“By the contract of agency a person binds himself to render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter. (1709a)”
All situations which one is employed to render some service for another
excludes relationship
o Employer and employee
o Master and servant
o Employer and independent contractor
Agency is a FIDUCIARY relationship which implies a power in an agent to contract with a 3rd party
o Power to effect the principals contractual relations with 3rd person
o Examples:
Terms
Agency – The relationship of principal and agent
o May be used to denote the place at which business is transacted
o Used as Sense of instrumentality- by which thing is done
o Refer to Exclusive right of a person to sell a product for another in a specific territory
Capacity of parties
1. Parties- Capacitated, or have the legal capacity to enter contract
Person not capacitated, cannot do it indirectly through another
a. Can either be Natural or Artificial One
i. Can be legal entities such as corporations
ii. Voluntary Association is not a legal entity
b. State of war, Enemy Alien, cannot appoint an Agent in the belligerent territory
c. Generally: Agent who assumes contract for principal without contractual capacity is liable
i. Although may be ratified once principal latter acquired capacity
ii. Agent is not liable where he was ignorant of principal capacity
iii. In example: Agent doesn’t warrant the full contractual capacity of his principal
2. Agent- Generally anyone can be an agent. He doesn’t have to possess full capacity because he derives
authority from the principal.
a. Some mental capacity is required, therefore completely incapable persons cannot be agents
b. In some cases additional qualifications may exist
c. Agent must be competent to bind himself to the Principal
d. Disqualified if it is their duty to act inconsistently toward another.
2. Criminal acts/ act not allowed by law – to delegate act which would be illegal is VOID
a. Aliens cannot appoint Filipino agent to buy land, prohibited Article 13 sec 3 and 7
b. Persons not allowed to obtain prop cannot obtain through agent
c. Cannot escape criminal liability because he acted as an agent.
4. Agent must not act for an adverse party -Agent cannot serve 2 masters unless both consent or only acts as
a middle man
a. Agent for a Foreign company = cannot be an agent for a local company
b. If acts for both principals without consent of either he is chargeable as trustee and is responsible
for any loss sustained by the principal though such action,
i. Cannot recover compensation from either principal
c. When 2nd principal knows and the 1st principal doesn’t
i. The first principal has the right to affirm or rescind the transcation
ii. Can recover damages from the third party and the agent irrespective of any proof
d. 2 employment known and consented by principal, principal is bound but cannot recover from the
other
i. cannot complain of breach of faith
5. Agent must not use or disclose secret information
Requirement of good faith and loyalty demand agent not to divulge confidential information
i. After the termination of the contract the agent has no duty to abstain from keeping
information
1) But not unjuriously use or disclose unique or confidential information
entrusted to him only for the principals use
1) A COMMISSION AGENT- engaged in purchase of sale for another, placed in his possession and his
disposal, Maintains relationship with principal, purchaser, and property
BROKER- No relation with the thing he buys or sells, merely an intermediary/ negotiator with the
custody or possession, Only office is to bring together the parties to the transaction never acting in his
own name
o Brokers are classified accordance with the type of property they are authorized to
sell
2 kinds of Brokers
1. Those authorized to secure customers for their principals, the resulting
contract being made by the principal parties
2. Authorized to effect contracts
Agency may be oral, unless the law requires a specific form. (1710a)
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. (n)
ARTICLE 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers
his power of attorney to the agent and the latter receives it without any objection. (n)
ARTICLE 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the
agent, except:
(1) When the principal transmits his power of attorney to the agent, who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is
habitually engaged as an agent, and he did not reply to the letter or telegram. (n)
ARTICLE 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney
to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who
received the special information, and in the latter case with regard to any person.
The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. (n)
ARTICLE 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. (n)
ARTICLE 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n)
The former comprises all the business of the principal. The latter, one or more specific transactions. (1712)
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 that the agent may execute such acts as he may consider appropriate, or even though the
agency should authorize a general and unlimited management. (n)