PHILIPPINE AGENCY LAW AND

JURISPRUDENCE
DEFINITION, OBJECTIVE AND NATURE OF
AGENCY
I will be discussing Art. 1870 which provides
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. Art. 1870 is actually a reiteration of
Art. 1869 which emphasized the consensual nature of
the contract of agency. I will, if I may, complement
the report of my group mates and/or cite some
pertinent decisions in which the articles are involved
in our report.

And lastly, 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).
All these decisions reiterated the purpose of
agency which is basically to extend the personality of
the principal.
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To reiterate, 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.
As earlier mentioned, the purpose of objective
of agency is to extend the personality of the principal.
This was adopted by the High Court in numerous
cases:
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.
An earlier case, 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.
Also, in 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.
In 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.

From these therefore, came the doctrine of

representation in the contract of agency. What are
then the legal consequences that flow from this
doctrine?
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).
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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
Lets then go back to the 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
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FORM REQUIRED
AGENCY

FOR

CONTRACT

OF

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.
From these provisions therefore, the Court
held in Equitable PCI-Bank v. Ku, 355 SCRA 309
(2001)
That 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.
Moreover in Lim v. Court of Appeals, 254
SCRA 170 (1996)
The Court stated that 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.
Although Art. 1869 and 1870 states that a
contract of agency may be constituted impliedly, it is
however, should not be presumed to exist which the
Court stated in an old case (Lopez v. Tan Tioco, 8 Phil.
693,1907).
Similarly, 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).
Because of this, the Court added a cautious
remark and said that 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).
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.