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PHILIPPINE AGENCY LAW AND JURISPRUDENCE

REPORTERS:
Abad, Geronimo
Abad, Kesha
Adviento, Tristan
DEFINITION, OBJECTIVE AND NATURE OF AGENCY
Definition
Article 1868 of the Civil Code defines the contract of agency as one whereby a person binds himself to render
some service or to do something in representation or on behalf of another, with the consent or authority of the latter.
Objectives
In Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007)
The Supreme Court held that The underlying principle of the contract of agency is to accomplish results by using
the services of others to do a great variety of things like selling, buying, manufacturing, and transporting. Its purpose is
to extend the personality of the principal.
In Orient Air Service & Hotel Representatives v. Court of Appeals, 197 SCRA 645 (1991)
The Court held that the purpose of every contract of agency is the ability, by legal fiction, to extend the
personality of the principal through the facility of the agent; but the same can only be effected with the consent of the
principal.
Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006)
The Court held that in an agent-principal relationship, the personality of the principal is extended through the
facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which
the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in
any way, be compelled by law or by any court.
Philex Mining Corp. v. Commissioner of Internal Revenue, 551 SCRA 428 (2008),
The Court reiterated the principle that the essence of an agency, even one that is coupled with interest, is the
agents ability to represent his principal and bring about business relations between the latter and third persons.
When an agency relationship is established, and the agent acts for the principal, he is insofar as the world is
concerned essentially the principal acting in the particular contract or transaction on hand. Consequently, the acts of the
agent on behalf of the principal within the scope of the authority have the same legal effect and consequence as though the
principal had been the one so acting in the given situation. Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251
(1978); Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007).
Some of the legal consequences that flow from the doctrine of representation in the contract of agency:
Notice to the agent is notice to the principal. Air France v. Court of Appeals , 126 SCRA 448 (1983).
Knowledge of the agent pertains to the principal
When an agent purchases the property in bad faith, the principal is deemed to be a purchaser in bad faith.
Caram, Jr. v. Laureta , 103 SCRA 7 (1981).
A suit against an agent in his personal capacity cannot, without compelling reasons, be considered a suit against
the principal. Philippine National Bank v. Ritratto Groups, Inc., 362 SCRA 216 (2001).
Elements of the Contract of Agency
Like any other contract, agency is constituted of the essential elements of:
(a) consent;
(b) object or subject matter; and
(c) cause or consideration.
However, in Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978), the Court held that the following are the
essential elements of the contract of agency:
(a) Consent, express or implied, of the parties to establish the relationship;
(b) Object, which is the execution of a juridical act in relation to third parties;
(c) Agent acts as a representative and not for himself; and
(d) Agent acts within the scope of his authority.

NOTE:
The element not included in the Rallos enumeration is the cause or consideration of every contract of agency.
The last two elements included in the Rallos enumeration should not be understood to be essential elements for
the perfection and validity of the contract of agency, for indeed they are matters that do not go into perfection, but rather
into the performance stage of the agency relationship. The non-existence of the two purported essential elements (i.e., that
the agent acted for herself and/or the agent acted beyond the scope of her authority), does not affect the validity of the
existing agency relationship, but rather the legality of the contracts entered into by the agent on behalf of the principal.
Dean Villanueva
Elements:
(a) consent
- The essential element of consent is manifest from the principle that No person may be represented by another
without his will; and that no person can be compelled against his will to represent another.
(b) object or subject matter
- The object of every contract of agency is service, which particularly is the legal undertaking of the agent to enter
into juridical acts with third persons on behalf of the principal.
(c) cause or consideration
- The cause or consideration in agency is the compensation or commission that the principal agreed or committed
to be paid to the agent for the latters services.
Essential Characteristics of Agency
a. Nominate and Principal
b. Consensual
c. Unilateral and Primarily Onerous
d. Preparatory and Representative
e. Derivative, Fiduciary and Revocable
FORM REQUIRED FOR CONTRACT OF AGENCY
How Agency May Be Constituted
Article 1869: Agency may be express, or implied from the acts of the principal, from his silence or lack of action,
or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may
be oral, unless the law requires a specific form.
Article 1870: Acceptance by the agent may also be express, or implied from his acts which carry out the agency,
or from his silence or inaction according to the circumstances.
Equitable PCI-Bank v. Ku, 355 SCRA 309 (2001)
Thus, when a law firm allowed the employee of its client to occasionally receive its mail, and not having formally
objected to the receipt by said employee of a court process, or taken any steps to put a stop to it, it was construed to mean
that an agency relationship had been established, to which receipt of the court process by said employee was legally
deemed to be service to the law firm.
In Lim v. Court of Appeals, 254 SCRA 170 (1996)
Since a contract of agency does not fall into any of the categories which require certain formalities for particular
contract, it was considered valid and enforceable in whatever form it may have been entered into.
Agency Not Presumed to Exist
Although an agency contract is consensual in nature and generally requires no formality, the Court has stressed
that an agency arrangement is never presumed (Lopez v. Tan Tioco, 8 Phil. 693,1907).
In other words, the declaration of one that he is an agent of another is never to be accepted at face value, except in
those cases where an agency arises by express provision of law. (Compania Maritima v. Limson, 141 SCRA 407,1986).
In People v. Yabut, 76 SCRA 624 (1977)
It was held that although the perfection of a contract of agency may take an implied form, the existence of an
agency relationship is never presumed. The relationship of principal and agent cannot be inferred from mere family
relationship; for the relation to exist, there must be consent by both parties. The law makes no presumption of agency; it
must exist as a fact. This principle was reiterated in Lim v. Court of Appeals, 251 SCRA 408 (1995).
Moreover, in Harry E. Keeler Elec . Co. v. Rodriguez, 44 Phil. 19 (1922)
The Court ruled that a third person must act with ordinary prudence and reasonable diligence to ascertain whether
the agent is acting and dealing with him within the scope of his powers.