TITLE X – AGENCY o Agent: He is the party who

represents the principal.

ART. 1868 o Sub-Agent: Agent of the
agent. The contract of agency
By the contract of agency, a person binds may prohibit the agent from
himself to render some service or to do appointing a substitute called
something in representation or on behalf of the sub-agent.
another, with the consent or authority of the
latter.  Agency enables the principal to be
constructively present in many places
 Basis of Agency is representation. and thus is able to carry on diverse
o Agent renders service “in activities.
representation or on behalf of  If the principal is capacitated to enter
another”. into a contract for all, the agent
 Other forms of service: employment. assumes no personal liability in the
 Always based on the intention of the transactions.
parties and not necessarily
phrases/words of agency used in the ART. 1869
contract.
Agency may be express, or implied from the
acts of the principal, from his silence or lack
 Elements of action, or his failure to repudiate the
1.) Consent, express or agency, knowing that another person is acting
on his behalf without authority.
implied
2.) Object: Execution of a Agency may be oral, unless the law requires
juridical act in relation a specific form.
to a 3rd Person.
Classes of Agency under this Article:
3.) Agent acts as
representative and not
1.) Express – agent is actually clothed by
for himself.
principal with authority.
4.) Agent acts within the
a. Oral/Verbal
scope of his authority
b. In writing
 Special Agents of the State: Art. 2180
2.) Implied – That kind where the agency
on vicarious or imputed liability.
created is deduced from:
a. Acts or conducts of the
 Characteristics
principal
o Nominate
b. Silence/Inaction
o Bilateral
c. Failure to repudiate agency.
o Preparatory
o Fiduciary
Other kinds of agency:
o Representative Relation
o Generally Onerous
A.) Nature
a. Conventional – agreement
 Parties
b. Legal – operation of law
o Principal: Party represented
by the agent.
B.) Consideration
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 a. Gratuitous – agent does not
receive any compensation.
b. Onerous – agent receives
compensation for his services
as such.
C.) Extent of Transaction Covered
a. General – comprises all
transactions of the principal.
b. Special – one or more specific
transactions
D.) Management
a. Agency couched in general
terms – comprises only acts of
administration.
b. Agency couched in specific
terms – acts of dominion or
ownership and needs a special
power of attorney to bind the
principal.
E.) Manner of Appointment
a. Direct – principal has
appointed the agent directly.
b. Indirect – appointment is
through another person.
ART. 1870
Acceptance by the agent may also be express,
or implied from his acts which carry out the
agency, or from his silence or inaction
according to the circumstances.
 This article contemplates the agent’s
acceptance.
 May be express or implied.
o Implied from:
 Acts of the agent
which carry out the
agency.
 Silence/Inaction
 Where the
persons are
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present.
(1871)
 Where the
persons are
absent (1872)
ART. 1871
Between persons who are present, the
acceptance of the agency may also be implied
if the principal delivers his power of attorney
to the agent and the latter receives it without
any objection.
Power of Attorney: It is an instrument in
writing whereby one person, as principal,
appoints another as his agent and confers
authority to perform certain specified acts or
kinds of acts in behalf of the principal.
o Purpose: Evidence of the
authority of the agent to third
persons
 Person holding the
power is designated as
attorney-in-fact, as
distinguished from an
attorney-at-law.
o It need not be notarized unless
expressly provided by a
statute.
o Agency under this provision
is implied because there was
no statement whether written
or oral that he is accepting the
agency.
o Both persons must be present.
 If both are absent: the
silence of the person
appointed as an agent
will not imply the
creation of the agency.
 Art 1872 makes an
exception of this rule.
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ART. 1872
Between persons who are absent, the
acceptance of the agency cannot be implied
from the silence of the agent, except:
(1) When the principal transmits his
power of attorney to the agent,
who receives it without any
objection;
(2) When the principal entrusts to
him by letter or telegram a power
of attorney with respect to the
business in which he is habitually
engaged as an agent, and he did
not reply to the letter or telegram.
Applicability: The article applies only when
the persons involved are both absent.
General Rule: Silence of the supposed agent
does not mean implied acceptance of the
agency.
 The provision provides for 2
exceptions to this rule.
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.
This provision is a form of agency by
estoppel.
Special Information (“Informs Another”):
 The third person becomes an agent of
the informant (principal).
Public Advertisement:
 The third person becomes an agent of
the advertiser (principal).
Termination: Rescission in the same manner
it was given.

Basis Art. 1871 Art. 1872 Implied Agency Agency by

Condition Both Both Estoppel
for Creation
principal principal Actual agency. No actual agency.
and agent and “agent” Principal is liable a.) Caused by
are present. are absent. alone, not the agent. Principal: He
Manner of Power of Power of alone is
delivery Attorney is Attorney is responsible.
personally transmitted b.) Caused by
delivered to by Agent: Agent is
the agent. messenger, responsible.
letter or  In either
telephone. case, third
person must
 Acceptance of agency is not have acted
compulsory but the person must in good
accept or decline in due time to put faith.
the principal in notice.

ART. 1873 ART. 1874

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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.
Applicability: Applies only to sale of a piece
of land or any interest therein (usufruct,
mortgage, antichresis, etc.)
 The sale may be effected by:
o The owner himself; or
o Agent of the owner
 Right of repurchase is also
contemplated under this provision of
the law since a repurchase is in the
nature of a sale.
1874 (Agency) 1403(2) (Statute of
Frauds)
Agent of the owner Owner himself sells
sells the land and the piece of land
not in writing, void. and not in writing,
unenforceable
ART. 1875
Agency is presumed to be for a
compensation, unless there is proof to the
contrary.
 An agent is entitled to compensation
only after he has completely or
substantially completed his
obligation as an agent UNLESS there
be a stipulation to the contrary.
o By stipulation, compensation
may be contingent or
dependent upon the
realization of profit for the
principal.
o Measure of compensation
depends upon the parties.
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Luzuriaga, Ivan Chris
o An unsuccessful agent (i.e.,
broker) is not entitled to
commission.
 If the labor of the agent is what set in
motion the intervention of the third
party that produced the sale, there is a
close proximate and reasonable
causal connection between the
agent’s effort and the principal’s sale.
 Preparation of documents is part of
the functions of a broker.
 A sub-agent may join a suit for
compensation against the principal.
 Receiving commission does not
necessarily make on an agent.
 Agent or broker cannot be deprived of
commission by the principal by
dealing directly with the broker.
 Agency cannot be revoked after the
agent consummated the transaction.
 Double Agency: Whenever an agent
is acting simultaneously for both the
seller and the buyer.
o Generally improper unless
with the consent of the
principal parties.
o Where there is double dealing,
the agent is not entitled to
compensation unless it is with
the knowledge of both
principals.
 When there is no fixed duration in the
contract, either party may terminate it
at will, subject only to the
requirements of good faith.
o The right of the principal to
terminate his authority is
absolute and unrestricted.
 EXCEPT: He may not
do it in bad faith, and
as a mere device to
escape the payment of
the broker’s
commissions.
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  Payment of the Agent’s Commission: Universal Agency:
o Generally, it is the principal  Agent is authorized to do all acts for
(party being represented by his principal which can lawfully be
the agent). delegated to an agent.
o It is the owner of the property
sold who must pay the agent’s ART. 1877
commission.
An agency couched in general terms
Broker Agent comprises only acts of administration,
 Negotiator  Represents only even if the principal should state that he
between the one party. withholds no power or that the agent may
parties.  Acting in the execute such acts as he may consider
 Does not act in name of one appropriate, or even though the agency
his own name. party and should authorize a general and unlimited
equipped with a management.
power of
attorney.  Covers only acts of administration.
 Exception (Goquiolay v. Sycip): With
respect to the power of a managing
ART. 1876 partner, he may perform acts
affecting ownership if the same are
An agency is either general or special. The necessary to promote or accomplish a
former comprises all the business of the declared object of the partnership.
principal. The latter, one or more specific
transactions. ART. 1878

General Agency: Special powers of attorney are necessary

 All the business of the principal are
covered.
 General Agent is usually authorized
to do all acts connected with the
business or employment in which he
is engaged.
 Authority may be by express terms,
usage of trade, customs or nature of
the business.
Special Agency:
 Only one ore more specific
transactions are covered in the
authority of the agent.
 Restrictions are necessarily implied
from the act to be done.
in the following cases:
1. To make such payments as are not
usually considered as acts of
administration;
2. To effect novations which put an end to
obligations already in existence at the
time the agency was constituted;
3. To compromise, to submit questions to
arbitration, to renounce the right to
appeal from a judgment, to waive
objections to the venue of an action or
to abandon a prescription already
acquired;
4. To waive any obligation gratuitously;
5. To enter into any contract by which the
ownership of an immovable is
transmitted or acquired either
gratuitously or for a valuable
consideration;

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6. To make gifts, except customary ones
for charity or those made to employees
in the business managed by the agent;
7. To loan or borrow money, unless the
latter act be urgent and indispensable
for the preservation of the things which
are under administration;
8. To lease any real property to another
person for more than one year;
9. To bind the principal to render some
service without compensation;
10. To bind the principal in a contract of
partnership;
11. To obligate the principal as a
guarantor or surety;
12. To create or convey real rights over
immovable property;
13. To accept or repudiate an inheritance;
14. To ratify or recognize obligations
contracted before the agency;
15. Any other act of strict dominion.
Special Power of Attorney: Authority
granted by the principal to the agent where
the act for which it is drawn is expressly
mentioned.
General Power of Attorney: Authority
granted to the agent to do all acts of a
particular character.
 Special p0wer can be included in a
general power by:
o Giving authority for all acts of
a particular character
o Specifying therein the act or
transaction for which a special
power is needed.
 Children cannot execute a SPA while
their father is alive.
Fifteen Acts:
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1. To make such payments as are not
usually considered as acts of
administration;
> The transmission of ownership by
payment is an act of ownership, NOT
administration.
> Payments made in the ordinary
course of management are merely acts of
administration.
2. To effect novations which put an
end to obligations already in existence at
the time the agency was constituted;
> Subsisting obligations of a principal
arising from agency cannot be modified
without a SPA executed by him in favor of
the agent.
3. To compromise, to submit
questions to arbitration, to renounce the
right to appeal from a judgment, to waive
objections to the venue of an action or to
abandon a prescription already acquired;
> Art. 2028: A compromise is a
contract whereby the parties, to avoid
litigation, or terminate a pending one, make
reciprocal concessions.
> Art. 2042: Arbitration is where the
parties submit their controversies to one or
more arbitrators for decision.
> These 2 acts are, in effect, acts of
alienation, which are acts of ownership.
> A special power to compromise
does not authorize submission of arbitration.
> An agent cannot waive:
1.) The right to appeal from a
judgement.
2.) Objections to the venue of
an action.
3.) Prescription already
acquired by the principal.
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 > A lease for more than 1 year creates
4. To waive any obligation a real right. To bind the principal, the agent
gratuitously; must be possessed of a special power.
> Not more than 1 year, acts of
> Act of ownership (waiver is in administration.
effect a remission or condonation of the debt) > Principal = Lessor

5. To enter into any contract by which 9. To bind the principal to render

the ownership of an immovable is some service without compensation;
transmitted or acquired either
gratuitously or for a valuable > Involuntary servitude. (Binding the
consideration; principal without authority)

> Conveyance of immovable, where 10. To bind the principal in a contract

gratuitously or onerously, is an act of
ownership.
6. To make gifts, except customary
ones for charity or those made to
employees in the business managed by the
agent;
> A donation is a gratuitous
conveyance of property. It is an act of
ownership.
> Exception: Gifts which are
customary for charity / Christmas gifts.
7. To loan or borrow money, unless
the latter act be urgent and indispensable
for the preservation of the things which
are under administration;
of partnership;
> SPA is needed otherwise, that will
mean binding his principal to contribute
money, property, or industry and these are
acts of ownership.
> The principal may not have trust
and confidence with the partners of the firm.
11. To obligate the principal as a
guarantor or surety;
> An act of ownership because to
fulfill the obligation of a guarantor/surety,
there may be a need to pay in cash or
property. Also, in a surety, the creditor may
make him primarily liable and that involves
an act of strict ownership.

> This may be subject to abuse by the 12. To create or convey real rights over
agent hence the necessity of SPA. immovable property;
> A loan made by the agent without
authority does not bind the principal. > Act of strict ownership.
> A special power to mortgage real
estate does not include the power to contract 13. To accept or repudiate an
loan for the principal. inheritance;

8. To lease any real property to > Refers to an hereditary heir, which

another person for more than one year; means he can accept or repudiate inheritance
and this is an act of strict ownership.

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14. To ratify or recognize obligations
contracted before the agency;

> This cannot be done by the agent

because he was not yet the representative of
the principal when the obligations arose.
> Act of ownership.

15. Any other act of strict dominion.

> Mere acts of administration are not

included in these 15 acts.

ART. 1879

A special power to sell excludes the power

to mortgage; and a special power to
mortgage does not include the power to
sell.

 Power to sell is more onerous then the

power to mortgage. In any case, they
are exclusive powers from each other.
 The agent becomes personally liable
for either acts without binding the
principal.

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Luzuriaga, Ivan Chris 2018