special
acquire suitable clothing. laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of
Article 1694. The head of the family shall treat the house labor and similar subjects.
helper in a just and humane manner. In no case shall
physical violence be used upon the house helper.
LEASE OF SERVICE
Article 1695. House helpers shall not be required to work
more than ten hours a day. Every house helper shall be ARTICLE 1644. In the lease of work or service, one of
allowed four days' vacation each month, with pay. the parties binds himself to execute a piece of work
or to render to the other some service for a price
Article 1696. In case of death of the house helper, the head
certain, but the relation of principal and agent does
of the family shall bear the funeral expenses if the house
not exist between them. (1544a)
helper has no relatives in the place where the head of the
family lives, with sufficient means therefor.
AGENCY LEASE OF SERVICE
Article 1697. If the period for household service is fixed
Based on representation Based on employment
neither the head of the family nor the house helper may
Agent exercises discretion Lessor exercises purely
terminate the contract before the expiration of the term,
ministerial functions
except for a just cause. If the house helper is unjustly
Involves three individuals: Only two persons are
dismissed, he shall be paid the compensation already
earned plus that for fifteen days by way of indemnity. If the
PRINCIPAL, AGENT, and a involved: LESSOR and
house helper leaves without justifiable reason, he shall THIRD PERSON LESSEE
forfeit any salary due him and unpaid, for not exceeding Concerns commercial or Matters of mere manual or
fifteen days. business transactions mechanical execution

D2019 | PAGE 5
AGENCY REVIEWER PROF. SANCHEZ

INDEPENDENT CONTRACTOR SALE

Article 1713. By the contract for a piece of work the Article 1458. By the contract of sale one of the
contractor binds himself to execute a piece of work for the contracting parties obligates himself to transfer the
employer, in consideration of a certain price or ownership and to deliver a determinate thing, and the
compensation. The contractor may either employ only his other to pay therefor a price certain in money or its
equivalent.
labor or skill, or also furnish the material. (1588a)
A contract of sale may be absolute or conditional.
(1445a)
AGENCT INDEPENDENT
CONTRACTOR AGENCY TO SELL SALE
Represents the principal Employed by the Agent receives the goods Buyer receives the
employer as the goods of the goods as owner
Acts according to the Acts according to his principal
instructions of the own method Agent delivers the Buyer pays the price
principal proceeds of the sale
Principal liable for torts The employer will not be Agent can return the Generally, the buyer
committed by agent held liable for any tort object to the principal in cannot return the
within the scope of his committed by the case he is unable to sell it object sold
authority independent contractor to a third person
It is incumbent upon the Buyer can deal with the
TRUST agent to deal with the thing as he pleases for
thing received according he owns it
Article 1440. A person who establishes a trust is called
the trustor; one in whom confidence is reposed as to the instructions of his
regards property for the benefit of another person is principal
known as the trustee; and the person for whose benefit
the trust has been created is referred to as the
beneficiary.

AGENCY TRUST
the agent represents and The title and control of
acts for his principal the property under the
trust instrument
passes to the trustee
who acts in his own
name
An agency may in general A trust may ordinarily
be revoked at any time be terminated only by
(generally speaking) the fulllment of its
purpose
Agency is formed with the A trust is based on the
thought of constant idea of discretion in
supervision and control by the trustee and
principal guidance by the settler
or cestui only to a
limited extent and
when expressly
provided for
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

D2019 | PAGE 6
AGENCY REVIEWER PROF. SANCHEZ

PARTNERSHIP NEGOTIORUM GESTIO/QUASI-CONTRACT

Article 2144. Whoever voluntarily takes charge of the

Article 1767. By the contract of partnership two or more agency or management of the business or property of
persons bind themselves to contribute money, property, another, without any power from the latter, is obliged to
or industry to a common fund, with the intention of continue the same until the termination of the affair and
dividing the profits among themselves. its incidents, or to require the person concerned to
Two or more persons may also form a partnership for substitute him, if the owner is in a position to do so. This
the exercise of a profession. (1665a) juridical relation does not arise in either of these
instances:
AGENCY PARTNERSHIP (1) When the property or business is not neglected
Agent acts only for his A partner acts not only or abandoned;
principal for his co-partners and (2) If in fact the manager has been tacitly
the partnership but also authorized by the owner.
as principal of himself In the first case, the provisions of articles 1317,
1403, No. 1, and 1404 regarding unauthorized
each partner is regarded
contracts shall govern.
as an agent of his co- In the second case, the rules on agency in Title X of
partners when he is this Book shall be applicable. (1888a)
acting and as principal of
his co-partners when Article 2145. The officious manager shall perform his
they are acting duties with all the diligence of a good father of a family,
the agent or partner can bind the principal or his co- and pay the damages which through his fault or
partner only by such contracts as are entered into negligence may be suffered by the owner of the property
within the scope of his authority or business under management.
The courts may, however, increase or moderate the
both conceptions import the idea of a duciary indemnity according to the circumstances of each case.
relationship (1889a)
An essential characteristic The partnership relation,
of the agency relationship, while having many of the In both agency and negotiorum gestio or the
i.e., control by the characteristics of the management of the business or affairs of an
principal, which is not agency relationship, absentee, there is representation. The distinction
applicable to the differs from it in that a lies in the fact that in the rst, the representation
partnership concept. It is partners power to bind is expressly conferred, while in the second, it is
fundamental in the law of his co-partner is not
not only without the authority of the owner of
agency that an agent must subject to the co-
the business but is without his knowledge. While
submit to the principals partners right to
the agent acts according to the express will of the
right to control the agents control, unless there is
conduct in regard to the an agreement to that principal, the gestor acts according to the
subject of the agency effect. presumed will of the owner by exercising all the
The ordinary agent A partner acting as agent diligence of a good father of a family. (Art. 2145.)
assumes no personal for the partnership binds Agency is a contract, while negotiorum gestio is a
liability where he acts not only the rm quasi-contract.
within the scope of his members but himself as
authority well JUDICIAL ADMINISTRATOR
What is the test to determine whether, in a given The provisions of law on agency should not apply
case, the parties have entered into a relationship of to a judicial administration.
partner and partner, or principal and agent?
A judicial administrator is appointed by the court.
The answer depends upon the manner in which
He is not only the representative of the said court,
the prots are shared: If, when earned, the prots
but also of the heirs and creditors of the estate. A
belong to all the parties as common proprietors in
agreed proportions, the relation is one of judicial administrator, before entering into his
partnership, but if the alleged owner or partner duties, is required to le a bond. These
takes his agreed share of prots, not as owner but as circumstances are not true in case of agency. The
an agreed measure of compensation for his services agent is only answerable to his principal. The
or the like, the relation is one of agency. 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

D2019 | PAGE 7
AGENCY REVIEWER PROF. SANCHEZ

a judicial administrator are subject to specic principal's authority as owner of the business
provisions of law and orders of the appointing undertaking. We are convinced, considering the
court. (San Diego, Sr. vs. Nombre, 11 SCRA 165 circumstances and from the respondent Court's recital
[1964].) of facts, that the ties had contemplated a principal
agent relationship, rather than a joint management or
BROKER a partnership.
COMMISSION AGENT BROKER
A commission agent (see A broker is one who is But unlike simple grants of a power of attorney, the
agency that we hereby declare to be compatible with
Art. 1903.) is one engaged engaged for others on a
the intent of the parties, cannot be revoked at will.
in the purchase or sale for commission; a The reason is that it is one coupled with an interest,
another of personal negotiator between the agency having been created for mutual interest,
property which for this other parties, never of the agent and the principal.
purpose, is placed in his acting in his own name
possession and at his but in the name of those
disposal who employed him SHELL V. FIREMENS INSURANCE CO.
Maintains a relation not has no relation with the
only with his principal and thing he buys or sells Taking into consideration the fact that the
the purchaser or vendor, he is merely an operator owed his position to the company and
but also with the property intermediary or the latter could remove him or terminate his
which is the subject negotiator between the services at will; that the service station belonged
matter of the transaction purchaser and the to the company and bore its tradename and the
vendor relative to the operator sold only the products of the company;
property with the
that the equipment used by the operator
custody or possession of
belonged to the company and were just loaned
which he has no concern
to the operator and the company took charge of
An agent receives a a broker earns his pay
commission upon the merely by bringing the their repair and maintenance; that an employee
successful conclusion of a buyer and the seller of the company supervised the operator and
transaction such as sale together, even if no sale conducted periodic inspection of the company's
is eventually made gasoline and service station; that the price of the
Agent is a broader term than broker, for, products sold by the operator was fixed by the
while brokers are agents, their powers are company and not by the operator; and that the
limited, and when they have no charge or receipt signed by the operator indicated that he
control of the property, but act only as go- was a mere agent, the finding of the Court of
betweens in executing a sale, they cannot be Appeals that the operator was an agent of the
said to be agents in the larger sense entitled company and not an independent contractor
to receive payment for the goods delivered, should not be disturbed.
unless specically authorized. (Lawrence Gas
To determine the nature of a contract courts do
Co. vs. Hawkeye Oil Co., 165 N.W. 445, 447.) not have or are not bound to rely upon the name or
title given it by the contracting parties, should there be
CASE DOCTRINES a controversy as to what they really had intended to
enter into, but the way the contracting parties do or
SEVILLA V. CA
perform their respective obligation stipulated or
agreed upon may be shown and inquired into, and
When the petitioner, Lina Sevilla, agreed to
should such performance conflict with the name or
(wo)man the private respondent, Tourist World Service,
title given the contract by the parties, the former must
Inc.'s Ermita office, she must have done so pursuant to a
prevail over the latter.
contract of agency. It is the essence of this contract that
the agent renders services "in representation or on As the act of the agent or his employees acting
behalf of another. In the case at bar, Sevilla solicited within the scope of his authority is the act of the
airline fares, but she did so for and on behalf of her principal, the breach of the undertaking by the agent
principal, Tourist World Service, Inc. As compensation, is one for which the principal is answerable.
she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her
letter of November 28, 1961, pre-assumed her

D2019 | PAGE 8
AGENCY REVIEWER PROF. SANCHEZ

DELA CRUZ V. NORTHERN THEATRICAL ENTERPRISES it, he returns it. By virtue of the contract between the
plaintiff and the defendant, the latter, on receiving the
The relationship between the movie corporation beds, was necessarily obliged to pay their price within
and the plaintiff was not that of principal and agent the term fixed, without any other consideration and
because the principle of representation was in no way regardless as to whether he had or had not sold the
involved. Plaintiff was not employed to represent the beds.
defendant corporation in its dealings with third parties.
He was a mere employee hired to perform a certain It would be enough to hold, as we do, that the
specific duty or task, that of acting as special guard and contract by and between the defendant and the
staying at the main entrance of the movie house to stop plaintiff is one of purchase and sale, in order to show
gate crashers and to maintain peace and order within that it was not one made on the basis of a commission
the premises. The question posed by this appeal is on sales, as the plaintiff claims it was, for these
whether an employee or servant who in line of duty and contracts are incompatible with each other. But,
besides, examining the clauses of this contract, none
while in the performance of the task assigned to him,
of them is found that substantially supports the
performs an act which eventually results in his incurring
plaintiff's contention. Not a single one of these clauses
in expenses, caused not directly by his master or
necessarily conveys the idea of an agency. The
employer or his fellow servants or by reason of his words commission on sales used in clause (A) of article
performance of his duty, but rather by a third party or 1 mean nothing else, as stated in the contract itself,
stranger not in the employ of his employer, may recover than a mere discount on the invoice price. The
said damages against his employer. word agency, also used in articles 2 and 3, only
expresses that the defendant was the only one that
could sell the plaintiff's beds in the Visayan Islands.
NIELSON & CO. V. LEPANTO CONSOLIDATED With regard to the remaining clauses, the least that
can be said is that they are not incompatible with the
In both agency and lease of services one of the contract of purchase and sale.
parties binds himself to render some service to the other
party. Agency, however, is distinguished from lease of
work or services in that the basis of agency is HAHN V. CA
representation, while in the lease of work or services the
An agent receives a commission upon the
basis is employment. The lessor of services does not
successful conclusion of a sale. On the other hand, a
represent his employer, while the agent represents his broker earns his pay merely by bringing the buyer and
principal. the seller together, even if no sale is eventually made.

As to the service centers and showrooms which he

QUIROGA V. PARSONS HARDWARE said he had put up at his own expense, Hahn said that
he had to follow BMW specifications as exclusive dealer
In order to classify a contract, due regard must be of BMW in the Philippines. According to Hahn, BMW
given to its essential clauses. In the contract in question, periodically inspected the service centers to see to it
what was essential, as constituting its cause and that BMW standards were maintained. Indeed, it would
subject matter, is that the plaintiff was to furnish the seem from BMW's letter to Hahn that it was for Hahn's
defendant with the beds which the latter might order, alleged failure to maintain BMW standards that BMW
at the price stipulated, and that the defendant was to was terminating Hahn's dealership.
pay the price in the manner stipulated. The price agreed
upon was the one determined by the plaintiff for the The fact that Hahn invested his own money to put
sale of these beds in Manila, with a discount of from 20 up these service centers and showrooms does not
to 25 per cent, according to their class. Payment was to necessarily prove that he is not an agent of BMW. For
be made at the end of sixty days, or before, at the as already noted, there are facts in the record which
plaintiff's request, or in cash, if the defendant so suggest that BMW exercised control over Hahn's
preferred, and in these last two cases an additional activities as a dealer and made regular inspections of
discount was to be allowed for prompt payment. These Hahn's premises to enforce compliance with BMW
are precisely the essential features of a contract of standards and specifications.
purchase and sale. There was the obligation on the part
of the plaintiff to supply the beds, and, on the part of
the defendant, to pay their price. These features
exclude the legal conception of an agency or order to
sell whereby the mandatory or agent received the thing
to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing
to a third person, and if he does not succeed in selling

D2019 | PAGE 9
AGENCY REVIEWER PROF. SANCHEZ

V. WHAT ARE THE CLASSIFICATIONS OF AGENCY b. Prior to the principal suffering

CONTRACTS? damage as a result of the delay on
the part of the agent in informing the
A. EXPRESS AGENCY; IMPLIED AGENCY
principal of his rejection of the
agency relationship
BASED ON MANNER BY WHICH AGENCY IS
ESTABLISHED:
B. AGENCY BY ESTOPPEL; NO CONSENT

EXPRESS AGENCY: created by the

Article 1900. So far as third persons are concerned,
express act of the principal an act is deemed to have been performed within the
authorizing the agent to act on his scope of the agents authority, if such act is within the
behalf and by the express act of the terms of the power of attorney, as written, even if the
agent accepting such authority agent has in fact exceeded the limits of his authority
IMPLIED AGENCY: where an agency according to an understanding between the principal
relationship may be implied from the and the agent.
acts of the principal or that of his
agent ESTOPPEL

1. Implied from the acts of the principal Definition: a bar which precludes a person
(silence, lack of action, or failure to from denying or asserting anything contrary to
repudiate the agency knowing that another that which has been established as the truth
person is acting on his behalf without by his own deed or representation either
authority) express or implied, and which are being relied
Alleged principal should be aware of upon by other people
the acts of the alleged agent * Art 1431: Through estoppel, an admission or
Alleged principal has had reasonable representation is thus rendered conclusive
opportunity under the circumstances upon the person making it and cannot be
to repudiate the acts of the alleged denied or disproved as against the person
agents relying thereon.
A third party has transacted with the
alleged agent without being made AGENCY BY ESTOPPEL DISTINGUISHED FROM
aware of the alleged agents lack of IMPLIED AGENCY
authority
There were no facts or circumstances AGENCY BY IMPLIED AGENCY
ESTOPPEL
that should have raised any suspicion Existence of No agency at all; There is an actual
on the part of the third person that actual agency none meant to agency, as much
the agent was not authorized be created in the as if it were
first place; created by
agency is only express words
2. Implied from the acts of the agent (acts apparent
which carry out the agency or from his Principals liability Two scenarios: Principal alone is
silence or inaction according to the 1) If estoppel is liable
circumstances) caused by the
principal >
Reasonable to expect that principal is liable
appointment must have been to any third
express person who
Reasonable for an implied relied on the
misrepresentatio
agency to be established through n
silence or inaction of the alleged 2) If estoppel is
agent if they do not inform the caused by the
agent > only
principal of their rejection of the
agent is liable
agency relationship:
a. Within a reasonable amount of
time under the circumstances; and

D2019 | PAGE 10
AGENCY REVIEWER PROF. SANCHEZ

ESTOPPEL DISTINGUISHED FROM RATIFICATION Article 1922. If the agent had general powers,
revocation of the agency does not prejudice third
RATIFICATION ESTOPPEL persons who acted in good faith and without
knowledge of the revocation. Notice of the
Basis Rests on intention, Rests on revocation in a newspaper of general circulation is a
express or implied, prejudice sufficient warning to third persons.
regardless of prejudice rather than
to another intention
Effect of revocation in relation to third persons

1) Agent authorized to contract with specified

Effect Retroactive; makes Operates after
persons. If the agency is created for the
on acts agents unauthorized the misleading
act good from the act; affects only purpose of contracting with specific persons,
beginning the relevant its revocation will not prejudice such third
parts of the persons until notice thereof is given them.
transaction and Reason: Third persons were made to
from that time
only when
believe by the principal that the agent
estoppel may is authorized to deal with them; they
be said to be have a right to presume that the
spelled out representation continues to exist in
the absence of notification by the
principal
Substa Confirmation of the Principals Notice not required if 3rd persons
nce unauthorized act or inducement to already knew of the revocation
contract after it has another to act
been done or made to his prejudice 2) Agent authorized to contract with public in
general. In case the agent has general
powers (as when the agent has been
appointed to manage a business), innocent
third persons dealing with the agent will not
be prejudiced by the revocation before they
Article 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the
had knowledge thereof.
agent if the former allowed the latter to act as though
he had full powers. Note: Under Article 1921, the
notice of revocation must be
Based on the principle of personal; under Article 1922, it
estoppel may be personal.
Necessary for the protection of
innocence of third persons Yun Kwan Byung vs PAGCOR:
Instance where solidarity is
In this case, the Court ruled that there was no implied
imposed by law > both agency because PAGCOR did not hold itself out to the
principal and agent are joint public as the principal of ABS Corp. It said that PAGCORs
tortfeasors actions did not mislead the public into believing that an
Third person with whom agent agency can be implied from the arrangement with the
junket operators, nor did it hold out ABS Corp. with any
dealt may sue either agent or apparent authority to represent it in any capacity.
principal alone, or both
Agent exempt from liability if
acted in good faith C. AGENCY BY OPERATION OF LAW

Article 1921. If the agency has been entrusted for the Article 1869. Agency may be express, or implied from the
purpose of contracting with specified persons, its acts of the principal, from his silence or lack of action, or
revocation shall not prejudice the latter if they were his failure to repudiate the agency, knowing that another
not given notice thereof. person is acting on his behalf without authority.

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

D2019 | PAGE 11
AGENCY REVIEWER PROF. SANCHEZ

Article 1884. The agent is bound by his acceptance to carry SPECIAL AGENT: one authorized
out the agency, and is liable for the damages which,
to act in one or more specific
through his nonperformance, the principal may suffer.
He must also finish the business already begun on the transactions, or to do one or
death of the principal, should delay entail any danger. more specific acts, or to act upon
a particular occasion.
Article 1930. The agency shall remain in full force and Has no authority to act in matters
effect even after the death of the principal, if it has been
other than that for which he has been
constituted in the common interest of the latter and of the
agent, or in the interest of a third person who has employed. His authority is to do only
accepted the stipulation in his favor. a particular act or a series of acts of
very limited scope. He has less power
Article 1931. Anything done by the agent, without than a general agent.
knowledge of the death of the principal or of any other
Example: agent with authority to sell
cause which extinguishes the agency, is valid and shall be
fully effective with respect to third persons who may have a house, attorney at law, broker,
contracted with him in good faith. auctioneer, factor, etc.
Note: While a principal may have
D. UNIVERSAL, GENERAL, AND SPECIAL as many special agents as
occasions may require and may
Article 1876. An agency is either general or special. have a general agent in each line
of his business and each of
The former comprises all the business of the principal.
several places, he can only have
The latter, one or more specific transactions.
one universal agent.
Distinction based on the scope or
E. DURABLE AGENCY
extent of the business covered

Article 1930. The agency shall remain in full force and

UNIVERSAL AGENT: one
effect even after the death of the principal, if it has
employed to do all acts that the been constituted in the common interest of the latter
principal may personally do, and and of the agent, or in the interest of a third person
which he can lawfully delegate to who has accepted the stipulation in his favor.
another the power of doing. GENERAL RULE: Agency is terminated
A contract creating a universal agency instantly by the death of the principal.
normally includes the following Reason: In agency, being based on
delegation: full power and authority representation, there is no one to be
to do and perform any and every act represented where the principal is
that I may legally do and every power already dead.
necessary to carry out the purposes EXCEPTIONS: the agency remains in full
for which it is granted. force and effect even after the death of the
May be viewed as an unlimited principal if:
general agent; cases of such are rare (1) if the agency has been constituted in the
since they can be created only by common interest of the principal and the
clear and unequivocal language agent (Art. 1927.); and
GENERAL AGENT: one employed (2) if it has been constituted in the interest of
to transact all the busi- ness of a third person who has accepted the
his principal, or all business of a stipulation in his favor.
particular kind or in a particular
place, or in other words, to do all
acts, connected with a particular
trade, business, or employment.
Has authority to do all acts connected
with or necessary to accomplish a
certain job
Example: manager of a store

D2019 | PAGE 12
AGENCY REVIEWER PROF. SANCHEZ

Siasat vs IAC (7) To loan or borrow money, unless the latter act be
Provided for the definitions of the three kinds of urgent and indispensable for the preservation of the
agents things which are under administration;
Respondent was declared petitioners agent. It was
easily seen by the way general words were employed (8) To lease any real property to another person for
in the agreement that no restrictions were intended as more than one year;
to the manner the agency was to be carried out or in
the place where it was to be executed. The power (9) To bind the principal to render some service
granted to the respondent was so broad that it without compensation;
practically covers the negotiations leading to, and the (10) To bind the principal in a contract of partnership;
execution of, a contract of sale of petitioners'
merchandise with any entity or organization. (11) To obligate the principal as a guarantor or
surety;
Dominion Insurance vs CA
(12) To create or convey real rights over immovable
Guevarra, having advanced sums to satisfy insurance
property;
claims of his principal, is not entitled to payment under
the law on agency, but under the law on obligations and (13) To accept or repudiate an inheritance;
contracts. Guevara exceeded his authority when he paid
from his personal funds and not the revolving fund as per (14) To ratify or recognize obligations contracted
the principals instructions. When a special power of before the agency;
attorney is required for the agent to do a certain act, the
(15) Any other act of strict dominion. (n)
agent, in the performance of such act, must comply with
the specifications embodied in the special power of
Article 1879. A special power to sell excludes the
attorney giving him authority to do such.
power to mortgage; and a special power to mortgage
does not include the power to sell. (n)
F. Couched in general terms; couched in
specific terms
1. Mortgage - 1878(12)
Article 1877. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power or PNB vs Sta Maria
that the agent may execute such acts as he may
consider appropriate, or even though the agency A special power of attorney to mortgage real estate is
should authorize a general and unlimited limited to such authority to mortgage and does not bind
management. (n) the grantor personally to other obligations contracted by
the grantee, in the absence of any ratification or other
Article 1878. Special powers of attorney are necessary similar act that would estop the grantor from questioning
in the following cases: or disowning such other obligations contracted by the
(1) To make such payments as are not usually grantee. The authority granted by 6 siblings (except
considered as acts of administration; Valeriana) unto their brother, Maximo, was merely to
mortgage the property jointly owned by them. They did
(2) To effect novations which put an end to obligations not grant Maximo any authority to contract for any loans
already in existence at the time the agency was in their names and behalf. Maximo alone, with Valeriana
constituted; who authorized him to borrow money, must answer for
said loans and the other siblings only liability is that the
(3) To compromise, to submit questions to arbitration, real estate authorized by them to be mortgaged would be
to renounce the right to appeal from a judgment, to subject to foreclosure and sale to respond for the
waive objections to the venue of an action or to obligations contracted by Maximo. They cannot be held
abandon a prescription already acquired; personally liable for the payment of such obligations, as
(4) To waive any obligation gratuitously; erroneously held by the trial court.

(5) To enter into any contract by which the ownership Bank of PI vs De Coster
of an immovable is transmitted or acquired either It is fundamental rule of construction that where in an
gratuitously or for a valuable consideration; instrument powers and duties are specified and defined,
(6) To make gifts, except customary ones for charity or that all of such powers and duties are limited and
those made to employees in the business managed by confined to those which are specified and defined, and
the agent; that all other powers and duties are excluded

D2019 | PAGE 13
AGENCY REVIEWER PROF. SANCHEZ

2. Loan/borrow - 1878(7) case, the law requires that the agent be armed with a
special power of attorney to lease the premises. This is
Hodges vs Salas apparent in Article 1878 of the Civil Code.
If the terms of the power of attorney to obtain a loan are
limited and the agent is authorized only to borrow any Since Herrera allowed the petitioners to occupy the leased
amount of money which he deemed necessary, the premises after the expiration of the lease contract and
principals can only be held liable for the amount they under Article 1670 of the Civil Code, a tacit renewal of the
actually received from their agent. lease is deemed to have taken place. However, as held in
With respect to a power of attorney of special character, Dizon vs. Magsaysay, a tacit renewal is limited only to the
it cannot be interpreted as authorizing the agent to terms of the contract which are germane to the lessee's
dispose of the money as he pleased, particularly when it right of continued enjoyment of the property and does not
does not appear that such was the intention of the extend to alien matters, like the option to buy the leased
principals. The agent is obliged to turn over the money to premises.
the principals, or at least, place it at their disposal. If the
agent applied part of the funds to pay his personal 5. Compromise - 1878(3)
obligations, he exceeds his authority.
Dungo vs Lopena
3. Sell - 1878(5)
While a special power of attorney is required to
Strong vs Guiterrez Rupide
compromise an interest of another [Article 1878(3)],
An agency stated in general terms only includes acts of compromise agreement is a contract. As such, it is
administration. In order to compromise, alienate, mortgage, or governed by the rules on contract. Under Article 1403(1),
to execute any other act of strict ownership an express mandate a contract "entered into in the name of another person by
is required. one who has been given no authority or legal
Such a mandate may be either oral or written, may stand by itself representation, or who has acted beyond his powers" is
or may be included in the general power, the one vital thing being
unenforceable, but it susceptible to ratification.
that the right to sell shall be express or shall be a necessary
ingredient of the power that is expressed.
Vicente vs Geraldez
3 qualifications whereby the principal is held bound even though
the agent acted beyond his powers: Special powers of attorney are necessary, among other
1) Where his acts have contributed to deceive a third cases, in the following: to compromise and to renounce
person in good faith; the right to appeal from a judgment. Attorneys have
2) Where the limitations upon the power created by him authority to bind their clients in any case by any
could not have been known by a third person; and agreement in relation thereto made in writing, and in
3) Where he has placed in the hands of the agent taking appeals, and in all matters of ordinary judicial
instruments signed by him in blank. procedure, but they cannot, without special authority,
compromise their clients' litigation, or receive anything in
Katigbak vs Tai Hung Co discharge of their clients' claims but the full amount in
A special power of attorney is necessary in order to enter cash.
into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously The law specifically requires that "juridical persons may
or for a valuable consideration. compromise only in the form and with the requisites
which may be necessary to alienate their property.
A power of attorney not recorded in the registry of deeds Under the corporation law, such power is lodged with the
is ineffective in order that an agent or attorney-in-fact Board of Directors. Although it MAY BE DELEGATED, the
may validly perform acts in the name of his principal, and general rule is that an officer or agent of the corporation
that any act performed by the agent by virtue of said with has no power to compromise or settle a claim by or
respect to the land is ineffective against a third person against the corporation, except to the extent that such
who, in good faith, may have acquired a right thereto, it power is given to him either expressly or by reasonable
does, however, bind the principal to acknowledge the acts implication from the circumstances. The facts must
performed by his attorney-in-fact regarding said sufficiently show such compromise was within the bounds
property. of his authority.

4. Lease - 1878(8) 6. Other acts of strict dominion - 1878(12)

Chua vs IAC Generally, a sale or purchase of

personal property is an act of
The lease contract, the linchpin of petitioners' cause of strict dominion. Hence, a special
action, involves the lease of real property for a period of
more than one year. The contract was entered into by the power is necessary in order that
agent of the lessor and not the lessor herself. In such a

D2019 | PAGE 14
AGENCY REVIEWER PROF. SANCHEZ

the act shall be binding on the violation of his duty principal to a

to the principal third person
principal. although the act
Thus, an agent appointed to constitutes a
manage a printing establishment violation of his
duty to the
of his principal cannot sell a principal
printing machine in said
establishment. But a sale or If the agent acts without
purchase made in the ordinary authority or in excess or beyond
course of management is merely the scope of his authority, there
an act of administration and, is no representation.
therefore, included in an agency Such act is unauthorized and,
couched in general terms. therefore, unenforceable,
whether or not the party with
VI. WHAT ARE THE OBLIGATIONS AND whom the agent contracted was
LIABILITIES OF AGENTS TO THEIR PRINCIPALS? aware of the limits of the agents
power, unless the principal
A. Act within scope of authority - 1879, 1880, ratifies the transaction before it
1881, 1882, 1887 is revoked by the other
contracting party (Arts. 1317,
ART. 1879. A special power to sell excludes the 1403[1].) or is in estoppel to
power to mortgage; and a special power to
deny the agents authority.
mortgage does not include the power to sell.
The agent is not deemed to have
ART. 1880. A special power to compromise does not exceeded the limits of his
authorize submission to arbitration. authority should he perform the
agency in a manner more
ART. 1881. The agent must act within the scope of advantageous to the principal
his authority. He may do such acts as may be than that indicated by him (Art.
conducive to the accomplishment of the purpose of 1882.) since he is authorized to
the agency. do such acts as may be
conducive to the
ART. 1882. The limits of the agents authority shall
accomplishment of the purpose
not be considered exceeded should it have been
per- formed in a manner more advantageous to the of the agency.
principal than that specified by him.
ART. 1887. In the execution of the agency, the agent
Authority is the power of the agent to affect shall act in accordance with the instructions of the
principal.
the legal relations of the principal by acts done
In default thereof, he shall do all that a
in accordance with the principals
good father of a family would do, as required by the
manifestation of consent to him. The authority nature of the business.
of the agent is the very essence the sine
qua non of the principal and agent INSTRUCTIONS: Private directions which the
relationship. This authority, unless it is principal may give the agent in regard to the
otherwise agreed, includes only authority to manner of performing his duties as such agent
act for the benefit of the principal, and the but of which a third party is ignorant.
source of the authority is always the principal Said to be secret if the principal intended
and never the agent. them not to be made known to such party.

AUTHORITY POWER
As to May be considered May be
Effect of violation of principals instructions:
existence source or cause considered the If an act done by an agent is
effect within the apparent scope of the
As to scope an act is within the it is within his
authority of the power if he has authority with which he has
agent if it is not a the legal ability been clothed, it matters not that
to bind the it is directly contrary to the

D2019 | PAGE 15
AGENCY REVIEWER PROF. SANCHEZ

instructions of the principal. The Ambiguous instructions: The

principal will, nevertheless, be agent will not be liable if he
liable unless the third person chooses reasonably one of two
with whom the agent dealt knew possible interpretations. Where
that he was exceeding his instructions are ambiguous, the
authority or violating his agent is not chargeable with
instructions. disobedience or its
Third persons dealing with an consequences in case he makes
agent do so at their peril and are an honest mistake and adopts a
bound to inquire as to the extent construction different from that
of his authority but they are not intended by the principal.
required to investigate the Important: GOOD FAITH
instructions of the principal. In
other words, the principal after LIABILITY FOR LOSS/DAMAGE: If the agent
clothing an agent with apparent exceeds, violates, or fails to act upon such
powers, cannot, by means of instructions, he will be liable to the principal
private communications with the for any loss or damage resulting therefrom.
agent, limit the authority which In the absence of specific
he allows the agent to assume. instructions of the principal, the
The principal will be liable to agent shall do all that a good
third persons, under the doctrine father of a family taking care of
of estoppel (see Art. 1911.), for the business as if it were his own
any unauthorized acts of the would do as required by the
agent who exceeds the nature of the business. (Art.
instructions given to him. 1887, par. 2.) If he acts in good
faith and with due care, the
GENERAL RULE: It is the fundamental duty of agent is not liable for losses due
the agent of obey all the reasonable and to errors or mistakes of
lawful instructions given to him by his judgment as regards to matters
principal. with which he is vested with
NEED NOT OBEY WHEN: discretionary powers. It will be
Instructions are outside the presumed that the agent acted
scope of the agency relationship in good faith and in accordance
agreed upon or that may subject with his power as he understood
him to unreasonable risk of it.
injury to himself
Where it calls for the B. Carry out the agency - 1884, 1928, 1929
performance of illegal acts, or
where he is privileged to do so to ART. 1884. The agent is bound by his acceptance to
protect his security interest in carry out the agency and is liable for the damages
the subject matter of the agency. which, through his non-performance, the principal
DEPARTURE MAY BE JUSTIFIED WHEN: may suffer.
He must also finish the business already begun on the
Sudden emergency: Where some
death of the principal, should delay entail any danger.
unexpected emergency or
unforeseen event occurs which Article 1928. The agent may withdraw from the
will admit no delay for agency by giving due notice to the principal. If the
communication with the latter should suffer any damage by reason of the
principal, the agent is justified in withdrawal, the agent must indemnify him therefor,
adopting the course which unless the agent should base his withdrawal upon the
seems best to him under the impossibility of continuing the performance of the
agency without grave detriment to himself.
circumstances.

D2019 | PAGE 16
AGENCY REVIEWER PROF. SANCHEZ

Article 1929. The agent, even if he should withdraw GENERAL RULE: Agent is liable for damages if
from the agency for a valid reason, must continue to he prefers his own interests over the
act until the principal has had reasonable opportunity principals
to take the necessary steps to meet the situation. Reason: Agency being a fiduciary relation,
the agent is required to observe utmost
GENERAL RULE: it is the duty of the agent to good faith and loyalty towards his
act with the utmost good faith and loyalty for principal. He must look after the
the furtherance and advancement of the principals interests as if they were his
interests of the principal. own
A person is free to refuse to be Basis of the rule: The underlying basis of
an agent (Art. 1885.) but once he the rule precluding an agent from
accepts the agency, he is bound engaging in self-dealing is to shut the
to carry it out in accordance with door against temptation and keep the
its terms in good faith (Art. agents eye single to the rights and
1159.) and following the welfare of his principal.
instructions, if any, of the Principal may waive: The principal,
principal. however, may waive the benefit of the
OBLIGATION TO ANWER FOR DAMAGES: upon rule so far as he is concerned, if he does
his failure to do so, he is liable for the damage so with full knowledge of the facts; but in
which the principal may suffer. the absence of such waiver, the rule is
The damages to which the absolute.
principal is entitled are those EXCEPTION: where the agents interests are
which result from the agents superior, such as where he has a security
non-performance. As there can interest in goods of the principal in his
be no indemnity when there has possession, he may protect this interest even
been no damage, the principal if in so doing he disobeys the principals orders
must prove his damages and the or injures his interest.
amount thereof. An agent, to be sure, is not required
to expose himself to great physical
C. Not to carry out the agency - 1888 risks not within the contemplation of
the parties, or to perform services
ART. 1888. An agent shall not carry out an agency if when he is ill.
its execution would manifestly result in loss or
damage to the principal.
ART. 1890. If the agent has been empowered to
borrow money, he may himself be the lender at the
GENERAL RULE: The agent must not carry out current rate of interest. If he has been authorized to
the agency if its execution would manifestly lend money at interest, he cannot borrow it without
result in loss or damage to the principal. the consent of the principal.
Reason: The duty of the agent who is merely
an extension of the personality of the principal OBLIGATION NOT TO LOAN TO HIMSELF
is to render service for the benefit of the Reason: may lead to a possible conflict of
principal and not to act to his detriment. interest and prejudice to the principal.
Furthermore, an agent must exercise due
diligence in carrying out the agency. The agent cannot, without a special power of
attorney, loan or borrow money.
D. Loyalty - 1889, 1890, 1491 (1) If he has been expressly empowered
to borrow money, he may himself be the
ART. 1889. The agent shall be liable for damages if, lender at the current rate of interest for
there being a conflict between his interests and those there is no danger of the principal
of the principal, he should prefer his own. suffering any damage since the current
rate of interest would have to be paid in
any case if the loan were obtained from a
third person.

D2019 | PAGE 17
AGENCY REVIEWER PROF. SANCHEZ

(2) If the agent has been authorized to appointed by him by virtue of or as a result of
lend money at interest, he cannot be the the agency
borrower without the consent of the Includes gifts from the third
principal because the agent may prove to party in connection with the
be a bad debtor. There is here a possible agency
conflict of interest.) The transaction may Source of profits (whether from
thus be prejudicial to the principal. performance or violation of the
agents duty) immaterial, as long
Article 1491. The following persons cannot acquire by as it be the fruit of the agency
purchase, even at a public or judicial auction, either As to secret profits: It has been
in person or through the mediation of another: held that an agent who takes a
secret profit in the nature of a
(2) Agents, the property whose administration or sale
bonus, gratuity or personal
may have been intrusted to them, unless the consent
of the principal has been given; benefit from the vendee,
without revealing the same to
E. Diligence - 1885, 1887, 1909 his principal, the vendor, is guilty
of breach of his loyalty to the
ART. 1885. In case a person declines an agency, he is
principal and forfeits his right to
bound to observe the diligence of a good father of a collect the commission from his
family in the custody and preservation of the goods principal.
for- warded to him by the owner until the latter
should appoint an agent. The owner shall as soon as STIPULATION EXEMPTING AGENT FROM
practicable either appoint an agent or take charge of OBLIGATION TO ACCOUNT IS VOID
the goods. Contrary to public policy as it
would encourage fraud; in the
ART. 1887. In the execution of the agency, the agent
nature of a waiver of an action
shall act in accordance with the instructions of the
principal. for future fraud which is void
Designed to stress the highest
In default thereof, he shall do all that a good father of loyalty that is required of an
a family would do, as required by the nature of the agent. Article 1891(and Art.
business. 1909) imposes upon the agent
the absolute obligation to make
ART. 1909. The agent is responsible not only for a full disclosure or complete
fraud, but also for negligence, which shall be judged
account to his principal of all his
with more or less rigor by the courts, according to
whether the agency was or was not for a
transactions and other material
compensation. facts relevant to the agency, so
much so that the law does not
F. Account/deliver - 1891 countenance any stipulation
exempting the agent from such
ART. 1891. Every agent is bound to render an account obligation and condemns as void
of his transactions and to deliver to the principal such stipulation.
whatever he may have received by virtue of the The duty of an agent is likened to
agency, even though it may not be owing to the that of a trustee.
principal.
E. Solidary liability - 1894, 1895
Every stipulation exempting the agent from the
obligation to render an account shall be void.
ART. 1894. The responsibility of two or more agents,
even though they have been appointed
OBLIGATION TO RENDER ACCOUNTS simultaneously, is not solidary, if solidarity has not
It is the duty of the agent to account for and to been expressly stipulated.
deliver to the principal (or an authorized third
party) all money and property which may have ART. 1895. If solidarity has been agreed upon, each of
come into his hands or of a sub-agent the agents is responsible for the non-fulfillment of

D2019 | PAGE 18
AGENCY REVIEWER PROF. SANCHEZ

the agency, and for the fault or negligence of his liable for interest by way of compensation
fellow agents, except in the latter case when the or indemnity (not to be confused with
fellow agents acted beyond the scope of their interest for delay) which shall be
authority.
computed from the day on which he did
so. Of course, the agents liability is
NATURE OF LIABILITY OF TWO OR MORE without prejudice to a criminal action that
AGENTS TO THEIR PRINCIPAL may be brought against him because of
In a joint obligation, each debtor the conversion.
is liable only for a proportionate (2) While there is no liability for interest
part of the debt. on sums which have not been converted
If it is solidary, each debtor is for the agents own use, the agent who is
liable for the entire obligation. found to owe the principal sums after the
The presumption is that an extinguishment of the agency is liable for
obligation is joint. (Arts. 1207, interest from the date the agency is
1208.9) The rule in Article 1894 extinguished.
follows the general principle Demand not necessary for delay
respecting solidarity. to exist; if by provision of law the
agent is bound to deliver to the
If solidarity has been agreed upon, each of the principal whatever he may have
agents becomes solidarily liable: received by virtue of the agency,
(a) for the non-fulfillment of the agency demand is no longer necessary.
even though in this case, the fellow
agents acted beyond the scope of their G. Fraud; negligence - 1909
authority; and
(b) for the fault or negligence of his fellow ART. 1909. The agent is responsible not only for
agents provided the latter acted within fraud, but also for negligence, which shall be judged
the scope of their authority. (Art. 1895.) with more or less rigor by the courts, according to
The innocent agent has a right later on to whether the agency was or was not for a
recover from the guilty or negligent compensation.
agent. (Art. 1217, par. 2.)
In the fulfillment of his obligation, the agent is
An agent who exceeds his responsible to the principal not only for fraud
powers does not act as such (Art. 1171.) committed by him but also for
agent, and, therefore, the negligence.
principal assumes no liability to
third persons. Since this is so, WHEN AGENT COMMITS TORT:
solidary liability cannot be The agent, to be sure, is also liable for torts
demanded by the principal. committed willfully.
F. Pay interest - 1896 GENERAL RULE: the principal is not responsible
if the agents tort was intentional rather than
ART. 1896. The agent owes interest on the sums he merely negligent. The reason is that an
has applied to his own use from the day on which he intentional wrong committed by one
did so, and on those which he still owes after the employed is more likely motivated by personal
extinguishment of the agency. reasons than by a desire to serve or benefit his
employer.
Article 1896 contemplates two distinct cases. EXCEPTION: The principal is solidarily liable if
The first refers to sums belonging to the the tort was committed by the agent while
principal which the agent applied to his own performing his duties in furtherance of the
use and the second, to sums which the agent principals business.
still owes the principal after the expiration of
the agency. H. Specific obligations of commission agents -
(1) The agent who converted to his 1903 to 1908
personal use the funds of the principal is

D2019 | PAGE 19
AGENCY REVIEWER PROF. SANCHEZ

Article 1903. The commission agent shall be An agent who guarantees payment of the
responsible for the goods received by him in the customers account in consideration of the
terms and conditions and as described in the higher commission is called a del credere
consignment, unless upon receiving them he should agent.
make a written statement of the damage and
Art. 1907 applies to both cash and credit sales
deterioration suffered by the same.
because it makes no distinction.
Article 1904. The commission agent who handles
goods of the same kind and mark, which belong to Austria vs CA
different owners, shall distinguish them by The consignee is exempt from liability arising from the
loss of consigned goods if such loss was due to fortuitous
countermarks, and designate the merchandise
event.
respectively belonging to each principal.

Article 1905. The commission agent cannot, without PNB v Manila Surety
An agent is required to act with the care and diligence of
the express or implied consent of the principal, sell on
a good father of a family and becomes liable for the
credit. Should he do so, the principal may demand
damages, which the principal may suffer through its non-
from him payment in cash, but the commission agent performance. PNBs power to collect was expressly made
shall be entitled to any interest or benefit, which may irrevocable so that BPW could very well refuse to make
result from such sale. payments to ATACO itself, and reject any demands by the
surety.
Article 1906. Should the commission agent, with
authority of the principal, sell on credit, he shall so Domingo vs Domingo
inform the principal, with a statement of the names Articles 1891 and 1909 demand the utmost good faith,
of the buyers. Should he fail to do so, the sale shall be fidelity, honesty, candor, and fairness on the part of the
deemed to have been made for cash insofar as the agent (real estate broker) to his principal, the vendor.
principal is concerned. Hence, an agent who takes a secret profit in the nature of
a bonus, gratuity, or personal benefit from the vendee,
Article 1907. Should the commission agent receive on without revealing the same to the principal, is guilty of a
a sale, in addition to the ordinary commission, breach of his loyalty.
another called a guarantee commission, he shall bear The agent thus forfeits his right to collect commission
from the principal, even if the principal does not suffer
the risk of collection and shall pay the principal the
any injury by reason of such breach of fidelity, or that he
proceeds of the sale on the same terms agreed upon
obtained better results from it.
with the purchaser.
Severino v Severino The agent is not only estopped from
Article 1908. The commission agent who does not
denying his principal's title to the property, but he is also
collect the credits of his principal at the time when disabled from acquiring interests therein adverse to those
they become due and demandable shall be liable for of his principal during the term of the agency
damages, unless he proves that he exercised due
diligence for that purpose. Green Valley Poultry v IAC
The commission agent cannot, without the express or
COMMISSION AGENT: one whose business is implied consent of the principal, sell on credit. Should he
to receive and sell goods for a commission do so, the principal may demand from him payment in
cash, but the commission agent shall be entitled to any
(also called factorage) and who is entrusted by
interest or benefit, which may result from such sale.
the principal with the possession of goods to
be sold, and usually selling in his own name. Municipality of Iloilo v. Evangelista An agent or attorney-
He may act in his own name or in that of the in-fact empowered to pay the debts of the principal, and
principal. (also called a factor agent) to employ lawyers to defend the latter's interests, is
impliedly empowered to pay the lawyer's fees for services
GUARANTEE COMMISSION: one where, in rendered in the interests of said principal, and may satisfy
them by an assignment of a judgment rendered in favor
consideration of an increased commission, the of said principal;
factor or commission agent guarantees to the When a person appoints two attorneys-in-fact
principal the payment of debts arising through independently, the consent of the one will not be required
his agency. to validate the acts of the other unless that appears
Purpose: to compensate the agent for the positively to have been the principal's intention.
risks he will have to bear in the collection of
the credit due the principal. VII. Responsibility for acts of substitutes

D2019 | PAGE 20
AGENCY REVIEWER PROF. SANCHEZ

Art. 1892. The agent may appoint a substitute if the If in the contract of agency, the
principal has not prohibited him from doing so; but he agent is given the power to appoint
shall be responsible for the acts of the substitute: a substitute and the principal did not
(1) When he was not given the power to appoint one; designate any particular person to
(2) When he was given such power, but without
be appointed, the substitution has
designating the person, and the person appointed was
the effect of releasing the agent
notoriously incompetent or insolvent.
All acts of the substitute appointed against the from his responsibility unless the
prohibition of the principal shall be void. (1721) person appointed is notoriously
incompetent or insolvent (Art.
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the 1892[2].), because this would be an
preceding article, the principal may furthermore bring abuse by the agent of the principals
an action against the substitute with respect to the condence. The principal may
obligations which the latter has contracted under the proceed against both the agent and
substitution. (1722a)
the substitute for damages he may
have suffered. But if the substitute is
A sub-agent is a person employed or the person designated by the
appointed by an agent as his agent, to
principal, the consequence is the
assist him in the performance of an act
absolute exemption of the agent.
for the principal which the agent has
been empowered to perform. If the agent appoints a substitute
Unless prohibited by the principal, when he was not given the power to
the agent may appoint a sub-agent appoint one (Ibid., No. 1.), the law
or substitute. The agent in this recognizes the validity of the
situation is a principal with respect substitution if the same is benecial
to the substitute. The law allows to the principal because the agency
such substitution for reasons of has thus been executed in
convenience and practical utility.
fulllment of its object. (Maam
An agent may not delegate to a
does not seem to espouse this
subagent where the work entrusted to
him by the principal to carry out requires
particular construction of the subject
special knowledge, skill, or competence provision)
unless he has been authorized to do so
by the principal Del Rosario v La Badenia An agent may lawfully appoint a
While ordinarily the selection of an substitute if the principal has not prohibited him from
agent is determined largely by the trust doing such. The principal shall be bound by the acts of the
sub-agent if it is shown that the agent who appointed
and condence that the principal has in
such subagent did not act in excess of his authority in
the agent, the principal need not fear
doing so
prejudice as he has a right of action not
only against the agent but also against
International Films v Lyric Films
the substitute with respect to the
A mere submandatory or sub-agent is not obliged to fulfil
obligations which the latter has
more than the contents of the mandate, and is also NOT
contracted under the substitution. (Art. required to answer for damages caused to the principal.
1893.)

VIII. What are the liabilities of agents to third
parties?

EFFECTS OF SUBSTITUTION A. Agent acting within scope of authority

When the substitute is appointed by
the agent against the express Art. 1883. If an agent acts in his own name, the principal
prohibition of the principal, the has no right of action against the persons with whom the
agent exceeds the limits of his agent has contracted; neither have such persons against
authority. (Art. 1881.) The law says the principal.
that all acts of the substitute in such
In such case the agent is the one directly bound in favor
a case shall be void. (Art. 1892, par.
of the person with whom he has contracted, as if the
2.)

D2019 | PAGE 21
AGENCY REVIEWER PROF. SANCHEZ

transaction were his own, except when the contract When the agent expressly binds himself,
involves things belonging to the principal. he thereby obligates himself personally
and by his own act. Thus, the agent may
The provisions of this article shall be understood to be
be bound with the third person when the
without prejudice to the actions between the principal
latter, not having faith in the nancial
and agent. (1717)
ability of the principal, enters into the
Art. 1897. The agent who acts as such is not personally contract on condition that the agents
liable to the party with whom he contracts, unless he nancial ability is back of it. It has been
expressly binds himself or exceeds the limits of his held that if the agent, aside from acting
authority without giving such party sufficient notice of on behalf of the principal, also bound
his powers. (1725) himself to pay the debt, this fact does not
relieve the principal for whose benet the
Article 1899. If a duly authorized agent acts in
debt was incurred. The individual liability
accordance with the orders of the principal, the latter
of the agent (who mortgaged his
cannot set up the ignorance of the agent as to
circumstances whereof he himself was, or ought to have property) can be considered a further
been, aware. (n) security in favor of the creditor and does
not affect or preclude the liability of the
In general. The duties of an agent to principal. Both are liable. (Tuazon vs.
third persons and his corresponding Orosco, 5 Phil. 596 [1905].)
liabilities must be considered with When the agent exceeds his authority, he
reference to the character of his act as to really acts without authority and,
whether it is authorized or unauthorized, therefore, the contract is unenforceable
and also with reference to the nature of against the principal unless the latter rati
liability which it sought to assert as being es the act. (Art. 1910, par. 2.)
in contract or in tort. The agent is liable to
third persons for his torts which result in B. Agent acting outside of authority
an injury to the third person.
Art. 1897. The agent who acts as such is not personally
Unauthorized assumption of agency.
liable to the party with whom he contracts, unless he
One who unauthorizedly assumes to act expressly binds himself or exceeds the limits of his
for another is guilty of a wrong, and is authority without giving such party sufficient notice of
liable for the damage to those dealing his powers. (1725)
with him in reliance on his assumed
authority in that they are deprived of the Art. 1898. If the agent contracts in the name of the
benet of the responsibility of the principal, exceeding the scope of his authority, and the
principal. Indeed, the assumed agent, by principal does not ratify the contract, it shall be void if
the party with whom the agent contracted is aware of
his act, impliedly warrants or represents
the limits of the powers granted by the principal. In this
that he has authority, thereby predicating
case, however, the agent is liable if he undertook to
liability for the damage sustained. This secure the principal's ratification. (n)
implied warranty and its accompanying
liability is not conned merely to the Art. 1911. Even when the agent has exceeded his
making of contracts but extends to all authority, the principal is solidarily liable with the agent
unauthorized acts perpetrated in his if the former allowed the latter to act as though he had
assumed agency. full powers. (n)
Nature of liability. A purported agent
will be held personally liable as principal EFFECT WHERE THIRD PERSON IS AWARE OF
on a contract executed without authority THE LIMITS OF AGENTS POWERS
if the contract contains apt words to bind If the agent acts in the name of the
him personally, or if such was the principal (Art. 1883, par. 1.) and
intention of the parties. However, in the within the scope of his authority (Art.
absence of an apt expression or intention, 1881.), the agent assumes no liability.
the nature of his liability is the subject of The effect of the representation is to
some divergence in judicial opinion.

D2019 | PAGE 22
AGENCY REVIEWER PROF. SANCHEZ

bind the principal as though he Hence, he may ratify the contract giving
personally entered into the contract. it the same effect as if he had originally
If the agent acts in excess of his authority, authorized it. (see Art. 1910, par. 2.)
even if he contracts in the name of the Under the above article, the third
principal, the agent is the one personally person cannot set up the fact that the
liable unless there is subsequent agent exceeded his authority to
ratication by the principal. (Art. 1910, disafrm his contract not only after the
par. 2.) The rule that a contract entered principal has ratied the agents acts
into by one who has acted beyond his but even before such ratication where
powers shall be unenforceable (see Arts. he has signied his willingness to ratify.
1317, par. 2; 1403[1].) refers to the In such a case, the third person can be
unenforceability of the contract against compelled to abide by his contract. The
the principal, and does not apply where ratication shall have retroactive effect.
the action is against the agent himself for It relates back to the time of the act or
contracting in excess of the limits of his contract ratied and is equivalent to
authority. original authority. (see Board of
The liability of an agent who exceeds the Liquidators vs. Kalaw, 20 SCRA 987
scope of his authority depends upon [1967].)
whether the third person is aware of the
limits of the agents power. (Development 2. Without notice to third parties
Bank of the Phils. vs. Court of Appeals, PNB v Agudelo
231 SCRA 370 [1994].) The agent is not When an agent negotiates a loan in his personal capacity
bound nor liable for damages in case he and executes a promissory note under his own signature,
without express authority from his principal, giving as
gave notice of his powers to the person security therefore real estate belonging to the letter, also
with whom he has contracted (Art. 1897.) in his own name and not in the name and representation
nor in case such person is aware of the of the said principal, the obligation do constructed by him
limits of the powers granted by the is personal and does not bind his aforesaid principal.
principal. (Art. 1898.) The effect is to
make the contract, which is Philippine Products v Primateria
Absent any proof that the agents exceeded the limits of
unenforceable as against the principal,
their authority, they cannot be held personally liable on
void even as between the agent and the contracts with 3rd persons, made in the name of the
third person, and consequently, not principal.
legally binding as between them. NPC v National Merchandising The rule is that "want of
o However, if the agent promised or authority of the person who executes an obligation as the
agent or representative of the principal will not, as a
undertook to secure the principals
general rule, affect the suretys liability thereon,
ratication and failed, he is especially in the absence of fraud, even though the
personally liable. If the ratication is obligation is not binding on the principal."
obtained, then the principal
becomes liable. (Cervantes vs. Court PNB v Welch, Fairchild
of Appeals, 304 SCRA 25 [1999]; Sa An agent cannot be permitted to intercept and
appropriate the thing which the principal is bound to
c Alcan & Cie vs. Imperial Vegetable
deliver, and thereby making performance by the principal
Oil Co., Inc., 355 SCRA 559 [2001].) impossible. The agent must be precluded from doing any
positive act that could prevent performance on the part
1. With notice to third parties of his principal. Else, such a situation would be an
exception to the general rule that, as regards a contract
entered into by the agent with a 3rd person on behalf of
Art. 1901. A third person cannot set up the fact that the
his principal, an action cannot be maintained against the
agent has exceeded his powers, if the principal has ratified,
agent.
or has signified his willingness to ratify the agent's acts. (n)
Tuazon v Orosco
The principal is not bound by the The fact that the agent has also bound himself to pay the
contract of his agent should the latter debt does not relieve from liability the principal for whose
exceed his power. The contract is benefit the debt was incurred. The individual liability of
the agent constitutes a further security in favor of the
unenforceable but only as regards him.

D2019 | PAGE 23
AGENCY REVIEWER PROF. SANCHEZ

creditor and does not affect or preclude the liability of the does not bind the principal is when the
principal. The law does not provide that the agent cannot contract involves things belonging to
bind himself personally to the fulfilment of an obligation
the principal. (Art. 1883, par. 2; see
incurred by him in the name and on behalf of his principal.
On the contrary, it provides that such act on the part of Gold Star Mining Co., Inc. vs. Lim-
an agent would be valid. Jimena, 25 SCRA 597 [1968].) In such
case, the contract is considered as
Cervantes v CA entered into between the principal and
The acts of an agent beyond the scope of his authority do the third person.
not bind the principal, unless the latter ratifies the same
This exception is necessary for
expressly or impliedly. Furthermore, when the third
person knows that the agent was acting beyond his the protection of third persons
power or authority, the principal cannot be held liable for against possible collusion
the acts of the agent. If the said third person is aware of between the agent and the
such limits of authority, he is to blame, and is not entitled principal. It applies only when
to recover damages from the agent, unless the latter
the agent has, in fact, been
undertook to secure the principal's ratification.
authorized by the principal to
enter into the particular
C. Agent acting in his own name; exception
transaction, but the agent,
instead of contracting for and
Article 1883. If an agent acts in his own name, the in behalf of the principal, acts
principal has no right of action against the persons in his own name. (Phil.
with whom the agent has contracted; neither have National Bank vs. Agudelo y
such persons against the principal. Gonzaga, 58 Phil. 635 [1933];
In such case the agent is the one directly Manubay vs. Picache, 2 C.A.
bound in favor of the person with whom he has Rep. 1034.)
contracted, as if the transaction were his own,
except when the contract involves things belonging Smith Bell v Sotelo
to the principal. The provisions of this article shall be When the agent transacts business in his own name, it
understood to be without prejudice to the actions shall not be necessary for him to state who is the principal
between the principal and agent. (1717) and he shall be directly liable, as if the business were for
his own account, to the persons with whom he transacts
the same
General rule. Article 1883 speaks of a
case where the agent (a) being Rural Bank of Bombon v CA
In order to bind the principal by a mortgage on real
authorized to act on behalf of the property executed by an agent, it must upon its face
principal, (b) acts instead in his own purport to be made, signed and sealed in the name of the
name. In such case, the general rule is principal, otherwise, it will bind the agent only. It is not
that the agent is the one directly liable enough merely that the agent was authorized to make
to the person with whom he had the mortgage, if he has not acted in the name of the
principal. Neither is it sufficient that in the mortgage the
contracted as if the transaction were his agent describes himself as acting by virtue of a power of
own. attorney, if in fact the agent has acted in his own name
The reason for the rule is that and has set his own hand and seal to the mortgage.
there is no representation of
the principal when the agent Sy Juco vs. Sy Juco
acts in his own name. In effect, Art. 1717 of the old Civil Code says that generally: when
an agent acts in his own name, the principal shall have no
the resulting contractual
right of action against the person with whom the agent
relation is only between the has contracted. It admits of an EXCEPTION: in cases
agent and the third person. involving things belonging to the principal. In such cases,
Therefore, the principal cannot the agent is bound to the principal although he does not
have a right of action against assume the character of such agent and appears to be
acting in his own name.
the third person nor the third
NFA v IAC
person against him When things belonging to the principal, the agent's
Exception. The exception to the rule apparent representation yields to the principal's true
that an agent acting in his own name representation and that, in reality and in effect, the

D2019 | PAGE 24
AGENCY REVIEWER PROF. SANCHEZ

contract must be considered as entered into between the (4) When it was stipulated that the expenses would be
principal and the third person. Corollarily, if the principal borne by the agent, or that the latter would be allowed
can be obliged to perform his duties under the contract, only a certain sum. (n)
then it can also demand the enforcement of its rights
arising from the contract.
GENERAL RULE: Where one is employed or
Gold Star Mining Co v Lim Jimenez directed by another to do an act in his
When Lincallo (agent) transferred his mining claims to behalf, not manifestly wrong, the law
Gold Star, even without disclosing that Jimena was part implies a promise by the principal to
owner, he acted as agent of Jimena with respect to reimburse the agent for expenditures
Jimena share of the claims Art. 1883 applicable. While incurred as a proximate consequence of
there is no privity of contract between 3rd party (Gold
Star) and principal (Jimena) in this case, the common the good faith execution of the agency,
subject matter supplies the juridical link. which includes interest thereon
The agent is bound by his acceptance to
Far East Bank v Spouses Cayetano carry out the agency. (Art. 1884.) On the
It is not enough merely that the agent was in fact other hand, the principal is under
authorized to make the mortgage, if he has not acted in obligation to provide the means with
the name of the principal. Neither is it ordinarily sufficient
that in the mortgage the agent describes himself as
which to execute the agency. In the
acting by virtue of a power of attorney, if in fact the agent absence of stipulation that the agent shall
has acted in his own name and has set his own hand and advance the necessary funds (Art. 1886.),
seal to the mortgage. This is especially true where the the principal must advance to the agent
agent himself is a party to the instrument. upon his request the sums necessary for
the execution of the agency. (Art. 1912,
IX. What are the obligations and liabilities of par. 1.)
principals to agents? If the principal fails to comply with his
obligations, the agent will not be liable for
A. Advance/Reimburse the damage which, through his
nonperformance, the principal may
Art. 1912. The principal must advance to the agent, should
suffer. (Art. 1884.)
the latter so request, the sums necessary for the execution
An agency is for the principals bene t. In
of the agency.
Should the agent have advanced them, the principal must case the agent advanced the sums
reimburse him therefor, even if the business or necessary for the execution of the
undertaking was not successful, provided the agent is free agency, whether on his own initiative or
from all fault. by virtue of stipulation, the said advances
The reimbursement shall include interest on the sums must be reimbursed by the principal with
advanced, from the day on which the advance was made. interest from the day the advance was
(1728) made. (see Art. 1896.) Demand is not
necessary in order that delay on the part
Art. 1914. The agent may retain in pledge the things which
of the principal shall exist. (Art. 1169[1].)
are the object of the agency until the principal effects the
reimbursement and pays the indemnity set forth in the
two preceding articles. (1730) B. Indemnify

Art. 1918. The principal is not liable for the expenses Art. 1913. The principal must also indemnify the agent for
incurred by the agent in the following cases: all the damages which the execution of the agency may
have caused the latter, without fault or negligence on his
(1) If the agent acted in contravention of the principal's part. (1729)
instructions, unless the latter should wish to avail himself
of the benefits derived from the contract; The rule in the above article is based on
equity. Since the principal receives the
(2) When the expenses were due to the fault of the agent;
bene ts of the agency and has a right
to demand damages from the agent
(3) When the agent incurred them with knowledge that an
unfavorable result would ensue, if the principal was not should the latter not perform the
aware thereof; agency (Art. 1884.), he should answer
for the damages resulting from the

D2019 | PAGE 25
AGENCY REVIEWER PROF. SANCHEZ

execution thereof without fault or

negligence on the part of the agent. At the time this agency was revoked, the
Article 1913 is also a logical corollary to defendant agent had already earned the commissions
agreed upon, and could not be deprived thereof by the
the rule which makes the agent liable to
arbitrary action of the plaintiff in declining to
the principal for damages or losses
execute the contract of sale. It would be the height
which the latter may suffer because of of injustice to permit the principal then to withdraw the
his nonperformance (Art. 1884.), fraud, authority and terminate the agency as against an express
or negligence. (Art. 1909.) provision of the contract, and perchance reap the benefit
of the agents labors, without being liable to him for his
C. Solidary Liability commissions. Macondray v Sellner

For an agent to be entitled to commission, the

Art. 1915. If two or more persons have appointed an agent
means employed by him and his efforts must result in the
for a common transaction or undertaking, they shall be
sale. He must find the purchaser, and the sale must
solidarily liable to the agent for all the consequences of the
proceed from his efforts acting as broker.
agency. (1731) "One who has employed a broker can himself
sell the property to a purchaser whom he has procured,
REQUISITES: without any aid from the broker." Danon v Brimo
There are two or more
principals; Rocha vs. Prats & Co.
The principal is not liable for commissions to an agent
The principals have all
when the buyer and the principal (as seller) did not agree
concurred in the as to the conditions of the sale. The agent never
appointment of the same succeeded in bringing the minds of the buyer and seller.
agent; and
The agent is appointed for a Inland Realty Investment Service, Inc. vs. Court of Appeals
common transaction or The principal is not liable for commissions to an agent
(a) where the authority granted has expired and has not
undertaking.
shown to be renewed, and
(b) where, during the authority, the agent did nothing but
D. Compensation merely submit a list of prospective buyers and did not
perform substantial acts that proximately and causatively
Art. 1875. Agency is presumed to be for a compensation, led to the consummation of the sale
unless there is proof to the contrary. (n)
Infante vs. Cunanan
The principal is liable to an agent where he induced the
E. Agents lien latter to sign a deed of cancellation of the authority, and
took advantage of the services of the agent and dealt
Art. 1914. The agent may retain in pledge the things which directly with the buyer.
are the object of the agency until the principal effects the
reimbursement and pays the indemnity set forth in the Prats vs. Court of Appeals
two preceding articles. (1730) An agent who is not efficient procuring cause in bringing
about sale of land to the buyer, as his exclusive authority
to sell had expired, is not entitled to compensation. As an
If the principal fails to reimburse or
exception, by way of equity, compensation is granted to
indemnify the agent as required in an agent whose efforts are recognized in consummating
Articles 1912 and 1913, the agent has a sale with a previous buyer although such consummation
the right to retain in pledge the was after the expiration of the agents authority.
things which are the object of the
agency. This is an instance of legal Uniland Resources vs. Development Bank of the Philippines
Similar to Prats, compensation is granted to an agent by
pledge or pledge which is created by
way of equity where his efforts are recognized in bringing
operation of law. the buyer and seller together and initiating the
Unlike contractual pledges, however, transaction, although without property and not actively
the agent is not entitled to the excess involved in the actual bidding and sale.
in case the things are sold to satisfy
his claim and the proceeds thereof Domingo vs. Domingo (supra)
The principal is not liable to an agent where the latter
are more than the amount due. (see takes a secret profit in the nature of a bonus, gratuity or
Arts. 2115, 2121.) personal benefit from the vendee, without revealing the

D2019 | PAGE 26
AGENCY REVIEWER PROF. SANCHEZ

same to his principal. The agent is guilty of a breach of his 2. Partially disclosed principal
loyalty to the principal and forfeits his right to collect the the third party only knows that
commission from his principal, even if the principal does
fact of the agency but not the
not suffer any injury by reason of such breach of fidelity,
or that he obtained better results or that the agency is a principals identity
gratuitous one, or that usage or custom allows it. 3. Undisclosed principal the third
party does not know that the
X. What are the obligations of principals to third agent is acting for a principal
parties?
Art. 1883 involves an agency undisclosed
GENERAL RULE: Principal is liable to third principal.
parties for all acts committed by agent The agent is acting within the
contracted by agent within the scope of scope of authority granted by a
authority. (Art. 1910) principal, but acts in his own name
and does not disclose the fact of
EXCEPTIONS: (Where principal is not liable to the agency.
third parties) The agent is liable to the third
1. Agent acts in his own name. party as if the transaction were his
Exception: Contract involves thing own.
belong to principal principal is - Reason There is no
liable to the third person (Art. 1883) representation of the principal.
2. Agent exceeds power. The contractual relation is only
Exception: Principal ratifies act between the agent and the
expressly of tacitly principal third person.
becomes bound by the obligation.
(Art. 1910) Exception When the contract involves things
3. Agent acts in bad faith where two person belonging to the principal.
contract with regard to the same thing, When the agent acts in his own
one with the agent and the other with the name but the contract involves
principal, and the two contracts are things belonging to the principal,
incompatible with each other. (Art. 1916) the contract is considered as
entered into between the principal
Art. 1883 and the third person. The principal
If an agent acts in his own name: is liable to the third person.
- The principal has no right of action - Reason To protect third
against the third party with whom the persons against the possible
agent has contracted. collusion between the agent
- The third persons also have no right and the principal
of action against the principal. The agents apparent
- The agent is directly bound in favor of representation (that he purports to
the third person, as if the transaction act in his own behalf) yields to the
were his own. principals true representation
Exception: When the contract (that the agent is acting in the
involves things belonging to the principals behalf).
principal.
This article is understood to be without Article 1910. The principal must comply with all
prejudice to the actions between the the obligations which the agent may have
principal and agent. contracted within the scope of his authority.

Kinds of Principals: As for any obligation wherein the agent has

1. Disclosed principal third party exceeded his power, the principal is not bound
knows that fact of the agency except when he ratifies it expressly or tacitly.
and of the principals identity The principal must

D2019 | PAGE 27
AGENCY REVIEWER PROF. SANCHEZ

Comply with all the obligations which One person contracts with the agent
the agent may have contracted and the other with the principal.
within the scope of his authority. The two contracts are incompatible
Where the agent has exceeded his with each other.
power Effect:
The principal is not bound to the The contract of prior date shall be
contracted obligations. preferred
Except when the principal without prejudice to the
ratifies it expressly or tacitly. provisions on double sales
(Art. 1544).
Generally: Principal is liable to third persons. Liability to the person prejudiced:
Where the relation of agency legally If the agent has acted in good faith
exists The principal shall be liable
Where the agent commits acts and in damages to the third
contracts obligations person whose contract must
in behalf of the principal, and be rejected.
within the actual or apparent scope If the agent acted in bad faith
of authority
The agent alone shall be
Effects of ratification
responsible.
As to agent
relieved of liability to third party for
Article 1544. If the same thing should have been sold
the unauthorized transaction to different vendees, the ownership shall be
relieved of liability to the principal for transferred to the person who may have first taken
acting without authority possession thereof in good faith, if it should be
may demand compensation due for movable property.
perforation ratified act Should it be immovable property, the ownership shall
As to principal belong to the person acquiring it who in good faith
assumes responsibility for the first recorded it in the
Registry of Property.
unauthorized transaction; liable to
Should there be no inscription, the ownership shall
third person pertain to the person who in good faith was first in
not liable for acts outside of the possession; and, in the absence thereof, to the
authority approved by ratification person who presents the oldest title, provided there
As to third parties is good faith.
bound by ratification; liable to
principal RULE ON DOUBLE SALES:
If movable property
Article 1916. When two persons contract with regard Ownership is with the vendee
to the same thing, one of them with the agent and who first took possession in
the other with the principal, and the two contracts good faith
are incompatible with each other, that of prior date
If immovable property
shall be preferred, without prejudice to the
provisions of article 1544. (n)
Ownership is with person who
First recorded the property
Article 1917. In the case referred to in the preceding in the Registry of Deeds in
article, if the agent has acted in good faith, the good faith
principal shall be liable in damages to the third person
If without inscription, first
whose contract must be rejected. If the agent acted
in bad faith, he alone shall be responsible. (n) took possession in good faith

Requisites:
Two persons contract with regard to
the same thing.

D2019 | PAGE 28
AGENCY REVIEWER PROF. SANCHEZ

If without possession, extent of authority in order to

presents in the oldest title in hold the principal liable
good faith Where authority in writing
Third party is not required to
B. Agent acting outside scope of authority inquire further than the terms
of the written power of
GENERAL RULE: Principal is not liable to third attorney.
parties where the agent exceeds the scope of As far as the third party is
authority. (Art. 1910) concerned, an agent of the
agent within the terms of the
EXCEPTIONS: (Where the principal is liable to power as written is within the
third parties) scope of authority
1. Agent acts within the terms of the power Although the agent has in
of attorney as written. (Art. 1900) fact exceeded the limits of
2. Principal allowed agent to act as though his actual authority
he had full powers. according to a secret
Note: Principal and agent are solidarily understanding between him
liable. (Art. 1911) and the principal
3. Agent acts in good faith where two person
contract with regard to the same thing, Article 1911. Even when the agent has exceeded his
one with the agent and the other with the authority, the principal is solidarily liable with the
principal, and the two contracts are agent if the former allowed the latter to act as though
incompatible with each other. (Art. 1917) he had full powers.
If the principal allowed the agent
Article 1900. So far as third persons are concerned, to act as though he had full
an act is deemed to have been performed within the powers
scope of the agent's authority, if such act is within the
event when the agent has
terms of the power of attorney, as written, even if the
exceeded his authority
agent has in fact exceeded the limits of his authority
according to an understanding between the principal The principal is solidarily liable
and the agent. with the agent.

Where an agent performs an act INVOLVES AGENCY BY ESTOPPEL

that is within the terms of the For Art. 1911 to operate
power of attorney, as written The agent must have acted in the
The act is deemed to have been name of the principal
performed within the scope of The third person was not aware of
the agent's authority so far as the of the limits of the power
third persons are concerned granted by the principal
The principal allowed the agent to
Even if the agent has in fact
act as though he had full powers
exceeded the limits of his
authority according to an Solidary liability of the principal
understanding between the and the agent
principal and the agent Both principal and agent are
considered as joint tortfeasors
Scope of agents authority as to third parties
Includes not only actual but also C. FOR CRIMES; TORTS
apparent or implied
authorization LIABILITY OF PRINCIPAL FOR CRIME OF AGENT
Where authority not in writing An attempt to delegate to
Third person must make an another authority to do an act
inquiry as to the fact of the which, if done by the principal
agency and the nature and would be illegal, is void. There

D2019 | PAGE 29
AGENCY REVIEWER PROF. SANCHEZ

can be no agency in the of the creditor and does not affect or preclude the liability
perpetration of a crime or an of the principal.
unlawful act.
The law on agency governing XI. DUTY OF THIRD PARTIES DEALING WITH AGENT
civil cases has no application in
Article 1902. A third person with whom the agent wishes
criminal cases. When a person
to contract on behalf of the principal may require the
participates in the commission of
presentation of the power of attorney, or the instructions
a crime, he cannot escape as regards the agency. Private or secret orders and
punishment on the ground that instructions of the principal do not prejudice third persons
he simply acted as an agent of who have relied upon the power of attorney or
another party. instructions shown them
The liability of the principal for a A third person with whom the
crime committed by an agent agent wishes to contract on
depends upon the circumstances behalf of the principal may
of the case. (Prof. Sanchezs require the presentation of:
discussion) the power of attorney, or
If the principal instructed the the instructions as regards the
agent to commit an unlawful agency.
act, both are principals of the Private or secret orders and
criminal act instructions of the principal do
The principal is held as a not prejudice third persons who
principal by inducement have relied upon the power of
attorney or instructions shown
The agent is held as a
them.
principal by direct
participation
OBLIGATION OF THIRD PERSONS DEALING
WITH AN AGENT
LIABILITY OF PRINCIPAL FOR TORT OF AGENT
To inquire as to the extent of the
Principal is liable to third persons
agents authority by requiring
of an act of an agent committed:
the production of:
at the principals direction,
the power of attorney, or
or
the instructions of the principal
in the course and within the
Fundamental rule Persons
scope of the agents
dealing with an assumed agent
employment
are bound at their peril, if they
Reason Principle that he who
would hold the principal, to
does an act through another
ascertain not only the fact of the
does it himself
agency but the nature and
The principal and the agent are
extent of the authority. In case
solidarily liable for the tort
either is controverted, the
committed by the latter. The
burden of proof is upon them to
third person may sue either.
establish it.
Gonzalez and Gomez vs. Haberer
The principal (as seller) cannot accept benefit from a sale
PRIVATE INSTRUCTIONS OF THE PRINCIPAL
and at the same time deny liability for the Third parties are not bound and
misrepresentations of the agent where the sale was cannot be affected by the private
effected on the strength misrepresentations. or secret orders and instructions
of the principal to the agent
Tuason vs. Orozco (supra)
The principal is not relieved from liability to a third party
even if the agent personally bound himself to the pay the
debt constituted for the principals benefit. The individual
liability of the agent constitutes a further security in favor

D2019 | PAGE 30
AGENCY REVIEWER PROF. SANCHEZ

PRINCIPLES IN DETERMINING WHETHER The third person thereby

ASSUMED AUTHORITY EXISTS (KEELER RULE) becomes a duly authorized
1. That the law indulges in no bare agent with respect to the
presumptions that an agency exists: it person who received the special
must be proved or presumed from facts; information.
2. That the agent cannot establish his own If a person states by public
authority, either by his representations or advertisement that he has given
by assuming to exercise it; a power of attorney to a third
3. That an authority cannot be established person
by mere rumor or general reputation; The third person thereby
4. That even a general authority is not an becomes a duly authorized
unlimited one; and agent with regard to any
5. That every authority must find its ultimate person
source in some act or omission of the The power shall continue to be
principal. in full force until the notice is
rescinded in
X. How is agency extinguished? The same manner in which it
was given.
A. Revocation; agency coupled with an interest

GENERAL RULE: Principal may revoke the COMMUNICATION OF EXISTENCE OF AGENCY

agency at will, at any time. (Art. 1920) If by special information the
person appointed as agent is
Implied revocation: considered such with respect to
the person to whom information
Principal appoints a new agent
was given
for the same business or
transaction. (Art. 1923) If by public advertisement the
person appointed as agent is
Principal directly manages the
considered such with regard to
business entrusted to agent.
any person. Public advertisement
(Art. 1924)
may be in any form.
Principal grants a special power
Either case agency deemed to
to another agent after granting a
exist whether there is actually an
general power to a previous
agency or not
agent (Art. 1926)

EXCEPTION: (Where agency cannot be MANNER OF REVOCATION

revoked/terminated) The power of attorney must be
Agency is coupled with interest (Art. 1927 and revoked in the same manner in
1930) which it was given
If by special information
Article 1873. If a person specially informs another or Revocation shall not prejudice
states by public advertisement that he has given a specified person if they were not
power of attorney to a third person, the latter given notice thereof
thereby becomes a duly authorized agent, in the If by public advertisement
former case with respect to the person who received
Revocation does not prejudice
the special information, and in the latter case with
third persons who acted in good
regard to any person.
The power shall continue to be in full force until the faith and without knowledge of
notice is rescinded in the same manner in which it revocation.
was given. Notice in newspaper of general
If a person specially informs circulation is sufficient.
another that he has given a Revocation made in any manner
power of attorney to a third is effective where person dealing
person

D2019 | PAGE 31
AGENCY REVIEWER PROF. SANCHEZ

with agent has actual knowledge General odes of extinguishment

thereof of obligations in e.g. loss of the
thing and novation; rescission or
Article 1919. Agency is extinguished: cancellation by mutual agreement
(1) By its revocation; War contract inoperative if
(2) By the withdrawal of the agent; either party if an enemy alien
(3) By the death, civil interdiction, insanity or insolvency
Legal impossibility if a change
of the principal or of the agent;
in the law makes the purpose of
(4) By the dissolution of the firm or corporation which
entrusted or accepted the agency; the agency unlawful
(5) By the accomplishment of the object or purpose of Termination of agents authority
the agency; terminates as a matter of law
(6) By the expiration of the period for which the agency with the destruction or loss of the
was constituted trust
Occurrence of a specified event
Presumption of continuance of resolutory condition; principal
agency and agent have originally agreed
Agency is presumed to exist in that the agency, or some
absence of anything to show its particular aspect of it, will
termination. continue until a specified event
Burden of proving termination or occurs
revocation is on party asserting it
Article 1920. The principal may revoke the agency at
Modes of extinguishment will, and compel the agent to return the document
By agreement (5 and 6) evidencing the agency.
Such revocation may be express or implied.
By the accomplishment of
The principal may
the object or purpose of the
Revoke the agency at will, and
agency
Compel the agent to return
By the expiration of the the document evidencing the
period for which the agency agency.
was constituted Such revocation may be express
By subsequent acts of the of the or implied.
parties
Both parties or mutual Revocation of agency by principal
consent General rule: Agency revocable
By unilateral act of one party at will by principal at any time,
(1 and 2) at his mere option, with or
By its revocation without reason
By the withdrawal of the Reason
agent The authority of the agent
By operation of law (3 and 4) emanates from or depends
By the death, civil on the will of the principal;
interdiction, insanity or Confidence is the cardinal
insolvency of the principal or basis of the relation;
of the agent; Principal-agent relationship
By the dissolution of the firm is consensual and personal
or corporation which in nature and no one can be
entrusted or accepted the forced to retain another as
agency; his agent against his will

Modes provided not exclusive;

other modes of extinguishment

D2019 | PAGE 32
AGENCY REVIEWER PROF. SANCHEZ

Liability of principal for damage caused by Actual notice must be brought to

revocation former customers
Principal must respond in Notice by publication is sufficient as
damages for breach of contract to other persons
where the termination is
wrongful in those cases wherein Renunciation of agency by agent
not having the legal right to do GENERAL RULE: Agent may renounce
so, he should discharge the the agency at will.
agent. Reason: The essence of an agency
Where agency constituted for a relationship is consensual the
fixed period. willingness of the agent to represent
Principal is liable for the principal
damages occasioned by the Revocation is subject to
wrongful discharge of the The contractual obligations owing to
agent before the expiration the principal
of the period fixed; Term or period of time fixed or
defined for the continuance of the
The action for indemnity
agency
would be derived from the
Form of renunciation
contract of the parties, not
Express
from law
Implied; examples
Where no time fixed for
continuance of agency. Agent abandons object of
the agency and acts for
Principal is at liberty to
himself in committing a
terminate it at will subject
fraud upon his principal
only to the requirements of
good faith. Agent institutes an action
against the principal for
Return of document evidencing agency. recovery of balance of
If the authority is in writing, the accounts
principal may compel the agent to Article 1921. If the agency has been entrusted for the
return the document evidencing the purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they were
agency
not given notice thereof.
To prevent the agent from making
If the agency has been entrusted
use of the power of attorney and
for the purpose of contracting
thus avoid liability to third persons
with specified persons
who may subsequently deal with the
Its revocation shall not prejudice
agent on the faith of the instrument.
the specified persons if they
Notice of revocation were not given notice of the
revocation.
As to agent
Principal must notify agent of
Article 1922. If the agent had general powers,
revocation (Prof. Sanchez), but
revocation of the agency does not prejudice third
express notice to the agent is not persons who acted in good faith and without
always necessary (De Leon). knowledge of the revocation. Notice of the
There is sufficient notice of revocation in a newspaper of general circulation is a
revocation if the agent actually sufficient warning to third persons.
knows, or has reason to know facts If the agent had general powers
indicating of revocation Its revocation of the agency does
Revocation without notice to the not prejudice third persons who
agent will not invalidate acts done in acted
pursuance of authority
in good faith and
As to third persons (see Art. 1873)

D2019 | PAGE 33
AGENCY REVIEWER PROF. SANCHEZ

without knowledge of the The revocation does not take effect

revocation. until it is in some way communicated
Notice of the revocation in a to the previous agent.
newspaper of general circulation Without prejudice to the provisions of
is a sufficient warning to third the two preceding articles
persons. Rights of third persons who acted in
good faith and without knowledge of
Effect of revocation in relation to third parties the revocation will not be prejudiced
Agent authorized to contract by the revocation.
with specified persons
Revocation will not prejudice such Article 1924. The agency is revoked if the principal
third persons until notice of directly manages the business entrusted to the agent,
dealing directly with third persons.
revocation is given them
Revocation must be personal If the principal directly manages the
business entrusted to the agent,
Agent authorized to contract with public in dealing directly with third persons
general The agency is revoked.
Revocation will not prejudice
Implied revocation by direct management of
innocent third persons until
business by principal himself
knowledge of revocation.
Management of the business
Publication of revocation in a
entrusted to the agent by the
newspaper of general circulation is
principal himself revokes the agency
sufficient warning to third persons
Reason No more basis for the
Publication constitutes representation previously conferred
notice whether or not such Exception When the intent of the
third persons have read the principal is for him and the agent is
newspaper concerned to manage the business together
Revocation may be personal
Article 1925. When two or more principals have
Article 1923. The appointment of a new agent for the
granted a power of attorney for a common
same business or transaction revokes the previous
transaction, any one of them may revoke the same
agency from the day on which notice thereof was
without the consent of the others.
given to the former agent, without prejudice to the
provisions of the two preceding articles.
When two or more principals
have granted a power of
The appointment of a new agent
attorney for a common
for the same business or
transaction
transaction revokes the previous
Any one of the principals may
agency.
revoke the agency without the
The revocation is effective from the
consent of the other principals.
day on which notice thereof was
given to the former agent.
Revocation by one of two or more principals
The revocation is without
Any of the two or more
prejudice to the provisions of the
principals may revoke the power
two preceding articles.
of attorney granted to an agent
appointed for a common
Implied revocation by appointment of new
transaction
agent
Reason Two or more principals
There must be incompatibility between
are solidarily liable to the agent
the appointment of another agent and
for all of the consequences of the
the previous agency.
agency (Art. 1915); The act of one
is the act of all.

D2019 | PAGE 34
AGENCY REVIEWER PROF. SANCHEZ

Article 1926. A general power of attorney is revoked not solely the rights of the
by a special one granted to another agent, as regards principal which are affected but
the special matter also the interest of the agent or
involved in the latter. of a third person
An irrevocable power of attorney
A general power of attorney is is only obligatory on the principal
revoked by a special one granted who executed the agency, and
to another agent does not affect one who is not a
As regards the special matter party thereto
involved in the special power. The agency cannot be revoked
by the sole will of the principal.
Implied partial revocation of general power by
a special power
Termination of the agency
Under this provision
Agency couple with an interest is
Two agents are involved
revocable after the interest
One granted with a general ceases
power Interest in the subject matter of
One granted with a special power conferred
power It is essential that the
The general power is impliedly interest of the agent
revoked as to matter covered by shall be in the subject
the special power matter of the power
The revocation may also apply conferred and
where the special power is not merely an interest
subsequently given to the same in the entitlement of
agent compensation or
A special power naturally commission, which is
prevails over a general power merely an incident of
Notice of the special power must the agency
be given to the agent who was Examples:
given the general power Agent has parted with
value or incurred
Article 1927. An agency cannot be revoked if a
liability at principals
bilateral contract depends upon it, or if it is the means
request and the
of fulfilling an obligation already contracted, or if a
partner is appointed manager of a partnership in the agency is the means
contract of partnership and his removal from the of reimbursement or
management is unjustifiable indemnity
- An agency cannot be revoked Interest over the
1. If a bilateral contract depends upon it, thing arises from an
or assignment, pledge or
2. If the agency is the means of fulfilling lien and the agency is
an obligation already contracted, or given to make the
3. If a partner is assignment, pledge or
- appointed manager of a partnership lien effectual
in the contract of partnership and
- his removal from the management is Terminology used by parties not controlling
unjustifiable. Even though an agency is made
in terms irrevocable, the entire
Agency coupled with an interest agreement of the parties and the
Agency coupled with an interest facts and circumstances of the
The agency is part of another case determine whether an
obligation or agreement, and it is agency is coupled with an

D2019 | PAGE 35
AGENCY REVIEWER PROF. SANCHEZ

interest and thus indeed disposed of, the authority to sell continues until all the lots
irrevocable. are sold. The contract cannot be terminated by principal
before then.

Revocability of agency couple with interest

New Manila Lumber Co. Inc. vs. Republic of the Philippines
Where there is no just cause Where a principal confers the power upon an agent to
A contract not to revoke an collect whatever amounts may be due him (the principal)
agency only limits the principals from the Government, demands and collects from the
right to revoke, and not his power latter the money the collection of which he entrusted to
his agent, the agency is thereby revoked.
to revoke. Even if the powers are irrevocable and coupled with
An agency coupled with an interest, its irrevocability cannot affect a third person who
interest deprives both the is not a party thereto. They are obligatory only on the
principals of his right to revoke principal.
and power to revoke.
Dy Buncio & Co. vs. Ong Guan Can
The principal may not revoke The making and accepting of a new power of attorney,
at his pleasure and a whether it enlarges or decreases the power of the agent,
purported revocation can must be held to supplant and revoke the prior power of
have no effect. attorney when the two are inconsistent.
Where there is just cause
Garcia vs. De Manzano
An agency, coupled with an interest
A second power of attorney revokes the first one only
or not, may be revoked for a just after notice of such second power is given to first agent.
cause, such as when the agent
betrays the interest of the principal. Rallos vs. Yangco
Where the principal sent an invitation to a third person to
Agency coupled with an interest not a true contract with an agent, the principal terminated such
agency without notifying the third person of such
agency
termination, and the third person proceeded to contract
Persons with proprietary interest with such agent without knowledge, actual or
in the subject matter of their constructive, of the termination of the agency, the
agency are not true agents at all. principal is liable to such third person.
If an agent holds an interest
for the benefit of a person who Compania General de Tabacos vs. Diaba
Where a third person sold and delivered merchandise to
is not the principal, the an agent whose power was terminated, and such third
agent is not really the agent person was not notified of such termination, the principal
of the principal. is liable to such third person for the goods sold and
An agency relation is delivered.
distinguished by the principals
Del Rosario vs. Abad
control over the agent
A mere statement in the power of attorney that it is
concerning the object of his coupled with an interest is not enough. In what does such
agency. interest consist must be stated in the power of attorney.
If the principal cannot The fact that the improvements on a parcel of land was
terminate the relation at will, mortgaged is not such an interest as could render
irrevocable a power of attorney authorizing an agent to
he has surrendered that
sell the parcel of land.
degree of control with an Such power, being revocable and not coupled with
agency requires. interest, does not survive principals death. The agent
could no longer validly convey the parcel of land to a third
Barretto vs. Santa Marina. person.
Where the agency is without a fixed or determined period,
and the confidence reposed upon the agent disappears, Coleongco vs. Claparols
the principal has a right to revoke the agency, especially An agency is not coupled with an interest if a financing
when the agent has expressly resigned from his position agreement already contains clauses for the protection of
for good reasons. the agent.
Even if the agency was coupled with an interest, the
Diolosa vs. Court of Appeals power could be revoked for a just cause, such as when the
Where the agency contract stipulated that the agent is agent betrays the interest of the principal. The
authorized to dispose of property until the same is full irrevocability of the power may not be used to shield the

D2019 | PAGE 36
AGENCY REVIEWER PROF. SANCHEZ

perpetration of acts in bad faith, breach of confidence, or The agent is not required to sacrifice
betrayal of trust by the agent. Such would amount to his own interest just the serve the
holding a power coupled with interest authorizing a agent
principal
to commit frauds against the principal.

Article 1929. The agent, even if he should withdraw

B. Withdrawal
from the agency for a valid reason, must continue to
act until the principal has had reasonable opportunity
Article 1928. The agent may withdraw from the
to take the necessary steps to meet the situation.
agency by giving due notice to the principal. If the
latter should suffer any damage - The agent must continue to act until the
by reason of the withdrawal, the agent must principal has had reasonable opportunity to
indemnify him therefor, unless the agent should base take the necessary steps to meet the
his withdrawal upon the situation
impossibility of continuing the performance of the - Even if the agent should withdraw
agency without grave detriment to himself. from the agency for a valid reason
- The agent may withdraw from the agency
by giving due notice to the principal. Obligation of agent to continue to act after
- If the principal should suffer any damage by withdrawal
reason of the withdrawal Even when the withdrawal is for
The agent must indemnify the principal a valid reason, the agent must
for the damage. continue to act until the principal
- Exception: The agent bases his has had reasonable opportunity
withdrawal upon the impossibility of to take necessary steps to
continuing the performance of the remedy the situation caused by
agency without grave detriment to the withdrawal.
himself. Reason To prevent damage or
prejudice to the principal
Right of agent to withdraw
The agent may withdraw or renounce Valera vs. Velasco
from the agency at any time. The misunderstanding between the principal and the
The agency must notify the principal agent over the payment of the balance as a result of the
liquidation of accounts between them arising from the
of such withdrawal, but consent of
agency, and the fact the agent brought suit against
the principal is not required. principal is equivalent to an express renunciation of the
Reason Constitutional prohibition agency and terminates the juridical relation between
against involuntary servitude; An them. They more than prove the breach of juridical
agency relationship is a voluntary relation relation, even though DEF as agent has not
expressly told his principal that he renounced the agency.
relationship between parties
Without just cause
C. Death; agency couple with an interest
The agent must indemnify the
principal should the principal suffer GENERAL RULE: Death of either principal or
damage by reason of such agent terminates the agency.
withdrawal - Death of principal source of authority is
With just cause extinguished
The agent cannot be held liable for - Death of agent no person to act for
the withdrawal benefit and representation of principal
If the withdrawal is based on
the impossibility of EXCEPTIONS:
continuing the agency 1. The agency has been constituted in
without grave detriment to the common interest of the principal
himself (Art. 1928) of the agent (Art. 1927 and 1930)
Due to a fortuitous event 2. The agency has been constituted in
(Art. 1174) the interest of a third person who has
accepted the stipulation in his favor.
(Art. 1930)

D2019 | PAGE 37
AGENCY REVIEWER PROF. SANCHEZ

- Notify the principal of the agents

Article 1930. The agency shall remain in full force and death, and
effect even after the death of the principal, if it has - In the meantime, adopt such
been constituted in the common interest of the latter measures as the circumstances may
and of the agent, or in the interest of a third person
demand in the interest of the
who has accepted the stipulation in his favor.
principal.
If the agency has been
constituted Duty of the agent's heirs when agent dies
In the common interest of 1. To notify the principal of the agent's
the principal and of the death, and
agent, or 2. To adopt measures as the circumstances
In the interest of a third may demand in the interest of the
person who has accepted principal.
the stipulation in his favor.
The agency shall remain in full force Pasno vs. Ravina
The power of sale given in a mortgage is a power coupled
and effect even after the death of
with an interest which survives the death of the grantor.
the principal. Ramos vs. Caoibes
Where an agent makes use of his power after the death
Article 1931. Anything done by the agent, without of his principal, the agent has the obligation to deliver the
knowledge of the death of the principal or of any amount collected by him by virtue of said power to the
other cause which extinguishes the agency, is valid administratrix of the estate of the principal.
and shall be fully effective with respect to third
persons who may have contracted with him in good Herrera vs. Luy Kim Guan
faith. The death of a principal does not render the act of an
agent unenforceable, where the agent had no knowledge
Anything done by the agent, without
of such extinguishment of the agency.
knowledge
of the death of the principal. Rallos vs. Felix Go Chan
or The law does not impose a duty on the heirs of principal
to notify agent of death of principal. However, if the agent
of any other cause which dies, his heirs must notify principal thereof.
extinguishes the agency,
is valid and shall be fully effective D. Dissolution of firm or corporation
with respect to third persons who Dissolution of a firm or corporation which
may have contracted with the agent entrusted (as principal) or accepted (as agent)
in good faith. extinguishes its juridical existence as far as the
right to go on doing ordinary business is
Validity of acts of agent after termination of concerned, except for the purpose of winding
agency up
Third person who contract with
an agent are not prejudiced, if E. Accomplishment
The agent had not knowledge of Fulfillment of the purpose for which the
termination of the agency agency is created ipso facto terminates the
because of the death of the agency, even though expressed to be
principal or of any other causes irrevocable. Continued existence of authority
for termination, and illogical when object of purpose of agency is
The third person dealt with the accomplished.
agent in good faith.
F. Expiration of period
Article 1932. If the agent dies, his heirs must notify - Term specified
the principal thereof, and in the meantime adopt The expiration of the period fixed or the
such measures as the circumstances may demand in
arrival of time stipulated results in the
the interest of the latter.
termination of the agency
- If the agent dies, the agents heirs must
- Term not specified

D2019 | PAGE 38
AGENCY REVIEWER PROF. SANCHEZ

Agency terminates at the end of a

reasonable period of time
Either party can terminate the
relationship at will by giving notice
- Period implied
Period implied from the terms of the
agreement, the purpose of the agency,
and the circumstances of the parties

G. Civil interdiction, insanity, insolvency

Presence, capacity, and solvency of parties
essential for continuance of agency. The
death, civil interdiction, insanity, or insolvency
of either party terminates the agency
notwithstanding that the agency period has
not yet expired.
Whether the death of one of two
or more principals or of one of
two or more agents terminates
the agency depends upon the
intention of the parties. Death of
one of several principals or
agents does not terminate the
agency.
A person under civil interdiction
cannot validly give consent.
Insolvency
Of principal Principal loses
control of subject matter of
agency. Authority of agent ceases
by operation of law.
Of agent Terminates agency if
it is connected with agents
business. Does not destroy any
right acquired by agency under
power coupled with interest.

D2019 | PAGE 39
AGENCY REVIEWER PROF. SANCHEZ

GROUP MEMBERS

BRITANICO, CAMILLE
ASTRID
CASTILLO, TRISTAN
CARLOS
NATIVIDAD, MICHAEL
RYAN
TE, MA. JULIENNE

D2019 | PAGE 40