AGENCY REVIEWER
SANCHEZ
THE LAW ON AGENCY
I. INTRODUCTION
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
representation or on behalf of another, with the consent or
authority of the latter. (1709a)
The denition, which is very broad enough to
include all situations in which one person is
employed to render service for another,
excludes, however, from its concept the
relationship of employer and employee (Art.*
1700.), of master and servant (Art. 1680.), and
of employer and independent contractor. (Art.
1713.)
Agency is a duciary relationship which
implies a power in an agent to contract with a
third person on behalf of a principal.
PURPOSE: extension of the principals
personality
Its both a contract and a relationship
CHARACTERISTICS
Its consensual, for it is perfected by
mere consent;
Its principal, for it can stand by itself;
Its nominate;
It can either be unilateral (if its
gratuitous) or bilateral (if its for
compensation); and
Its preparatory because it is entered
into as a means to an end
ELEMENTS
CONSENT (express/implied)
Manifestation of Consent:
The principal must intend
that the agent shall act for
him, the agent must intend
to accept the authority and
act on it, and such intention
of the parties must nd
expression either in words
or conduct between them.
ART. 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 specic form. (1710a)
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PROF.
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. (n)
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. (n)
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. (n)
ART. 1901. A third person cannot set up the fact that the
agent has exceeded his powers, if the principal has ratied,
or has signied his willingness to ratify the agents acts. (n)
ART. 1910. The principal must comply with all the
obligations which the agent may have contracted within the
scope of his authority. As for any obligation wherein the
agent has exceeded his power, the principal is not bound
except when he raties it expressly or tacitly. (1727)
ART. 1898. If the agent contracts in the name of the
principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the
party with whom the agent contracted is aware of the limits
of the powers granted by the principal. In this case
however, the agent is liable if he undertook to secure the
principals ratification.
ART. 1317. No one may contract in the name of another
without being authorized by the latter, or unless he has by
law a right to represent him.
A contract entered into the name of another by one who
has no authority or legal representation, or who has acted
beyond powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has
been executed before it is revoked by the other contracting
party. (1259a)
ART. 1403. The following contracts are unenforceable,
unless they are ratified:
(1) Those entered into in the name of another
person by one who has been given no authority
or legal representation, or who has acted beyond
his powers;
AGENCY REVIEWER
GENERAL RULE: AS STATED BY ART. 1317, no one may
contract in the name of another without being authorized
by the latter, or unless, he has by law a right to represent
him or else, such contract entered into shall be
unenforceable (NCC 1317, 1403 (1)).
THIS RULE APPLIES TO AGENCY (See NCC 1868;
emphasis should be placed on the phrase, with
the consent or authority of the latter)
CONSENT, HOWEVER, MAYBE EXPRESS or
IMPLIED
EXPRESS CONSENT: may be made orally or in
writing (principal verbally confers or expressly
stipulates in writing authorization upon another
who accepts it, by stating his or her conformity,
verbally, or in writing)
IMPLIED CONSENT
one which is 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 (1869); OR
from the acts of the agent which
carry out the agency, or from his
silence or inaction according to the
circumstances. (Art. 1870.)
o As regards implied
acceptance by the agent,
the law distinguishes
between cases (1) where
persons are present (Art.
1871.) and (2) where
persons are absent. (Art.
1872.)
o The agency is impliedly
accepted if the agent
receives a power of
attorney from the principal
himself personally without
any objection, both being
present. The presumption
of acceptance may be
rebutted by contrary proof.
An implied agency is an actual agency
as much as an express agency
Ratication may produce the effect of an express
or implied agency. It results in agency by
ratication. (see Arts. 1901, 1910, par. 2.)
For ratification to be valid, the
following requisites must concur:
o The act performed by the
agent must be legal
o The principal must ratify
such act voluntarily
o And the ratification cannot
be divisible
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PROF. SANCHEZ
POWER OF ATTORNEY: is an instrument in writing by which
one person, as principal, appoints another as his agent and
confers upon him the authority to perform certain
specied acts or kinds of acts on behalf of the principal.
The written authorization itself is the power of attorney,
and this is clearly indicated by the fact that it has also been
called a letter of attorney.
PURPOSE: to evidence the authority of the agent
to third parties within whom the agent deals
OBJECT: execution of the juridical act
CONSIDERATION
ART. 1875. Agency is presumed to be for a compensation,
unless there is proof to the contrary. (n)
The agent does not have to prove that the
agency is for compensation.
The prima facie presumption that the agency is
for a compensation may be contradicted by
contrary evidence.
B. WHO ARE THE PARTIES TO THE CONTRACT OF AGENCY
PRINCIPAL: one whom the agent represents and
from whom he derives his authority (2 C.J.S.
1024.); he is the person represented. Agency
imports the contemporaneous existence of a
principal, and there is no agency unless one is
acting for and in behalf of another (2-A Words
and Phrases 436.)
AGENT: one who acts for and represents another;
he is the person acting in a representative
capacity. The agent has derivative authority in
carrying out the principals business. He may
employ his own agent in which case he becomes a
principal with respect to the latter. (see Art.
1892.) If an act done by one person in behalf of
another is, in its essential nature, one of
agency, the former is agent of the latter
notwithstanding that he is not so called. (2-A
Words and Phrases 436.)
C. MUST THE PARTIES BE CAPACITATED
DE LEONS VIEW: It is only the principal who
needs to be capacitated
A principal must be capacitated (see Arts.
1327, 1329.4) or have the legal capacity to
enter into contract in his own right. The logic
is simple. A person who cannot legally enter
into contracts directly should not be
permitted to do it indirectly through another
Generally, anyone can be an agent. His
capacity is usually immaterial. In the case of
AGENCY REVIEWER
the agent, since he assumes no personal
liability, he does not have to possess full
capacity to act for himself insofar as third
persons are concerned. An agent derives his
authority from the principal, and a contract
made by the agent is legally viewed as a
contract of the principal.
VILLANUEVAS VIEW (the one who recited in class,
espoused this view)
Both the principal and the agent should be
capacitated because an agency is a contract.
CASE DOCTRINES
RALLOS V. FELIX GO CHAN
ELEMENTS OF AN AGENCY:
There is consent, express or implied, of the
parties to establish the relationship;
The object is the execution of a juridical act
in relation to third persons;
The agent acts as a representative and not
for himself; and
The agent acts within the scope of his
authority
ORIENT AIR SERVICES V. CA
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.
LITONJUA, JR. V. ETERNIT CORP.
The property of a corporation, however, is not
the property of the stockholders or members, and
as such, may not be sold without express authority
from the board of directors. Physical acts, like the
offering of the properties of the corporation for
sale, or the acceptance of a counter-offer of
prospective buyers of such properties and the
execution of the deed of sale covering such
property, can be performed by the corporation
only by officers or agents duly authorized for the
purpose by corporate by-laws or by specific acts of
the board of directors. Absent such valid
delegation/authorization, the rule is that the
declarations of an individual director relating to
the affairs of the corporation, but not in the course
of, or connected with, the performance of
authorized duties of such director, are not binding
on the corporation.
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PROF. SANCHEZ
II. WHAT IS THE FORM OF THE CONTRACT OF AGENCY
The usual method an agency is created is by
contract which may be oral, written, or implied.
There are some provisions of law which require
certain formalities for particular contracts. The
rst is when the form is required for the validity
of the contract; the second, when it is required to
make the contract effective against third persons
such as those mentioned in Articles 1357 and
1358 of the Civil Code; and the third, when it is
required for the purpose of proving the existence
of a contract such as those provided in the
Statute of Frauds in Article 1403
In general, there are no formal requirements
governing the appointment of an agent. The
agents authority may be oral or written. It may
be in public or private writing. An instance when
the law requires a specic form for the agency is
Article 1874.
ART. 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)
Agency may even be implied from words and
conduct of the parties and the circumstances of
the particular case. (Arts. 1869-1872.)
CASE DOCTRINES
ANGELES V. PNR
Where agency exists, the third party's (in this
case, PNR's) liability on a contract is to the
principal and not to the agent and the relationship
of the third party to the principal is the same as
that in a contract in which there is no agent.
Normally, the agent has neither rights nor liabilities
as against the third party. He cannot thus sue or be
sued on the contract. Since a contract may be
violated only by the parties thereto as against each
other, the real party-in-interest, either as plaintiff
or defendant in an action upon that contract must,
generally, be a contracting party.
Article 1374 of the Civil Code provides that
the various stipulations of a contract shall be read
and interpreted together, attributing to the
doubtful ones that sense which may result from all
of them taken jointly. In fine, the real intention of
the parties is primarily to be determined from the
language used and gathered from the whole
instrument.
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
Procedure say that the authority of the agent must
be in writing and subscribed by the party to be
charged.
AF REALTY V. DISELMAN FREIGHT
Since a corporation, such as the private
respondent, can act only through its officers and
agents, all acts within the powers of said
corporation may be performed by agents of its
selection; and, except so far as limitations or
restrictions may be imposed by special charter, by-
law, or statutory provisions, the same general
principles of law which govern the relation of agency
for a natural person govern the officer or agent of a
corporation, of whatever status or rank, in respect to
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
incapacities as are agents of individuals and private
persons.
AS A RULE, a third person deals with an agent at his peril.
Hence, he is bound to inquire as to the extent of the
agents authority, and this is especially true where the act
of the agent is of an unusual nature. Ignorance of the
agents authority is no excuse. So, it is his duty to require
the agent to produce his power of attorney to ascertain
the scope of his authority. He may also ask for the
instructions of the principal. (Art. 1887.)
While the third person is chargeable with knowledge of
the terms of the power of attorney as written and the
instructions disclosed to him, he is not bound and cannot
be affected by the private or secret orders and
instructions of the principal in the same way that he
cannot be prejudiced by any understanding between the
principal and the agent (Art. 1900). Such secret orders or
instructions cannot be invoked as against third parties if
the agent has apparent authority.
CASE DOCTRINES
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.

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AGENCY REVIEWER
IV. HOW IS AGENCY DISTINGUISHED FROM OTHER
CONTRACTS/RELATIONSHIPS
AGENCY
ARTICLE 1868. 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)
MASTER-SERVANT
Article 1689. Household service shall always be reasonably
compensated. Any stipulation that household service is
without compensation shall be void. Such compensation
shall be in addition to the house helper's lodging, food, and
medical attendance.
Article 1690. The head of the family shall furnish, free of
charge, to the house helper, suitable and sanitary quarters
as well as adequate food and medical attendance.
Article 1691. If the house helper is under the age of
eighteen years, the head of the family shall give an
opportunity to the house helper for at least elementary
education. The cost of such education shall be a part of the
house helper's compensation, unless there is a stipulation
to the contrary.
Article 1692. No contract for household service shall last for
more than two years. However, such contract may be
renewed from year to year.
Article 1693. The house helper's clothes shall be subject to
stipulation. However, any contract for household service
shall be void if thereby the house helper cannot afford to
acquire suitable clothing.
Article 1694. The head of the family shall treat the house
helper in a just and humane manner. In no case shall
physical violence be used upon the house helper.
Article 1695. House helpers shall not be required to work
more than ten hours a day. Every house helper shall be
allowed four days' vacation each month, with pay.
Article 1696. In case of death of the house helper, the head
of the family shall bear the funeral expenses if the house
helper has no relatives in the place where the head of the
family lives, with sufficient means therefor.
Article 1697. If the period for household service is fixed
neither the head of the family nor the house helper may
terminate the contract before the expiration of the term,
except for a just cause. If the house helper is unjustly
dismissed, he shall be paid the compensation already
earned plus that for fifteen days by way of indemnity. If the
house helper leaves without justifiable reason, he shall
forfeit any salary due him and unpaid, for not exceeding
fifteen days.
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PROF. SANCHEZ
Article 1698. If the duration of the household service is not
determined either by stipulation or by the nature of the
service, the head of the family or the house helper may give
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
given on any day that the service shall end at the close of
the following day;
(2) If the compensation is paid by the week, notice may be
given, at the latest on the first business day of the week,
that the service shall be terminated at the end of the
seventh day from the beginning of the week;
(3) If the compensation is paid by the month, notice may be
given, at the latest, on the fifth day of the month that the
service shall cease at the end of the month.
Article 1699. Upon the extinguishment of the service
relation, the house helper may demand from the head of
the family a written statement on the nature and duration
of the service and the efficiency and conduct of the house
helper.
EMPLOYER-EMPLOYEE
Article 1700. The relations between capital and labor are
not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the special
laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of
labor and similar subjects.
LEASE OF SERVICE
ARTICLE 1644. In the lease of work or service, one of
the parties binds himself to execute a piece of work
or to render to the other some service for a price
certain, but the relation of principal and agent does
not exist between them. (1544a)
AGENCY LEASE OF SERVICE
Based on representation Based on employment
Agent exercises discretion Lessor exercises purely
ministerial functions
Involves three individuals: Only two persons are
PRINCIPAL, AGENT, and a involved: LESSOR and
THIRD PERSON LESSEE
Concerns commercial or Matters of mere manual or
business transactions mechanical execution
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

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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

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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

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AGENCY REVIEWER
DELA CRUZ V. NORTHERN THEATRICAL ENTERPRISES
The relationship between the movie corporation
and the plaintiff was not that of principal and agent
because the principle of representation was in no way
involved. Plaintiff was not employed to represent the
defendant corporation in its dealings with third parties.
He was a mere employee hired to perform a certain
specific duty or task, that of acting as special guard and
staying at the main entrance of the movie house to stop
gate crashers and to maintain peace and order within
the premises. The question posed by this appeal is
whether an employee or servant who in line of duty and
while in the performance of the task assigned to him,
performs an act which eventually results in his incurring
in expenses, caused not directly by his master or
employer or his fellow servants or by reason of his
performance of his duty, but rather by a third party or
stranger not in the employ of his employer, may recover
said damages against his employer.
NIELSON & CO. V. LEPANTO CONSOLIDATED
In both agency and lease of services one of the
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
representation, while in the lease of work or services the
basis is employment. The lessor of services does not
represent his employer, while the agent represents his
principal.
QUIROGA V. PARSONS HARDWARE
In order to classify a contract, due regard must be
given to its essential clauses. In the contract in question,
what was essential, as constituting its cause and
subject matter, is that the plaintiff was to furnish the
defendant with the beds which the latter might order,
at the price stipulated, and that the defendant was to
pay the price in the manner stipulated. The price agreed
upon was the one determined by the plaintiff for the
sale of these beds in Manila, with a discount of from 20
to 25 per cent, according to their class. Payment was to
be made at the end of sixty days, or before, at the
plaintiff's request, or in cash, if the defendant so
preferred, and in these last two cases an additional
discount was to be allowed for prompt payment. These
are precisely the essential features of a contract of
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
PROF. SANCHEZ
it, he returns it. By virtue of the contract between the
plaintiff and the defendant, the latter, on receiving the
beds, was necessarily obliged to pay their price within
the term fixed, without any other consideration and
regardless as to whether he had or had not sold the
beds.
It would be enough to hold, as we do, that the
contract by and between the defendant and the
plaintiff is one of purchase and sale, in order to show
that it was not one made on the basis of a commission
on sales, as the plaintiff claims it was, for these
contracts are incompatible with each other. But,
besides, examining the clauses of this contract, none
of them is found that substantially supports the
plaintiff's contention. Not a single one of these clauses
necessarily conveys the idea of an agency. The
words commission on sales used in clause (A) of article
1 mean nothing else, as stated in the contract itself,
than a mere discount on the invoice price. The
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.
With regard to the remaining clauses, the least that
can be said is that they are not incompatible with the
contract of purchase and sale.
HAHN V. CA
An agent receives a commission upon the
successful conclusion of a sale. On the other hand, a
broker earns his pay merely by bringing the buyer and
the seller together, even if no sale is eventually made.
As to the service centers and showrooms which he
said he had put up at his own expense, Hahn said that
he had to follow BMW specifications as exclusive dealer
of BMW in the Philippines. According to Hahn, BMW
periodically inspected the service centers to see to it
that BMW standards were maintained. Indeed, it would
seem from BMW's letter to Hahn that it was for Hahn's
alleged failure to maintain BMW standards that BMW
was terminating Hahn's dealership.
The fact that Hahn invested his own money to put
up these service centers and showrooms does not
necessarily prove that he is not an agent of BMW. For
as already noted, there are facts in the record which
suggest that BMW exercised control over Hahn's
activities as a dealer and made regular inspections of
Hahn's premises to enforce compliance with BMW
standards and specifications.
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

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

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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

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AGENCY REVIEWER
Article 1884. The agent is bound by his acceptance to carry
out the agency, and is liable for the damages which,
through his nonperformance, the principal may suffer.
He must also finish the business already begun on the
death of the principal, should delay entail any danger.
Article 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has been
constituted in the common interest of the latter and of the
agent, or in the interest of a third person who has
accepted the stipulation in his favor.
Article 1931. Anything done by the agent, without
knowledge of the death of the principal or of any other
cause which extinguishes the agency, is valid and shall be
fully effective with respect to third persons who may have
contracted with him in good faith.
D. UNIVERSAL, GENERAL, AND SPECIAL
Article 1876. An agency is either general or special.
The former comprises all the business of the principal.
The latter, one or more specific transactions.
Distinction based on the scope or
extent of the business covered
UNIVERSAL AGENT: one
employed to do all acts that the
principal may personally do, and
which he can lawfully delegate to
another the power of doing.
A contract creating a universal agency
normally includes the following
delegation: full power and authority
to do and perform any and every act
that I may legally do and every power
necessary to carry out the purposes
for which it is granted.
May be viewed as an unlimited
general agent; cases of such are rare
since they can be created only by
clear and unequivocal language
GENERAL AGENT: one employed
to transact all the busi- ness of
his principal, or all business of a
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
PROF. SANCHEZ
SPECIAL AGENT: one authorized
to act in one or more specific
transactions, or to do one or
more specific acts, or to act upon
a particular occasion.
Has no authority to act in matters
other than that for which he has been
employed. His authority is to do only
a particular act or a series of acts of
very limited scope. He has less power
than a general agent.
Example: agent with authority to sell
a house, attorney at law, broker,
auctioneer, factor, etc.
Note: While a principal may have
as many special agents as
occasions may require and may
have a general agent in each line
of his business and each of
several places, he can only have
one universal agent.
E. DURABLE AGENCY
Article 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has
been constituted in the common interest of the latter
and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor.
GENERAL RULE: Agency is terminated
instantly by the death of the principal.
Reason: In agency, being based on
representation, there is no one to be
represented where the principal is
already dead.
EXCEPTIONS: the agency remains in full
force and effect even after the death of the
principal if:
(1) if the agency has been constituted in the
common interest of the principal and the
agent (Art. 1927.); and
(2) if it has been constituted in the interest of
a third person who has accepted the
stipulation in his favor.
AGENCY REVIEWER
Siasat vs IAC
Provided for the definitions of the three kinds of
agents
Respondent was declared petitioners agent. It was
easily seen by the way general words were employed
in the agreement that no restrictions were intended as
to the manner the agency was to be carried out or in
the place where it was to be executed. The power
granted to the respondent was so broad that it
practically covers the negotiations leading to, and the
execution of, a contract of sale of petitioners'
merchandise with any entity or organization.
Dominion Insurance vs CA
Guevarra, having advanced sums to satisfy insurance
claims of his principal, is not entitled to payment under
the law on agency, but under the law on obligations and
contracts. Guevara exceeded his authority when he paid
from his personal funds and not the revolving fund as per
the principals instructions. When a special power of
attorney is required for the agent to do a certain act, the
agent, in the performance of such act, must comply with
the specifications embodied in the special power of
attorney giving him authority to do such.
F. Couched in general terms; couched in
specific terms
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)
Article 1878. Special powers of attorney are necessary
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;
(6) To make gifts, except customary ones for charity or
those made to employees in the business managed by
the agent;
D2019 | PAGE 13
PROF. SANCHEZ
(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. (n)
Article 1879. A special power to sell excludes the
power to mortgage; and a special power to mortgage
does not include the power to sell. (n)
1. Mortgage - 1878(12)
PNB vs Sta Maria
A special power of attorney to mortgage real estate is
limited to such authority to mortgage and does not bind
the grantor personally to other obligations contracted by
the grantee, in the absence of any ratification or other
similar act that would estop the grantor from questioning
or disowning such other obligations contracted by the
grantee. The authority granted by 6 siblings (except
Valeriana) unto their brother, Maximo, was merely to
mortgage the property jointly owned by them. They did
not grant Maximo any authority to contract for any loans
in their names and behalf. Maximo alone, with Valeriana
who authorized him to borrow money, must answer for
said loans and the other siblings only liability is that the
real estate authorized by them to be mortgaged would be
subject to foreclosure and sale to respond for the
obligations contracted by Maximo. They cannot be held
personally liable for the payment of such obligations, as
erroneously held by the trial court.
Bank of PI vs De Coster
It is fundamental rule of construction that where in an
instrument powers and duties are specified and defined,
that all of such powers and duties are limited and
confined to those which are specified and defined, and
that all other powers and duties are excluded
AGENCY REVIEWER
2. Loan/borrow - 1878(7)
Hodges vs Salas
If the terms of the power of attorney to obtain a loan are
limited and the agent is authorized only to borrow any
amount of money which he deemed necessary, the
principals can only be held liable for the amount they
actually received from their agent.
With respect to a power of attorney of special character,
it cannot be interpreted as authorizing the agent to
dispose of the money as he pleased, particularly when it
does not appear that such was the intention of the
principals. The agent is obliged to turn over the money to
the principals, or at least, place it at their disposal. If the
agent applied part of the funds to pay his personal
obligations, he exceeds his authority.
3. Sell - 1878(5)
Strong vs Guiterrez Rupide
An agency stated in general terms only includes acts of
administration. In order to compromise, alienate, mortgage, or
to execute any other act of strict ownership an express mandate
is required.
Such a mandate may be either oral or written, may stand by itself
or may be included in the general power, the one vital thing being
that the right to sell shall be express or shall be a necessary
ingredient of the power that is expressed.
3 qualifications whereby the principal is held bound even though
the agent acted beyond his powers:
1) Where his acts have contributed to deceive a third
person in good faith;
2) Where the limitations upon the power created by him
could not have been known by a third person; and
3) Where he has placed in the hands of the agent
instruments signed by him in blank.
Katigbak vs Tai Hung Co
A special power of attorney is necessary in order to enter
into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously
or for a valuable consideration.
A power of attorney not recorded in the registry of deeds
is ineffective in order that an agent or attorney-in-fact
may validly perform acts in the name of his principal, and
that any act performed by the agent by virtue of said with
respect to the land is ineffective against a third person
who, in good faith, may have acquired a right thereto, it
does, however, bind the principal to acknowledge the acts
performed by his attorney-in-fact regarding said
property.
4. Lease - 1878(8)
Chua vs IAC
The lease contract, the linchpin of petitioners' cause of
action, involves the lease of real property for a period of
more than one year. The contract was entered into by the
agent of the lessor and not the lessor herself. In such a
D2019 | PAGE 14
PROF. SANCHEZ
case, the law requires that the agent be armed with a
special power of attorney to lease the premises. This is
apparent in Article 1878 of the Civil Code.
Since Herrera allowed the petitioners to occupy the leased
premises after the expiration of the lease contract and
under Article 1670 of the Civil Code, a tacit renewal of the
lease is deemed to have taken place. However, as held in
Dizon vs. Magsaysay, a tacit renewal is limited only to the
terms of the contract which are germane to the lessee's
right of continued enjoyment of the property and does not
extend to alien matters, like the option to buy the leased
premises.
5. Compromise - 1878(3)
Dungo vs Lopena
While a special power of attorney is required to
compromise an interest of another [Article 1878(3)],
compromise agreement is a contract. As such, it is
governed by the rules on contract. Under Article 1403(1),
a contract "entered into in the name of another person by
one who has been given no authority or legal
representation, or who has acted beyond his powers" is
unenforceable, but it susceptible to ratification.
Vicente vs Geraldez
Special powers of attorney are necessary, among other
cases, in the following: to compromise and to renounce
the right to appeal from a judgment. Attorneys have
authority to bind their clients in any case by any
agreement in relation thereto made in writing, and in
taking appeals, and in all matters of ordinary judicial
procedure, but they cannot, without special authority,
compromise their clients' litigation, or receive anything in
discharge of their clients' claims but the full amount in
cash.
The law specifically requires that "juridical persons may
compromise only in the form and with the requisites
which may be necessary to alienate their property.
Under the corporation law, such power is lodged with the
Board of Directors. Although it MAY BE DELEGATED, the
general rule is that an officer or agent of the corporation
has no power to compromise or settle a claim by or
against the corporation, except to the extent that such
power is given to him either expressly or by reasonable
implication from the circumstances. The facts must
sufficiently show such compromise was within the bounds
of his authority.
6. Other acts of strict dominion - 1878(12)
Generally, a sale or purchase of
personal property is an act of
strict dominion. Hence, a special
power is necessary in order that
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
instructions of the principal. The
principal will, nevertheless, be
liable unless the third person
with whom the agent dealt knew
that he was exceeding his
authority or violating his
instructions.
Third persons dealing with an
agent do so at their peril and are
bound to inquire as to the extent
of his authority but they are not
required to investigate the
instructions of the principal. In
other words, the principal after
clothing an agent with apparent
powers, cannot, by means of
private communications with the
agent, limit the authority which
he allows the agent to assume.
The principal will be liable to
third persons, under the doctrine
of estoppel (see Art. 1911.), for
any unauthorized acts of the
agent who exceeds the
instructions given to him.
GENERAL RULE: It is the fundamental duty of
the agent of obey all the reasonable and
lawful instructions given to him by his
principal.
NEED NOT OBEY WHEN:
Instructions are outside the
scope of the agency relationship
agreed upon or that may subject
him to unreasonable risk of
injury to himself
Where it calls for the
performance of illegal acts, or
where he is privileged to do so to
protect his security interest in
the subject matter of the agency.
DEPARTURE MAY BE JUSTIFIED WHEN:
Sudden emergency: Where some
unexpected emergency or
unforeseen event occurs which
will admit no delay for
communication with the
principal, the agent is justified in
adopting the course which
seems best to him under the
circumstances.
D2019 | PAGE 16
PROF. SANCHEZ
Ambiguous instructions: The
agent will not be liable if he
chooses reasonably one of two
possible interpretations. Where
instructions are ambiguous, the
agent is not chargeable with
disobedience or its
consequences in case he makes
an honest mistake and adopts a
construction different from that
intended by the principal.
Important: GOOD FAITH
LIABILITY FOR LOSS/DAMAGE: If the agent
exceeds, violates, or fails to act upon such
instructions, he will be liable to the principal
for any loss or damage resulting therefrom.
In the absence of specific
instructions of the principal, the
agent shall do all that a good
father of a family taking care of
the business as if it were his own
would do as required by the
nature of the business. (Art.
1887, par. 2.) If he acts in good
faith and with due care, the
agent is not liable for losses due
to errors or mistakes of
judgment as regards to matters
with which he is vested with
discretionary powers. It will be
presumed that the agent acted
in good faith and in accordance
with his power as he understood
it.
B. Carry out the agency - 1884, 1928, 1929
ART. 1884. The agent is bound by his acceptance to
carry out the agency and is liable for the damages
which, through his non-performance, the principal
may suffer.
He must also finish the business already begun on the
death of the principal, should delay entail any danger.
Article 1928. The agent may withdraw from the
agency by giving due notice to the principal. If the
latter should suffer any damage by reason of the
withdrawal, the agent must indemnify him therefor,
unless the agent should base his withdrawal upon the
impossibility of continuing the performance of the
agency without grave detriment to himself.
AGENCY REVIEWER
Article 1929. The agent, even if he should withdraw
from the agency for a valid reason, must continue to
act until the principal has had reasonable opportunity
to take the necessary steps to meet the situation.
GENERAL RULE: it is the duty of the agent to
act with the utmost good faith and loyalty for
the furtherance and advancement of the
interests of the principal.
A person is free to refuse to be
an agent (Art. 1885.) but once he
accepts the agency, he is bound
to carry it out in accordance with
its terms in good faith (Art.
1159.) and following the
instructions, if any, of the
principal.
OBLIGATION TO ANWER FOR DAMAGES: upon
his failure to do so, he is liable for the damage
which the principal may suffer.
The damages to which the
principal is entitled are those
which result from the agents
non-performance. As there can
be no indemnity when there has
been no damage, the principal
must prove his damages and the
amount thereof.
C. Not to carry out the agency - 1888
ART. 1888. An agent shall not carry out an agency if
its execution would manifestly result in loss or
damage to the principal.
GENERAL RULE: The agent must not carry out
the agency if its execution would manifestly
result in loss or damage to the principal.
Reason: The duty of the agent who is merely
an extension of the personality of the principal
is to render service for the benefit of the
principal and not to act to his detriment.
Furthermore, an agent must exercise due
diligence in carrying out the agency.
D. Loyalty - 1889, 1890, 1491
ART. 1889. The agent shall be liable for damages if,
there being a conflict between his interests and those
of the principal, he should prefer his own.
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PROF. SANCHEZ
GENERAL RULE: Agent is liable for damages if
he prefers his own interests over the
principals
Reason: Agency being a fiduciary relation,
the agent is required to observe utmost
good faith and loyalty towards his
principal. He must look after the
principals interests as if they were his
own
Basis of the rule: The underlying basis of
the rule precluding an agent from
engaging in self-dealing is to shut the
door against temptation and keep the
agents eye single to the rights and
welfare of his principal.
Principal may waive: The principal,
however, may waive the benefit of the
rule so far as he is concerned, if he does
so with full knowledge of the facts; but in
the absence of such waiver, the rule is
absolute.
EXCEPTION: where the agents interests are
superior, such as where he has a security
interest in goods of the principal in his
possession, he may protect this interest even
if in so doing he disobeys the principals orders
or injures his interest.
An agent, to be sure, is not required
to expose himself to great physical
risks not within the contemplation of
the parties, or to perform services
when he is ill.
ART. 1890. If the agent has been empowered to
borrow money, he may himself be the lender at the
current rate of interest. If he has been authorized to
lend money at interest, he cannot borrow it without
the consent of the principal.
OBLIGATION NOT TO LOAN TO HIMSELF
Reason: may lead to a possible conflict of
interest and prejudice to the principal.
The agent cannot, without a special power of
attorney, loan or borrow money.
(1) If he has been expressly empowered
to borrow money, he may himself be the
lender at the current rate of interest for
there is no danger of the principal
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.
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
the agency, and for the fault or negligence of his
fellow agents, except in the latter case when the
fellow agents acted beyond the scope of their
authority.
NATURE OF LIABILITY OF TWO OR MORE
AGENTS TO THEIR PRINCIPAL
In a joint obligation, each debtor
is liable only for a proportionate
part of the debt.
If it is solidary, each debtor is
liable for the entire obligation.
The presumption is that an
obligation is joint. (Arts. 1207,
1208.9) The rule in Article 1894
follows the general principle
respecting solidarity.
If solidarity has been agreed upon, each of the
agents becomes solidarily liable:
(a) for the non-fulfillment of the agency
even though in this case, the fellow
agents acted beyond the scope of their
authority; and
(b) for the fault or negligence of his fellow
agents provided the latter acted within
the scope of their authority. (Art. 1895.)
The innocent agent has a right later on to
recover from the guilty or negligent
agent. (Art. 1217, par. 2.)
An agent who exceeds his
powers does not act as such
agent, and, therefore, the
principal assumes no liability to
third persons. Since this is so,
solidary liability cannot be
demanded by the principal.
F. Pay interest - 1896
ART. 1896. The agent owes interest on the sums he
has applied to his own use from the day on which he
did so, and on those which he still owes after the
extinguishment of the agency.
Article 1896 contemplates two distinct cases.
The first refers to sums belonging to the
principal which the agent applied to his own
use and the second, to sums which the agent
still owes the principal after the expiration of
the agency.
(1) The agent who converted to his
personal use the funds of the principal is
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PROF. SANCHEZ
liable for interest by way of compensation
or indemnity (not to be confused with
interest for delay) which shall be
computed from the day on which he did
so. Of course, the agents liability is
without prejudice to a criminal action that
may be brought against him because of
the conversion.
(2) While there is no liability for interest
on sums which have not been converted
for the agents own use, the agent who is
found to owe the principal sums after the
extinguishment of the agency is liable for
interest from the date the agency is
extinguished.
Demand not necessary for delay
to exist; if by provision of law the
agent is bound to deliver to the
principal whatever he may have
received by virtue of the agency,
demand is no longer necessary.
G. Fraud; negligence - 1909
ART. 1909. The agent is responsible not only for
fraud, but also for negligence, which shall be judged
with more or less rigor by the courts, according to
whether the agency was or was not for a
compensation.
In the fulfillment of his obligation, the agent is
responsible to the principal not only for fraud
(Art. 1171.) committed by him but also for
negligence.
WHEN AGENT COMMITS TORT:
The agent, to be sure, is also liable for torts
committed willfully.
GENERAL RULE: the principal is not responsible
if the agents tort was intentional rather than
merely negligent. The reason is that an
intentional wrong committed by one
employed is more likely motivated by personal
reasons than by a desire to serve or benefit his
employer.
EXCEPTION: The principal is solidarily liable if
the tort was committed by the agent while
performing his duties in furtherance of the
principals business.
H. Specific obligations of commission agents -
1903 to 1908
AGENCY REVIEWER
Article 1903. The commission agent shall be
responsible for the goods received by him in the
terms and conditions and as described in the
consignment, unless upon receiving them he should
make a written statement of the damage and
deterioration suffered by the same.
Article 1904. The commission agent who handles
goods of the same kind and mark, which belong to
different owners, shall distinguish them by
countermarks, and designate the merchandise
respectively belonging to each principal.
Article 1905. The commission agent cannot, without
the express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand
from him payment in cash, but the commission agent
shall be entitled to any interest or benefit, which may
result from such sale.
Article 1906. Should the commission agent, with
authority of the principal, sell on credit, he shall so
inform the principal, with a statement of the names
of the buyers. Should he fail to do so, the sale shall be
deemed to have been made for cash insofar as the
principal is concerned.
Article 1907. Should the commission agent receive on
a sale, in addition to the ordinary commission,
another called a guarantee commission, he shall bear
the risk of collection and shall pay the principal the
proceeds of the sale on the same terms agreed upon
with the purchaser.
Article 1908. The commission agent who does not
collect the credits of his principal at the time when
they become due and demandable shall be liable for
damages, unless he proves that he exercised due
diligence for that purpose.
COMMISSION AGENT: one whose business is
to receive and sell goods for a commission
(also called factorage) and who is entrusted by
the principal with the possession of goods to
be sold, and usually selling in his own name.
He may act in his own name or in that of the
principal. (also called a factor agent)
GUARANTEE COMMISSION: one where, in
consideration of an increased commission, the
factor or commission agent guarantees to the
principal the payment of debts arising through
his agency.
Purpose: to compensate the agent for the
risks he will have to bear in the collection of
the credit due the principal.
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PROF. SANCHEZ
An agent who guarantees payment of the
customers account in consideration of the
higher commission is called a del credere
agent.
Art. 1907 applies to both cash and credit sales
because it makes no distinction.
Austria vs CA
The consignee is exempt from liability arising from the
loss of consigned goods if such loss was due to fortuitous
event.
PNB v Manila Surety
An agent is required to act with the care and diligence of
a good father of a family and becomes liable for the
damages, which the principal may suffer through its non-
performance. PNBs power to collect was expressly made
irrevocable so that BPW could very well refuse to make
payments to ATACO itself, and reject any demands by the
surety.
Domingo vs Domingo
Articles 1891 and 1909 demand the utmost good faith,
fidelity, honesty, candor, and fairness on the part of the
agent (real estate broker) to his principal, the vendor.
Hence, an agent who takes a secret profit in the nature of
a bonus, gratuity, or personal benefit from the vendee,
without revealing the same to the principal, is guilty of a
breach of his loyalty.
The agent thus forfeits his right to collect commission
from the principal, even if the principal does not suffer
any injury by reason of such breach of fidelity, or that he
obtained better results from it.
Severino v Severino The agent is not only estopped from
denying his principal's title to the property, but he is also
disabled from acquiring interests therein adverse to those
of his principal during the term of the agency
Green Valley Poultry v IAC
The commission agent cannot, without the express or
implied consent of the principal, sell on credit. Should he
do so, the principal may demand from him payment in
cash, but the commission agent shall be entitled to any
interest or benefit, which may result from such sale.
Municipality of Iloilo v. Evangelista An agent or attorney-
in-fact empowered to pay the debts of the principal, and
to employ lawyers to defend the latter's interests, is
impliedly empowered to pay the lawyer's fees for services
rendered in the interests of said principal, and may satisfy
them by an assignment of a judgment rendered in favor
of said principal;
When a person appoints two attorneys-in-fact
independently, the consent of the one will not be required
to validate the acts of the other unless that appears
positively to have been the principal's intention.
VII. Responsibility for acts of substitutes
AGENCY REVIEWER
Art. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he
shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without
designating the person, and the person appointed was
notoriously incompetent or insolvent.
All acts of the substitute appointed against the
prohibition of the principal shall be void. (1721)
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the
preceding article, the principal may furthermore bring
an action against the substitute with respect to the
obligations which the latter has contracted under the
substitution. (1722a)
A sub-agent is a person employed or
appointed by an agent as his agent, to
assist him in the performance of an act
for the principal which the agent has
been empowered to perform.
Unless prohibited by the principal,
the agent may appoint a sub-agent
or substitute. The agent in this
situation is a principal with respect
to the substitute. The law allows
such substitution for reasons of
convenience and practical utility.
An agent may not delegate to a
subagent where the work entrusted to
him by the principal to carry out requires
special knowledge, skill, or competence
unless he has been authorized to do so
by the principal
While ordinarily the selection of an
agent is determined largely by the trust
and condence that the principal has in
the agent, the principal need not fear
prejudice as he has a right of action not
only against the agent but also against
the substitute with respect to the
obligations which the latter has
contracted under the substitution. (Art.
1893.)
EFFECTS OF SUBSTITUTION
When the substitute is appointed by
the agent against the express
prohibition of the principal, the
agent exceeds the limits of his
authority. (Art. 1881.) The law says
that all acts of the substitute in such
a case shall be void. (Art. 1892, par.
2.)
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PROF. SANCHEZ
If in the contract of agency, the
agent is given the power to appoint
a substitute and the principal did not
designate any particular person to
be appointed, the substitution has
the effect of releasing the agent
from his responsibility unless the
person appointed is notoriously
incompetent or insolvent (Art.
1892[2].), because this would be an
abuse by the agent of the principals
condence. The principal may
proceed against both the agent and
the substitute for damages he may
have suffered. But if the substitute is
the person designated by the
principal, the consequence is the
absolute exemption of the agent.
If the agent appoints a substitute
when he was not given the power to
appoint one (Ibid., No. 1.), the law
recognizes the validity of the
substitution if the same is benecial
to the principal because the agency
has thus been executed in
fulllment of its object. (Maam
does not seem to espouse this
particular construction of the subject
provision)
Del Rosario v La Badenia An agent may lawfully appoint a
substitute if the principal has not prohibited him from
doing such. The principal shall be bound by the acts of the
sub-agent if it is shown that the agent who appointed
such subagent did not act in excess of his authority in
doing so
International Films v Lyric Films
A mere submandatory or sub-agent is not obliged to fulfil
more than the contents of the mandate, and is also NOT
required to answer for damages caused to the principal.
VIII. What are the liabilities of agents to third
parties?
A. Agent acting within scope of authority
Art. 1883. If an agent acts in his own name, the principal
has no right of action against the persons with whom the
agent has contracted; neither have such persons against
the principal.
In such case the agent is the one directly bound in favor
of the person with whom he has contracted, as if the
AGENCY REVIEWER
transaction were his own, except when the contract
involves things belonging to the principal.
The provisions of this article shall be understood to be
without prejudice to the actions between the principal
and agent. (1717)
Art. 1897. The agent who acts as such is not personally
liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his
authority without giving such party sufficient notice of
his powers. (1725)
Article 1899. If a duly authorized agent acts in
accordance with the orders of the principal, the latter
cannot set up the ignorance of the agent as to
circumstances whereof he himself was, or ought to have
been, aware. (n)
In general. The duties of an agent to
third persons and his corresponding
liabilities must be considered with
reference to the character of his act as to
whether it is authorized or unauthorized,
and also with reference to the nature of
liability which it sought to assert as being
in contract or in tort. The agent is liable to
third persons for his torts which result in
an injury to the third person.
Unauthorized assumption of agency.
One who unauthorizedly assumes to act
for another is guilty of a wrong, and is
liable for the damage to those dealing
with him in reliance on his assumed
authority in that they are deprived of the
benet of the responsibility of the
principal. Indeed, the assumed agent, by
his act, impliedly warrants or represents
that he has authority, thereby predicating
liability for the damage sustained. This
implied warranty and its accompanying
liability is not conned merely to the
making of contracts but extends to all
unauthorized acts perpetrated in his
assumed agency.
Nature of liability. A purported agent
will be held personally liable as principal
on a contract executed without authority
if the contract contains apt words to bind
him personally, or if such was the
intention of the parties. However, in the
absence of an apt expression or intention,
the nature of his liability is the subject of
some divergence in judicial opinion.
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PROF. SANCHEZ
When the agent expressly binds himself,
he thereby obligates himself personally
and by his own act. Thus, the agent may
be bound with the third person when the
latter, not having faith in the nancial
ability of the principal, enters into the
contract on condition that the agents
nancial ability is back of it. It has been
held that if the agent, aside from acting
on behalf of the principal, also bound
himself to pay the debt, this fact does not
relieve the principal for whose benet the
debt was incurred. The individual liability
of the agent (who mortgaged his
property) can be considered a further
security in favor of the creditor and does
not affect or preclude the liability of the
principal. Both are liable. (Tuazon vs.
Orosco, 5 Phil. 596 [1905].)
When the agent exceeds his authority, he
really acts without authority and,
therefore, the contract is unenforceable
against the principal unless the latter rati
es the act. (Art. 1910, par. 2.)
B. Agent acting outside of authority
Art. 1897. The agent who acts as such is not personally
liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his
authority without giving such party sufficient notice of
his powers. (1725)
Art. 1898. If the agent contracts in the name of the
principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if
the party with whom the agent contracted is aware of
the limits of the powers granted by the principal. In this
case, however, the agent is liable if he undertook to
secure the principal's ratification. (n)
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the agent
if the former allowed the latter to act as though he had
full powers. (n)
EFFECT WHERE THIRD PERSON IS AWARE OF
THE LIMITS OF AGENTS POWERS
If the agent acts in the name of the
principal (Art. 1883, par. 1.) and
within the scope of his authority (Art.
1881.), the agent assumes no liability.
The effect of the representation is to
AGENCY REVIEWER
bind the principal as though he
personally entered into the contract.
If the agent acts in excess of his authority,
even if he contracts in the name of the
principal, the agent is the one personally
liable unless there is subsequent
ratication by the principal. (Art. 1910,
par. 2.) The rule that a contract entered
into by one who has acted beyond his
powers shall be unenforceable (see Arts.
1317, par. 2; 1403[1].) refers to the
unenforceability of the contract against
the principal, and does not apply where
the action is against the agent himself for
contracting in excess of the limits of his
authority.
The liability of an agent who exceeds the
scope of his authority depends upon
whether the third person is aware of the
limits of the agents power. (Development
Bank of the Phils. vs. Court of Appeals,
231 SCRA 370 [1994].) The agent is not
bound nor liable for damages in case he
gave notice of his powers to the person
with whom he has contracted (Art. 1897.)
nor in case such person is aware of the
limits of the powers granted by the
principal. (Art. 1898.) The effect is to
make the contract, which is
unenforceable as against the principal,
void even as between the agent and the
third person, and consequently, not
legally binding as between them.
o However, if the agent promised or
undertook to secure the principals
ratication and failed, he is
personally liable. If the ratication is
obtained, then the principal
becomes liable. (Cervantes vs. Court
of Appeals, 304 SCRA 25 [1999]; Sa
c Alcan & Cie vs. Imperial Vegetable
Oil Co., Inc., 355 SCRA 559 [2001].)
1. With notice to third parties
Art. 1901. A third person cannot set up the fact that the
agent has exceeded his powers, if the principal has ratified,
or has signified his willingness to ratify the agent's acts. (n)
The principal is not bound by the
contract of his agent should the latter
exceed his power. The contract is
unenforceable but only as regards him.
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PROF. SANCHEZ
Hence, he may ratify the contract giving
it the same effect as if he had originally
authorized it. (see Art. 1910, par. 2.)
Under the above article, the third
person cannot set up the fact that the
agent exceeded his authority to
disafrm his contract not only after the
principal has ratied the agents acts
but even before such ratication where
he has signied his willingness to ratify.
In such a case, the third person can be
compelled to abide by his contract. The
ratication shall have retroactive effect.
It relates back to the time of the act or
contract ratied and is equivalent to
original authority. (see Board of
Liquidators vs. Kalaw, 20 SCRA 987
[1967].)
2. Without notice to third parties
PNB v Agudelo
When an agent negotiates a loan in his personal capacity
and executes a promissory note under his own signature,
without express authority from his principal, giving as
security therefore real estate belonging to the letter, also
in his own name and not in the name and representation
of the said principal, the obligation do constructed by him
is personal and does not bind his aforesaid principal.
Philippine Products v Primateria
Absent any proof that the agents exceeded the limits of
their authority, they cannot be held personally liable on
contracts with 3rd persons, made in the name of the
principal.
NPC v National Merchandising The rule is that "want of
authority of the person who executes an obligation as the
agent or representative of the principal will not, as a
general rule, affect the suretys liability thereon,
especially in the absence of fraud, even though the
obligation is not binding on the principal."
PNB v Welch, Fairchild
An agent cannot be permitted to intercept and
appropriate the thing which the principal is bound to
deliver, and thereby making performance by the principal
impossible. The agent must be precluded from doing any
positive act that could prevent performance on the part
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
his principal, an action cannot be maintained against the
agent.
Tuazon v Orosco
The fact that the agent has also bound himself to pay the
debt does not relieve from liability the principal for whose
benefit the debt was incurred. The individual liability of
the agent constitutes a further security in favor of the
AGENCY REVIEWER
creditor and does not affect or preclude the liability of the
principal. The law does not provide that the agent cannot
bind himself personally to the fulfilment of an obligation
incurred by him in the name and on behalf of his principal.
On the contrary, it provides that such act on the part of
an agent would be valid.
Cervantes v CA
The acts of an agent beyond the scope of his authority do
not bind the principal, unless the latter ratifies the same
expressly or impliedly. Furthermore, when the third
person knows that the agent was acting beyond his
power or authority, the principal cannot be held liable for
the acts of the agent. If the said third person is aware of
such limits of authority, he is to blame, and is not entitled
to recover damages from the agent, unless the latter
undertook to secure the principal's ratification.
C. Agent acting in his own name; exception
Article 1883. If an agent acts in his own name, the
principal has no right of action against the persons
with whom the agent has contracted; neither have
such persons against the principal.
In such case the agent is the one directly
bound in favor of the person with whom he has
contracted, as if the transaction were his own,
except when the contract involves things belonging
to the principal. The provisions of this article shall be
understood to be without prejudice to the actions
between the principal and agent. (1717)
General rule. Article 1883 speaks of a
case where the agent (a) being
authorized to act on behalf of the
principal, (b) acts instead in his own
name. In such case, the general rule is
that the agent is the one directly liable
to the person with whom he had
contracted as if the transaction were his
own.
The reason for the rule is that
there is no representation of
the principal when the agent
acts in his own name. In effect,
the resulting contractual
relation is only between the
agent and the third person.
Therefore, the principal cannot
have a right of action against
the third person nor the third
person against him
Exception. The exception to the rule
that an agent acting in his own name
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PROF. SANCHEZ
does not bind the principal is when the
contract involves things belonging to
the principal. (Art. 1883, par. 2; see
Gold Star Mining Co., Inc. vs. Lim-
Jimena, 25 SCRA 597 [1968].) In such
case, the contract is considered as
entered into between the principal and
the third person.
This exception is necessary for
the protection of third persons
against possible collusion
between the agent and the
principal. It applies only when
the agent has, in fact, been
authorized by the principal to
enter into the particular
transaction, but the agent,
instead of contracting for and
in behalf of the principal, acts
in his own name. (Phil.
National Bank vs. Agudelo y
Gonzaga, 58 Phil. 635 [1933];
Manubay vs. Picache, 2 C.A.
Rep. 1034.)
Smith Bell v Sotelo
When the agent transacts business in his own name, it
shall not be necessary for him to state who is the principal
and he shall be directly liable, as if the business were for
his own account, to the persons with whom he transacts
the same
Rural Bank of Bombon v CA
In order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face
purport to be made, signed and sealed in the name of the
principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was authorized to make
the mortgage, if he has not acted in the name of the
principal. Neither is it sufficient that in the mortgage the
agent describes himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his own name
and has set his own hand and seal to the mortgage.
Sy Juco vs. Sy Juco
Art. 1717 of the old Civil Code says that generally: when
an agent acts in his own name, the principal shall have no
right of action against the person with whom the agent
has contracted. It admits of an EXCEPTION: in cases
involving things belonging to the principal. In such cases,
the agent is bound to the principal although he does not
assume the character of such agent and appears to be
acting in his own name.
NFA v IAC
When things belonging to the principal, the agent's
apparent representation yields to the principal's true
representation and that, in reality and in effect, the
AGENCY REVIEWER
contract must be considered as entered into between the
principal and the third person. Corollarily, if the principal
can be obliged to perform his duties under the contract,
then it can also demand the enforcement of its rights
arising from the contract.
Gold Star Mining Co v Lim Jimenez
When Lincallo (agent) transferred his mining claims to
Gold Star, even without disclosing that Jimena was part
owner, he acted as agent of Jimena with respect to
Jimena share of the claims Art. 1883 applicable. While
there is no privity of contract between 3rd party (Gold
Star) and principal (Jimena) in this case, the common
subject matter supplies the juridical link.
Far East Bank v Spouses Cayetano
It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted in
the name of the principal. Neither is it ordinarily sufficient
that in the mortgage the agent describes himself as
acting by virtue of a power of attorney, if in fact the agent
has acted in his own name and has set his own hand and
seal to the mortgage. This is especially true where the
agent himself is a party to the instrument.
IX. What are the obligations and liabilities of
principals to agents?
A. Advance/Reimburse
Art. 1912. The principal must advance to the agent, should
the latter so request, the sums necessary for the execution
of the agency.
Should the agent have advanced them, the principal must
reimburse him therefor, even if the business or
undertaking was not successful, provided the agent is free
from all fault.
The reimbursement shall include interest on the sums
advanced, from the day on which the advance was made.
(1728)
Art. 1914. The agent may retain in pledge the things which
are the object of the agency until the principal effects the
reimbursement and pays the indemnity set forth in the
two preceding articles. (1730)
Art. 1918. The principal is not liable for the expenses
incurred by the agent in the following cases:
(1) If the agent acted in contravention of the principal's
instructions, unless the latter should wish to avail himself
of the benefits derived from the contract;
(2) When the expenses were due to the fault of the agent;
(3) When the agent incurred them with knowledge that an
unfavorable result would ensue, if the principal was not
aware thereof;
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PROF. SANCHEZ
(4) When it was stipulated that the expenses would be
borne by the agent, or that the latter would be allowed
only a certain sum. (n)
GENERAL RULE: Where one is employed or
directed by another to do an act in his
behalf, not manifestly wrong, the law
implies a promise by the principal to
reimburse the agent for expenditures
incurred as a proximate consequence of
the good faith execution of the agency,
which includes interest thereon
The agent is bound by his acceptance to
carry out the agency. (Art. 1884.) On the
other hand, the principal is under
obligation to provide the means with
which to execute the agency. In the
absence of stipulation that the agent shall
advance the necessary funds (Art. 1886.),
the principal must advance to the agent
upon his request the sums necessary for
the execution of the agency. (Art. 1912,
par. 1.)
If the principal fails to comply with his
obligations, the agent will not be liable for
the damage which, through his
nonperformance, the principal may
suffer. (Art. 1884.)
An agency is for the principals bene t. In
case the agent advanced the sums
necessary for the execution of the
agency, whether on his own initiative or
by virtue of stipulation, the said advances
must be reimbursed by the principal with
interest from the day the advance was
made. (see Art. 1896.) Demand is not
necessary in order that delay on the part
of the principal shall exist. (Art. 1169[1].)
B. Indemnify
Art. 1913. The principal must also indemnify the agent for
all the damages which the execution of the agency may
have caused the latter, without fault or negligence on his
part. (1729)
The rule in the above article is based on
equity. Since the principal receives the
bene ts of the agency and has a right
to demand damages from the agent
should the latter not perform the
agency (Art. 1884.), he should answer
for the damages resulting from the
AGENCY REVIEWER
execution thereof without fault or
negligence on the part of the agent.
Article 1913 is also a logical corollary to
the rule which makes the agent liable to
the principal for damages or losses
which the latter may suffer because of
his nonperformance (Art. 1884.), fraud,
or negligence. (Art. 1909.)
C. Solidary Liability
Art. 1915. If two or more persons have appointed an agent
for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of the
agency. (1731)
REQUISITES:
There are two or more
principals;
The principals have all
concurred in the
appointment of the same
agent; and
The agent is appointed for a
common transaction or
undertaking.
D. Compensation
Art. 1875. Agency is presumed to be for a compensation,
unless there is proof to the contrary. (n)
E. Agents lien
Art. 1914. The agent may retain in pledge the things which
are the object of the agency until the principal effects the
reimbursement and pays the indemnity set forth in the
two preceding articles. (1730)
If the principal fails to reimburse or
indemnify the agent as required in
Articles 1912 and 1913, the agent has
the right to retain in pledge the
things which are the object of the
agency. This is an instance of legal
pledge or pledge which is created by
operation of law.
Unlike contractual pledges, however,
the agent is not entitled to the excess
in case the things are sold to satisfy
his claim and the proceeds thereof
are more than the amount due. (see
Arts. 2115, 2121.)
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PROF. SANCHEZ
At the time this agency was revoked, the
defendant agent had already earned the commissions
agreed upon, and could not be deprived thereof by the
arbitrary action of the plaintiff in declining to
execute the contract of sale. It would be the height
of injustice to permit the principal then to withdraw the
authority and terminate the agency as against an express
provision of the contract, and perchance reap the benefit
of the agents labors, without being liable to him for his
commissions. Macondray v Sellner
For an agent to be entitled to commission, the
means employed by him and his efforts must result in the
sale. He must find the purchaser, and the sale must
proceed from his efforts acting as broker.
"One who has employed a broker can himself
sell the property to a purchaser whom he has procured,
without any aid from the broker." Danon v Brimo
Rocha vs. Prats & Co.
The principal is not liable for commissions to an agent
when the buyer and the principal (as seller) did not agree
as to the conditions of the sale. The agent never
succeeded in bringing the minds of the buyer and seller.
Inland Realty Investment Service, Inc. vs. Court of Appeals
The principal is not liable for commissions to an agent
(a) where the authority granted has expired and has not
shown to be renewed, and
(b) where, during the authority, the agent did nothing but
merely submit a list of prospective buyers and did not
perform substantial acts that proximately and causatively
led to the consummation of the sale
Infante vs. Cunanan
The principal is liable to an agent where he induced the
latter to sign a deed of cancellation of the authority, and
took advantage of the services of the agent and dealt
directly with the buyer.
Prats vs. Court of Appeals
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
exception, by way of equity, compensation is granted to
an agent whose efforts are recognized in consummating
a sale with a previous buyer although such consummation
was after the expiration of the agents authority.
Uniland Resources vs. Development Bank of the Philippines
Similar to Prats, compensation is granted to an agent by
way of equity where his efforts are recognized in bringing
the buyer and seller together and initiating the
transaction, although without property and not actively
involved in the actual bidding and sale.
Domingo vs. Domingo (supra)
The principal is not liable to an agent where the latter
takes a secret profit in the nature of a bonus, gratuity or
personal benefit from the vendee, without revealing the
AGENCY REVIEWER
same to his principal. The agent is guilty of a breach of his
loyalty to the principal and forfeits his right to collect the
commission from his principal, even if the principal does
not suffer any injury by reason of such breach of fidelity,
or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it.
X. What are the obligations of principals to third
parties?
GENERAL RULE: Principal is liable to third
parties for all acts committed by agent
contracted by agent within the scope of
authority. (Art. 1910)
EXCEPTIONS: (Where principal is not liable to
third parties)
1. Agent acts in his own name.
Exception: Contract involves thing
belong to principal principal is
liable to the third person (Art. 1883)
2. Agent exceeds power.
Exception: Principal ratifies act
expressly of tacitly principal
becomes bound by the obligation.
(Art. 1910)
3. Agent acts in bad faith where two person
contract with regard to the same thing,
one with the agent and the other with the
principal, and the two contracts are
incompatible with each other. (Art. 1916)
Art. 1883
If an agent acts in his own name:
- The principal has no right of action
against the third party with whom the
agent has contracted.
- The third persons also have no right
of action against the principal.
- The agent is directly bound in favor of
the third person, as if the transaction
were his own.
Exception: When the contract
involves things belonging to the
principal.
This article is understood to be without
prejudice to the actions between the
principal and agent.
Kinds of Principals:
1. Disclosed principal third party
knows that fact of the agency
and of the principals identity
D2019 | PAGE 27
PROF. SANCHEZ
2. Partially disclosed principal
the third party only knows that
fact of the agency but not the
principals identity
3. Undisclosed principal the third
party does not know that the
agent is acting for a principal
Art. 1883 involves an agency undisclosed
principal.
The agent is acting within the
scope of authority granted by a
principal, but acts in his own name
and does not disclose the fact of
the agency.
The agent is liable to the third
party as if the transaction were his
own.
- Reason There is no
representation of the principal.
The contractual relation is only
between the agent and the
third person.
Exception When the contract involves things
belonging to the principal.
When the agent acts in his own
name but the contract involves
things belonging to the principal,
the contract is considered as
entered into between the principal
and the third person. The principal
is liable to the third person.
- Reason To protect third
persons against the possible
collusion between the agent
and the principal
The agents apparent
representation (that he purports to
act in his own behalf) yields to the
principals true representation
(that the agent is acting in the
principals behalf).
Article 1910. The principal must comply with all
the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has
exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.
The principal must
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
power of attorney, as written
The act is deemed to have been
performed within the scope of
the agent's authority so far as
third persons are concerned
Even if the agent has in fact
exceeded the limits of his
authority according to an
understanding between the
principal and the agent
Scope of agents authority as to third parties
Includes not only actual but also
apparent or implied
authorization
Where authority not in writing
Third person must make an
inquiry as to the fact of the
agency and the nature and
For Art. 1911 to operate
The agent must have acted in the
name of the principal
The third person was not aware of
the of the limits of the power
granted by the principal
The principal allowed the agent to
act as though he had full powers
Solidary liability of the principal
and the agent
Both principal and agent are
considered as joint tortfeasors
C. FOR CRIMES; TORTS
LIABILITY OF PRINCIPAL FOR CRIME OF AGENT
An attempt to delegate to
another authority to do an act
which, if done by the principal
would be illegal, is void. There

D2019 | PAGE 29
AGENCY REVIEWER
can be no agency in the
perpetration of a crime or an
unlawful act.
The law on agency governing
civil cases has no application in
criminal cases. When a person
participates in the commission of
a crime, he cannot escape
punishment on the ground that
he simply acted as an agent of
another party.
The liability of the principal for a
crime committed by an agent
depends upon the circumstances
of the case. (Prof. Sanchezs
discussion)
If the principal instructed the
agent to commit an unlawful
act, both are principals of the
criminal act
The principal is held as a
principal by inducement
The agent is held as a
principal by direct
participation
LIABILITY OF PRINCIPAL FOR TORT OF AGENT
Principal is liable to third persons
of an act of an agent committed:
at the principals direction,
or
in the course and within the
scope of the agents
employment
Reason Principle that he who
does an act through another
does it himself
The principal and the agent are
solidarily liable for the tort
committed by the latter. The
third person may sue either.
Gonzalez and Gomez vs. Haberer
The principal (as seller) cannot accept benefit from a sale
and at the same time deny liability for the
misrepresentations of the agent where the sale was
effected on the strength misrepresentations.
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
PROF. SANCHEZ
of the creditor and does not affect or preclude the liability
of the principal.
XI. DUTY OF THIRD PARTIES DEALING WITH AGENT
Article 1902. A third person with whom the agent wishes
to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions
as regards the agency. Private or secret orders and
instructions of the principal do not prejudice third persons
who have relied upon the power of attorney or
instructions shown them
A third person with whom the
agent wishes to contract on
behalf of the principal may
require the presentation of:
the power of attorney, or
the instructions as regards the
agency.
Private or secret orders and
instructions of the principal do
not prejudice third persons who
have relied upon the power of
attorney or instructions shown
them.
OBLIGATION OF THIRD PERSONS DEALING
WITH AN AGENT
To inquire as to the extent of the
agents authority by requiring
the production of:
the power of attorney, or
the instructions of the principal
Fundamental rule Persons
dealing with an assumed agent
are bound at their peril, if they
would hold the principal, to
ascertain not only the fact of the
agency but the nature and
extent of the authority. In case
either is controverted, the
burden of proof is upon them to
establish it.
PRIVATE INSTRUCTIONS OF THE PRINCIPAL
Third parties are not bound and
cannot be affected by the private
or secret orders and instructions
of the principal to the agent
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
with agent has actual knowledge
thereof
Article 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or insolvency
of the principal or of the agent;
(4) By the dissolution of the firm or corporation which
entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose of
the agency;
(6) By the expiration of the period for which the agency
was constituted
Presumption of continuance of
agency
Agency is presumed to exist in
absence of anything to show its
termination.
Burden of proving termination or
revocation is on party asserting it
Modes of extinguishment
By agreement (5 and 6)
By the accomplishment of
the object or purpose of the
agency
By the expiration of the
period for which the agency
was constituted
By subsequent acts of the of the
parties
Both parties or mutual
consent
By unilateral act of one party
(1 and 2)
By its revocation
By the withdrawal of the
agent
By operation of law (3 and 4)
By the death, civil
interdiction, insanity or
insolvency of the principal or
of the agent;
By the dissolution of the firm
or corporation which
entrusted or accepted the
agency;
Modes provided not exclusive;
other modes of extinguishment
D2019 | PAGE 32
PROF. SANCHEZ
General odes of extinguishment
of obligations in e.g. loss of the
thing and novation; rescission or
cancellation by mutual agreement
War contract inoperative if
either party if an enemy alien
Legal impossibility if a change
in the law makes the purpose of
the agency unlawful
Termination of agents authority
terminates as a matter of law
with the destruction or loss of the
trust
Occurrence of a specified event
resolutory condition; principal
and agent have originally agreed
that the agency, or some
particular aspect of it, will
continue until a specified event
occurs
Article 1920. The principal may revoke the agency at
will, and compel the agent to return the document
evidencing the agency.
Such revocation may be express or implied.
The principal may
Revoke the agency at will, and
Compel the agent to return
the document evidencing the
agency.
Such revocation may be express
or implied.
Revocation of agency by principal
General rule: Agency revocable
at will by principal at any time,
at his mere option, with or
without reason
Reason
The authority of the agent
emanates from or depends
on the will of the principal;
Confidence is the cardinal
basis of the relation;
Principal-agent relationship
is consensual and personal
in nature and no one can be
forced to retain another as
his agent against his will
AGENCY REVIEWER
Liability of principal for damage caused by
revocation
Principal must respond in
damages for breach of contract
where the termination is
wrongful in those cases wherein
not having the legal right to do
so, he should discharge the
agent.
Where agency constituted for a
fixed period.
Principal is liable for
damages occasioned by the
wrongful discharge of the
agent before the expiration
of the period fixed;
The action for indemnity
would be derived from the
contract of the parties, not
from law
Where no time fixed for
continuance of agency.
Principal is at liberty to
terminate it at will subject
only to the requirements of
good faith.
Return of document evidencing agency.
If the authority is in writing, the
principal may compel the agent to
return the document evidencing the
agency
To prevent the agent from making
use of the power of attorney and
thus avoid liability to third persons
who may subsequently deal with the
agent on the faith of the instrument.
Notice of revocation
As to agent
Principal must notify agent of
revocation (Prof. Sanchez), but
express notice to the agent is not
always necessary (De Leon).
There is sufficient notice of
revocation if the agent actually
knows, or has reason to know facts
indicating of revocation
Revocation without notice to the
agent will not invalidate acts done in
pursuance of authority
As to third persons (see Art. 1873)
D2019 | PAGE 33
PROF. SANCHEZ
Actual notice must be brought to
former customers
Notice by publication is sufficient as
to other persons
Renunciation of agency by agent
GENERAL RULE: Agent may renounce
the agency at will.
Reason: The essence of an agency
relationship is consensual the
willingness of the agent to represent
the principal
Revocation is subject to
The contractual obligations owing to
the principal
Term or period of time fixed or
defined for the continuance of the
agency
Form of renunciation
Express
Implied; examples
Agent abandons object of
the agency and acts for
himself in committing a
fraud upon his principal
Agent institutes an action
against the principal for
recovery of balance of
accounts
Article 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they were
not given notice thereof.
If the agency has been entrusted
for the purpose of contracting
with specified persons
Its revocation shall not prejudice
the specified persons if they
were not given notice of the
revocation.
Article 1922. If the agent had general powers,
revocation of the agency does not prejudice third
persons who acted in good faith and without
knowledge of the revocation. Notice of the
revocation in a newspaper of general circulation is a
sufficient warning to third persons.
If the agent had general powers
Its revocation of the agency does
not prejudice third persons who
acted
in good faith and
AGENCY REVIEWER
without knowledge of the
revocation.
Notice of the revocation in a
newspaper of general circulation
is a sufficient warning to third
persons.
Effect of revocation in relation to third parties
Agent authorized to contract
with specified persons
Revocation will not prejudice such
third persons until notice of
revocation is given them
Revocation must be personal
Agent authorized to contract with public in
general
Revocation will not prejudice
innocent third persons until
knowledge of revocation.
Publication of revocation in a
newspaper of general circulation is
sufficient warning to third persons
Publication constitutes
notice whether or not such
third persons have read the
newspaper concerned
Revocation may be personal
Article 1923. The appointment of a new agent for the
same business or transaction revokes the previous
agency from the day on which notice thereof was
given to the former agent, without prejudice to the
provisions of the two preceding articles.
The appointment of a new agent
for the same business or
transaction revokes the previous
agency.
The revocation is effective from the
day on which notice thereof was
given to the former agent.
The revocation is without
prejudice to the provisions of the
two preceding articles.
Implied revocation by appointment of new
agent
There must be incompatibility between
the appointment of another agent and
the previous agency.
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PROF. SANCHEZ
The revocation does not take effect
until it is in some way communicated
to the previous agent.
Without prejudice to the provisions of
the two preceding articles
Rights of third persons who acted in
good faith and without knowledge of
the revocation will not be prejudiced
by the revocation.
Article 1924. The agency is revoked if the principal
directly manages the business entrusted to the agent,
dealing directly with third persons.
If the principal directly manages the
business entrusted to the agent,
dealing directly with third persons
The agency is revoked.
Implied revocation by direct management of
business by principal himself
Management of the business
entrusted to the agent by the
principal himself revokes the agency
Reason No more basis for the
representation previously conferred
Exception When the intent of the
principal is for him and the agent is
to manage the business together
Article 1925. When two or more principals have
granted a power of attorney for a common
transaction, any one of them may revoke the same
without the consent of the others.
When two or more principals
have granted a power of
attorney for a common
transaction
Any one of the principals may
revoke the agency without the
consent of the other principals.
Revocation by one of two or more principals
Any of the two or more
principals may revoke the power
of attorney granted to an agent
appointed for a common
transaction
Reason Two or more principals
are solidarily liable to the agent
for all of the consequences of the
agency (Art. 1915); The act of one
is the act of all.
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

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AGENCY REVIEWER
interest and thus indeed
irrevocable.
Revocability of agency couple with interest
Where there is no just cause
A contract not to revoke an
agency only limits the principals
right to revoke, and not his power
to revoke.
An agency coupled with an
interest deprives both the
principals of his right to revoke
and power to revoke.
The principal may not revoke
at his pleasure and a
purported revocation can
have no effect.
Where there is just cause
An agency, coupled with an interest
or not, may be revoked for a just
cause, such as when the agent
betrays the interest of the principal.
Agency coupled with an interest not a true
agency
Persons with proprietary interest
in the subject matter of their
agency are not true agents at all.
If an agent holds an interest
for the benefit of a person who
is not the principal, the
agent is not really the agent
of the principal.
An agency relation is
distinguished by the principals
control over the agent
concerning the object of his
agency.
If the principal cannot
terminate the relation at will,
he has surrendered that
degree of control with an
agency requires.
Barretto vs. Santa Marina.
Where the agency is without a fixed or determined period,
and the confidence reposed upon the agent disappears,
the principal has a right to revoke the agency, especially
when the agent has expressly resigned from his position
for good reasons.
Diolosa vs. Court of Appeals
Where the agency contract stipulated that the agent is
authorized to dispose of property until the same is full
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PROF. SANCHEZ
disposed of, the authority to sell continues until all the lots
are sold. The contract cannot be terminated by principal
before then.
New Manila Lumber Co. Inc. vs. Republic of the Philippines
Where a principal confers the power upon an agent to
collect whatever amounts may be due him (the principal)
from the Government, demands and collects from the
latter the money the collection of which he entrusted to
his agent, the agency is thereby revoked.
Even if the powers are irrevocable and coupled with
interest, its irrevocability cannot affect a third person who
is not a party thereto. They are obligatory only on the
principal.
Dy Buncio & Co. vs. Ong Guan Can
The making and accepting of a new power of attorney,
whether it enlarges or decreases the power of the agent,
must be held to supplant and revoke the prior power of
attorney when the two are inconsistent.
Garcia vs. De Manzano
A second power of attorney revokes the first one only
after notice of such second power is given to first agent.
Rallos vs. Yangco
Where the principal sent an invitation to a third person to
contract with an agent, the principal terminated such
agency without notifying the third person of such
termination, and the third person proceeded to contract
with such agent without knowledge, actual or
constructive, of the termination of the agency, the
principal is liable to such third person.
Compania General de Tabacos vs. Diaba
Where a third person sold and delivered merchandise to
an agent whose power was terminated, and such third
person was not notified of such termination, the principal
is liable to such third person for the goods sold and
delivered.
Del Rosario vs. Abad
A mere statement in the power of attorney that it is
coupled with an interest is not enough. In what does such
interest consist must be stated in the power of attorney.
The fact that the improvements on a parcel of land was
mortgaged is not such an interest as could render
irrevocable a power of attorney authorizing an agent to
sell the parcel of land.
Such power, being revocable and not coupled with
interest, does not survive principals death. The agent
could no longer validly convey the parcel of land to a third
person.
Coleongco vs. Claparols
An agency is not coupled with an interest if a financing
agreement already contains clauses for the protection of
the agent.
Even if the agency was coupled with an interest, the
power could be revoked for a just cause, such as when the
agent betrays the interest of the principal. The
irrevocability of the power may not be used to shield the
AGENCY REVIEWER
perpetration of acts in bad faith, breach of confidence, or
betrayal of trust by the agent. Such would amount to
holding a power coupled with interest authorizing a agent
to commit frauds against the principal.
B. Withdrawal
Article 1928. The agent may withdraw from the
agency by giving due notice to the principal. If the
latter should suffer any damage
by reason of the withdrawal, the agent must
indemnify him therefor, unless the agent should base
his withdrawal upon the
impossibility of continuing the performance of the
agency without grave detriment to himself.
- The agent may withdraw from the agency
by giving due notice to the principal.
- If the principal should suffer any damage by
reason of the withdrawal
The agent must indemnify the principal
for the damage.
- Exception: The agent bases his
withdrawal upon the impossibility of
continuing the performance of the
agency without grave detriment to
himself.
Right of agent to withdraw
The agent may withdraw or renounce
from the agency at any time.
The agency must notify the principal
of such withdrawal, but consent of
the principal is not required.
Reason Constitutional prohibition
against involuntary servitude; An
agency relationship is a voluntary
relationship between parties
Without just cause
The agent must indemnify the
principal should the principal suffer
damage by reason of such
withdrawal
With just cause
The agent cannot be held liable for
the withdrawal
If the withdrawal is based on
the impossibility of
continuing the agency
without grave detriment to
himself (Art. 1928)
Due to a fortuitous event
(Art. 1174)
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PROF. SANCHEZ
The agent is not required to sacrifice
his own interest just the serve the
principal
Article 1929. The agent, even if he should withdraw
from the agency for a valid reason, must continue to
act until the principal has had reasonable opportunity
to take the necessary steps to meet the situation.
- The agent must continue to act until the
principal has had reasonable opportunity to
take the necessary steps to meet the
situation
- Even if the agent should withdraw
from the agency for a valid reason
Obligation of agent to continue to act after
withdrawal
Even when the withdrawal is for
a valid reason, the agent must
continue to act until the principal
has had reasonable opportunity
to take necessary steps to
remedy the situation caused by
the withdrawal.
Reason To prevent damage or
prejudice to the principal
Valera vs. Velasco
The misunderstanding between the principal and the
agent over the payment of the balance as a result of the
liquidation of accounts between them arising from the
agency, and the fact the agent brought suit against
principal is equivalent to an express renunciation of the
agency and terminates the juridical relation between
them. They more than prove the breach of juridical
relation relation, even though DEF as agent has not
expressly told his principal that he renounced the agency.
C. Death; agency couple with an interest
GENERAL RULE: Death of either principal or
agent terminates the agency.
- Death of principal source of authority is
extinguished
- Death of agent no person to act for
benefit and representation of principal
EXCEPTIONS:
1. The agency has been constituted in
the common interest of the principal
of the agent (Art. 1927 and 1930)
2. The agency has been constituted in
the interest of a third person who has
accepted the stipulation in his favor.
(Art. 1930)
AGENCY REVIEWER
Article 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has
been constituted in the common interest of the latter
and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor.
If the agency has been
constituted
In the common interest of
the principal and of the
agent, or
In the interest of a third
person who has accepted
the stipulation in his favor.
The agency shall remain in full force
and effect even after the death of
the principal.
Article 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third
persons who may have contracted with him in good
faith.
Anything done by the agent, without
knowledge
of the death of the principal.
or
of any other cause which
extinguishes the agency,
is valid and shall be fully effective
with respect to third persons who
may have contracted with the agent
in good faith.
Validity of acts of agent after termination of
agency
Third person who contract with
an agent are not prejudiced, if
The agent had not knowledge of
termination of the agency
because of the death of the
principal or of any other causes
for termination, and
The third person dealt with the
agent in good faith.
Article 1932. If the agent dies, his heirs must notify
the principal thereof, and in the meantime adopt
such measures as the circumstances may demand in
the interest of the latter.
- If the agent dies, the agents heirs must
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PROF. SANCHEZ
- Notify the principal of the agents
death, and
- In the meantime, adopt such
measures as the circumstances may
demand in the interest of the
principal.
Duty of the agent's heirs when agent dies
1. To notify the principal of the agent's
death, and
2. To adopt measures as the circumstances
may demand in the interest of the
principal.
Pasno vs. Ravina
The power of sale given in a mortgage is a power coupled
with an interest which survives the death of the grantor.
Ramos vs. Caoibes
Where an agent makes use of his power after the death
of his principal, the agent has the obligation to deliver the
amount collected by him by virtue of said power to the
administratrix of the estate of the principal.
Herrera vs. Luy Kim Guan
The death of a principal does not render the act of an
agent unenforceable, where the agent had no knowledge
of such extinguishment of the agency.
Rallos vs. Felix Go Chan
The law does not impose a duty on the heirs of principal
to notify agent of death of principal. However, if the agent
dies, his heirs must notify principal thereof.
D. Dissolution of firm or corporation
Dissolution of a firm or corporation which
entrusted (as principal) or accepted (as agent)
extinguishes its juridical existence as far as the
right to go on doing ordinary business is
concerned, except for the purpose of winding
up
E. Accomplishment
Fulfillment of the purpose for which the
agency is created ipso facto terminates the
agency, even though expressed to be
irrevocable. Continued existence of authority
illogical when object of purpose of agency is
accomplished.
F. Expiration of period
- Term specified
The expiration of the period fixed or the
arrival of time stipulated results in the
termination of the agency
- Term not specified
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.

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AGENCY REVIEWER PROF. SANCHEZ

GROUP MEMBERS

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

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